<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-K/A
                                 AMENDMENT NO. 1


[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

                         Commission file number 0-22725

                            CRESCENT OPERATING, INC.
          ------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                  75-2701931
----------------------------------------   -------------------------------------
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)


     777 Main Street, Suite 1240
           Fort Worth, Texas                             76102
----------------------------------------   -------------------------------------
(Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code (817) 321-1602


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

Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $0.01 per share
                    ---------------------------------------
                                (Title of class)

                        Preferred Share Purchase Rights
                        -------------------------------
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 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 the 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]

The aggregate market value of the 9,377,414 shares of $0.01 par value common
stock held by non-affiliates (all directors, executive officers and persons
holding 10% or more of the outstanding shares of common stock are presumed to be
affiliates for the purposes of this calculation) of the registrant on March 28,
2002 was $3.9 million based upon the closing price of $0.42 on The OTC Bulletin
Board.

Number of shares of Common Stock outstanding as of March 28, 2002:  10,828,497
<PAGE>

The Form 10-K of Crescent Operating, Inc. (the "Company") for the year ended
December 31, 2001 is being amended to (i) amend Item 1. Business in response to
a comment letter received from the Securities and Exchange Commission ("SEC"),
(ii) amend Item 6. Selected Financial Data in response to a comment letter
received from the SEC, (iii) amend Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations in response to a comment letter
received from the SEC, (iv) amend Item 8. Financial Statements and Supplementary
Data in response to a comment letter received from the SEC, which includes the
restatement of the financial statements for the change in accounting related to
the reporting of discontinued operations in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and (v) amend
Item 14. Exhibits, Financial Statements Schedule, and Reports on Form 8-K to
include, as an exhibit, the Notice Regarding Arthur Andersen LLP. All amended
Items are presented in their entirety.


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                                TABLE OF CONTENTS


<TABLE>
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                                          PART I.

Item 1.    Business.................................................................       6
Item 2.    Properties...............................................................      24
Item 3.    Legal Proceedings........................................................      24
Item 4.    Submission of Matters to a Vote of Security Holders......................      25

                                          PART II.

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters....      26
Item 6.    Selected Financial Data..................................................      27
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations................................................      29
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk...............      40
Item 8     Financial Statements and Supplementary Data..............................      41
Item 9.    Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure...................................      41

                                          PART III.

Item 10.   Directors and Executive Officers of the Registrant.......................      41
Item 11.   Executive Compensation...................................................      42
Item 12.   Security Ownership of Certain Beneficial Owners and Management...........      44
Item 13.   Certain Relationships and Related Transactions...........................      45

                                          PART IV.

Item 14.   Exhibits, Financial Statements Schedules, and Reports on Form 8-K........      50
</TABLE>


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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. Although Crescent Operating, Inc. (the
"Company" or "Crescent Operating") believes that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, the
Company's actual results could differ materially from those the Company expects
to achieve. The Company's auditors report included on the financial statements
included in this Annual Report on Form 10-K has expressed substantial doubt
about the Company's ability to continue to operate as a going concern. Some of
the other factors that might cause material variation from the expectations
reflected in the forward-looking statements include:

    -    the current inability of Crescent Operating to pay its deferred rent
         obligations to Crescent Real Estate Equities Limited Partnership
         ("Crescent Partnership"), the operating partnership of Crescent Real
         Estate Equities Company ("Crescent Equities", "Crescent Real Estate" or
         "CEI");

    -    the ability of Crescent Operating to generate income from the assets
         remaining after the transfers of its hospitality and land development
         businesses pursuant to the Settlement Agreement;

    -    the Company's inability to complete the transactions contemplated by
         the February 14, 2002 Settlement Agreement with Crescent Partnership,
         including but not limited to, holding a shareholders' meeting to
         approve the prepackaged bankruptcy plan contemplated by the Settlement
         Agreement; obtaining shareholder approval for that plan; or filing that
         plan in the form contemplated;

    -    failure of Crescent Equities to provide assistance and funding to the
         Company of substantially all the costs of performing the steps required
         under the Settlement Agreement for implementation of the prepackaged
         bankruptcy plan, which funding is expected to provide for the
         preparation of a proxy statement for a shareholders' meeting to approve
         the prepackaged bankruptcy plan, the solicitation of proxies for that
         meeting, and all other expenses associated therewith; the expenses of
         operating the Company from the date of the Settlement Agreement through
         the commencement of the prepackaged bankruptcy; and the settlement or
         satisfaction of all of the Company's known creditors;

    -    the Company's inability, after the commencement of bankruptcy
         proceedings, to control the course or outcome of the proceedings or its
         business operations, as federal bankruptcy law places the ultimate
         control over the bankrupt debtor into the discretion of the bankruptcy
         court;

    -    the unpredictable nature of course or outcome of Crescent Machinery
         Company's bankruptcy proceedings;

    -    even if the prepackaged bankruptcy plan is confirmed as contemplated,
         the Company will not have the ability to control the issuance of CEI
         common shares to Crescent Operating stockholders, following
         confirmation of the prepackaged bankruptcy plan;

    -    the Company's inability to make any forecast regarding shareholders'
         recovery in bankruptcy if the prepackaged bankruptcy plan is not
         approved by the shareholders prior to the Company's filing for
         bankruptcy protection, as the Company's debts far exceed its assets,
         and its creditors, including CEI, may not be paid in full, and,
         consequently, it is probable that if the stockholders do not approve
         the prepackaged bankruptcy plan, the stockholders would receive no
         distributions with respect to their share ownership in the Company;

    -    the Company's inability to sell its interest in the tenant of the
         AmeriCold temperature controlled logistics properties to a new entity
         that will be owned by the CEI shareholders, proceeds of which sale
         would be applied by the Company to the repayment of the Company's $15.0
         million obligation to Bank of America;

    -    the high levels of debt that the Company maintains and the Company's
         current inability to generate revenue sufficient to meet debt service
         payments, other obligations and operating expenses;

    -    the availability of the financing that likely will be necessary to
         maintain the Company's operations and investments;

                                       4
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    -    the current and continuing underperformance or non-performance of the
         Company's existing business investments;

    -    the Company's inability to reach an agreement with its creditors which
         may result in the Company losing control of its remaining assets or
         operations or both either through foreclosure or bankruptcy;

    -    any unfavorable resolution of issues that relate to the bankruptcy
         petition of Charter Behavioral Health Systems, LLC ("CBHS"), including,
         but not limited to, judgments against the Company in respect of
         lawsuits instituted in connection with the closure of certain CBHS
         facilities prior to CBHS's filing bankruptcy;

    -    the impact of changes in the industries in which the Company's
         businesses and investments operate (including equipment sales and
         leasing and temperature controlled logistics) and the economic,
         demographic and other competitive conditions affecting those
         industries, the Company's cash flows and the value of the Company's
         investments, and

    -    the impact of terrorism acts on the industries in which the Company's
         businesses and investments operate (including equipment sales and
         leasing and temperature controlled logistics).

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

                                       5
<PAGE>
                                     PART I

ITEM 1.  BUSINESS

                                  THE COMPANY

Crescent Operating, Inc., a Delaware corporation, was formed on April 1, 1997,
by Crescent Equities and its subsidiary Crescent Partnership. Effective June 12,
1997 Crescent Equities distributed shares of Crescent Operating common stock to
shareholders of Crescent Equities and unit holders of Crescent Partnership (the
"Spinoff"), and, on that date, Crescent Operating became a public company.
Crescent Operating was formed to be the lessee and operator of certain assets
owned or to be acquired by Crescent Partnership, but which Crescent Partnership
could not operate due to Crescent Equities' status as a real estate investment
trust ("REIT"). Unless the context otherwise requires, the terms "Crescent
Operating", "the Company", "Crescent Equities", "CEI" and "Crescent Partnership"
include the subsidiaries of each and, in the case of "CEI", "Crescent Equities"
and "Crescent Real Estate", includes "Crescent Partnership".

BUSINESS SEGMENTS

As of December 31, 2001, Crescent Operating, through various subsidiaries and
affiliates, had assets and operations comprising four business segments: (i)
Equipment Sales and Leasing, (ii) Hospitality, (iii) Temperature Controlled
Logistics and (iv) Land Development. Within these segments the Company owned the
following for all or some portion of 2001:

-    THE EQUIPMENT SALES AND LEASING SEGMENT consisted of a 100% interest in
     Crescent Machinery Company ("Crescent Machinery" or "CMC") and its
     subsidiary, a construction equipment sales, leasing and service company
     which had as many as 18 locations in seven states.

-    THE HOSPITALITY SEGMENT consisted of (i) the Company's lessee interests in
     three Upscale Business Class Hotels owned by Crescent Partnership, which
     included the Denver Marriott City Center, the Hyatt Regency Albuquerque,
     and the Renaissance Hotel in Houston, Texas; lessee interests in three
     Destination Resort Properties owned by Crescent Partnership, which included
     the Hyatt Regency Beaver Creek, the Ventana Inn and Spa and the Sonoma
     Mission Inn and Spa (including the Sonoma Mission Inn Golf and Country
     Club); lessee interests in two destination fitness resort and spa
     properties, including Canyon Ranch-Tucson and Canyon Ranch-Lenox
     (collectively, the "Hospitality Properties"); and a 5% economic interest in
     CRL Investments, Inc. ("CRL"), which has an investment in the Canyon Ranch
     Day Spa in the Venetian Hotel in Las Vegas, Nevada and participates in the
     future use of the "Canyon Ranch" name. Crescent Partnership owned the
     remaining 95% economic interest in CRL.

-    THE TEMPERATURE CONTROLLED LOGISTICS SEGMENT consisted of a 40% interest in
     the operations of Vornado Crescent Logistics Operating Partnership
     ("AmeriCold Logistics"), which operated 100 refrigerated storage properties
     with an aggregate storage capacity of approximately 525 million cubic feet.
     Crescent Partnership had a 40% interest in AmeriCold Corporation, which
     owned 89 of the 100 properties.

-    THE LAND DEVELOPMENT SEGMENT consisted of (i) a 4.65% economic interest in
     Desert Mountain, a master planned, luxury residential and recreational
     community in northern Scottsdale, Arizona (Crescent Partnership owned a
     88.35% economic interest in Desert Mountain), (ii) a 52.5% general partner
     interest in The Woodlands Operating Company, L.P. ("Woodlands Operating"),
     (iii) a 2.625% economic interest in The Woodlands Land Development Company
     L.P. ("Landevco") (2.475% through November 2001) (Crescent Partnership
     owned a 49.875% economic interest in this entity) and (iv) a 60% economic
     interest in COPI Colorado, L.P. ("COPI Colorado"), a company that has a 10%
     economic interest in Crescent Resort Development Inc. ("CRDI"), formerly
     Crescent Development Management Corp. ("CDMC"). Crescent Partnership owned
     the remaining 90% economic interest in CRDI.

                                       6
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BACKGROUND OF SETTLEMENT AGREEMENT

On February 6, 2002, Crescent Machinery Company - comprising the Company's
Equipment Sales and Leasing segment - filed a voluntary petition in bankruptcy.
On February 14, 2002, Crescent Operating entered into the Settlement Agreement
with Crescent Real Estate, pursuant to which the Company's interests in the Land
Development and Hospitality segments were transferred to Crescent Partnership in
partial satisfaction of the indebtedness owing from Crescent Operating. The
Company agreed to transfer the assets of its Temperature Controlled Logistics
segment in the future in connection with the satisfaction of its indebtedness to
Bank of America. The Settlement Agreement also requires the filing of a
prepackaged bankruptcy plan for Crescent Operating. This bankruptcy plan effects
the orderly termination of Crescent Operating's business. Substantially all of
Crescent Operating's assets are encumbered by liens in favor of Crescent
Partnership. Crescent Operating is in default in its obligations to Crescent
Real Estate. The Settlement Agreement also provides Crescent Operating with
funds to satisfy its creditors' claims and gives Crescent Operating stockholders
the opportunity to receive common shares of Crescent Real Estate.

TRANSACTIONS WITH CRESCENT PARTNERSHIP

Historically, Crescent Operating generally was involved with Crescent Equities
in two types of transactions: "LESSEE TRANSACTIONS" and "CONTROLLED SUBSIDIARY
TRANSACTIONS".

    -    LESSEE TRANSACTIONS were those in which Crescent Operating entered into
         a transaction to lease and operate real property owned by Crescent
         Partnership but which could not, under prior law applicable to REITs,
         be operated by Crescent Partnership due to Crescent Equities's status
         as a REIT. Lessee Transactions included the Company's leases of
         Hospitality Properties.

    -    CONTROLLED SUBSIDIARY TRANSACTIONS were those in which Crescent
         Operating invested alongside Crescent Partnership in acquisitions where
         Crescent Operating owned all of the voting stock, and Crescent
         Partnership owned all of the non-voting stock of a corporate
         acquisition vehicle which in turn acquired a target business which
         could not be operated by Crescent Partnership due to Crescent
         Equities's status as a REIT. The voting stock represented the
         controlling interest of the entity being purchased, and due to its
         status as a REIT, Crescent Equities could not hold a controlling
         interest in such entities. Controlled Subsidiary Transactions include
         investments in CRL, Desert Mountain and Landevco.

In connection with the Spinoff, Crescent Operating and Crescent Partnership
entered into the Intercompany Agreement to provide each other with rights to
participate in the types of transactions mentioned above. The Intercompany
Agreement provided, subject to certain terms, that Crescent Partnership would
provide Crescent Operating with a right of first refusal to become the lessee of
any real property acquired by Crescent Partnership if Crescent Partnership
determined that, consistent with Crescent Equities's status as a REIT, it was
required to enter into a "master" lease arrangement. Crescent Operating's right
of first refusal under the Intercompany Agreement was conditioned upon the
ability of Crescent Operating and Crescent Partnership to negotiate a mutually
satisfactory lease arrangement and the determination of Crescent Partnership, in
its sole discretion, that Crescent Operating was qualified to be the lessee. (In
general, a master lease arrangement is an arrangement pursuant to which an
entire property or project (or a group of related properties or projects) is
leased to a single lessee.) If a mutually satisfactory agreement could not be
reached within a 30-day period (or such longer period to which Crescent
Operating and Crescent Partnership agreed), Crescent Partnership could offer the
opportunity to others.

Under the Intercompany Agreement, Crescent Operating agreed not to acquire or
make (i) investments in real estate which, for purposes of the Intercompany
Agreement, included the provision of services related to real estate and
investment in hotel properties, real estate mortgages, real estate derivatives
or entities that invest in real estate assets or (ii) any other investments that
might be structured in a manner that qualified under the federal income tax
requirements applicable to REITs. Crescent Operating agreed to notify Crescent
Partnership of, and make available to Crescent Partnership, investment
opportunities developed by Crescent Operating, or of which Crescent Operating
became aware but was unable or unwilling to pursue.

                                       7
<PAGE>

    Effective February 14, 2002, the Company entered into the Settlement
    Agreement (discussed within this item) with Crescent Equities. The
    Settlement Agreement provided for the cancellation of the Intercompany
    Agreement.


INDEBTEDNESS TO CRESCENT PARTNERSHIP

In connection with the formation and capitalization, and the subsequent
operations and investments, of Crescent Operating since 1997, Crescent Real
Estate made loans to Crescent Operating under a line of credit and various term
loans. In connection with Crescent Real Estate's agreement to acquire certain
assets and equity interests from Crescent Operating, Crescent Real Estate agreed
that it would not charge interest on these loans from May 1, 2001 and that it
would allow Crescent Operating to defer all principal and interest payments due
under the loans until December 31, 2001. As of December 31, 2001, the
outstanding indebtedness under the line of credit and term loans was
approximately $75.4 million.

Crescent Operating subsidiaries, as tenants, have not paid to Crescent Real
Estate, as landlord, the full amount of rent due under the leases of the
Hospitality Properties. As of December 31, 2001, rent expense accrued but
deferred was approximately $41.2 million.

CHANGES IN REIT LAWS

The REIT Modernization Act, which became effective January 1, 2001, contained a
provision that permitted Crescent Equities to lease or operate certain
investment properties and assets that were leased or operated by Crescent
Operating. The REIT Modernization Act reduced the number of business
opportunities that Crescent Equities would otherwise offer to Crescent Operating
pursuant to the Intercompany Agreement. Crescent Equities expressed an interest
in acquiring from Crescent Operating certain lessee interests and voting
interests owned by Crescent Operating that the REIT Modernization Act would
allow Crescent Equities to own but which were prohibited under prior law.
Management of the Company commenced negotiations with Crescent Equities to sell
the entities within the Company's Hospitality and Land Development segments to
Crescent Equities or one of its affiliates.

2001 RESTRUCTURING PROPOSAL

On June 28, 2001, Crescent Operating and Crescent Equities entered into an asset
and stock purchase agreement (the "Purchase Agreement") in which Crescent Real
Estate agreed to acquire the Company's hotel operations, land development
interests and other assets in exchange for $78.4 million. Crescent Real Estate
also entered into an agreement, subsequently amended and restated as of October
31, 2001 (the "Capital Agreement"), to make a $10.0 million investment in
Crescent Machinery, which, along with capital from a third-party investment
firm, was expected to put Crescent Machinery on solid financial footing. The
transactions contemplated by the Purchase Agreement and Capital Agreement,
called the "Restructuring Proposal" and described in the Company's Proxy
Statement dated October 29, 2001, relating to its 2001 Annual Meeting of
Stockholders (the "Annual Meeting Proxy Statement"), also included the future
sale of the Company's 40% interest in AmeriCold Logistics. The Restructuring
Proposal was approved by the stockholders of the Company on December 6, 2001.

Following the date of the agreements, the results of operations for the
Company's hotel operations and land development interests declined due to the
slowdown in the economy. 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, 2001.

As disclosed in the Annual Meeting Proxy Statement and also in the Company's
quarterly report on Form 10-Q filed November 14, 2001, Crescent Machinery was in
payment default on certain major loans from commercial lending institutions.
Among the conditions to the closing of the transactions included in the
Restructuring Proposal was the consent of Crescent Machinery's secured lenders,
including those institutions.

As the Company stated in its press release regarding the results of the
stockholders' meeting, Crescent Machinery was negotiating with these lenders
regarding these defaults and the possible restructuring of the loans, but the

                                       8
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differences in the positions of the lenders and Crescent Machinery were
significant and, as a result, management was not optimistic that an agreement
would be reached with these lenders. Without the consent of the lenders, it was
unlikely that the Restructuring Proposal would be consummated, and any failure
by the Company to consummate the transactions included in the Restructuring
Proposal would greatly impair the Company's prospects to continue to operate as
a going concern.

Crescent Machinery was unable to reach satisfactory agreements with its lenders
regarding restructuring of the loans. As a result, Crescent Real Estate advised
the Company that it believed that substantial additional capital, beyond the
investment called for in the Capital Agreement, would have to be made to
Crescent Machinery to adequately capitalize Crescent Machinery and satisfy
concerns of Crescent Machinery's lenders. Crescent Real Estate announced that it
was "unwilling to make this non-core investment."

On January 23, 2002, Crescent Real Estate terminated the Purchase Agreement
pursuant to which Crescent Real Estate would have acquired the Crescent
Operating hotel operations, the Crescent Operating land development interests
and other assets. On February 4, 2002, Crescent Real Estate terminated the
Capital Agreement relating to its planned investment in Crescent Machinery.

EVENTS SUBSEQUENT TO STOCKHOLDERS' MEETING

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

On February 13, 2002, Crescent Real Estate delivered default notices to Crescent
Operating relating to approximately $49.0 million of unpaid rent and
approximately $76.2 million of principal and accrued interest due to Crescent
Real Estate under certain secured loans.

SETTLEMENT AGREEMENT

On February 14, 2002, Crescent Operating entered into a Settlement Agreement
with Crescent Real Estate. The Settlement Agreement also provided the basis for
Crescent Operating to file a prepackaged bankruptcy plan that the Company
believes will provide for a limited recovery to its stockholders. Pursuant to
the Settlement Agreement, Crescent Operating has transferred the following
assets to Crescent Real Estate:

    -    all of its hotel operations, in lieu of foreclosure, on February 14,
         2002 in exchange for a $23.6 million reduction in its rent obligations
         to Crescent Real Estate;

    -    all of its land development interests, through a strict foreclosure, on
         February 14, 2002, and March 22, 2002, in exchange for a $40.1 million
         reduction of its debt obligations to Crescent Real Estate.

    In addition, the Settlement Agreement provides as follows:

    -    Crescent Real Estate will make sufficient funds available to Crescent
         Operating to pay all of Crescent Operating's creditors, other than
         Crescent Real Estate, in full and to cover the expenses of implementing
         the Settlement Agreement and seeking to confirm the bankruptcy plan. To
         facilitate repayment of $15.0 million, plus interest, owed to Bank of
         America, Crescent Real Estate has allowed Crescent Operating to secure
         the Bank of America debt with a pledge of Crescent Operating's interest
         in AmeriCold Logistics, LLC. The bankruptcy plan contemplates that the
         AmeriCold Logistics interest will be purchased by a Crescent Real
         Estate affiliate for a sufficient amount to repay the Bank of America
         debt.

    -    If Crescent Operating's stockholders approve the bankruptcy plan at a
         special meeting of stockholders called for that purpose, Crescent Real
         Estate will issue common shares of Crescent Equities to the Crescent
         Operating stockholders pursuant to the formula contained in the
         bankruptcy plan. If the stockholders of Crescent Operating do NOT
         accept the bankruptcy plan, they will not receive a distribution of
         common shares of Crescent Real Estate. If the total amount of claims
         and expenses paid by Crescent Real Estate in connection with the
         Crescent Operating bankruptcy and reorganization transactions equals or
         exceeds $16.0 million, the stockholders of Crescent Operating will
         receive no common shares of Crescent Real Estate and will not be
         entitled to reconsider their approval of the bankruptcy plan. Crescent
         Operating stockholders

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         receiving Crescent Real Estate shares will be deemed to have released
         all claims they may have against Crescent Operating and Crescent Real
         Estate and those acting on their behalf that arose before the effective
         date of the plan. If the Crescent Operating stockholders do not approve
         the Crescent Operating bankruptcy plan, Crescent Operating will still
         seek to have that bankruptcy plan confirmed by the bankruptcy court. If
         the bankruptcy court confirms the plan, Crescent Operating stockholders
         will not receive common shares of Crescent Equities and will still
         cease to be stockholders of Crescent Operating on the date the plan
         becomes effective.

    -    Crescent Operating will cancel all outstanding shares of its common
         stock.

    -    Pursuant to both the Settlement Agreement and the bankruptcy plan,
         Crescent Operating will transfer the remaining assets of Crescent
         Operating at the direction of Crescent Real Estate.

A copy of the Settlement Agreement is attached as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed March 1, 2002, with the Securities and Exchange
Commission ("SEC"); that report is available at the SEC's website at
www.sec.gov. The Settlement Agreement and the mutual releases executed in
connection with the Settlement Agreement, including Crescent Operating's release
of all claims it may have against Crescent Real Estate, are enforceable
regardless of whether the plan is approved by Crescent Operating's stockholders
or confirmed by the bankruptcy court.

OTHER CRESCENT OPERATING RECENT DEVELOPMENTS

In accordance with the Settlement Agreement on February 14, 2002, the Company
filed with the SEC a preliminary proxy statement for a special meeting of
stockholders to be held for the purpose of approving the prepackaged bankruptcy
plan contemplated by the Settlement Agreement.

Effective December 31, 2001, the Company, in connection with extending the
maturity of its $15.0 million loan from Bank of America from December 31, 2001
to August 15, 2002, agreed to modify the loan from an unsecured to a secured
credit facility. The Company, with the consent of Crescent Partnership which
agreed to subordinate its security interest in the Company's 40% interest in
AmeriCold Logistics, pledged all of its interest in AmeriCold Logistics to Bank
of America to secure the loan.

Effective February 13, 2002, all of the directors of Crescent Operating, other
than Jeffrey L. Stevens, who became the sole director of Crescent Operating,
resigned. The four directors who resigned continue to serve as trust managers of
Crescent Real Estate. In addition, two of these directors, Richard E. Rainwater
and John C. Goff, also served as officers of both Crescent Operating and
Crescent Real Estate. Mr. Rainwater continues to serve as Chairman of the Board
of Crescent Real Estate and Mr. Goff continues to serve as Vice Chairman of the
Board and Chief Executive Officer of Crescent Real Estate. Both resigned from
their executive officer positions with Crescent Operating effective February 13,
2002. The directors and officers who resigned determined that resignation was
advisable and in the interest of the Crescent Operating stockholders in order to
avoid potential conflicts of interest and the appearance of impropriety.

                          EQUIPMENT SALES AND LEASING

OVERVIEW

Crescent Machinery is engaged in the sale, leasing and service of construction
equipment and accessories to the construction industry located primarily in six
states as of December 31, 2001. Historically, construction equipment businesses
have been owned and operated primarily by individuals in a localized area.
Crescent Machinery has consolidated some of these businesses in order to gain
improvements in purchasing and operating efficiencies. All of the Crescent
Machinery locations represent major lines of equipment. This differentiates
Crescent Machinery from some of its pure rent-to-rent competition. Crescent
Machinery's locations offer new and used equipment for sale and rent, have
factory trained service personnel, and provide parts and warranty service.

                                       10
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Effective February 6, 2001, the Company, Crescent Machinery and SunTx Capital
Management Corp. ("SunTx") entered into a Management Rights Agreement
("Management Agreement). Under the Management Agreement, the Company and
Crescent Machinery engaged SunTx to provide general administrative and financial
advice regarding all matters not otherwise reserved for the board of directors
for Crescent Machinery for a fee of $1.0 million. This Management Agreement
terminated December 31, 2001.

Like many companies serving the construction industries, Crescent Machinery was
affected in 2001 by multiple factors impacting the industry. These factors
include excess inventories of machines available for sale or rental, severe
price competition, a slowdown in many construction markets, the reduction in the
number of new projects, the general recessionary economy, and the continued
negative effects following the terrorist attacks of September 11, 2001.


Beginning in the second quarter of 2001, Crescent Machinery's business plan
focused on right-sizing the business and creating liquidity. This plan included
the reduction of operating costs and excess or underutilized assets. As of
December 31, 2001, Crescent Machinery had reduced its inventory and rental fleet
by approximately $37.0 million since June 30, 2001 and implemented actions to
reduce expenses of approximately $5.0 million on an annualized basis. Crescent
Machinery has closed its branches in Beaumont, Texas, Van Wert, Ohio and
Franklin, Indiana, Honolulu, Hawaii, Santa Rosa, California, Sacramento,
California, Sparks, Nevada, Union City, California, Tracy, California and
Fresno, California in 2002.


Crescent Machinery's downsized refocus was implemented under the leadership of
Crescent Machinery's new chief executive, Eric E. Anderson, who joined Crescent
Machinery in July 2001. Mr. Anderson comes to Crescent Machinery immediately
from serving as interim chief operating officer of a company in a turnaround
situation in an unrelated industry. Mr. Anderson's previous experience also
includes serving as chairman and chief executive officer of Aviall, Inc. (NYSE:
AVL), a publicly traded aerospace distribution company, where he was
instrumental in a successful turnaround in 1996.

In reviewing the markets it serves, Crescent Machinery made the initial decision
to focus Crescent Machinery Company in the Texas and Oklahoma markets. Crescent
Machinery operated eight locations in these states, and believed its experience
with its customer base and the suppliers represented in these markets gave it a
strong position. With its decision to downsize to an eight location company in
Texas and Oklahoma, Crescent Machinery began to sell or close its branch
operations in California, Nevada and Hawaii.

As part of that business plan, Crescent Machinery continued reviewing key
factors to its business, including the business mix between the sale of
equipment and various rental and service programs; evaluating the suppliers
Crescent Machinery used or may add in the future to maximize the equipment
solutions Crescent Machinery offered its customers; standardizing best practices
across all branch locations; and implementing new compensation programs that
directly linked pay to performance.


An essential part of Crescent Machinery's plan involved restructuring its
existing lines of credit to provide debt service relief. Crescent Machinery
defaulted on certain major loans from commercial institutions due to Crescent
Machinery's decision not to pay the principal portion of payment installments
due from September through December 2001 in the total amount of approximately
$6.4 million. Outstanding principal amounts under default by Crescent Machinery
totaled $84.9 million at December 31, 2001. Crescent Machinery's lenders did not
exercise remedies available for Crescent Machinery's payment default.



Crescent Machinery was unable to reach satisfactory agreements with other
lenders, however, and on February 6, 2002, Crescent Machinery Company filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S.
Bankruptcy Court for the Northern District of Texas in Fort Worth, Texas.
Crescent Machinery intends to continue its normal operations in the sale, rental
and servicing of construction equipment, while attempting to reorganize and
restructure its debt to emerge a financially stronger and more competitive
business. Crescent Machinery plans to continue with business as usual during
this process, but certain locations will be evaluated and may be sold or closed
to improve efficiency. Crescent Machinery did reach an agreement with one of its
lenders to take back the equipment it had financed and limit Crescent
Machinery's exposure to shortfall on the sale of the equipment to $500,000. The
lender further agreed to finance the $500,000 over three years at 1% over prime
interest rate. Completion of the return of equipment under this agreement would
eliminate approximately $11.5


                                       11
<PAGE>

million of indebtedness of Crescent Machinery. Crescent Machinery has closed all
its locations outside of Texas and Oklahoma in 2002.



In addition to its equity claim as the sole shareholder of Crescent Machinery,
Crescent Operating is a creditor of Crescent Machinery, holding a $10.0 million
principal amount note receivable from Crescent Machinery. Crescent Operating
does not anticipate receiving a significant repayment for this note receivable
in the Crescent Machinery bankruptcy case, if any.


The Company is unable to predict as of the date of the filing of this Annual
Report whether Crescent Machinery will be able to successfully reorganize its
debt and operations, or what the treatment of creditors of Crescent Machinery
and the Company, as the sole shareholder of Crescent Machinery and as a
creditor, will be under any proposed plan of reorganization of Crescent
Machinery. The payment rights and other entitlements of pre-petition creditors
of Crescent Machinery (including the Company) and the Company, as Crescent
Machinery's sole shareholder, may be substantially altered by any plan of
reorganization confirmed by the Court. Under a plan, pre-petition creditors may
receive less than 100% of the face value of their claims, and the ownership
interest of the Company in Crescent Machinery may be substantially diluted or
cancelled in whole or in part. Crescent Operating does not anticipate receiving
any distribution in the Crescent Machinery bankruptcy case. Crescent Machinery's
bankruptcy schedules reflect that the value of Crescent Machinery's assets is
less than the amount of debt. As a result, it is likely that if Crescent
Machinery is reorganized, the equity in reorganized Crescent Machinery will be
distributed to its creditors and potential new investors not to Crescent
Operating.

There can be no assurance given that a plan of reorganization of Crescent
Machinery will be approved by the creditors, or that the Bankruptcy Court will
confirm any such plan. If a plan of reorganization is not confirmed by the
Bankruptcy Court, there can be no assurance that Crescent Machinery will have
sufficient funds to continue as a going concern, to restructure its debt on
acceptable terms or continue its operations. If such a plan is not confirmed by
the Bankruptcy Court, Crescent Machinery may be forced to liquidate its assets
under Chapter 7 of the U.S. Bankruptcy Code and to cease operations, in which
case it is unlikely that the Company would realize any significant value for its
ownership interest in Crescent Machinery.

OPERATIONAL STATISTICS


The following are operational statistics for the eight remaining branch
locations within continued operations on a same store basis.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                           For The Year Ended December 31,
                                          ---------------------------------
                                            2001         2000        1999
                                          --------     --------    --------
<S>                                       <C>          <C>         <C>
Revenue:
  New and used equipment............         47%          47%         59%
  Rental equipment..................         35%          34%         27%
  Parts, service and supplies.......         18%          19%         14%
                                          -----        -----       -----
Total revenue.......................        100%         100%        100%

Expenses:
  Cost of sales:
    New and used equipment..........         93%          88%         83%
    Rental equipment................         69%          61%         47%
    Parts, service and supplies.....         64%          66%         85%
                                          -----        -----       -----
  Total cost of sales...............         80%          75%         73%

                                          -----        -----       -----
  Gross profit......................         20%          25%         27%

  Operating expenses................         26%          23%         21%
                                          -----        -----       -----

Income (loss) from operations                (5)%          2%          6%
                                          =====        =====       =====
</TABLE>


Under the Capital Agreement, which terminated January 22, 2002, the Company
agreed upon a value for its investment in Crescent Machinery. Such agreed upon
value served as an indicator to the Company that the potential existed for the
impairment of certain assets as it relates to its current investment in Crescent
Machinery. As required under Statement of Financial Accounting Standards No.
121, using all information available, the Company determined that certain assets
within Crescent Machinery have carrying values which exceed the estimated
undiscounted cash flows of those assets. As a result, the Company recorded an
adjustment of $12.3 million and $26.9 million as impairment loss on assets in
the Company's results from continuing operations and discontinued operations of
closed branches, respectively, for the year ended December 31, 2001 related to
Crescent Machinery. The Company will continue to evaluate the assets within
Crescent Machinery for impairment and adjust such carrying values as necessary.


                                   HOSPITALITY

OVERVIEW

Prior to the February 2002 transfer of the Company's hospitality operations to
Crescent Partnership, the Hospitality segment generally consisted of the
operations of the Hospitality Properties. Each of such properties were owned by
Crescent Partnership or its affiliates and all were leased to subsidiaries of
the Company under long term leases. In addition to these properties, the Company
also had other investments in CRL.

The Hospitality Properties were comprised of unique luxury resorts, business and
convention hotels and destination health and fitness resorts and made up a small
portion of the hospitality industry. Because Crescent Operating, for the most
part, relied on third-party operators such as Marriott and Hyatt, the Company
enjoyed the advantage of the third-party operators' nationwide advertising,
reservation services and strong management.

Each of the Hospitality Properties was under lease with Crescent Equities, with
terms expiring from December 2004 to June 2009 and generally providing for (i)
base rent, with periodic rent increases, (ii) percentage rent based on a

                                       13
<PAGE>

percentage of gross hotel revenues less food and beverage revenues above a
specified amount and (iii) a percentage of gross food and beverage revenues
above a specified amount. Under the leases, the Company's subsidiaries had
assumed the rights and obligations of the property owner under the respective
management agreement with the hotel operators (including the property management
agreements with Sonoma Management Company ("SMC") for Sonoma Mission Inn and
Spa, Sonoma Mission Inn Golf and Country Club and Ventana Inn and Spa), as well
as the obligation to pay all property taxes and other charges against the
property. As part of each of the lease agreements for eight of the Hospitality
Properties, Crescent Equities had agreed to fund all capital expenditures
relating to furniture, fixtures and equipment reserves required under the
applicable management agreements. The only exception was Canyon Ranch-Tucson, in
which instance the Company owned all furniture, fixtures and equipment
associated with the property and funded all related capital expenditures. With
the permission of Crescent Equities, the Company had deferred payment of rent on
the hospitality properties. Rent expense accrued but deferred as of December 31,
2001 was $41.2 million and is included in discontinued operations.


All of the Company's hotel operations, except for the Sonoma Mission Inn and
Spa, Sonoma Mission Inn Golf and Country Club and the Ventana Inn and Spa, were
managed by third party operators. The Company and its hospitality subsidiaries
had a Master Asset Management and Administrative Services Agreement with SMC
(the "SMC Management Agreement") to manage the Hyatt Albuquerque, the
Renaissance Hotel Houston and the Denver City Center Marriott. In addition, the
Company's hospitality subsidiaries had accepted assignment from the owners of
the Sonoma Mission Inn and Spa, the Sonoma Mission Inn Golf and Country Club and
the Ventana Inn and Spa of its property management agreements with SMC. The
principals of SMC are Sanjay and Johanna Varma and CEI is an equity owner in
SMC. Payment of obligations under the SMC Management Agreement was guaranteed by
the Company. For each property for which it provided asset management services,
SMC was entitled to receive a base fee equal to 0.85% of gross revenues of the
property managed plus an incentive fee of 50% of actual net income in excess of
budgeted net income. For each property for which it provided property management
services, SMC was entitled to receive a base fee equal to 2.0% of gross revenues
of the property plus an incentive fee of 20% of net operating income in excess
of a 12% annual return on investment to owner.

As consideration for its services under the SMC Management Agreement, SMC
received an annual base fee (and no incentive fee) for 2001 of approximately
$0.6 million, for its asset management services related to the Hyatt
Albuquerque, the Renaissance Houston Hotel and the Denver City Center Marriott.

The Company had limited the potential impact of downturns in the hospitality
industry on the Company by limiting its guarantee of the rent payment
obligations of its Hospitality segment subsidiaries. The Company's guarantee
related to rent payments was limited to cash generated by the Hospitality
segment, i.e. cash flows from segments other than Hospitality would not be used
to fund rent payments in the event cash flows of the Hospitality Properties were
less than scheduled rent payments.

The Company had a 5% economic interest, representing all of the voting stock, in
CRL. CRL has a 30% interest in CR License. CR License is the entity which owns
the rights to the future use of the "Canyon Ranch" name. CRL also has an
approximate 65% economic interest in the Canyon Ranch Spa Club located in the
Venetian Hotel in Las Vegas.

RECENT DEVELOPMENTS

As more fully discussed above (See - Settlement Agreement), the Company has
transferred all of its interest in the Hospitality Properties and other assets
reflected in the Hospitality segment, including the SMC Management Agreement and
all other management agreements, to Crescent Equities as provided in the
Settlement Agreement.

OPERATIONAL STATISTICS

The following table sets forth certain information about the Hospitality
Properties, excluding the Sonoma Mission Inn Golf and Country Club, Houston
Center Athletic Club ("HCAC"), CRL and the Four Seasons in Houston for the years
ended December 31, 2001 and 2000. The information below is based on available
rooms, except for Canyon Ranch-Tucson and Canyon Ranch-Lenox, which are
destination health and fitness resorts that measure performance based on
available guest nights.

                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                                                       For the year ended December 31,
                                                                              ----------------------------------------------------
                                                                                  Average           Average           Revenue
                                                                                 Occupancy           Daily              Per
                                                                                    Rate              Rate         Available Room
                                                                              ---------------    --------------   ----------------
                                   Location       Lease Expiration    Rooms    2001     2000      2001    2000     2001      2000
                               ----------------  ------------------  -------  ------   ------    ------  ------   ------   -------
<S>                            <C>               <C>                 <C>      <C>      <C>       <C>     <C>      <C>      <C>
Upscale Business Class
  Hotels:
Denver Marriott City Center...  Denver, CO           June 2005         613      77%      84%      $123    $120     $ 95     $101
Hyatt Regency Albuquerque.....  Albuquerque, NM    December 2005       395      69       69        108     106       74       73
Renaissance Houston...........  Houston, TX          June 2009         389      64       59        113      95       73       56
                                                                     -----------------------------------------------------------
    Total/Weighted Average                                           1,397      71%      73%      $116    $111     $ 83     $ 80
                                                                     ===========================================================

Luxury Resorts and Spas:
Hyatt Regency Beaver Creek(1).  Avon, CO           December 2004       276      57%      69%      $278    $254     $159     $176
Sonoma Mission Inn & Spa......  Sonoma, CA         October 2006        228(2)   59       75        299     302      176      226
Ventana Inn & Spa.............  Big Sur, CA        December 2007        62      73       78        420     458      304      358
                                                                     -----------------------------------------------------------
    Total/Weighted Average                                             566      60%      72%      $305    $298     $182     $216
                                                                     ===========================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                   Guest
                                                                   Nights
                                                                  -------
<S>                             <C>             <C>               <C>        <C>      <C>      <C>       <C>      <C>      <C>
Destination Fitness Resorts
  and Spas:
Canyon Ranch-Tucson...........  Tucson, AZ        July 2006         250(3)
Canyon Ranch-Lenox............  Lenox, MA       December 2006       212(3)
                                                                  -------------------------------------------------------------
    Total/Weighted Average                                          462      81%(4)   86%(4)   $469(5)   $442(5)  $318(6)  $340(6)
                                                                  =============================================================

Grand Total/Weighted Average                                                 71%      75%      $263      $256     $183     $191
                                                                  =============================================================
</TABLE>

(1)  The hotel is undergoing $6.9 million renovation of all guest rooms. The
     project is scheduled to be completed by the second quarter of 2002.

(2)  In January 2000, 20 rooms, which were previously taken out of commission
     for construction of a 30,000 square foot full-service spa in connection
     with an approximately $21.0 million expansion of the hotel, were returned
     to service. The expansion was completed in the second quarter of 2000. The
     expansion also included 30 additional guest rooms. Rates were discounted
     during the construction period, which resulted in a lower average daily
     rate and revenue per available room for the year ended December 31, 1999,
     as compared to December 31, 2000.

(3)  Represents available guest nights, which is the maximum number of guests
     that the resort can accommodate per night.

(4)  Represents the number of paying and complimentary guests for the period,
     divided by the maximum number of available guest nights for the period.

(5)  Represents the average daily "all-inclusive" guest package charges for the
     period, divided by the average daily number of paying guests for the
     period.

(6)  Represents the total "all-inclusive" guest package charges for the period,
     divided by the maximum number of available guest nights for the period.

                        TEMPERATURE-CONTROLLED LOGISTICS

OVERVIEW

As of the date of this annual report, Crescent Operating continues to own and
conduct its temperature-controlled logistics operations through COPI Cold
Storage LLC.

On February 14, 2002, the Company agreed in the Settlement Agreement that a
Crescent Real Estate subsidiary, Crescent Spinco, upon the effectiveness of its
registration statement, will distribute its shares to the holders of Crescent
Real Estate common shares and will purchase Crescent Operating's entire
membership interest in COPI Cold Storage LLC, for approximately $15.0 million to
$15.5 million. It is anticipated that the interest in AmeriCold Logistics will
be transferred in 2002. The proceeds are intended to payoff the Bank of America
loan for which the Company's 40% interest in AmeriCold Logistics serves as
collateral. The distribution of the Crescent Spinco shares will be made to the
holders of Crescent Real Estate common shares prior to the issuance of Crescent
Real Estate common shares to the Crescent Operating stockholders. As a result,
the holders of Crescent Operating common stock will not receive any interest in
Crescent Spinco.

                                       15
<PAGE>
The Temperature-Controlled Logistics segment consists of a 40% interest in the
operations of AmeriCold Logistics. AmeriCold Logistics, headquartered in
Atlanta, Georgia, has 5,900 employees and operates 100 temperature controlled
storage facilities nationwide with an aggregate of approximately 525 million
cubic feet of refrigerated, frozen and dry storage space. Of the 100 warehouses,
AmeriCold Logistics leases 89 temperature controlled facilities with an
aggregate of approximately 445 million cubic feet from the Temperature
Controlled Logistics Partnerships, and manages 11 additional facilities
containing approximately 80 million cubic feet of space. AmeriCold Logistics
provides the frozen food industry with refrigerated storage and transportation
management services.

AmeriCold Logistics leases 89 refrigerated storage facilities used in its
business. The leases, as amended, which commenced in March 1999, generally have
a 15-year term with two five-year renewal options and provide for the payment of
fixed base rent and percentage rent based on revenues AmeriCold Logistics
receives from its customers. Fixed base rent was approximately $136.0 million in
2000 and was and will be approximately $137.0 million per annum from 2001
through 2003, $139.0 million per annum from 2004 through 2008 and $141.0 million
per annum from 2009 through February 28, 2014. Percentage rent for each lease is
based on a specified percentage of revenues in excess of a specified base
amount. The aggregate base revenue amount under five of the six leases is
approximately $350.0 million and the weighted average percentage rate is
approximately 36% through 2003, approximately 38% for the period from 2004
through 2008 and approximately 40% for the period from 2009 through February 28,
2014. The aggregate base revenue amount under the sixth lease is approximately
$32.0 million through 2001, and approximately $26.0 million for the period from
2002 through February 28, 2014, and the percentage rate is 24% through 2001,
37.5% for the period from 2002 through 2006, 40% from 2007 through 2011 and 41%
from 2012 through February 28, 2014. AmeriCold Logistics recognized $156.3
million and $170.6 million of rent expense for the year ended December 31, 2001
and December 31, 2000, respectively, which includes, effects of straight-lining,
rent to parties other than the Landlord and is before the waiver of rent
discussed below. AmeriCold Logistics is required to pay for all costs arising
from the operation, maintenance and repair of the properties, including all real
estate taxes and assessments, utility charges, permit fees and insurance
premiums, as well as property capital expenditures in excess of $9.5 million
annually. AmeriCold Logistics has the right to defer the payment of 15% of the
fixed base rent and all percentage rent for up to three years beginning on March
11, 1999 to the extent that available cash, as defined in the leases, is
insufficient to pay such rent. AmeriCold Logistics deferred $25.5 million and
$19.0 million of rent payments for the periods ending December 31, 2001 and
December 31, 2000, respectively.

On February 22, 2001, the AmeriCold Logistics leases were restructured to, among
other things, (i) reduce 2001's contractual rent to $146.0 million ($14.5
million less than 2000's contractual rent), (ii) reduce 2002's contractual rent
to $150.0 million (plus contingent rent in certain circumstances), (iii)
increase the Landlord's share of annual maintenance capital expenditures by $4.5
million to $9.5 million effective January 1, 2000 and (iv) extend the deferred
rent period to December 31, 2003 from March 11, 2002.

In the fourth quarter ended December 31, 2001, AmeriCold Logistics reversed
$25.5 million of the rent expense recorded for 2001 resulting from Temperature
Controlled Logistics Partnerships waiving of its rights to collect this portion
of the rent. Further, Temperature Controlled Logistics Partnerships waived $14.3
million of the rent expense recorded by AmeriCold Logistics for 2000 which
AmeriCold Logistics recorded as income in the fourth quarter ended December 31,
2001. The aggregate amount waived by the Landlord of $39.8 million represents a
portion of the rent due under the leases which AmeriCold Logistics deferred in
such years.

Under the terms of the partnership agreement for AmeriCold Logistics, Vornado
Operating, Inc. ("Vornado Operating") has the right to make all decisions
relating to the management and operations of AmeriCold Logistics other than
certain major decisions that require the approval of both the Company and
Vornado Operating. Vornado Operating must obtain Crescent Operating's approval
for specified matters involving AmeriCold Logistics, including approval of the
annual budget, requiring specified capital contributions, entering into
specified new leases or amending existing leases, selling or acquiring specified
assets and any sale, liquidation or merger of AmeriCold Logistics. If the
partners fail to reach an agreement on such matters during the period from
November 1, 2000 through October 30, 2007, Vornado Operating may set a price at
which it commits to either buy Crescent Operating's investment, or sell its own,
and Crescent Operating will decide whether to buy or sell at that price. If the
partners fail to reach agreement on such matters after October 30, 2007, either
party may set a price at which it commits to either buy the other party's
investment, or sell its own, and the other party will decide whether to buy or

                                       16
<PAGE>
sell at that price. Neither partner may transfer its rights or interest in the
partnership without the consent of the other partner. Vornado has consented to
Crescent Operating's transfer of its membership interest in COPI Cold Storage,
and thus Crescent Operating's general partnership interest in AmeriCold
Logistics, to a subsidiary of Crescent Real Estate. The partnership will
continue for a term through October 30, 2027, except as the partners may
otherwise agree.


As of December 31, 2001, the Company had not contributed its 40% portion of a
total $10.0 million expected contribution to AmeriCold Logistics. Accordingly,
AmeriCold Logistics cancelled its $4.0 million contribution receivable in
partners capital on December 31, 2001. In addition, during 2001, AmeriCold
Logistics recorded a charge of $8.9 million comprised of (i) severance and
relocation costs associated with a management restructuring and (ii) expenses
arising from the consolidation of a portion of the corporate office in Portland,
Oregon into AmeriCold Logistics Atlanta headquarters.


On May 1, 2001, Alec C. Covington became the President and Chief Executive
Officer of AmeriCold Logistics. Mr. Covington succeeded Daniel F. McNamara who
continues as Vice Chairman until May, 2002. Mr. Covington, age 45, was formerly
an Executive Vice President of SUPERVALU Inc. (NYSE:SVU) and President and Chief
Operating Officer of the SUPERVALU food distribution companies division, which
is the nation's largest distributor to grocery retailers having $17.0 billion of
revenue and 34 distribution centers. Previously, Mr. Covington was the President
and Chief Operating Officer of the wholesale division of Richfood Holdings, Inc.
when it was acquired by SUPERVALU in the fall of 1999. He has more than 25 years
of wholesale, retail and supply-chain management experience in the food
industry.

On October 22, 2001, Jonathan C. Daiker joined AmeriCold Logistics as Chief
Financial Officer. Most recently, Mr. Daiker served for five years as Executive
Vice President and Chief Financial Officer of the Simmons Company, a
manufacturer and distributor of mattresses. Prior thereto, from 1981-1995, he
held subsidiary and unit Chief Financial Officer positions with Phillips
Electronics N.V., a multibillion dollar consumer electronics company. Mr.
Daiker, a CPA, began his career with Price Waterhouse & Company.

AmeriCold Logistics is experiencing cash flow deficits which management of is
currently addressing through sales of non-core assets. In addition, AmeriCold
Logistics anticipates that the Temperature Controlled Logistics Partnerships may
further restructure the leases to provide additional cash flow.

RECENT DEVELOPMENTS


On December 31, 2002, AmeriCold Logistics sold its interests in its Carthage,
Missouri and Kansas City, Kansas quarries to a joint venture owned 56% by
Crescent Real Estate Equities Company and 44% by Vornado Realty Trust for
approximately $20 million. AmeriCold Logistics will continue to manage these
assets on behalf of the new owners.



On November 5, 2002, AmeriCold Logistics issued a $6,000,000 note to Vornado
Operating, effective March 11, 2002, in exchange for Vornado Operating's
$6,000,000 special equity contribution. Certain of AmeriCold Logistics' trade
receivables collateralize the loan. The loan bears interest of 12% and requires
monthly interest payments until maturity on December 31, 2004.


On January 23, 2002, the leases with Temperature Controlled Logistics
Partnerships were restructured to consolidate four of the non-encumbered leases
into one non-encumbered lease. The restructuring did not affect total
contractual rent due under the combined leases.

Effective December 31, 2001, the Company, in connection with extending the
maturity of its $15.0 million loan from Bank of America from December 31, 2001
to August 15, 2002, agreed to modify the loan from an unsecured to a secured
credit facility. The Company, with the consent of Crescent Partnership which
agreed to subordinate its security interest in the Company's 40% interest in
AmeriCold Logistics, pledged all of its interest in AmeriCold Logistics to Bank
of America to secure the loan.

MARKET 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

                                       17
<PAGE>
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.

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

Customers consist primarily of national, regional and local frozen food
manufacturers, distributors, retailers and food service organizations, including
H.J. Heinz & Co., ConAgra, Inc., Sara Lee Corp., Tyson Foods, Inc. and McCain
Foods, Inc.

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, transporataion and
distribution) reduction initiatives in an effort to improve operating
performance. As the economy continues to recover from the current recession and
stabilize at a level significantly greater than the trailing six months'
performance, 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. However, as AmeriCold Logistics focuses on its key initiatives, it
will forge alliances with existing and new customers that will encourage
movement of product into its facilities and strengthen long-term revenues.

AmeriCold Logistics is the largest operator of public refrigerated warehouse
space in the country. AmeriCold Logistics operated an aggregate of approximately
18% of total 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.

OPERATIONAL INFORMATION

The following table shows the location and size of facility for each of the
properties operated by AmeriCold Logistics as of December 31, 2001:

<TABLE>
<CAPTION>
                                          Total Cubic                                                    Total Cubic
                          Number of         Footage                                     Number of          Footage
      State              Properties      (in millions)                State            Properties       (in millions)
-------------------     -------------    --------------         ------------------    ------------      -------------
<S>                     <C>              <C>                    <C>                   <C>               <C>
Alabama                      5               10.8               Missouri(1)                 2                46.8
Arizona                      1                2.9               Nebraska                    2                 4.4
Arkansas                     6               33.1               New York                    1                11.8
California                  12               49.8               North Carolina              3                10.0
Colorado                     1                2.8               Ohio                        1                 5.5
Florida                      5                7.5               Oklahoma                    2                 2.1
Georgia                      8               49.5               Oregon                      6                40.4
Idaho                        2               18.7               Pennsylvania                4                50.8
Illinois                     2               11.6               South Carolina              1                 1.6
Indiana                      1                9.1               South Dakota                2                 6.3
Iowa                         2               12.5               Tennessee                   3                10.6
Kansas                       2                5.0               Texas                       4                27.2
Kentucky                     1                2.7               Utah                        1                 8.6
Maine                        1                1.8               Virginia                    2                 8.7
Massachusetts                5               10.5               Washington                  6                28.7
</TABLE>

                                       18
<PAGE>
<TABLE>
<S>                          <C>             <C>                <C>                   <C>               <C>
Minnesota                    1               5.9                Wisconsin                   3                17.4
Mississippi                  1                                  Canada                      1                 4.8
                                             4.7
                                                                                      -------           ---------
                                                                Total                     100               524.6
                                                                                      =======           =========
</TABLE>

(1) Includes one underground facility of approximately 33.1 million cubic feet.

                                LAND DEVELOPMENT

OVERVIEW

Prior to the transfer of the Company's land development interests to Crescent
Partnership in February and March 2002 pursuant to the Settlement Agreement, the
Land Development segment consisted primarily of:

    -    a 4.65% economic interest in Desert Mountain, a master planned, luxury
         residential and recreational community in northern Scottsdale, Arizona;

    -    a 52.5% general partner interest in Woodlands Operating, which provided
         management, advisory, landscaping and maintenance services to The
         Woodlands, Texas and was the lessee of The Woodlands Resort and
         Conference Center;

    -    a 2.625% economic interest (2.475% through November 2001) in Landevco,
         which owned approximately 6,600 acres for commercial and residential
         development as well as a realty office, an athletic center, and
         interests in both a title company and a mortgage company; and

    -    a 60% economic interest in COPI Colorado, an entity that had a 10%
         economic interest in CRDI, formerly CDMC, which invests in entities
         that develop or manage residential and resort properties (primarily in
         Colorado) and provides support services to such properties.

The Land Development segment competed against a variety of other housing
alternatives including other planned developments, pre-existing single-family
homes, condominiums, townhouses and non-owner occupied housing, such as luxury
apartments.

DESERT MOUNTAIN

Desert Mountain is a master planned, mixed use residential and recreational
community located in northern Scottsdale, Arizona. The property consists of
8,000 acres of land located in the high Sonoran Desert that is zoned for the
development of approximately 4,500 lots. Desert Mountain includes The Desert
Mountain Club, a private golf, tennis and fitness club which serves over 2,300
members and offers five Jack Nicklaus signature 18-hole golf courses and four
clubhouses. One of these courses is Cochise, the site of the Senior PGA Tour's
The Tradition golf tournament. Lyle Anderson, the original developer of Desert
Mountain, provides advisory services in connection with the operation and
development of Desert Mountain. Pursuant to the terms of a limited partnership
agreement, Desert Mountain Development Corporation ("Desert Mountain
Development") is entitled to receive 93% of the net cash flow of Desert Mountain
after certain payments to the sole limited partner, Sonora Partners Mountain
Partnership which owns the remaining 7% interest, have been made.

THE WOODLANDS OPERATING COMPANY

The Woodlands, is an approximately 27,000-acre master-planned residential and
commercial community located approximately 27 miles north of Houston, Texas,
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 other local developments, include a shopping mall, retail
centers, office buildings, a hospital, a community college, places of worship, a
conference center, 60 parks, 81 holes of golf, two man-made lakes, a riverwalk
and a performing arts pavilion.

Woodlands Operating was formed to provide management, advisory, landscaping and
maintenance services to entities affiliated with Crescent Operating and Crescent
Equities as well as to third parties. Pursuant to the terms of service
agreements, Woodlands Operating performed general management, landscaping and
maintenance,

                                       19
<PAGE>
construction, design, sales, promotional and other marketing services for
certain properties in which Crescent Equities owns a direct or indirect
interest. In addition, Woodlands Operating monitored certain of the real estate
investments of, and provides advice regarding real estate and development issues
to, such entities. As compensation for its management and advisory services,
Woodlands Operating was paid a monthly advisory fee on a cost-plus basis. As
compensation for its landscaping and maintenance services, Woodlands Operating
received a monthly fee on a cost-plus basis related to performing the required
landscaping and maintenance services.

Woodlands Operating also leased The Woodlands Conference Center and Country
Club, an executive conference center with a private golf and tennis club and
certain related assets (the "Conference Center") from The Woodlands Commercial
Properties Company, L.P. ("Woodlands Commercial"), a partnership, the interests
of which are owned by Crescent Equities and certain Morgan Stanley Group funds.
Woodlands Operating leased the Conference Center on a triple net basis, with
base rent in the amount of $0.75 million per month during the eight-year term of
the lease. The lease also provides for the payment of percentage rent for each
calendar year in which gross receipts from the operation of the Conference
Center exceed certain amounts.

The Woodlands Operating partnership agreement provided that distributions be
made to partners in accordance with specified payout percentages subject to
change based upon whether certain established cumulative preferred returns were
earned. As cumulative preferred returns reach certain thresholds, distributions
to the Company from Woodlands Operating increased from 42.5% to 49.5% and then
from 49.5% to 52.5%. Beginning in 2000, both the 42.5% and the 49.5% thresholds
were met by Woodlands Operating; therefore, the payout percentage to the Company
increased to 52.5%.

THE WOODLANDS LAND COMPANY, INC.

Crescent Operating owned all of the voting stock, representing a 5% economic
interest, of The Woodlands Land Company ("LandCo"), a residential and commercial
development corporation which was formerly wholly owned by Crescent Partnership,
prior to the Settlement Agreement entered into on February 14, 2002. LandCo
holds a 52.5% general partner interest in, and is the managing general partner
of, Landevco, a Texas limited partnership in which certain Morgan Stanley funds
hold a 47.5% limited partner interest. Landevco primarily owns (i) approximately
4,900 acres of land capable of supporting the development of more than 13,100
lots for single-family homes, (ii) approximately 1,700 acres capable of
supporting more than 13.3 million net rentable square feet of commercial
development, (iii) a realty office, (iv) contract rights relating to the
operation of its property, (v) an athletic center and (vi) a 50% interest in a
title company.

The Landevco partnership agreement provided that distributions be made to
partners in accordance with specified payout percentages subject to change based
upon whether certain established cumulative preferred returns were earned. As
cumulative preferred returns reach certain thresholds, distributions to Landco
from Landevco increase from 42.5% to 49.5% and then from 49.5% to 52.5%. In
2001, the 42.5% and 49.5% thresholds were met; therefore, the payout percentage
to the Company increased to 2.625%.

CRESCENT RESORT DEVELOPMENT, INC.

CRDI's investments included direct and indirect economic interests that vary
from 25% to 64% consisting primarily of the following: (i) six residential and
commercial developments and eleven residential developments in Colorado, South
Carolina and California; (ii) a timeshare development in Colorado; (iii) two
transportation companies providing approximately 80% of the airport shuttle
service to Colorado resort areas; (iv) two private clubs consisting of various
recreational and social amenities in Colorado and California; and (v) an
interest in a partnership owning an interest in the Ritz Carlton Hotel in Palm
Beach, Florida. Until December 2000, CRDI had an indirect economic interest in a
real estate company specializing in the management of resort properties in
Colorado, Utah, South Carolina and Montana. That investment was transferred to
CDMC II, a newly formed entity having the same owners, board of directors and
officers as CRDI. In connection with that transfer, CDMC II assumed the
indebtedness of CRDI incurred in connection with that investment, all of which
is owed to Crescent Partnership. Effective March 30, 2001, CDMC II sold that
investment - a membership interest in East West Resorts, LLC ("EWR") - to a
company affiliated with the other owner of EWR, for cash and a secured
promissory note. CDMC II immediately transferred the cash and note to
Transportal Investment Corp. ("TIC") in exchange for its assumption

                                       20
<PAGE>
of all of its indebtedness and dissolved. Crescent Operating owned 1%, and
Crescent Partnership owned 99%, of TIC, which owns an interest in Transportal
Network, LLC. Transportal Network is an abandoned venture that had been planned
to provide routing and load management services and facilitate related purchases
over the internet to independent truckers, shippers and receivers. Transportal
Network ceased operations in October 2000.

Effective September 11, 1998, the Company and Gerald W. Haddock, John C. Goff
and Harry H. Frampton, III (collectively, the "CRDI Sellers") entered into a
partnership agreement (the "Partnership Agreement") to form COPI Colorado. COPI
Colorado was formed for the purpose of holding and managing the voting stock of
CRDI (and, consequently, to manage CRDI) and investing in shares of Crescent
Operating common stock. In September, 1998, the Company contributed to COPI
Colorado $9.0 million in cash in exchange for a 50% general partner interest in
COPI Colorado, and each CRDI Seller contributed to COPI Colorado approximately
667 shares of CRDI voting stock, which the CRDI Sellers owned individually, in
exchange for an approximately 16.67% limited partner interest in COPI Colorado;
as a result and until January 2000, the Company owned a 50% managing interest in
COPI Colorado and the CRDI Sellers collectively owned a 50% investment interest
in COPI Colorado. Mr. Haddock assigned his 16.67% limited partner interest to
COPI Colorado effective January 2000, causing the Company's general partner
interest to increase from 50% to 60%.

COPI Colorado purchased approximately 1.1 million shares of Crescent Operating
common stock at a total purchase price of $4.3 million. The average price paid
for such shares, excluding brokers' commissions, was $3.88 per share. COPI
Colorado did not purchase shares of Crescent Operating after August 1999.

RECENT DEVELOPMENTS

On February 13, 2002, in anticipation of the Company's entering into the
Settlement Agreement - pursuant to which the Company transferred its 60% general
partnership interest in COPI Colorado to Crescent Partnership - the partners of
COPI Colorado caused it to distribute among its partners, in accordance with
their respective ownership percentage, all of the shares of the Company's stock
it held. Messrs. Goff and Frampton each received 220,506 shares, while the
Company received 661,518 shares.

Effective February 14, 2002, the Company transferred its equity interests in the
Land Development assets and related liabilities, other than the Company's
interest in Woodlands Operating, as provided for in the Settlement Agreement.
The Company transferred its interest in Woodlands Operating to Crescent Equities
on March 22, 2002.

OPERATIONAL STATISTICS

The following table sets forth certain information as of December 31, 2001
relating to the residential development properties.

<TABLE>
<CAPTION>
                                                   Total          Total           Average
                                     Total       Lots/Units     Lots/Units        Closed
                                     Lots/        Developed       Closed        Sale Price
                                     Units         Since          Since          Per Lot/         Range of Proposed
Land Development                    Planned      Inception      Inception         Unit(1)       Sale Prices Per Lot(2)
----------------                    -------      ---------      ---------         -------       ----------------------
<S>                                 <C>          <C>            <C>             <C>             <C>
Desert Mountain............          2,665          2,338          2,195        $ 515,000        $400,000-$3,050,000(3)
The Woodlands..............         37,554         26,027         24,472        $  57,000        $ 16,000-$1,035,000
CRDI.......................          2,679          1,274            869              N/A        $ 25,000-$4,600,000
                                    ------         ------         ------

Total Land Development.....         42,898         29,639         27,536
                                    ======         ======         ======
</TABLE>

(1)  Based on lots/units closed during the Company's ownership period.

(2)  Based on existing inventory of developed lots and lots to be developed.

(3)  Includes golf membership, which as of December 31, 2001, was $225,000.

                                       21
<PAGE>
                                OTHER INVESTMENTS

CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC

CBHS was the largest provider of behavioral health care treatment in the United
States. From September 9, 1999 to December 29, 2000, Crescent Operating (which
prior thereto had owned 50% of CBHS) owned a 25% common membership interest and
100% of the preferred membership interests in CBHS, and a limited partnership
interest in COPI CBHS Holdings (controlled by individual officers of Crescent
Operating), in which Crescent Operating owned 100% of the economic interests,
and which owned 65% of the common interests of CBHS. In the fourth quarter of
1999, CBHS began significant downsizing, including the closing of 18 facilities
in December 1999 and 33 facilities in January 2000. Closure of those facilities
resulted in the filing by terminated employees of several lawsuits against CBHS
and others, including Crescent Operating, for alleged violation of the WARN Act
(see "Item 3 - Legal Proceedings"). On February 16, 2000, CBHS petitioned for
relief under Chapter 11 of the United States Bankruptcy Code. Under the
protection of the bankruptcy court, CBHS has engaged in efforts to sell and
liquidate, in a controlled fashion, all of its ongoing business. On April 16,
2000, the asset purchase agreement to which a newly formed, wholly-owned
subsidiary of Crescent Operating had agreed to acquire, for $24.5 million,
CBHS's core business assets used in the operation of 37 behavioral healthcare
facilities, subject to certain conditions, terminated by its own terms because
not all of the conditions precedent to closing had been met by that date.
Subsequent to the termination of the asset purchase agreement, CBHS sold or
closed all of its remaining facilities and is in the process of final
liquidation of any remaining assets.

As a result of the liquidation of CBHS through bankruptcy, the equity investment
in CBHS became worthless. On December 29, 2000 Crescent Operating sold its 25%
common interest and its 100% preferred membership interest in CBHS, and COPI
CBHS Holdings sold its 65% common interest in CBHS, to The Rockwood Financial
Group, Inc. for a nominal sum. The Rockwood Financial Group, Inc. is wholly
owned by Jeffrey L. Stevens, Crescent Operating's Chief Executive Officer and
sole director. The sale of CBHS to the Rockwood Financial Group, Inc. was
effected as part of Crescent Operating's tax planning strategy. For the year
2000, Crescent Operating was faced with a potentially large minimum tax
liability. Crescent Operating sold its interest in CBHS in order to trigger a
loss that would significantly reduce, if not eliminate this minimum tax
liability.

MAGELLAN WARRANTS

In connection with the transaction in which the Company acquired its interest in
CBHS in 1997, the Company purchased, for $12.5 million, warrants to acquire
1,283,311 shares of Magellan Health Services, Inc. ("Magellan") common stock for
an exercise price of $30.00 per share. The Magellan warrants are exercisable in
varying increments beginning on May 31, 1998 and ending on May 31, 2009. The
Company had written down its investment in the warrants based on the estimated
fair value of the warrants of $3.0 million at December 31, 2000, using the
Black-Scholes pricing model.

As of January 1, 2001, the Company was required to adopt Statement of Financial
Standards (SFAS) No. 133, as amended by No. 138. SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, provides that all derivative
instruments be recognized as either assets or liabilities depending on the
rights or obligations under the contract and that all derivative instruments be
measured at fair value. Upon adoption, the Company was required to record the
net comprehensive loss related to its investment in Magellan warrants as a
charge in the statement of operations. Based on the value of the warrants on
December 31, 2000, the Company expensed $9.5 million on January 1, 2001 as a
cumulative effect of change in accounting principle. From January 1, 2001
forward, the Company records changes in the fair value of these warrants in the
statement of operations as investment income (loss). For the year ended December
31, 2001, the Company recorded changes in the fair value of these warrants, as
calculated using the Black-Scholes pricing model, as investment income of $1.1
million in the Company's statement of operations.

Crescent Operating transferred the Magellan warrants to Crescent Machinery
Company in 1999 as a contribution to capital. With the commencement of Crescent
Machinery's bankruptcy proceedings, the Magellan warrants became part of
Crescent Machinery's estate, subject to the claims of creditors.

                                       22
<PAGE>
For additional financial information related to the Company's business segments,
see the Company's notes to the consolidated financial statements.

                        RECENT ACCOUNTING PRONOUNCEMENTS


In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company will apply the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter 2002. The Company performed the first of the required impairment
test of goodwill and indefinite lived intangible assets in 2002 which had no
material effect on the earnings and financial position of the Company.



In August 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. It
also supersedes the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 for recognition and measurement of
the impairment of long-lived assets to be held and used and measurement of the
long-lived assets to be disposed of by sale, but broadens the definition of what
constitutes a discontinued operation and how the results of a discontinued
operation are to be measured and presented. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. The Company has presented the results
from ten branch locations that were closed during 2002 in discontinued
operations, net of tax. Accordingly, the results for years 2001, 2000 and 1999
have been restated to show discontinued operations for these branch locations.
In addition, due to the Settlement Agreement discussed in this Item 1, the Land
Development and Hospitality segments remaining at December 31, 2001 will be
presented as discontinued operations in these financial statements.


                                    EMPLOYEES

As of December 31, 2001, Crescent Operating and the following consolidated
subsidiaries had the number of employees indicated below:

<TABLE>
<S>                                                     <C>
Crescent Operating-corporate.................               5
Equipment Sales and Leasing segment..........             337
Hospitality segment..........................             635
Land Development segment.....................             691
                                                        -----

                                                        1,668
                                                        =====
</TABLE>

On May 1, 2001, Richard P. Knight resigned his position as Vice President and
Chief Financial Officer to pursue other interests.

The Company has excluded employees of Woodlands Operating, Landevco and
AmeriCold Logistics, as these subsidiaries represent equity investments for
financial reporting purposes.

                                       23
<PAGE>
ITEM 2.  PROPERTIES

At December 31, 2001, the Company, through its subsidiary, Crescent Machinery,
owned fee simple interests in four properties located in Dallas and Austin,
Texas, Tulsa, Oklahoma and Van Wert, Ohio. At December 31, 2001, the Company,
directly or indirectly, also held leasehold interests in certain facilities,
including the Hospitality Properties and other leased Crescent Machinery
locations (collectively, the "Leased Properties"). As stated in Item 1 above,
the Company transferred all of the leasehold interests in the Hospitality
Properties to Crescent Partnership in February 2002. As also stated in Item 1
above, Crescent Machinery Company filed a voluntary petition in bankruptcy on
February 6, 2002, and its properties and assets - including but not limited to
the fee simple interests and leaseholds referenced in this Item 2 - are subject
to the claims of creditors; as stated in Item 1 above, the Company believes it
will not likely receive any distribution in respect of the bankruptcy
proceeding. Management believes that, for so long as it directly or indirectly
owned or controlled fee simple interests and leaseholds referenced in this Item
2, each of such owned and the Leased Properties was adequately maintained and
suitable for use in its respective capacity. The Company or certain of its
subsidiaries entered into lease agreements in respect of the Leased Properties,
pursuant to which each respective lessee was responsible for routine maintenance
of the subject property.

For further description as to the general character of the Company's properties
by segment, see Item 1.

ITEM 3.  LEGAL PROCEEDINGS

CBHS became the subject of Chapter 11 bankruptcy proceedings by filing a
voluntary petition on February 16, 2000, in United States Bankruptcy Court for
the District of Delaware. Although CBHS is not a subsidiary of Crescent
Operating, Crescent Operating did own a majority (90%) economic interest in
CBHS, until December 29, 2000.

As stated above under "Charter Behavioral Health Systems, LLC", as a result of
the liquidation of CBHS through bankruptcy, the equity investment in CBHS became
worthless. On December 29, 2000, as part of Crescent Operating's tax planning,
Crescent Operating sold its 25% common interest and its 100% preferred
membership interest in CBHS, and COPI CBHS Holdings sold its 65% common interest
in CBHS to The Rockwood Financial Group, Inc. for a nominal sum.

Crescent Operating held no funded or liquidated claims against the estate of
CBHS. Crescent Operating filed proofs of claim against CBHS as a protective
matter for potential indemnification or contribution for third party lawsuits
and claims where Crescent Operating is a named defendant with CBHS, such as
lawsuits based upon alleged WARN Act violations purported to have been committed
by CBHS and/or its subsidiaries in closing behavioral health care facilities in
1999 and 2000. The only such lawsuits that have been brought against Crescent
Operating arise from WARN Act claims. In connection with a settlement entered
into among Crescent Operating, CBHS, the WARN Act plaintiffs, and others,
Crescent Operating's indemnification and contribution claims against CBHS based
on such lawsuits have been resolved. No other claims or lawsuits have been
asserted against Crescent Operating that would give rise to indemnification or
contribution claims by Crescent Operating against CBHS. In the event that, prior
to the bar date for asserting claims against Crescent Operating in its
bankruptcy case, no other claims or lawsuits are asserted against Crescent
Operating that would give rise to indemnification or contribution claims by
Crescent Operating against CBHS, Crescent Operating's claims for indemnification
or contribution in the CBHS case will be disallowed. If any such lawsuits or
claims are brought, Crescent Operating will pursue its indemnification and
contribution claims in the CBHS case as appropriate.

To date, several lawsuits, all of which seek class action certification, have
been filed against CBHS alleging violations of the WARN Act in the closing of
certain healthcare facilities in 1999 and 2000. Of those lawsuits, three also
named Crescent Operating as a defendant, but all three of those suits have since
been dismissed. An additional suit seeking similar relief was also filed against
Crescent Operating and Crescent Partnership, as well as CBHS.

                                       24
<PAGE>
A global Stipulation of Settlement of all WARN matters was reached and filed
with the United States District Court and Bankruptcy Court for the District of
Delaware by the WARN Act claimants, CBHS, Crescent Operating, Crescent
Partnership and the Creditors Committee in the CBHS case. The settlement was
approved by the District Court by order dated March 18, 2002. As it applies to
Crescent Operating, the settlement provides that either Crescent Operating or
Crescent Partnership was required to deposit into escrow $500,000 for the
benefit of the WARN Act claimants and, upon the settlement becoming final,
Crescent Operating will receive a complete release for all WARN Act claims and
any other claims in the CBHS case other than potential claims from those CBHS
employees who have opted out of the settlement. It appears that a maximum of
three such employees have opted out and none have made claims against Crescent
Operating to date. Crescent Partnership has paid the $500,000 into escrow. This
payment will not be included as an expense for the purposes of calculating the
aggregate value of the Crescent Real Estate shares to be distributed to the
Crescent Operating shareholders.

In accordance with an agreement between Gerald Haddock and Crescent Operating,
COPI Colorado redeemed the limited partnership interest of Mr. Haddock, Crescent
Operating's former Chief Executive Officer and President, in January 2000. COPI
Colorado paid Mr. Haddock approximately $2.6 million for his approximate 16.67%
limited partner interest (determined from an independent appraisal of the value
of COPI Colorado). Mr. Haddock challenged the valuation performed by the
independent appraiser and the procedures followed by Crescent Operating with
respect to the redemption and valuation process. On February 7, 2001, Crescent
Operating filed a lawsuit in the 141st Judicial Court of Tarrant County, Texas
seeking a declaratory judgment to assist in resolution of Crescent Operating's
dispute with Mr. Haddock. The parties settled their dispute, and the lawsuit was
dismissed effective as of January 2, 2002.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Stockholders was held on December 6, 2001. The
Company submitted three proposals to the stockholders: (i) approval of the
Restructuring Proposal (described in Item 1 above), (ii) election of two
directors - Richard E. Rainwater and Anthony M. Frank - for a term of three
years, and (iii) ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 2001. The
Restructuring Proposal is described in Item 1. The number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes,
with respect to each matter are set forth below:

              (1) The Restructuring Proposal was approved, with 5,728,738 votes
                  cast for, 810,700 votes cast against, 2,796 abstentions, and
                  4,207,294 non-votes;

              (2) Both nominees to the Board of Directors were elected, with the
                  votes for each as follows:

<TABLE>
<CAPTION>
        Name                     For             Votes Withheld
-------------------------    ------------     --------------------
<S>                          <C>              <C>
Richard E. Rainwater          9,759,359             990,169
Anthony M. Frank             10,028,135             721,393
</TABLE>

              (3) The appointment of Ernst & Young LLP as the independent
                  auditors for the Company for the year ending December 31, 2001
                  was ratified, with 10,586,328 votes cast for, 53,705 votes
                  against and 109,495 abstentions.

                                       25
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Effective June 12, 1997, shares of the Company's common stock were distributed
to shareholders of Crescent Equities and unit holders of Crescent Partnership of
record on May 30, 1997. For Crescent Equities shareholders, the distribution was
made on the basis of one share of Crescent Operating common stock for every 10
common shares of beneficial interest of Crescent Equities held on the record
date, and for limited partners of Crescent Partnership, the distribution was
made on the basis of one share of Crescent Operating common stock for every 5
units of limited partnership interest held on the record date. The Company's
common stock, $0.01 par value per share, began trading on the OTC Bulletin Board
on June 13, 1997. Effective September 8, 1997, the Company's common stock was
listed on the NASDAQ National Market under the symbol "COPI" and effective April
27, 2000, the Company's shares again began trading on the OTC Bulletin Board
because the Company's shares became ineligible for continued NASDAQ listing.

The following table reflects the high and low bid prices of the common stock for
each calendar quarter indicated.

<TABLE>
<CAPTION>
                 2001                          HIGH                     LOW
                 ----                          ----                     ---
<S>                                          <C>                      <C>
March 31................................     $   1.63                 $   0.63
June 30.................................     $   1.25                 $   0.65
September 30............................     $   0.73                 $   0.25
December 31.............................     $   0.26                 $   0.03
</TABLE>

<TABLE>
<CAPTION>
                 2000                          HIGH                     LOW
                 ----                          ----                     ---
<S>                                          <C>                      <C>
March 31................................     $   3.69                 $   2.06
June 30.................................     $   2.75                 $   1.25
September 30............................     $   1.75                 $   1.19
December 31.............................     $   1.13                 $   0.45
</TABLE>

As of April 15, 2002, there were approximately 186 holders of record of the
common stock of Crescent Operating. No cash dividends have been declared or paid
in respect of the Company's common stock. In addition, the Settlement Agreement
(See Item 1 - Settlement Agreement) limits Crescent Operating's ability to incur
additional indebtedness, incur liens, pay dividends or make certain other
restrictive payments.

                                       26
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

The following table sets forth certain summary historical financial information
for the Company and for the Predecessor. For purposes of this table, the
Predecessor consists of Moody-Day, Inc. and Hicks Muse Tate & Furst Equity Fund
II, L.P. (collectively, the "Carter-Crowley Asset Group"). The following
information should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 and the
Financial Statements and Supplementary Data included in Item 8.


<TABLE>
<CAPTION>
                                                                                                                  Carter-Crowley
                                                                                                                    Asset Group
                                                            Crescent Operating, Inc.                              (Predecessor)
                                       ---------------------------------------------------------------------    ----------------
                                                                                            For the Period       For the Period
                                                                                                 From                 From
                                                                                             May 9, 1997         January 1, 1997
                                           2001         2000          1999        1998     December 31, 1997      to May 8, 1997
                                       ------------  -----------  ------------  ---------  -----------------    ----------------
                                                                 (in thousands)
<S>                                    <C>           <C>          <C>           <C>        <C>                  <C>
Operating Data:
   Revenues.......................       $ 67,521     $102,591      $ 97,615     $ 80,754       $ 19,600             $ 4,657
   (Loss) income from
      operations..................        (22,893)      (1,027)        2,440        2,734           (556)                158

   Net (loss) income..............        (78,133)      (3,690)       (2,695)       1,141        (22,165)                 25
   (Loss) Income per share-basic
      and diluted.................          (7.55)       (0.36)        (0.26)        0.10          (2.00)                  -

Balance Sheet Data:
   Total assets...................       $945,404     $910,528      $795,653     $937,333       $602,083
   Total debt.....................        587,110      473,517       421,874      371,139        258,129
   Total shareholders'
      deficit.....................        (93,388)     (23,533)      (20,522)     (16,068)        (8,060)
</TABLE>


                                       27
<PAGE>

                          SEGMENT FINANCIAL INFORMATION
                             (AMOUNTS IN THOUSANDS)

The following is a summary of Crescent Operating's financial information
reported by segment for the year ended December 31, 2001:

<TABLE>
<CAPTION>
                                                                                 EQUIPMENT                          TEMPERATURE
                                                                                   SALES                            CONTROLLED
                                                                                AND LEASING        HOSPITALITY       LOGISTICS
                                                                               -------------       -----------      ----------
<S>                                                                            <C>                 <C>              <C>
Revenues....................................................................   $      67,521       $         -       $       -

Operating expenses..........................................................          83,445                 -              21
                                                                               -------------       -----------       ---------
Loss from operations........................................................         (15,924)                -             (21)
Investment loss.............................................................               -                 -               -
Equity in losses of unconsolidated subsidiaries.............................               -                 -          (2,275)
Other (income) expense
    Interest expense (net)..................................................           4,125                 -               -
    Other...................................................................           1,419                 -               -
                                                                               -------------       -----------       ---------
Total other expense.........................................................           5,544                 -               -
                                                                               -------------       -----------       ---------
Loss from operations before income taxes....................................         (21,468)                -          (2,296)
Income tax provision (benefit)..............................................          (1,816)                -            (919)
                                                                               -------------       -----------       ---------
Loss from continuing operations.............................................         (19,652)                -          (1,377)
Discontinued operations (note 4 of financial statements)
    (Loss) income from operations of discontinued Hospitality
    and Land Development segments (less applicable income
    tax expense of $7,966 and minority interests of $(13,588)...............               -            (8,536)              -

    Loss from operations of discontinued equipment sales and
    leasing branches less applicable income tax benefit of $(1,968).........         (32,707)                -               -
                                                                               -------------       -----------       ---------
(Loss) income from discontinued operations..................................         (32,707)           (8,536)              -
                                                                               -------------       -----------       ---------
(Loss) income before accounting change......................................         (52,359)           (8,536)         (1,377)
Cumulative effect of change in accounting principle.........................               -                 -               -
                                                                               -------------       -----------       ---------
    Net (loss) income.......................................................   $     (52,359)      $    (8,536)      $  (1,377)
                                                                               =============       ===========       =========
</TABLE>



<TABLE>
<CAPTION>
                                                                                 LAND
                                                                             DEVELOPMENT               OTHER             TOTAL
                                                                           --------------          -------------     -------------
<S>                                                                        <C>                     <C>               <C>
Revenues................................................................   $            -          $           -      $     67,521

Operating expenses......................................................                -                  6,948            90,414
                                                                           --------------          -------------      ------------
Loss from operations....................................................                -                 (6,948)          (22,893)
Investment loss.........................................................                -                  1,135             1,135
Equity in losses of unconsolidated subsidiaries.........................                -                      -            (2,275)
Other (income) expense
    Interest expense (net)..............................................                -                  9,116            13,241
    Other...............................................................                -                     (2)            1,417
                                                                           --------------          -------------      ------------
Total other expense.....................................................                -                  9,114            14,658
                                                                           --------------          -------------      ------------
Loss from operations before income taxes................................                -                (14,927)          (38,691)
Income tax provision (benefit)..........................................                -                 (5,856)           (8,591)
                                                                           --------------          -------------      ------------
Loss from continuing operations.........................................                -                 (9,071)          (30,100)
Discontinued operations (note 4 of financial statements)

    (Loss) income from operations of discontinued Hospitality
    and Land Development segments (less applicable income
    tax expense of $7,966 and minority interests of $(13,588)...........            2,719                      -            (5,817)

    Loss from operations of discontinued equipment sales and
    leasing branches less applicable income tax benefit of $(1,968).....                -                      -           (32,707)
                                                                           --------------          -------------      ------------
(Loss) income from discontinued operations..............................            2,719                      -           (38,524)
                                                                           --------------          -------------      ------------
(Loss) income before accounting change..................................            2,719                 (9,071)          (68,624)
Cumulative effect of change in accounting principle.....................                -                 (9,509)           (9,509)
                                                                           --------------          -------------      ------------
    Net (loss) income...................................................   $        2,719          $     (18,580)     $    (78,133)
                                                                           ==============          =============      ============
</TABLE>


                                       28
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

OVERVIEW

The Settlement Agreement discussed above provides for a bankruptcy plan of
Crescent Operating to be implemented under the federal Bankruptcy Code. In
addition, all of the Company's assets in its Hospitality and Land Development
segments were transferred to Crescent Real Estate pursuant to the Settlement
Agreement. (See - Item 1 - Settlement Agreement)

The following discussion should be read in conjunction with the "Selected
Financial Data" and the financial statements and notes thereto, appearing
elsewhere in this report. Historical results and percentage relationships set
forth in "Selected Financial Data" should not be taken as indicative of future
operations of the Company.

The following table sets forth financial data for the Company.


<TABLE>
<CAPTION>
                                                                  For the            For the             For the
                                                                 Year Ended         Year Ended          Year Ended
(In thousands)                                               December 31, 2001   December 31, 2000   December 31, 1999
                                                            ------------------  ------------------  ------------------
<S>                                                         <C>                 <C>                 <C>
REVENUES
  Equipment sales & leasing                                    $        67,521     $        69,976         $    62,311
  Hospitality                                                                -              32,615              35,304
                                                               ---------------     ---------------         -----------
     Total revenues                                                     67,521             102,591              97,615

OPERATING EXPENSES
  Equipment sales & leasing                                             71,113              68,710              58,799
  Hospitality                                                                -              22,582              24,649
  Hospitality properties rent - CEI                                          -               8,102               9,105
  Land development                                                           -                   -                  18
  Corporate general and administrative                                   6,969               4,224               2,604
  Impairment of assets                                                  12,332                   -                   -
                                                               ---------------     ---------------         -----------
     Total operating expenses                                           90,414             103,618              95,175
                                                               ---------------     ---------------         -----------
(LOSS) INCOME FROM OPERATIONS                                          (22,893)             (1,027)              2,440
                                                               ---------------     ---------------         -----------
INVESTMENT INCOME                                                        1,135                 722               1,890

EQUITY IN LOSS OF UNCONSOLIDATED SUBSIDIARIES                           (2,275)             (6,952)             (3,472)

OTHER EXPENSE (INCOME)
  Interest expense                                                      13,241              14,123              11,993
  Interest income                                                            -                (439)               (458)
  Gain on lease termination of hotel and sale of club                        -             (19,852)                  -
  Other                                                                  1,417                 762                  19
                                                               ---------------     ---------------         -----------
     Total other expense (income)                                       14,658              (5,406)             11,554
                                                               ---------------     ---------------         -----------

 LOSS FROM CONTINUING OPERATIONS BEFORE TAXES                          (38,691)             (1,851)            (10,696)

INCOME TAX BENEFIT                                                      (8,591)               (929)             (9,102)
                                                               ---------------     ---------------         -----------

LOSS FROM CONTINUING OPERATIONS                                        (30,100)               (922)             (1,594)

DISCONTINUED OPERATIONS
    (Loss) income from operations of discontinued
     Hospitality and Land Development segments
     (less applicable income tax expense of $7,966,
     $14,664 and $6,505 and minority interests of
     $(13,588), $(26,018) and $(14,112))                                (5,817)                106                 319

    Loss from operations of discontinued Equipment
    Sales and Leasing branches (less applicable
    income tax benefit of $(1,968), $(1,988) and $(874)                (32,707)             (2,874)             (1,420)
                                                               ---------------     ---------------         -----------

       (LOSS) FROM DISCONTINUED OPERATIONS                             (38,524)             (2,768)             (1,101)
                                                               ---------------     ---------------         -----------

LOSS BEFORE ACCOUNTING CHANGE                                          (68,624)             (3,690)             (2,695)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                     (9,509)                  -                   -
                                                               ---------------     ---------------         -----------
NET LOSS                                                       $       (78,133)    $        (3,690)        $    (2,695)
                                                               ===============     ===============         ===-=======
</TABLE>


                                       29
<PAGE>
YEAR ENDED DECEMBER 31, 2001, COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

REVENUES


Total revenue decreased $35.1 million, or 34.2%, to $67.5 million for the year
ended December 31, 2001, compared with $102.6 million for the year ended
December 31, 2000. The decrease in total revenue is attributable to the
following:



Equipment Sales and Leasing Segment

Equipment sales and leasing revenue decreased $2.5 million, or 3.6%, to $67.5
million for the year ended December 31, 2001, compared with $70.0 million for
the year ended December 31, 2000. The decrease in revenue is discussed below.
In addition, Crescent Operating believes that revenue was impacted significantly
and negatively by the general recession and additionally as a consequence of the
September 11, 2001 terrorist attacks against the United States and the
continuing threat of terrorism as certain industries reduce their construction
expenditures. Significant components of the decrease were:



     -   a decrease of $1.3 million in new and used equipment sales due to
         weaker market conditions and increased demand from customers for
         rentals as compared to purchases; and



     -   an decrease in parts, service and supplies revenue of $1.6 million for
         the current year primarily due to decreased demand for maintenance and
         repair work; partially offset by



     -   an increase in rental revenue of $0.4 million during the year ended
         December 31, 2001 primarily due to same store rental growth.



Hospitality Segment

Hospitality revenue from continuing operations decreased $32.6 million, or 100%,
for the year ended December 31, 2001 as compared to hospitality revenue from
continuing operations of $32.6 million for the year ended December 31, 2000. The
decrease in revenue was due to the sale of the Four Seasons Hotel in Houston on
November 3, 2000.


OPERATING EXPENSES


Total operating expenses decreased $13.2 million, or 12.7%, to $90.4 million for
the year ended December 31, 2001, compared with $103.6 million for the year
ended December 31, 2000. The decrease in operating expenses is attributable to
the following:


Equipment Sales and Leasing Segment


Equipment sales and leasing expenses increased $14.7 million, or 21.4%, to $83.4
million for the year ended December 31, 2001, compared with $68.7 million for
the year ended December 31, 2000. Significant components of the overall increase
were:



-    an adjustment of $12.3 million related to impairment of property, equipment
     and goodwill at Crescent Machinery;



-    a $2.1 million increase in rental expenses due mainly to an increase in
     rental inventory resulting in increased depreciation expense and
     maintenance costs for the year ended December 31, 2001;



-    an increase of $1.0 million in general and administrative expenses due
     primarily to increases in corporate payroll, insurance expense and
     professional fees; and



-    a $0.5 million increase in new and used equipment expenses; partially
     offset by



-    a $1.2 million decrease in parts, service and supplies expenses due
     primarily to reductions in sales of new and used equipment.



Hospitality Segment

Hospitality expenses from continuing operations decrease $30.7 million, or 100%,
for the year ended December 31, 2001 as compared to hospitality expenses from
continuing operations of $30.7 million for the year ended December 31, 2000. The
decrease was due to the sale of the Four Seasons Hotel in Houston on November 3,
2000.


Corporate General and Administrative Expenses

Corporate general and administrative expenses increased $2.8 million, or 66.7%,
to $7.0 million for the year ended December 31, 2001, compared with $4.2 million
for the year ended December 31, 2000. These expenses consisted of general
corporate overhead costs, such as legal and accounting costs, insurance costs
and corporate salaries. The increase over prior year is primarily attributable
to (i) a reserve recorded by the Company for amounts due from Crescent
Operating, Inc. Voluntary Employees' Beneficiary Association Health Care Plan,
(ii) management fees payable to SunTx under the Management Agreement and (iii)
professional fees incurred in connection with the proposed restructuring of the
Company. See - Item 1 - Settlement Agreement.

                                       30
<PAGE>
INVESTMENT INCOME


Investment income increased $0.4 million or 57.1%, to $1.1 million for the year
ended December 31, 2001, compared with $0.7 million for the year ended December
31, 2000. Significant components of the overall increase were:



-    an increase in investment income of Magellan warrants in the amount of $1.1
     million; partially offset by



-    no gains on sales of investments in 2001 compared to gains on sale of CS I
     and CS II in the amount of $0.7 million which occurred in 2000.



EQUITY IN LOSSES OF UNCONSOLIDATED SUBSIDIARIES



Equity in losses of unconsolidated subsidiaries decreased $4.7 million or 67.1%,
to $(2.3) million for the year ended December 31, 2001, compared with loss $7.0
million for the year ended December 31, 2000. Significant components of the
overall decrease were:






-    no equity in income of Transportal Network as compared to income of $0.4
     million in 2000; partially offset by


-    a decrease in equity in loss of AmeriCold Logistics in the amount of $5.1
     million.


OTHER EXPENSE (INCOME)



Other expense (income) decreased $20.1 million to $14.7 million for the year
ended December 31, 2001, compared with income of $(5.4) million for the year
ended December 31, 2000. Significant components of the decrease were:



-    no gain on sale of the Four Seasons Hotel in Houston of $18.3 million;

-    no gain on sale of the Houston Center Athletic Club $1.6 million;

-    a decrease in interest expense of $0.9 million for the year ended December
     31, 2001 primarily due to lower debt balances as compared to the year ended
     December 31, 2000; and

-    a decrease in interest income in the amount of $0.4 million due to a put
     option to sell the Company's remaining 20% of its 5% interest in the
     Temperature Controlled Logistics Partnerships in 2000; partially offset by

-    an increase in Other expense in the amount of $0.7 million due to increases
     in bad debt expense within the Equipment Sales and Leasing segment.





INCOME TAX (BENEFIT) PROVISION


Income tax benefit of $8.6 million for the year ended December 31, 2001
represents a increase of $7.7 million from the year ended December 31, 2000.
Income tax benefit consisted of a $5.9 million benefit at the corporate level, a
$1.8 million benefit for the Equipment Sales and Leasing segment, and a $0.9
million benefit for the Temperature Controlled Logistics segment.



Management continues to evaluate its ability to realize the deferred tax assets
quarterly by assessing the need for a valuation allowance. An inability of the
Company to execute business plans for certain of the company's segments could
affect the ultimate realization of the deferred tax assets.



MINORITY INTERESTS



Minority interests were eliminated as a result of the assignment of the Land
Development and Hospitality segments to Crescent Equities pursuant to the
Settlement Agreement.



DISCONTINUED OPERATIONS



On January 1, 2002, the Company adopted Statements of Financial Accounting
Standards SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (See Note 12). SFAS No. 144 broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented.



Pursuant to the Settlement Agreement, the Company transferred its interests in
the Hospitality and Land Development segments as of February 14, 2002 and March
22, 2002. The Company has reclassed results from operations for the Hospitality
and Land Development segments as discontinued operations for the years ended
December 31, 2001, 2000 and 1999. The Company realized losses from discontinued
operations of $5.8 million


                                       31
<PAGE>

after minority interest of $13.6 million and a $8.0 million income tax expense,
related to the Hospitality and Land Development segments for the year ended
December 31, 2001, as compared to income from discontinued operations of $0.1
million after minority interest of $26.0 million and income tax expense of $14.7
million, for the year ended December 31, 2000. Significant components of the
$5.9 million decrease in discontinued operations related to the Hospitality and
Land Development segments were:



-    decrease in income from the Hospitality segment due to decreases in
     occupancy from weaker market conditions; and



-    fewer home sales and memberships within the Land Development segment due to
     weaker market conditions.



In addition, during 2002, Crescent Machinery closed down ten branch locations.
The Company realized a loss $32.7 million, net of income tax benefit of $2.0
million, from discontinued operations related to the Equipment Sales and Leasing
segment for the year ended December 31, 2001 as compared to a loss of $2.9
million, net of income tax benefit of $2.0 million for the year ended December
31, 2000. Significant components of the $29.8 million decrease were:



-    an adjustment of $26.9 million related to impairment of property, equipment
     and goodwill at the closed branches; and



-    decreases in new and used equipment income and parts, supplies and service
     income due to weaker market conditions and increased demand for rentals as
     compared to purchases.


YEAR ENDED DECEMBER 31, 2000, COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

REVENUES


Total revenue increased $5.0 million, or 5.1%, to $102.6 million for the year
ended December 31, 2000, compared with $97.6 million for the year ended December
31, 1999. The increase in total revenue is attributable to the following:



Equipment Sales and Leasing Segment

Equipment sales and leasing revenue increased $7.7 million, or 12.4%, to $70.0
million for the year ended December 31, 2000, compared with $62.3 million for
the year ended December 31, 1999. Significant components of the increase were:



     -   an increase in rental revenue of $6.4 million during the year ended
         December 31, 2000 primarily due to acquisitions since January 1, 1999
         and same store rental growth; and



     -   an increase in parts, service and supplies revenue of $4.7 million for
         the current year primarily due to increased demand for maintenance and
         repair work; partially offset by



     -   a decrease of $3.4 million in new and used equipment sales due to
         increased demand from customers for rentals as compared to purchases.



Hospitality Segment

Hospitality revenue from continuing operations decreased $2.7 million, 7.6%, to
$32.6 million for the year ended December 31, 2000 as compared to hospitality
revenue from continuing operations of $35.3 million for the year ended
December 31, 1999. The $2.7 million decrease in revenue was due to the sale
of the Four Seasons Hotel in Houston on November 3, 2000.


OPERATING EXPENSES


Total operating expenses increased $8.4 million, or 8.8%, to $103.6 million for
the year ended December 31, 2000, compared with $95.2 million for the year ended
December 31, 1999. The increase in operating expenses is attributable to the
following:


                                       32
<PAGE>
Equipment Sales and Leasing Segment


Equipment sales and leasing expenses increased $9.9 million, or 16.8%, to $68.7
million for the year ended December 31, 2000, compared with $58.8 million for
the year ended December 31, 1999. Significant components of the overall increase
were:



-    an $6.4 million increase in rental expenses due mainly to an increase in
     rental inventory resulting in increased depreciation expense for the year
     ended December 31, 2000;



-    a $3.2 million increase in operating expenses due primarily to acquisitions
     since January 1, 1999 and to the startup of the Fort Worth location in late
     1999; and



-    a $1.4 million increase in parts, service and supplies expenses as a result
     of an increase in parts, service and supplies revenue; partially offset by



-    a $1.1 million decrease in new and used equipment expenses as a result of a
     decrease in new and used equipment sales.



Hospitality Segment



Hospitality expenses from continuing operations decreased $3.1 million, or 9.2%,
to $30.7 million for the year ended December 31, 2000 as compared to hospitality
expenses from continuing operations of $33.8 million for the year ended December
31, 1999. The decrease of $3.1 million was due to the sale of the Four Seasons
Hotel in Houston on November 3, 2000.





Corporate General and Administrative Expenses


Corporate general and administrative expenses increased $1.6 million, or 61.5%,
to $4.2 million for the year ended December 31, 2000, compared with $2.6 million
for the year ended December 31, 1999. These expenses consisted of general
corporate overhead costs, such as legal and accounting costs, insurance costs
and corporate salaries. The increase over prior year is primarily attributable
to (i) costs of approximately $0.5 million incurred in connection with
proceedings in bankruptcy court and litigation outside of bankruptcy court
arising from the Company's ownership interest in CBHS, (ii) professional fees of
approximately $0.6 million incurred in connection with the proposed
restructuring of the Company and (iii) transaction costs of approximately $0.5
million incurred by the Company in conjunction with the negotiation, execution
and termination of the asset purchase agreement with CBHS.


Investment Income


Investment income decreased $1.2 million or 63.2%, to $0.7 million for the year
ended December 31, 2000, compared with $1.9 million for the year ended December
31, 1999. Significant components of the overall decrease were:



-    a decrease in gain on sale of CS I and CS II of $0.8 million to $0.7
     million for the year ended December 31, 2000 as compared to a gain of $1.5
     million for the year ended December 31, 1999;


-    no recognition of income of $0.2 million from the investment in Hicks Muse
     as it was sold in 1999; and

-    no gain on sale from the Corporate Arena of $0.2 million recognized for the
     year ended December 31, 1999.


Equity in Income (Loss) of Unconsolidated Subsidiaries



Equity in income (loss) of unconsolidated subsidiaries increased $3.5 million
or 100%, to $7.0 million for the year ended December 31, 2000, compared with
losses of $(3.5) million for the year ended December 31, 1999. Significant
components of the overall increase were:





-    an increase in equity in loss of AmeriCold Logistics in the amount of $3.7
     million partially due to holding the investment for a full year as compared
     to ten months in the prior year as well as increased labor costs;


-    a decrease in equity in income of HCAC in the amount of $0.3 million; and



-    a decrease in equity in income of CS I and CSII in the amount of $0.3
     million; partially offset by



-    a decrease in equity in loss of Transportal Network in the amount of $0.8
     million.




                                       33
<PAGE>





OTHER EXPENSE(INCOME)



Other expense (income) decreased $17.0 million, or 147%, to $(5.4) million for
the year ended December 31, 2000, compared with $11.6 million for the year ended
December 31, 1999. Significant components of the decrease were:



-    gain on lease termination resulting from sale of the Four Seasons Hotel in
     Houston of $18.3 million; and

-    gain on sale of the Houston Center Athletic Club of $1.6 million; partially
     offset by

-    an increase in interest expense in the amount of $2.1 million for the year
     ended December 31, 2000, resulting from an increase in outstanding
     indebtedness in connection with acquisitions; and

-    an increase in Other expense in the amount of $0.8 million due to increases
     in bad debt expense within the Equipment Sales & Leasing segment.



INCOME TAX BENEFIT



Income tax benefit of $0.9 million for the year ended December 31, 2000
represents an decrease of $8.2 million from the year ended December 31, 1999.
Income tax benefit consisted of a $4.4 million benefit at the corporate level, a
$1.8 million benefit for the Equipment Sales and Leasing segment and a $3.0
million benefit for the Temperature Controlled Logistics segment partially
offset by income tax expense for the Hospitality segment of $8.2 million.



Management continues to evaluate its ability to realize the deferred tax assets
quarterly by assessing the need for a valuation allowance. An inability of the
Company to execute business plans for certain of the company's segments could
affect the ultimate realization of the deferred tax assets.



MINORITY INTERESTS



Minority interests were eliminated as a result of the assignment of the Land
Development and Hospitality segments to Crescent Equities pursuant to the
Settlement Agreement.



DISCONTINUED OPERATIONS



On January 1, 2002, the Company adopted Statements of Financial Accounting
Standards SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (See Note 12). SFAS No. 144 broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented.



Pursuant to the Settlement Agreement, the Company transferred its interests in
the Hospitality and Land Development segments as of February 14, 2002 and March
22, 2002. The Company has reclassed results from operations for the Hospitality
and Land Development segments remaining at December 31, 2001 as discontinued
operations for the years ended December 31, 2001, 2000 and 1999. The Company
realized income from discontinued operations of $0.1 million after minority
interest of $26.0 million and a $14.7 million income tax expense, related to the
Hospitality and Land Development segments for the year ended December 31, 2000,
as compared to income from discontinued operations of $0.3 million after
minority interest of $14.1 million and income tax expense of $6.5 million, for
the year ended December 31, 1999. Significant components of the $0.2 million
decrease were:




-    decreased income from the Land Development segment due to fewer home and
     lot sales as compared to the prior year; partially offset by



-    increased income at Sonoma Mission Inn and Spa which can be attributed to
     the 30 additional guest rooms completed in April 2000, the return of 20
     rooms in January 2000 which were taken out of commission in February 1999
     to house a temporary spa during the construction of the 30,000 square foot
     full-service spa, as well as increased rates in the current year as
     compared to discounted rates used in the prior year during the construction
     period; and



-    income from the Renaissance Hotel, which was first leased by the Company in
     June 1999; and



-    increased income from the Hospitality segment due to increased rates and
     occupancy as compared to 1999.




                                       34
<PAGE>

During 2002, Crescent Machinery closed down ten branch locations. The Company
realized a loss $2.9 million, net of income tax benefit of $2.0 million, from
discontinued operations related to the Equipment Sales and Leasing segment for
the year ended December 31, 2000 as compared to a loss of $1.4 million, net of
income tax benefit of $0.9 million for the year ended December 31, 1999.
Significant components of the $1.5 million increase were:



-    an increase in loss during the year ended December 31, 2000 as compared to
     the year ended December 31, 1999 primarily due to a full year recognition
     of operations from acquisitions throughout 1999; and



-    a decrease in demand of new and used equipment due to increased demand from
     customers for rentals as compared to purchases.


LIQUIDITY AND CAPITAL RESOURCES

Recognizing that cash flow from its assets would not provide the Company with
adequate capital to meet its requirements during 2000 and 2001, the Company,
during the first quarter of 2000, extended certain payment obligations by
reaching agreements with Crescent Equities to defer until February 2001 payments
on certain of Crescent Operating's obligations to Crescent Equities otherwise
scheduled to be made in 2000. During 2001, the Company and Crescent Partnership
agreed to modify certain debt agreements, subject to the consummation of the
Restructuring Proposal, to (i) defer principal and interest payments until the
earlier of December 31, 2001 or the close of the transaction contemplated by the
Purchase Agreement and (ii) cease the accrual of interest on certain debt
instruments as of May 1, 2001. Because the transactions contemplated by the
Purchase Agreement were not consummated, the condition was not met, and the
modifications became ineffective. In addition, in August 2001, November 2001 and
again in March 2002, with an effective date of December 2001, the Company
modified the due date of its line of credit with Bank of America to be August
15, 2002.

In addition, the recession, magnified by the September 11, 2001 terrorist
attacks, has placed significant pressure on Crescent Operating's ability to meet
its obligations as they come due. Consequently, Crescent Operating and its
operating units have defaulted in the payment of their obligations owed to
Crescent Real Estate and Crescent Partnership. Based upon current and reasonably
forecasted operating results, Crescent Operating will not be able to pay all of
its obligations as they come due. In addition, the Company's auditors report
included on the financial statements included in this Annual Report on Form 10-K
has expressed substantial doubt about the Company's ability to continue to
operate as a going concern.

In February 2002, Crescent Operating was notified by Crescent Real Estate that
the Company's obligations to Crescent Real Estate were in default. Moreover,
Crescent Real Estate announced that it would seek to enforce collection by
foreclosure or otherwise of its claims against Crescent Operating and its
operating units as quickly as possible. Crescent Operating was unable to repay
the debts to Crescent Real Estate as to which a default had been declared.
Crescent Operating did not have sufficient liquidity to pay its liabilities on a
current basis. In light of these factors, Crescent Operating entered into a
Settlement Agreement with Crescent Real Estate. See - Item I - Settlement
Agreement.


The Settlement Agreement significantly restricts Crescent Operating's ability to
access capital resources. Among other things, the Settlement Agreement limits
Crescent Operating's ability to incur additional indebtedness, incur liens, pay
dividends or make certain other restrictive payments. Based on these
restrictions in the Settlement Agreement and Crescent Operating's current
financial condition, it is unlikely that Crescent Operating would have access to
any third-party financing. In connection with the Settlement Agreement, Crescent
Real Estate did provide Crescent Operating with a $8.6 million facility to
provide liquidity during the pendency of the bankruptcy case. Pursuant to this
facility, Crescent Real Estate will fund only Crescent Operating's out-of-pocket
operating expenses through the bankruptcy. Even with this financing, it is
unlikely that Crescent Operating will be able to fund its working capital
requirements.


                                       35
<PAGE>



Interest payments and rent payments accrued but deferred as of December 31, 2001
totaled approximately $6.4 million and $41.2 million, respectively. Based on the
above, the Company's auditors' report included on the financial statements
included in this Annual Report on Form 10-K has expressed substantial doubt
about the Company's ability to continue to operate as a going concern and meet
its obligations when they come due.

CASH FLOWS

Cash and cash equivalents include amounts from all consolidated subsidiaries,
including subsidiaries not wholly owned. Changes, therefore, do not necessarily
represent increases or decreases in cash directly available to the Company.


Cash and cash equivalents were $0.5 million and $1.0 million at December 31,
2001 and December 31, 2000, respectively (see Note 1 of financial statements).
The 50.0% decrease is attributable to $14.2 million and $118.7 million of cash
provided by investing and financing activities, respectively, partially offset
by $133.4 million of cash used in operating activities.


OPERATING ACTIVITIES


Net cash flows used in operating activities for the year ended December 31, 2001
were $133.4 million compared with the net cash used in operating activities of
$46.4 million and $9.1 million for the years ended December 31, 2000 and 1999,
respectively. The Company's outflow of cash used in operating activities of
$133.4 million was primarily attributable to outflows from:



     -   net operating activities of discontinued operations of $136.7 million;



     -   net loss of $78.1 million; and



     -   a decrease in other assets of $0.5 million.


The outflow of cash used in operating activities was partially offset by:


     -   decrease in inventories of $15.8 million;



     -   decrease in accounts receivable of $11.2 million; and



     -   decrease in prepaid expenses and current assets of $0.6 million.


INVESTING ACTIVITIES

Net cash flows provided by investing activities for the year ended December 31,
2001 were $14.2 million compared with the net cash provided by investing
activities of $20.4 million and the net cash used in investing activities of
$34.5 million for the years ended December 31, 2000 and 1999, respectively. The
Company's inflow of cash provided by investing activities of $14.2 million was
primarily attributable to inflows from:


     -   proceeds from the sale of property and equipment of $22.4 million; and



     -   net investing activities of discontinued operations of $13.0 million.


The inflow of cash provided by investing activities was partially offset by:


     -   purchases of property and equipment of $21.1 million.


FINANCING ACTIVITIES

Net cash flows provided by financing activities for the year ended December 31,
2001 were $118.7 million compared with the net cash provided by financing
activities of $27.0 million and $40.1 million for the years ended

                                       36
<PAGE>
December 31, 2000 and 1999, respectively. The Company's inflow of cash provided
by financing activities of $118.7 million was primarily attributable to inflows
from:


     -   net financing activities of discontinued operations of $156.2 million;
         and



     -   proceeds of all long-term debt of $39.8 million.


The inflow of cash provided by financing activities was partially offset by:


     -   payments of all long-term debt of $77.4 million.


FINANCING ATTRIBUTABLE TO CORPORATE AND WHOLLY OWNED SUBSIDIARIES

As of December 31, 2001, financing instruments attributable to corporate and
wholly owned subsidiaries were as follows:

-    During 2001, the Company extended the maturity date of its $15.0 million
     unsecured bank line of credit from Bank of America, first from August 2001
     to November 2001, then from November 2001 to the earlier of December 31,
     2001 or the close of the Purchase Agreement and finally in March 2002, with
     an effective date of December 31, 2001, from December 2001 to August 2002.
     The line of credit bears interest at the LIBOR rate plus 1% per annum,
     payable monthly and all principal and unpaid interest on the line of credit
     is payable August 15, 2002. The $15.0 million available under the line of
     credit from Bank of America is fully drawn.

-    In connection with the formation and capitalization of Crescent Operating
     in the second quarter of 1997, Crescent Operating received approximately
     $14.1 million in cash from Crescent Partnership and Crescent Partnership
     loaned Crescent Operating approximately $35.9 million pursuant to a
     five-year term loan, maturing on May 8, 2002, of which approximately $16.2
     million was outstanding as of December 31, 2001. The loan is a recourse
     loan that is collateralized, to the extent not prohibited by pre-existing
     arrangements, by a first lien on the assets which the Company now owns or
     may acquire in the future. The loan bears interest at the rate of 12% per
     annum, compounded quarterly, with required quarterly principal and interest
     payments limited by quarterly cash flow of the Company as defined in the
     applicable credit agreement. This loan is called the "1997 Term Loan."

-    Effective March 12, 1999, the Company agreed to make a permanent reduction
     in its $30.4 million 12% line of credit with Crescent Partnership
     commensurate with the proceeds from the sale of 80% of the Company's 2%
     interest in the Temperature Controlled Logistics Partnerships. On March 12,
     1999, the Company received $13.2 million of proceeds and correspondingly
     permanently reduced the availability under the line of credit from $30.4
     million to $17.2 million. The line of credit bears interest at the rate of
     12% per annum, compounded quarterly, payable on an interest-only basis
     during its term, which expires on the later of (i) May 21, 2002 or (ii)
     five years after the last draw under the line of credit (in no event shall
     the maturity date be later than June 2007). Draws may be made under the
     line of credit until June 22, 2002. The line of credit is a recourse
     obligation and amounts outstanding thereunder are collateralized, to the
     extent not prohibited by pre-existing arrangements, by a first lien on the
     assets which the Company now owns or may acquire in the future. The line of
     credit is cross-collateralized and cross-defaulted with the Company's other
     borrowings from Crescent Partnership. As of December 31, 2001, $20.2
     million was outstanding under the line of credit. This line of credit is
     called the "1997 Revolving Loan."

-    Also effective March 12, 1999, the Company obtained from Crescent
     Partnership a $19.5 million line of credit bearing interest at a rate of 9%
     per annum. The line of credit is payable on an interest-only basis during
     its term, which expires in May 2002. The note is cross-collateralized and
     cross-defaulted with the Company's other borrowings from Crescent
     Partnership. Upon inception of this line of credit, the Company immediately
     borrowed the full $19.5 million with which it contributed approximately
     $15.5 million in connection with the formation of AmeriCold Logistics and
     used the remaining $4.0 million of proceeds to reduce the amount
     outstanding under the 12% line of credit with Crescent Partnership. As of
     December 31, 2001, $22.0 million was outstanding under the line of credit.
     This line of credit is called the "AmeriCold Loan."

                                       37
<PAGE>
-    The Company funded its contribution to COPI Colorado using the proceeds
     from a $9.0 million term loan from Crescent Partnership. The loan bears
     interest at 12% per annum, with interest payable quarterly and the full
     original principal amount of $9.0 million, together with any accrued but
     unpaid interest, payable in May 2002. The Company's interest in COPI
     Colorado secures the loan, which is cross-collateralized and
     cross-defaulted with the Company's other borrowings from Crescent
     Partnership. As of December 31, 2001, $10.6 million was outstanding under
     the line of credit. This line of credit is called the "COPI Colorado Loan."

-    As a part of the acquisitions of E.L. Lester and Company ("Lester") and
     Harvey Equipment Center, Inc. ("Harvey"), Crescent Operating issued notes
     payable in the amount of $6.0 million and $1.2 million, respectively. The
     Lester and Harvey notes are payable in semi-annual principal and interest
     payments and bear interest at 7.5% and 8.0%, respectively. All principal
     and unpaid interest on the Harvey and Lester notes are due July 2002 and
     July 2003, respectively. The Lester note is collateralized by stock of
     Lester. As of December 31, 2001, the outstanding balances on the Lester and
     Harvey notes were $2.5 million and $0.3 million, respectively. These notes
     are called the "Equipment Acquisition Notes."

-    Crescent Machinery has various equipment notes payable and floor plan notes
     under credit facilities which are collateralized by the equipment financed.
     The equipment notes are payable in monthly principal and interest payments
     and bear interest at 4.5% to 9.5% per annum and mature in 2002 due to
     defaults in payments. The floor plan notes do not bear interest, do not
     require monthly principal or interest payments and generally have terms
     ranging from three to twelve months. As of December 31, 2001, the
     outstanding balance on the equipment notes was $80.7 million and on the
     floor plan notes was $4.2 million. At December 31, 2001, Crescent Machinery
     was in default on its loans from commercial institutions because of its
     nonpayment of required principal payments with outstanding principal
     amounts under default by Crescent Machinery of $84.9 million at December
     31, 2001. These notes are called the "Equipment Financing Notes."

Subsequent to December 31, 2001, the following events occurred involving such
financing instruments:

-    On February 15, 2002, Crescent Partnership purchased Equipment Acquisition
     Notes from the note holders.

-    Due to its bankruptcy filing and to non-payment of required principal
     payments, Crescent Machinery is currently in default on its Equipment
     Financing Notes. Outstanding principal amounts under default by Crescent
     Machinery totaled $84.9 million at December 31, 2001. On February 6, 2002,
     Crescent Machinery Company filed a voluntary petition under Chapter 11 of
     the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in Fort Worth,
     Texas.

-    On February 13, 2002, the Company received notice from Crescent Partnership
     that it was in default on the 1997 Term Loan, the 1997 Revolving Loan, the
     AmeriCold Loan and the COPI Colorado Loan. On February 14, 2002, pursuant
     to the Settlement Agreement, Crescent Partnership foreclosed on certain
     collateral securing such loans, which had the effect of reducing the
     aggregate indebtedness from $76.2 million to $36.1 million.

FINANCING ATTRIBUTABLE TO NON WHOLLY OWNED SUBSIDIARIES

As of December 31, 2001, financing instruments attributable to non wholly owned
subsidiaries were as follows:

-    Desert Mountain Properties has a credit agreement with Crescent Partnership
     pursuant to which Crescent Partnership has advanced funds to Desert
     Mountain Properties through a "Junior Note". The Junior Note evidences a
     $60.0 million advance from Crescent Partnership to Desert Mountain
     Properties and accrues interest at 14% per annum. The principal and
     interest on the Junior Note is payable in quarterly installments, based on
     proceeds from the operations of Desert Mountain Properties. As of December
     31, 2001, the outstanding balance of the Junior Note was $59.0 million.

-    Desert Mountain Properties entered into a $50.0 million credit facility
     with National Bank of Arizona in May 1998. The facility was amended in
     December 2001. The facility is comprised of (i) a $40.0 million line of
     credit available for vertical financing related to new home construction
     and bears an annual interest at the prime

                                       38
<PAGE>
     rate and (ii) a $10.0 million line of credit available for borrowings
     against certain notes receivable issued by Desert Mountain Properties and
     bears an annual interest rate of prime plus 1%. The credit facility expires
     November 2003 with interest payable monthly, collateralized by land owned
     by Desert Mountain Properties, deeds of trust on lots sold and home
     construction. As of December 31, 2001, the outstanding balance on the line
     of credit with National Bank of Arizona was $29.9 million.

-    Desert Mountain Properties has an unsecured promissory note payable to
     Crescent Partnership for $1.0 million. The note bears interest at 10%, with
     payments of interest due in quarterly installments. Payment of principal is
     due at the note's expiration of December 31, 2002.

-    CRDI has four lines of credit with Crescent Partnership. The first line of
     credit of $56.2 million bears interest at 11.5% per annum, compounded
     annually. Principal and interest payments are due as distributions from
     projects are received, as defined by the applicable agreement. The line of
     credit is due August 2004. As of December 31, 2001, $48.4 million was
     outstanding on the $56.2 million line of credit. The second line of credit
     of $100.0 million bears interest at 11.5% per annum, compounded annually.
     Principal and interest payments are due as distributions from projects are
     received, as defined by the applicable agreement. The line of credit is due
     September 2008. As of December 31, 2001, $72.3 million was outstanding on
     the $100.00 million line of credit. The third line of credit with Crescent
     Partnership for $40.0 million bears interest at 11.5% per annum. Principal
     and interest payments are due as distributions are received, as defined by
     the applicable credit agreement. The line of credit is due December 2006.
     As of December 31, 2001, $23.4 million was outstanding on the $40.0 million
     line of credit. The fourth line of credit with Crescent Partnership for
     $70.0 million bears interest at 11.5% per annum. Principal and interest
     payments are due as distributions are received, as defined by the
     applicable credit agreement. The line of credit is due December 2006. As of
     December 31, 2001, $36.6 million was outstanding on the $70.0 million line
     of credit. The lines of credit are collateralized by CRDI's interests in
     East West Resort Development partnerships, East West Resorts, LLC and other
     CRDI property. Generally, CRDI's loans with Crescent Partnership are
     cross-collateralized and cross-defaulted.

-    The operating entities in which CRDI invests have various construction
     loans for East West projects which are collateralized by deeds of trust,
     security agreements and a first lien on the assets conveyed. The notes are
     payable in monthly principal and interest payments and bear interest at
     4.4% to 11.3% per annum. The notes mature between 2002 and 2003. As of
     December 31, 2001, the outstanding balance on these construction notes was
     $136.6 million in the aggregate.

-    CRL has a line of credit with Crescent Partnership in the amount of $7.0
     million bearing interest at a rate of 12% per annum. The line of credit is
     due August 2003. The principal and interest are payable as CRL receives
     distributions pursuant to the CR License Operating Agreement and the CR Las
     Vegas Operating Agreement. The $7.0 million available under the line of
     credit was fully drawn as of December 31, 2001.

-    In July 2000, CRL obtained from Crescent Partnership a $0.2 million term
     note bearing interest at a rate of 12% per annum. The full original
     principal amount of $0.2 million, together with any accrued but unpaid
     interest is due August 2003. As of December 31, 2001, $0.2 million was
     outstanding on the note.

     In February and March 2002, in accordance with the Settlement Agreement,
     the Company transferred its equity interest in each of the debtors to
     Crescent Partnership.

     On a consolidated basis, this had an impact of transferring debt of $414.3
     million at December 31, 2001 back to Crescent Partnership.


CRITICAL ACCOUNTING POLICIES



The Company's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, and contingencies as of the date of the financial
statements and


                                       39
<PAGE>

the reported amounts of revenues and expenses during the reporting periods. The
Company evaluates its assumptions and estimates on an on-going basis. The
Company bases its estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. The Company believes the following critical accounting policies
affect the more significant judgments and estimates used in the preparation of
our consolidated financial statements.



INVENTORIES



Inventories consist of new and used equipment held for sale and equipment parts,
all of which are stated at the lower of cost or market using the first-in,
first-out (FIFO) or specific identification methods.



PROPERTY AND EQUIPMENT



Property and equipment is recorded at cost. The Company uses the straight-line
method of depreciation for financial statement purposes. The estimated useful
lives used in computing depreciation are as follows:



<TABLE>
<S>                                                         <C>
Rental equipment................................            2-10 years
Transportation equipment........................             3-5 years
Furniture, fixtures, and other equipment........            5-10 years
</TABLE>



From time-to-time, Crescent Machinery offers its rental customers the
opportunity to purchase rented equipment for a stated value at a future point in
time. In such instances, Crescent Machinery depreciates the specific rental item
in accordance with the contract. Expenditures for maintenance and repairs are
charged to expense as incurred. Expenditures for renewals or betterments are
capitalized. The cost of property replaced, retired, or otherwise disposed of is
removed from the asset account along with the related accumulated depreciation.
Long-lived assets are evaluated when indications of impairment are present, and
provisions for possible losses are recorded when undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
value.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At December 31, 2001, the Company had fixed and variable rate notes payable and
lines of credit subject to market risk related to changes in interest rates,
none of which were entered into for trading purposes. The Company endeavored to
manage its market risk by attempting to match anticipated inflow of cash from
its operating, investing and financing activities with anticipated outflow of
cash to fund debt payments, investments and other cash requirements. The Company
has not used derivative financial instruments to manage interest rate risk.

As of December 31, 2001, the Company's subsidiaries had amounts outstanding
under variable rate notes payable and lines of credit totaling $242.1 million,
with a weighted average interest rate of 10.5% per annum. A hypothetical 10%
increase in the weighted average interest rate on the Company's variable rate
notes and lines of credit would cause a $2.5 million increase in interest
expense and a decrease in the Company's earnings and cash flows of $0.7 million,
based on the amount of variable rate debt outstanding as of December 31, 2001.
Crescent Operating ceased either to own or to control such subsidiaries in
February 2002 and thus ceased to have market interest rate exposure with respect
to those instruments.

As of December 31, 2001, the Company had amounts outstanding under fixed rate
notes payable and lines of credit totaling $345.0 million, with a weighted
average interest rate of 11.4% per annum. Hypothetically, if market interest
rates were substantially lower than the rates on the Company's fixed rate notes
and credit lines, the Company would be able to reduce interest expense if it
were able to prepay and/or refinance those instruments. However, as explained
elsewhere in this report, Crescent Operating is unable to prepay or refinance
any of those instruments, either because Crescent Operating in February 2002
ceased either to own or to control subsidiaries holding such instruments or
because such instruments have matured due to Crescent Operating's payment
default.

                                       40
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this Item is contained in the Company's Consolidated
Financial Statements as indicated in the Index on Page F-1 of this Amendment
No. 1 to the Annual Report on Form 10-K/A, and is incorporated herein by
reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Below is the summary of the background, business experience and description of
the principal occupation of the sole director and executive officer of the
Company.

JEFFREY L. STEVENS, 53, has served as Sole Director, President and Chief
Executive Officer since February 14, 2002 and Secretary since May 1, 2001. Prior
to this appointment, he had served as Director, Executive Vice President and
Chief Operating Officer of Crescent Operating since February 1998. From May 1997
to June 1999, Mr. Stevens served as the Company's Treasurer and Secretary. From
May 1997 to February 1998, Mr. Stevens served as Chief Financial Officer of the
Company. Mr. Stevens also serves in various capacities with respect to the
Company's investments such as Chairman of Crescent Machinery and President of
the entity that holds the AmeriCold interest. As stated elsewhere in this annual
report, Crescent Machinery filed a voluntary petition in bankruptcy on February
6, 2002. Until December 1998, Mr. Stevens served in these capacities pursuant to
a services agreement between the Company and Petroleum Financial, Inc. ("PFI"),
a firm which provides accounting, financial and management services to business
enterprises, which employed Mr. Stevens until December 1998. When that services
agreement ended, Mr. Stevens was immediately employed by the Company. Mr.
Stevens is the founder of PFI, and from 1991 until December 1998 served as PFI's
President and Chief Executive Officer. Mr. Stevens became a director of Crescent
Operating in June 1997. From November 1998 to June 2000, Mr. Stevens served as
Chairman of the governing board of CBHS. For over 10 years, Mr. Stevens was a
director of Amerac Energy Corporation, an oil and gas acquisition, production
and development company ("Amerac"), and has held various positions with Amerac
since 1974. Mr. Stevens' last positions with Amerac were Senior Vice President,
Chief Financial Officer and Secretary, offices which he held until January 1997.
Mr. Stevens is also a member of the board of directors of Stewart Title of
Montgomery County, Inc. Mr. Stevens holds a Bachelor of Business Administration
(B.B.A.) from East Texas State University and is a Certified Public Accountant.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and related rules of the SEC require the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Related rules of the SEC also require such persons to
furnish the Company with copies of all reports filed pursuant to Section 16(a).
Based solely on the Company's review of the copies of the reports received or
written representations from certain reporting persons, the Company believes
that all Section 16(a) filing requirements applicable to its directors, officers
and shareholders owning more than 10% of the Common Stock were complied with
during the fiscal year ended December 31, 2001.

                                       41
<PAGE>
ITEM 11.  EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                         LONG-TERM
                                                            ANNUAL COMPENSATION                      COMPENSATION AWARDS
                                                            -------------------                      -------------------
                                                                              OTHER ANNUAL      RESTRICTED       SECURITIES
       NAME AND PRINCIPAL POSITION         YEAR      SALARY        BONUS      COMPENSATION     STOCK AWARDS   UNDERLYING OPTIONS
       ---------------------------         ----      ------        -----      ------------     ------------   ------------------
<S>                                        <C>      <C>           <C>         <C>              <C>            <C>
Jeffrey L. Stevens                         2001     $200,000         --            --               --
     President and Chief Executive         2000     $200,000         --            --               --
     Officer (2/02 - present)              1999     $166,458      $ 35,000         --               --            150,000(2)
     Executive Vice President and Chief
     Operating Officer

John C. Goff                               2001     $100,000         --            --               --               --
     President and Chief Executive         2000     $100,000         --            --               --               --
     Officer (6/99-2/02)                   1999     $ 55,556(1)      --            --               --            260,000(1)(2)
</TABLE>

(1)  Mr. Goff was elected President and Chief Executive Officer on June
     11, 1999. His annualized base salary of $100,000 in 1999 was earned from
     June 11, 1999. In August 1999, Mr. Goff was granted 60,000 fully vested
     options exercisable at $4.75 per share. In December 1999, Mr. Goff was
     granted 200,000 options, scheduled to vest in equal amounts over the
     succeeding five years, exercisable at $2.50 per share. Mr. Goff resigned
     from his position on February 13, 2002.

(2)  Options to purchase shares were granted under the Company's 1997 Management
     Stock Incentive Plan as amended (the "Management Stock Incentive Plan").

STOCK OPTION GRANTS

No stock options or stock appreciation rights were granted to the executive
officers of the Company during fiscal year 2001.

OPTION EXERCISES

The following table sets forth information concerning the exercise of stock
options by the Company's executive officers during fiscal year 2001, and the
number and value of unexercised stock options held by the Company's executive
officers at December 31, 2001.

                                       42
<PAGE>
 AGGREGATED OPTION EXERCISES DURING 2001 AND OPTION VALUES AT DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                          NUMBER OF SECURITIES             VALUE OF UNEXERCISED
                                                     UNDERLYING UNEXERCISED OPTIONS        IN-THE-MONEY OPTIONS
                                                           AT FISCAL YEAR-END             AT FISCAL YEAR-END (1)
                                                           ------------------             ----------------------
                        SHARES
                      ACQUIRED ON        VALUE
NAME                   EXERCISE        REALIZED      EXERCISABLE     UNEXERCISABLE    EXERCISABLE      UNEXERCISABLE
----                   --------        --------      -----------     -------------    -----------      -------------
<S>                   <C>              <C>           <C>             <C>              <C>              <C>
John C. Goff              --              --            549,190           --               --                --

Jeffrey L. Stevens        --              --            202,800           --               --                --
</TABLE>

(1) Based on the closing price of the Common Stock on December 28, 2001 (the
last trading day of the fiscal year) on the OTC Bulletin Board, all of the
options were out-of-the-money.

Under the terms of the Company's Management Stock Incentive Plan and its earlier
Amended Stock Incentive Plan, the execution of the Purchase Agreement as of June
28, 2001 caused all outstanding Company options issued under those plans to
immediately vest and become fully exercisable (provided that such options must
have been held at least six months) and caused all restrictions on outstanding
shares of restricted stock issued under such plans to lapse. As a result of this
acceleration, previously unvested outstanding stock options to purchase 396,460
shares of the Company's Common Stock became immediately vested and exercisable
as of June 29, 2001. These options are exercisable to purchase shares of Company
common stock at prices ranging from $0.99 to $20.50 per share. Options to
purchase 359,605 of such shares were held by persons who were, at the time,
directors and executive officers of the Company. At current and recent stock
prices for the Company's Common Stock, all of the accelerated options were
out-of-the-money.

COMPENSATION OF DIRECTORS

For 2001, each director who was not also an officer of the Company (an "outside
director") received an annual fee of $15,000 and 16,667 shares of restricted
stock, valued at the aggregate market price of $10,000 on the date of grant for
their service. Two directors received pro rata payment of the annual fee in the
amount of $6,250 as well as pro rata shares of restricted stock, 6,945 shares,
for their partial term served during the year. In addition, each member of the
Audit and Compensation Committees received $750 for each meeting attended, with
the committee chairman receiving an additional $450 per meeting attended; and
each member of the Intercompany Evaluation Committee received $2,500 for each
meeting attended (except for Mr. Stevens who is an officer of the Company).
Directors who are also officers of the Company receive no annual fee for their
service as directors and no fees are paid to members of the Executive Committee
for meetings attended. All directors, however, are reimbursed for expenses
incurred in attending meetings.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

During the year ended December 31, 2001, the Company was not subject to any
agreement with any executive officer regarding employment or any compensatory
plan or arrangement relating to the termination of employment of change in
control of the Company.

In January 2002, following the termination of the Restructuring Proposal, the
Board of Directors of Crescent Operating determined unanimously (with Mr.
Stevens, however, abstaining) that it was in the best interests of the Company
to induce Mr. Stevens to remain with Crescent Operating and Crescent Machinery,
by having each corporation offer Mr. Stevens an employment agreement for the
next 12 months. The aggregate salary to be paid under both agreements was
$300,000, with a $150,000 bonus to be paid upon the earlier of the confirmation
by a bankruptcy court of a bankruptcy plan for Crescent Operating or the end of
the employment term. On February 6,

                                       43
<PAGE>
2002, Crescent Machinery filed a petition in bankruptcy, and on February 13,
2002, all of the directors of the Company other than Mr. Stevens resigned.
Because of Crescent Machinery's bankruptcy, payment of the compensation due to
Mr. Stevens under the employment agreements was made the sole responsibility of
Crescent Operating.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2001, the Compensation Committee of the Board of Directors of the Company
was composed entirely of outside directors. The function of the Compensation
Committee was to determine compensation for the Company's executive officers, to
administer the stock incentive plans and other compensation plans adopted by the
Company, and to nominate persons to serve as directors of the Company. Decisions
regarding executive compensation during fiscal 2001 were made by the
Compensation Committee. During 2001, the Compensation Committee consisted of
Carl F. Thorne (Chairman) and Paul E. Rowsey, III, neither of whom was or has
been an officer of the Company or any of its subsidiaries or had a relationship
requiring disclosure in Item 14 of this annual report. The Compensation
Committee held no meetings in 2001. There were no Compensation Committee
interlocks during 2001.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of April 15, 2002, unless otherwise
indicated, information regarding beneficial ownership of shares of Crescent
Operating common stock by (i) the sole director of Crescent Operating, (ii) the
sole executive officer of Crescent Operating, (iii) each person known by
Crescent Operating to beneficially own more than 5% of the Crescent Operating
common stock, and (iv) all directors and executive officers of Crescent
Operating as a group. Unless otherwise noted below, each person or entity named
in the table has sole voting power and sole investment power with respect to
each of the shares beneficially owned by such person or entity.

BENEFICIAL OWNERSHIP

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER             NUMBER OF SHARES         PERCENT OF OUTSTANDING SHARES (7)
------------------------------------             ----------------         ---------------------------------
<S>                                              <C>                      <C>
     Jeffrey L. Stevens (1)(2)                       207,800(3)                        1.9%
   777 Main Street, Suite 1240
     Fort Worth, Texas 76102

       Richard E. Rainwater                        1,253,714(4)                       11.5%
     777 Main Street, Suite 2250
       Fort Worth, Texas 76102

            John C. Goff                             858,121(5)                        7.5%
    777 Main Street, Suite 2100
      Fort Worth, Texas 76102

    Magten Asset Management Corp.                    670,300(6)                        6.2%
         35 East 21st Street
      New York, New York 10010

All Directors and Executive Officers                 207,800(3)                        1.9%
        As a Group (one person)
</TABLE>

---------------------
(1)  Indicates a director of Crescent Operating.

(2)  Indicates an executive officer of Crescent Operating.

(3)  Includes 5,000 restricted shares issued pursuant to Crescent Operating's
     Amended Stock Incentive Plan, all of which have vested, that is, the
     restrictions on the shares have lapsed, as of February 13, 2002. Also
     includes 202,800 shares underlying stock options issued pursuant to the
     Amended Plan or the Management Stock Incentive Plan, all of which were
     vested as of February 13, 2002.

(4)  Includes 45,178 shares beneficially owned by Ms. Darla D. Moore, who is
     Mr. Rainwater's spouse. However, Mr. Rainwater disclaims beneficial
     ownership with respect to all shares owned by his spouse. Includes 854,146
     shares owned indirectly by Mr. Rainwater, including (i) 10,520 shares owned
     by Rainwater, Inc., a Texas corporation, of which Mr. Rainwater is a
     director and the sole owner; (ii) 624,224 shares owned by Office Towers
     LLC, a Nevada limited liability company, of which Mr. Rainwater and
     Rainwater, Inc. own an aggregate

                                       44
<PAGE>
     100% interest; and (iii) 219,402 shares owned by The Richard E. Rainwater
     1995 Charitable Remainder Unitrust No. 1, of which Mr. Rainwater is the
     sole trustee. Also includes 116,562 shares underlying a stock option which
     have vested.

(5)  Based solely on the Schedule 13D as amended through the amendment dated
     March 4, 2002, includes 15,256 shares owned by Goff Family, L.P., a
     Delaware limited partnership, of which Mr. Goff is a general partner, and
     61 shares held for Mr. Goff's benefit in Crescent Operating's 401(k) plan..
     Mr. Goff disclaims beneficial ownership with respect to all shares owned by
     Goff Family, L.P. in excess of his pecuniary interest in the partnership.
     Also includes 549,190 shares underlying stock options all of which were
     vested as of February 13, 2002.

(6)  Based solely on the Schedule 13G as amended through the amendment dated
     February 8, 2002, filed by Magten Asset Management Corp., it is Crescent
     Operating's understanding that (i) Magten is an investment advisor; and
     (ii) Magten has shared, but no sole, voting power and dispositive power
     with respect to all of the reported shares.

(7)  The percentage of Crescent Operating common stock a person beneficially
     owns is based on 10,828,497 outstanding shares and assumes that (i) as to
     any person listed in this table, all stock options exercisable and (ii) as
     to all other persons, no stock options are exercised.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH CRESCENT EQUITIES AND CERTAIN OFFICERS AND STOCKHOLDERS OF
CRESCENT EQUITIES AND THE COMPANY

The Company has entered into transactions and arrangements with Crescent
Equities and Crescent Partnership and certain officers and directors of Crescent
Equities and Crescent Partnership, which are described in the following
paragraphs. Mr. Rainwater, who up until February 13, 2002, was the Chairman of
the Board of Directors of the Company and is the Chairman of the Board of Trust
Managers of Crescent Equities and owns beneficially more than ten percent of the
common shares of Crescent Equities. Mr. Goff, who up until February 13, 2002,
was the Vice Chairman of the Board and Chief Executive Officer of the Company
and is Vice Chairman of the Board and Chief Executive Officer of Crescent
Equities; he also serves as the sole director and President and Chief Executive
Officer of the sole general partner of Crescent Partnership. As of December 31,
2001, Messrs. Rainwater and Goff beneficially owned in the aggregate
approximately 14.8% of the outstanding equity securities of Crescent Equities.

As part of the Settlement Agreement, Crescent Operating transferred its general
partner interest in COPI Colorado, a Delaware limited partnership in which
Crescent Operating was the sole general partner, owning a 60% general partner
interest, to Crescent Partnership. Prior to the Settlement Agreement, COPI
Colorado distributed its holdings of Crescent Operating, Inc. common stock,
consisting of 1,102,530 shares, to the Company and COPI Colorado's other two
partners, John C. Goff and Harry Frampton, each holding a 20% limited
partnership interest. Accordingly, each of Messrs. Goff and Frampton received
approximately 220,506 shares of Crescent Operating common stock in the COPI
Colorado distribution.

Messrs. Goff and Rainwater are parties to a support agreement with Crescent
Operating and Bank of America whereby they have personally agreed to make
additional equity investments in Crescent Operating if and to the extent
Crescent Operating defaults on payment obligations on its line of credit with
Bank of America. In accordance with the Settlement Agreement, the Company agreed
that a Crescent Real Estate subsidiary, Crescent Spinco, upon the effectiveness
of its registration statement, will distribute its shares to the holders of
Crescent Real Estate common shares and will purchase Crescent Operating's entire
membership interest in COPI Cold Storage LLC, for approximately $15.0 million to
$15.5 million. The proceeds of that sale would be applied by the Company to the
repayment of the Company's $15.0 million obligation to Bank of America. Messrs.
Goff and Rainwater will be relieved of their potential personal liability under
the support agreement to the extent the transactions under the Settlement
Agreement are consummated and the proceeds are used to discharge the outstanding
balance on the Bank of America line of credit.

Effective December 31, 2001, the Company, in connection with extending the
maturity of its $15.0 million loan from Bank of America from December 31, 2001,
to August 15, 2002, agreed to modify the loan from an unsecured to a secured
credit facility. The Company, with the consent of Crescent Partnership which
agreed to subordinate its security interest in the Company' 40% interest in
AmeriCold Logistics, pledged all of its interest in AmeriCold Logistics to Bank
of America to secure the loan.

In addition, pursuant to the Settlement Agreement and the Company's bankruptcy
plan, the current and former directors and officers of the Company and the
current and former trust managers and officers of Crescent Real

                                       45
<PAGE>
Estate will receive certain liability releases from the Company and, upon the
distribution of Crescent Equities shares to the Company's stockholders, from the
Company's stockholders.

INTERCOMPANY AGREEMENT WITH CRESCENT LP

The Company was formed to be the lessee and operator of certain assets owned or
to be acquired by Crescent Equities and perform an agreement (the "Intercompany
Agreement") between the Company and Crescent LP. The Intercompany Agreement
provided, subject to certain terms, that Crescent Partnership would provide the
Company with a right of first refusal to become the lessee of any real property
acquired by Crescent Partnership if Crescent Partnership determines that,
consistent with the status of Crescent Real Estate Equities Company as a real
estate investment trust, it is required to enter into a "master lease"
arrangement. In general, a master lease arrangement is an arrangement pursuant
to which an entire property or project (or group of related properties or
projects) is leased to a single lessee. In addition to lessee transactions, the
Company and Crescent Partnership had also entered into "controlled subsidiary
transactions" under the Intercompany Agreement. Controlled subsidiary
transactions are those in which the Company invested alongside Crescent
Partnership in acquisitions where the Company owned all of the voting stock and
Crescent Partnership owned all of the non-voting stock of a corporate
acquisition vehicle which in turn would acquire a target business which at the
time could not be operated by Crescent Partnership because of Crescent Equities'
status as a REIT. In addition, under the Intercompany Agreement, the Company had
agreed not to acquire or make investments in real estate or any other
investments that may be structured in a manner that qualified under the federal
income tax requirements applicable to REITs, unless Crescent Partnership had
been given notice of the opportunities and had decided not to pursue them.

The REIT Modernization Act, which took effect January 1, 2001, contained a
provision that would permit REITS, such as Crescent Equities, to own and operate
certain types of investments that are currently owned and operated by Crescent
Operating. As a consequence of the REIT Modernization Act, the Intercompany
Agreement was not expected to result in future business opportunities for
Crescent Operating. The Settlement Agreement provided for the termination of the
Intercompany Agreement.

LEASES WITH CRESCENT EQUITIES AND RELATED MANAGEMENT AGREEMENTS

Prior to the Company's transfer of its hospitality assets pursuant to the
Settlement Agreement, Crescent Operating or its subsidiaries leased six hotels
and two destination health and fitness resorts from Crescent Equities during all
or part of 2001. The properties are subject to long-term leases that expire
between December 2004 and June 2009 and generally provide for (i) base rent,
with periodic rent increases, (ii) percentage rent based on a percentage of
gross hotel revenues less food and beverage revenues above a specified amount
and (iii) a percentage of gross food and beverage revenues above a specified
amount. Under the leases, the Company's subsidiaries have assumed the rights and
obligations of the property owner under the respective management agreements
with the hotel operators (including the property management agreements with two
of the hotels and one golf course associated with a hotel), as well as the
obligation to pay all property taxes and charges against the properties and,
with one exception, Crescent Equities is obligated to fund all capital
expenditures related to furniture, fixtures and equipment reserves required
under the respective management agreements. Crescent Operating has executed a
master guaranty and other guaranties pursuant to which it unconditionally
guarantees payment and performance of the leases solely from its hotel and
resort-related assets and income streams.

Total rent expense related to the hotel and destination health and fitness
resort properties leased from Crescent Equities totaled approximately $55.7
million for the year ended December 31, 2001. As of December 31, 2001, the
lessees had accrued but deferred payment of approximately $41.2 million of rent
with the consent of Crescent Equities. Pursuant to the Settlement Agreement on
February 14, 2002, the hospitality assets were transferred to Crescent Equities
for a consideration of $23.6 million in deferred rent.

All of the Company's hotel operations, except for the Sonoma Mission Inn and
Spa, Sonoma Mission Inn Golf and Country Club and the Ventana Inn and Spa, were
managed by third party operators. The Company and its hospitality subsidiaries
had a Master Asset Management and Administrative Services Agreement with SMC
(the "SMC Management Agreement") to manage the Hyatt Albuquerque, the
Renaissance Hotel Houston and the Denver City Center Marriott. In addition, the
Company's hospitality subsidiaries had accepted assignment from the owners

                                       46
<PAGE>
of the Sonoma Mission Inn and Spa, the Sonoma Mission Inn Golf and Country Club
and the Ventana Inn and Spa of its property management agreements with SMC. The
principals of SMC are Sanjay and Johanna Varma and CEI is an equity owner in
SMC. Payments of obligations under the SMC Management Agreement were guaranteed
by the Company. For each property for which it provided asset management
services, SMC was entitled to receive a base fee equal to 0.85% of gross
revenues of the property managed plus an incentive fee of 50% of actual net
income in excess of budgeted net income. For each property for which it provided
property management services, SMC was entitled to receive a base fee equal to
2.0% of gross revenues of the property plus an incentive fee of 20% of net
operating income in excess of a 12% annual return on investment to owner.

As consideration for its services under the SMC Management Agreement, SMC
received an annual base fee (and no incentive fee) for 2001 of approximately
$0.6 million, for its asset management services related to the Hyatt
Albuquerque, the Renaissance Houston Hotel and the Denver City Center Marriott.

FINANCING ARRANGEMENTS WITH CRESCENT EQUITIES

Crescent Operating and certain of its subsidiaries have various debt instruments
payable to Crescent Equities, which, in the aggregate, had outstanding balances
in the amount of $317.9 million as of December 31, 2001. A portion of such debt
instruments is payable by Crescent Operating or subsidiaries of Crescent
Operating which are 100% owned ("Wholly Owned Debt") and the remainder is
payable by subsidiaries of Crescent Operating which are not 100% owned
("Non-Wholly Owned Debt").

As of December 31, 2001, Wholly Owned Debt instruments in the amount of $70.2
million consisted of the following: (i) a note payable in the amount of $16.2
million, due May 2002, at an interest rate of 12% per annum, collateralized by a
first lien on assets which Crescent Operating now owns or may acquire in the
future; (ii) a line of credit in the amount of $20.2 million, due the later of
May 2002 or five years after the last draw, at an interest rate of 12% per
annum, collateralized by a first lien on assets which Crescent Operating now
owns or may acquire in the future; (iii) a note payable in the amount of $10.6
million, due May 2002, at an interest rate of 12% per annum, collateralized by a
first lien on assets which Crescent Operating now owns or may acquire in the
future; (iv) a note payable in the amount of $0.8 million, due August 2003, at
an interest rate of 10.75% per annum, collateralized by a deed of trust in
certain real and personal property; (v) a note payable in the amount of $0.2
million, due August 2003, at an interest rate of 10.75% per annum,
collateralized by a deed of trust in certain real and personal property; (vi) a
note payable in the amount of $0.2 million, due November 2006, at an interest
rate of 7.5% per annum; and (vii) a note payable in the amount of $22.0 million,
due May 2002, at an interest rate of 9% per annum, cross-collateralized and
cross-defaulted with Crescent Operating's other borrowings with Crescent
Equities. The accrued interest related to Wholly Owned Debt totaled $6.4 million
at December 31, 2001. On February 13, 2002, Crescent Equities delivered default
notices to Crescent Operating relating to approximately $76.2 million of
principal and accrued interest due to Crescent Real Estate under certain secured
loans.

The Company, during the first quarter of 2000, extended certain payment
obligations by reaching agreements with Crescent Equities to defer until
February 2001 payments on certain of Crescent Operating's obligations to
Crescent Equities otherwise scheduled to be made in 2000. During 2001, the
Company and Crescent Partnership agreed to modify certain debt agreements,
subject to the consummation of the Restructuring Proposal, to (i) defer
principal and interest payments until the earlier of December 31, 2001 or the
close of the transaction contemplated by the Purchase Agreement and (ii) cease
the accrual of interest on certain debt instruments as of May 1, 2001. Because
the transactions contemplated by the Purchase Agreement were not consummated,
the condition was not met, and the modifications became ineffective. Interest
payments and rent payments accrued but deferred as of December 31, 2001, totaled
approximately $6.4 million and $41.2 million, respectively.

As of December 31, 2001, Non-Wholly Owned Debt instruments in the amount of
$247.7 million consisted of the following: (i) a note payable by Desert Mountain
Development Limited Partnership ("Desert Mountain Properties") in the amount of
$59.0 million, due December 2010, at an interest rate of 14% per annum,
collateralized by land, improvements and equipment at Desert Mountain
Properties; (ii) an unsecured promissory note by Desert Mountain Properties for
$1.0 million, bearing interest at 10%, with payments of interest due in
quarterly installments and principal due at the note's expiration of December
31, 2002 (iii) a line of credit (the "CRDI Credit Agreement") payable by CRDI in
the amount of $56.2 million ($48.4 million of which was outstanding), due August
2004, at an interest rate of 11.5% per annum, collateralized by the interests of
in certain property, partnerships and a limited

                                       47
<PAGE>
liability company (the interest in the limited liability company was
subsequently transferred and sold in 2001, as described below); (iv) a line of
credit payable by CRDI in the amount of $100.0 million ($72.2 million of which
was outstanding), due September 2008, at an interest rate of 11.5% per annum,
collateralized by CRDI's interests in certain property, partnerships and a
limited liability company; (v) a line of credit payable by CRDI in the amount of
$70.0 million ($36.6 million of which was outstanding), due December 2006, at an
interest rate of 11.5% per annum, collateralized by CRDI's interests in certain
property, partnerships and a limited liability company; (vi) a line of credit
(the "CRL Credit Facility") payable by CRL Investments, Inc. ("CRL") in the
amount of $7.0 million, due August 2003, at an interest rate of 12% per annum,
collateralized by a first lien on assets which CRL now owns or may acquire in
the future; (vii) a line of credit in the amount of $40.0 million ($23.4 million
of which was outstanding) payable by CRDI, due December 2006, at an interest
rate of 11.5% per annum, collateralized by CRDI's interests in certain property,
partnerships and a limited liability company; and (viii) a term note in the
amount of $0.2 million payable by CRL, due August 2003, at an interest rate of
12% per annum, and collateralized by a first lien on assets which the debtor now
owns or may acquire in the future. Crescent Operating's economic investment in
the entities which have Non-Wholly Owned Debt is 6% or less.


In February and March 2002, in accordance with the Settlement Agreement, the
Company transferred its equity interest in each of the debtors to Crescent
Partnership.


Crescent Resort Development, Inc. (formerly Crescent Development Management
Corp.)

Until February 14, 2002, Crescent Operating was the sole general partner of COPI
Colorado, LP, which owns 10% of CRDI, representing 100% of the voting stock of
CRDI. Mr. Goff is a limited partner of COPI Colorado. Until December 2000, CRDI
had an indirect economic interest in a real estate company specializing the
management of resort properties. That investment was transferred to Crescent
Development Management Corp. II, a Delaware corporation, a newly formed entity
have the same owners, board of directors and officers as CRDI, in anticipation
of the proposed restructuring of Crescent Operating involving Crescent Equities.
In connection with that transfer, CDMC II assumed the indebtedness of CRDI
incurred in connection with that investment, all of which is owed to Crescent
Partnership, and CRDI and CDMC II each guaranteed the indebtedness of the other
to Crescent Partnership. Effective March 30, 2001, CDMC II sold that investment
- a membership interests in East West Resorts, LLC- to a company affiliated with
the other owner of EWR, for cash and a secured promissory note. CDMC II
immediately transferred the cash and note to Transportal Investment Corp. in
exchange for its assumption of all of its indebtedness and dissolved. Crescent
Operating owned 1%, and Crescent Partnership owned 99%, of TIC, which owns an
interest in Transportal Network, LLC. Transportal Network is an abandoned
venture that had been planned to provide routing and load management services
and facilitate related purchases over the internet to independent truckers,
shippers and receivers. Transportal Network ceased operations in October 2000.

On February 14, 2002, in accordance with the Settlement Agreement, the Company
transferred its general partner interest in COPI Colorado to Crescent Equities.

Canyon Ranch

Effective July 27, 1998, to enable Crescent Operating to invest in the future
use of the "Canyon Ranch" name, Crescent Operating obtained a 5% economic
interest, representing all of the voting stock, of CRL Investments, Inc. The
remaining 95% interest in CRL is held by Crescent Equities. Immediately after
the formation of CRL, CRL exercised its purchase option (acquired from Crescent
Equities) to obtain a 10% economic interest in CR License, LLC, which owns the
right to use the "Canyon Ranch" name. Contemporaneously, CRL acquired a 50%
interest in CR Las Vegas, LLC, an entity that built a Canyon Ranch day spa in
the Venetian Hotel in Las Vegas. In July 2000, CRL exercised its final option to
purchase an additional 10% economic interest in CR License by paying $3.0
million, bringing CRL's total economic interest in CR License to 30%. Through
CRL and CR License, Crescent Operating has an effective 3.25% economic interest
in the Canyon Ranch Spa Club located in the Venetian Hotel in Las Vegas. In
order to exercise options with respect to CR License and to fund its obligations
to CR Las Vegas and other entities, CRL obtained the CRL Credit Facility from
Crescent Equities and in July 2000 CRL obtained from Crescent Partnership a $0.2
million term note bearing interest at 12% per annum, which matures in August
2003.

                                       48
<PAGE>
On February 14, 2002, in accordance with the Settlement Agreement, the Company
transferred its equity interest in CRL to Crescent Equities.

Temperature-Controlled Logistics

A partnership, AmeriCold Logistics, of which a subsidiary of Crescent Operating
owns 40% and Vornado Operating L.P. owns 60%, owns directly or indirectly the
business operations at approximately 100 temperature controlled logistics
properties (the "AmeriCold Properties"). AmeriCold Logistics leases the
AmeriCold Properties under a triple-net master lease from a partnership in which
Crescent Equities is a 40% owner. Each of the AmeriCold Properties is subject to
one or more of the leases, each of which has an initial term of 15 years,
subject to two, five-year renewal options. The leases provide for an aggregate
base rental rate of approximately $137.0 million per annum through 2003, $139.0
million per annum from 2004 through 2008 and $141.0 million per annum from 2009
through 2014, plus percentage rent based on the gross revenues received from
customers at the AmeriCold Properties above a specified amount. In February 2001
the lessees and lessor 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 lessor's
share of capital expenditures for property maintenance by $4.5 million to $9.5
million (effective January 1, 2000) and the extension from March 11, 2002 to
December 31, 2003 of the date upon which deferred rent is required to be paid.

In accordance with the Settlement Agreement, the Company agreed that a Crescent
Real Estate subsidiary, Crescent Spinco, upon the effectiveness of its
registration statement, will distribute its shares to the holders of Crescent
Real Estate common shares and will purchase Crescent Operating's entire
membership interest in COPI Cold Storage LLC, for approximately $15.0 million to
$15.5 million. The proceeds of which would be applied by the Company to the
repayment of the Company's $15.0 million obligation to Bank of America.

In March 1999, Crescent Operating sold Crescent Equities an additional 4%
nonvoting interest in the two subsidiaries that had an indirect interest in the
AmeriCold Properties and was granted an option to require Crescent Equities to
purchase Crescent Operating's remaining 1% interest in either or both
subsidiaries at any time within the next two years, subject to the condition
that such purchase would not, in the opinion of counsel to Crescent Equities,
adversely affect the status of Crescent Real Estate Equities Company as a REIT.
The option was exercised in December 2000 and Crescent Operating sold the
remaining 1% interests in both subsidiaries to Crescent Equities for $4.1
million.

Charter Behavioral Health Systems, LLC

From September 9, 1999 to December 29, 2000, Crescent Operating (which prior
thereto had owned 50% of CBHS) owned a 25% common membership interest and 100%
of the preferred membership interests in CBHS, and a limited partnership
interest in COPI CBHS Holdings (controlled by individual officers of Crescent
Operating), in which Crescent Operating owned 100% of the economic interests,
and which owned 65% of the common interests of CBHS. In the fourth quarter of
1999, CBHS began significant downsizing, including the closing of 18 facilities
in December 1999 and 33 facilities in January 2000. Closure of those facilities
resulted in the filing by terminated employees of several lawsuits against CBHS
and others, including Crescent Operating, for alleged violation of the WARN Act
(see Legal Proceedings). On February 16, 2000, CBHS petitioned for relief under
Chapter 11 of the United States Bankruptcy Code. Under the protection of the
bankruptcy court, CBHS has engaged in efforts to sell and liquidate, in a
controlled fashion, all of its ongoing business. On April 16, 2000, the asset
purchase agreement to which a newly formed, wholly-owned subsidiary of Crescent
Operating had agreed to acquire, for $24.5 million, CBHS's core business assets
used in the operation of 37 behavioral healthcare facilities, subject to certain
conditions, terminated by its own terms because not all of the conditions
precedent to closing had been met by that date. Subsequent to the termination of
the asset purchase agreement, CBHS sold or closed all of its remaining
facilities and is in the process of final liquidation of any remaining assets.

As a result of the liquidation of CBHS through bankruptcy, the equity investment
in CBHS became worthless. On December 29, 2000 Crescent Operating sold its 25%
common interest and its 100% preferred membership interest in CBHS, and COPI
CBHS Holdings sold its 65% common interest in CBHS, to The Rockwood Financial
Group, Inc. for a nominal sum. The Rockwood Financial Group, Inc. is wholly
owned by Jeffrey L. Stevens, Crescent

                                       49
<PAGE>
Operating's Chief Executive Officer and sole director. The sale of CBHS to the
Rockwood Financial Group, Inc. was effected as part of Crescent Operating's tax
planning strategy. For the year 2000, Crescent Operating was faced with a
potentially large minimum tax liability. Crescent Operating sold its interest in
CBHS in order to trigger a loss that would significantly reduce, if not
eliminate any minimum tax liability, as CBHS was in bankruptcy and liquidation
and the interest held by Crescent Operating was worthless.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


(a)  Documents filed as part of Amendment No. 1 to the Annual Report on Form
     10-K/A:


     1.  Financial Statements


         Information with respect to this Item is contained on pages F-1 to F-79
         of this Amendment No. 1 to the Annual Report on Form 10-K/A.


     2.  Financial Statement Schedules


         Information with respect to this Item is listed on page F-1 and is
         contained on pages S-1 to S-4 of this Amendment No. 1 to the Annual
         Report on Form 10-K/A.


                                       50
<PAGE>
3.   Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBITS
------      --------------------------------------------------------------------
<S>         <C>
  3.1       First Amended and Restated Certificate of Incorporation (filed as
            Exhibit 3.3 to the Company's registration statement on Form S-1
            dated July 12, 1997 ("Form S-1") and incorporated by reference
            herein)

  3.2       First Amended and Restated Bylaws (filed as Exhibit 3.4 to Form S-1
            and incorporated by reference herein)

  3.3       Amendment of Article V of First Amended and Restated Bylaws (filed
            as Exhibit 3.3 to the Company's June 30, 1998 Form 10-Q ("June 30,
            1998 Form 10-Q") and incorporated by reference herein)

  3.4       Repeal of Amendment of Article V of First Amended and Restated
            Bylaws (filed as Exhibit 3.4 to the Company's September 30, 1998
            Form 10-Q ("September 30, 1998 Form 10-Q") and incorporated by
            reference herein)

  4.1       Specimen stock certificate (filed as Exhibit 4.1 to Form S-1 and
            incorporated by reference herein)

  4.2       Preferred Share Purchase Rights Plan (filed as Exhibit 4.2 to Form
            S-1 and incorporated by reference herein)

  4.3       First Amendment to Preferred Share Purchase Rights Agreement dated
            as of September 25, 1998, between Crescent Operating, Inc. and Bank
            Boston, N.A., as Rights Agent (filed as Exhibit 4.3 to September 30,
            1998 Form 10-Q and incorporated by reference herein)

  4.4       Second Amendment to Preferred Share Purchase Rights Agreement dated
            as of March 4, 1999, between Crescent Operating, Inc. and Bank
            Boston, N.A., as Rights Agent (filed as Exhibit 4.4 to March 31,
            1999 Form 10-Q ("March 31, 1999 Form 10-Q") and incorporated by
            reference herein)

  10.1      Amended Stock Incentive Plan (filed as Exhibit 10.1 to Form S-1 and
            incorporated by reference herein)

  10.2      Intercompany Agreement between Crescent Operating, Inc. and Crescent
            Real Estate Equities Limited Partnership (filed as Exhibit 10.2 to
            the Company's Quarterly Report on Form 10-Q for the Quarter Ended
            June 30, 1997 ("June 30, 1997 Form 10-Q") and incorporated by
            reference herein)

  10.3      Amended and Restated Operating Agreement of Charter Behavioral
            Health Systems, LLC (filed as Exhibit 10.3 to June 30, 1997 Form
            10-Q and incorporated by reference herein)

  10.5      Amended and Restated Credit and Security Agreement, dated as of May
            30, 1997, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc., together with related Note (filed as
            Exhibit 10.5 to the Company's September 30, 1997 Form 10-Q
            ("September 30, 1997 Form 10-Q") and incorporated by reference
            herein)

  10.6      Line of Credit and Security Agreement, dated as of May 21, 1997,
            between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc., together with related Line of Credit Note
            (filed as Exhibit 10.6 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)
</TABLE>

                                       51
<PAGE>
<TABLE>
<S>         <C>
  10.7      Acquisition Agreement, dated as of February 10, 1997, between
            Crescent Real Estate Equities Limited Partnership and Carter-Crowley
            Properties, Inc. (filed as Exhibit 10.7 to Form S-1 and incorporated
            by reference herein)

  10.10     Security Agreement dated September 22, 1997 between COI Hotel Group,
            Inc., as debtor, and Crescent Real Estate Equities Limited
            Partnership, as lender, together with related $1 million promissory
            note (filed as Exhibit 10.10 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.11     Security Agreement dated September 22, 1997 between COI Hotel Group,
            Inc., as debtor, and Crescent Real Estate Equities Limited
            Partnership, as lender, together with related $800,000 promissory
            note (filed as Exhibit 10.11 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.12     Amended and Restated Asset Management dated August 31, 1997, to be
            effective July 31, 1997, between Wine Country Hotel, LLC and The
            Varma Group, Inc. (filed as Exhibit 10.12 to September 30, 1997 Form
            10-Q and incorporated by reference herein)

  10.13     Amended and Restated Asset Management Agreement dated August 31,
            1997, to be effective July 31, 1997, between RoseStar Southwest, LLC
            and The Varma Group, Inc. (filed as Exhibit 10.13 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.14     Amended and Restated Asset Management Agreement dated August 31,
            1997, to be effective July 31, 1997, between RoseStar Management LLC
            and The Varma Group, Inc. (filed as Exhibit 10.14 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.15     Agreement for Financial Services dated July 1, 1997, between
            Crescent Real Estate Equities Company and Petroleum Financial, Inc.
            (filed as Exhibit 10.15 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.16     Credit Agreement dated August 27, 1997, between Crescent Operating,
            Inc. and NationsBank of Texas, N.A. together with related $15.0
            million promissory note (filed as Exhibit 10.16 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.17     Support Agreement dated August 27, 1997, between Richard E.
            Rainwater, John Goff and Gerald Haddock in favor of Crescent Real
            Estate Equities Company and NationsBank of Texas, N.A. (filed as
            Exhibit 10.17 to September 30, 1997 Form 10-Q and incorporated by
            reference herein)

  10.18     1997 Crescent Operating, Inc. Management Stock Incentive Plan (filed
            as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the
            year ended December 31, 1997 ("December 31, 1997 Form 10-K") and
            incorporated by reference herein)

  10.19     Memorandum of Agreement executed November 16, 1997, among Charter
            Behavioral Health Systems, LLC, Charter Behavioral Health Systems,
            Inc. and Crescent Operating, Inc. (filed as Exhibit 10.19 to
            December 31, 1997 Form 10-K and incorporated by reference herein)

  10.20     Purchase Agreement dated August 31, 1997, by and among Crescent
            Operating, Inc., RoseStar Management LLC, Gerald W. Haddock, John C.
            Goff and Sanjay Varma (filed as Exhibit 10.20 to December 31, 1997
            Form 10-K and incorporated by reference herein)

  10.21     Stock Purchase Agreement dated August 31, 1997, by and among
            Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and Sanjay
            Varma (filed as Exhibit 10.21 to December 31, 1997 Form 10-K and
            incorporated by reference herein)
</TABLE>

                                       52
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<TABLE>
<S>         <C>
  10.22     Amended and Restated Lease Agreement, dated June 30, 1995 between
            Crescent Real Estate Equities Limited Partnership and RoseStar
            Management LLC, relating to the Denver Marriott City Center (filed
            as Exhibit 10.17 to the Annual Report on Form 10-K of Crescent Real
            Estate Equities Company for the Fiscal Year Ended December 31, 1995
            (the "1995 CEI 10-K") and incorporated by reference herein)

  10.23     Lease Agreement, dated December 19, 1995 between Crescent Real
            Estate Equities Limited Partnership and RoseStar Management LLC,
            relating to the Hyatt Regency Albuquerque (filed as Exhibit 10.16 to
            the 1995 CEI 10-K and incorporated by reference herein)

  10.24     Form of Amended and Restated Lease Agreement, dated January 1, 1996,
            among Crescent Real Estate Equities Limited Partnership, Mogul
            Management, LLC and RoseStar Management LLC, relating to the Hyatt
            Regency Beaver Creek (filed as Exhibit 10.12 to the 1995 CEI 10-K
            and incorporated by reference herein)

  10.25     Lease Agreement, dated July 26, 1996, between Canyon Ranch, Inc. and
            Canyon Ranch Leasing, L.L.C., assigned by Canyon Ranch, Inc. to
            Crescent Real Estate Equities Limited Partnership pursuant to the
            Assignment and Assumption Agreement of Master Lease, dated July 26,
            1996 (filed as Exhibit 10.24 to the Quarterly Report on Form 10-Q/A
            of Crescent Real Estate Equities Company for the Quarter Ended June
            30, 1997 (the "1997 CEI 10-Q") and incorporated by reference herein)

  10.26     Lease Agreement, dated November 18, 1996 between Crescent Real
            Estate Equities Limited Partnership and Wine Country Hotel, LLC
            (filed as Exhibit 10.25 to the Annual Report on Form 10-K of
            Crescent Real Estate Equities Company for the Fiscal Year Ended
            December 31, 1996 and incorporated by reference herein)

  10.27     Lease Agreement, dated December 11, 1996, between Canyon
            Ranch-Bellefontaine Associates, L.P. and Vintage Resorts, L.L.C., as
            assigned by Canyon Ranch-Bellefontaine Associates, L.P. to Crescent
            Real Estate Funding VI, L.P. pursuant to the Assignment and
            Assumption Agreement of Master Lease, dated December 11, 1996 (filed
            as Exhibit 10.26 to the 1997 CEI 10-Q and incorporated by reference
            herein)

  10.28     Master Lease Agreement, dated June 16, 1997, between Crescent Real
            Estate Funding VII, L.P. and Charter Behavioral Health Systems, LLC
            and its subsidiaries, relating to the Facilities (filed as Exhibit
            10.27 to the 1997 CEI 10-Q and incorporated by reference herein)

  10.29     Form of Indemnification Agreement (filed as Exhibit 10.29 to
            December 31, 1997 Form 10-K and incorporated by reference herein)

  10.30     Purchase Agreement, dated as of September 29, 1997, between Crescent
            Operating, Inc. and Crescent Real Estate Equities Limited
            Partnership, relating to the purchase of Desert Mountain Development
            Corporation (filed as Exhibit 10.30 to December 31, 1997 Form 10-K
            and incorporated by reference herein)

  10.31     Lease Agreement dated December 19, 1997, between Crescent Real
            Estate Equities Limited Partnership, as Lessor, and Wine Country
            Hotel, as Lessee, for lease of Ventana Inn (filed as Exhibit 10.31
            to the Company's March 31, 1998 Form 10-Q ("March 31, 1998 Form
            10-Q") and incorporated by reference herein)

  10.32     Lease Agreement dated September 22, 1997, between Crescent Real
            Estate Equities Limited Partnership, as Lessor, and COI Hotel Group,
            Inc., as lessee, for lease of Four Seasons Hotel, Houston (filed as
            Exhibit 10.32 to March 31, 1998 Form 10-Q and incorporated by
            reference herein)
</TABLE>

                                       53
<PAGE>
<TABLE>
<S>         <C>
  10.33     Asset Purchase Agreement dated December 19, 1997, among Crescent
            Operating, Inc., Preco Machinery Sales, Inc., and certain individual
            Preco shareholders (filed as Exhibit 10.33 to March 31, 1998 Form
            10-Q and incorporated by reference herein)

  10.34     Asset Purchase Agreement dated April 30, 1998, among Crescent
            Operating, Inc., Central Texas Equipment Company, and certain
            individual Central Texas shareholders (filed as Exhibit 10.34 to
            March 31, 1998 Form 10-Q and incorporated by reference herein)

  10.35     Credit Agreement dated August 29, 1997 between Crescent Real Estate
            Equities Limited Partnership, as lender, and Desert Mountain
            Properties Limited Partnership, as borrower, together with related
            Senior Note, Junior Note and deed of trust (filed as Exhibit 10.35
            to March 31, 1998 Form 10-Q and incorporated by reference herein)

  10.36     Buy-Out Agreement dated April 24, 1998, between Crescent Operating,
            Inc. and Crescent Real Estate Equities Limited Partnership (filed as
            Exhibit 10.36 to March 31, 1998 Form 10-Q and incorporated by
            reference herein)

  10.37     Stock Acquisition Agreement and Plan of Merger dated June 4, 1998,
            among Machinery, Inc., Oklahoma Machinery, Inc., Crescent Machinery
            Company, Crescent Operating, Inc. and certain individual Machinery
            shareholders (filed as Exhibit 10.37 to June 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.38     Master Revolving Line of Credit Loan Agreement (Borrowing Base and
            Warehouse) dated May 14, 1998, between Desert Mountain Properties
            Limited Partnership and National Bank of Arizona (filed as Exhibit
            10.38 to June 30, 1998 Form 10-Q and incorporated by reference
            herein)

  10.39     1997 Management Stock Incentive Plan (filed as Exhibit 10.39 to June
            30, 1998 Form 10-Q and incorporated by reference herein)

  10.40     Credit and Security Agreement, dated as of September 21, 1998,
            between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc., together with related Note (filed as
            Exhibit 10.40 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.41     First Amendment to Amended and Restated Pledge Agreement, dated as
            of September 21, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.41 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.42     First Amendment to Line of Credit and Security Agreement, dated as
            of August 11, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc., together with related Note
            (filed as Exhibit 10.42 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.43     First Amendment to Amended and Restated Credit and Security
            Agreement, dated as of August 11, 1998, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. (filed as
            Exhibit 10.43 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.44     Second Amendment to Amended and Restated Credit and Security
            Agreement, dated as of September 21, 1998, between Crescent Real
            Estate Equities Limited Partnership and Crescent Operating, Inc.
            (filed as Exhibit 10.44 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.45     Second Amendment to Line of Credit and Security Agreement, dated as
            of September 21, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.45 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)
</TABLE>

                                       54
<PAGE>
<TABLE>
<S>         <C>
  10.46     Agreement of Limited Partnership of COPI Colorado, L.P. (filed as
            Exhibit 10.1 to that Schedule 13D Statement dated September 28,
            1998, filed by COPI Colorado, L.P., Crescent Operating, Inc., Gerald
            W. Haddock, John C. Goff and Harry H. Frampton, III, and
            incorporated by reference herein)

  10.47     Contribution Agreement effective as of September 11, 1998, by and
            among Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and
            Harry H. Frampton, III (filed as Exhibit 10.2 to that Schedule 13D
            Statement dated September 28, 1998, filed by COPI Colorado, L.P.,
            Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and Harry
            H. Frampton, III, and incorporated by reference herein)

  10.48     Agreement Regarding Schedules and Other Matters made as of September
            11, 1998, by and among Crescent Operating, Inc., Gerald W. Haddock,
            John C. Goff and Harry H. Frampton, III (filed as Exhibit 10.3 to
            that Schedule 13D Statement dated September 28, 1998, filed by COPI
            Colorado, L.P., Crescent Operating Inc., Gerald W. Haddock, John C.
            Goff and Harry H. Frampton, III, and incorporated by reference
            herein)

  10.49     Stock Purchase Agreement dated as of August 7, 1998 by and among
            Western Traction Company, The Carlston Family Trust, Ronald D.
            Carlston and Crescent Operating, Inc. (filed as Exhibit 10.49 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.50     Stock Purchase Agreement dated as of July 31, 1998 by and among
            Harvey Equipment Center, Inc., L and H Leasing Company, William J.
            Harvey, Roy E. Harvey, Jr., Betty J. Harvey and Crescent Operating,
            Inc. (filed as Exhibit 10.50 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.51     Credit Agreement dated as of July 28, 1998, between Crescent Real
            Estate Equities Limited Partnership and CRL Investments, Inc.,
            together with the related Note (filed as Exhibit 10.51 to September
            30, 1998 Form 10-Q and incorporated by reference herein)

  10.52     Security Agreement dated as of July 28, 1998, between Crescent Real
            Estate Equities Limited Partnership and CRL Investments, Inc. (filed
            as Exhibit 10.52 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.53     First Amendment to Credit Agreement effective as of August 27, 1998,
            among Crescent Operating, Inc., NationsBank, N. A., and the Support
            Parties identified therein (filed as Exhibit 10.53 to September 30,
            1998 Form 10-Q and incorporated by reference herein)

  10.54     Lease Agreement dated as of October 13, 1998, between Crescent Real
            Estate Equities Limited Partnership and Wine Country Golf Club,
            Inc., relating to Sonoma Golf Club (filed as Exhibit 10.54 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.55     First Amendment to Lease Agreement effective December 31, 1998,
            between Canyon Ranch Leasing, L.L.C., and Crescent Real Estate
            Equities Limited Partnership, relating to Canyon Ranch - Tucson
            (filed as Exhibit 10.55 to the Company's Annual Report on Form 10-K
            for the year ended December 31, 1998 ("December 31, 1998 Form 10-K")
            and incorporated by reference herein)

  10.56     First Amendment to Lease Agreement effective April 1, 1996; Second
            Amendment to Lease Agreement effective November 22, 1996; Third
            Amendment to Lease Agreement effective August 12, 1998; and Fourth
            Amendment to Lease Agreement effective December 31, 1998 between
            RoseStar Southwest, LLC, and Crescent Real Estate Funding II L.P.,
            relating to Hyatt Regency Albuquerque (filed as Exhibit 10.56 to
            December 31, 1998 Form 10-K and incorporated by reference herein)
</TABLE>

                                       55
<PAGE>
<TABLE>
<S>         <C>
  10.57     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC, and Crescent Real Estate Equities
            Limited Partnership, relating to Sonoma Mission Inn & Spa (filed as
            Exhibit 10.57 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.58     First Amendment to Amended and Restated Lease Agreement effective
            December 31, 1998, between RoseStar Management, LLC, and Crescent
            Real Estate Equities Limited Partnership, relating to Marriott City
            Center, Denver (filed as Exhibit 10.58 to December 31, 1998 Form
            10-K and incorporated by reference herein)

  10.59     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC, and Crescent Real Estate Equities
            Limited Partnership, relating to Ventana Inn (filed as Exhibit 10.59
            to December 31, 1998 Form 10-K and incorporated by reference herein)

  10.60     First Amendment to Amended and Restated Lease Agreement effective
            April 1, 1996 and Second Amendment to Amended and Restated Lease
            Agreement effective December 31, 1998, between RoseStar Southwest,
            LLC, and Crescent Real Estate Funding II, L.P., relating to Hyatt
            Regency Beaver Creek (filed as Exhibit 10.60 to December 31, 1998
            Form 10-K and incorporated by reference herein)

  10.61     First Amendment to Lease Agreement effective December 31, 1998,
            between COI Hotel Group, Inc. and Crescent Real Estate Equities
            Limited Partnership, relating to Four Seasons - Houston (filed as
            Exhibit 10.61 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.62     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC and Crescent Real Estate Funding VI,
            L.P., relating to Canyon Ranch - Lenox (filed as Exhibit 10.62 to
            March 31, 1999 Form 10-Q and incorporated by reference herein)

  10.63     Master Guaranty effective December 31, 1998, by Crescent Operating,
            Inc. for the benefit of Crescent Real Estate Equities Limited
            Partnership, Crescent Real Estate Funding II, L.P., and Crescent
            Real Estate Funding VI, L.P., relating to leases for Hyatt Regency
            Albuquerque, Hyatt Regency Beaver Creek, Canyon Ranch-Lenox, Sonoma
            Mission Inn & Spa, Canyon Ranch - Tucson, and Marriott City Center
            Denver (filed as Exhibit 10.63 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.64     Guaranty of Lease effective December 19, 1997, by Crescent
            Operating, Inc. for the benefit of Crescent Real Estate Equities
            Limited Partnership, relating to Ventana Inn (filed as Exhibit 10.64
            to December 31, 1998 Form 10-K and incorporated by reference herein)

  10.65     Amended and Restated Guaranty of Lease effective December 31, 1998,
            by Crescent Operating, Inc. for the benefit of Crescent Real Estate
            Equities Limited Partnership, relating to Four Seasons Hotel -
            Houston (filed as Exhibit 10.65 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.66     Amended and Restated Guaranty of Lease effective December 31, 1998,
            by Crescent Operating, Inc. for the benefit of Crescent Real Estate
            Equities Limited Partnership, relating to Sonoma Golf Club (filed as
            Exhibit 10.66 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.67     Credit Agreement dated August 11, 1995, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender; First Amendment to Credit Agreement
            dated as of April 15, 1997; Second Amendment to Credit Agreement
            dated as of May 8, 1998; and related Note and Security Agreement
            (filed as Exhibit 10.67 to December 31, 1998 Form 10-K and
            incorporated by reference herein)
</TABLE>

                                       56
<PAGE>
<TABLE>
<S>         <C>
  10.68     Credit Agreement dated January 1, 1998, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender, and related Note and Security
            Agreement (filed as Exhibit 10.68 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.69     $3,100,000 Note dated February 29, 1996, made by Crescent
            Development Management Corp. payable to Crescent Real Estate
            Equities Limited Partnership (filed as Exhibit 10.69 to December 31,
            1998 Form 10-K and incorporated by reference herein)

  10.70     Credit Agreement dated January 1, 1999, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender, and related Line of Credit Note and
            Security Agreement (filed as Exhibit 10.70 to March 31, 1999 Form
            10-Q and incorporated by reference herein)

  10.71     Amended and Restated Credit Agreement dated January 1, 1999, between
            Crescent Development Management Corp., as borrower, and Crescent
            Real Estate Equities Limited Partnership, as lender, and related
            Line of Credit Note and Amended and Restated Security Agreement
            (filed as Exhibit 10.71 to March 31, 1999 Form 10-Q and incorporated
            by reference herein)

  10.72     Purchase Agreement dated March 12, 1999, between Crescent Operating,
            Inc. and Crescent Real Estate Equities Limited Partnership, relating
            to sale of interests in Crescent CS Holdings Corp., and Crescent CS
            Holdings II Corp., and related Put Agreement of same date (filed as
            Exhibit 10.72 to March 31, 1999 Form 10-Q and incorporated by
            reference herein)

  10.73     Second Amendment to Lease Agreement effective April 1, 1999, between
            Wine Country Hotel, LLC, and Crescent Real Estate Funding VI, L.P.,
            relating to Canyon Ranch-Lenox (filed as Exhibit 10.73 to March 31,
            1999 Form 10-Q and incorporated by reference herein)

  10.74     Master Revolving Line of Credit Loan Agreement (Borrowing Base and
            Warehouse) dated May 14, 1998, between Desert Mountain Properties
            Limited Partnership, as borrower, and National Bank of Arizona, as
            lender; Modification Agreement dated December 30, 1998; second
            Modification Agreement dated March 31, 1999; and related Promissory
            Note (Borrowing Base), Promissory Note (Warehouse), Pledge
            Agreement, Deed of Trust, and Amendment to Deed of Trust (filed as
            Exhibit 10.74 to March 31, 1999 Form 10-Q and incorporated by
            reference herein)

  10.75     Lease Agreement dated as of June 15, 1999, between Crescent Real
            Estate Funding III, L.P. and COI Hotel Group, Inc., relating to the
            Renaissance Houston Hotel (filed as Exhibit 10.75 to June 30, 1999
            Form 10-Q and incorporated by reference herein)

  10.76     Guaranty of Lease dated June 15, 1999, by Crescent Operating, Inc.
            for the benefit of Crescent Real Estate Funding III, L.P., relating
            to Renaissance Houston Hotel (filed as Exhibit 10.76 to June 30,
            1999 Form 10-Q and incorporated by reference herein)

  10.77     Asset Management Agreement dated as of January 1, 1999, between
            Crescent Real Estate Equities Limited Partnership and COI Hotel
            Group, Inc., relating to the Omni Austin Hotel (filed as Exhibit
            10.77 to June 30, 1999 Form 10-Q and incorporated by reference
            herein)

  10.78     Agreement dated June 11, 1999, by and between Gerald W. Haddock and
            Crescent Operating, Inc. and its subsidiaries and affiliates (filed
            as Exhibit 10.78 to June 30, 1999 Form 10-Q and incorporated by
            reference herein)
</TABLE>

                                       57
<PAGE>
<TABLE>
<S>         <C>
  10.79     Stock Purchase Agreement dated as of July 15, 1999, by and among E.
            L. Lester & Company, Incorporated, E. L. Lester, Jr., Howard T.
            Tellepsen II, Karen Tellepsen, Tom Tellepsen II, Linda Lester
            Griffen, Crescent Operating, Inc. and Crescent Machinery Company
            (filed as Exhibit 10.79 to the Company's September 30, 1999 Form
            10-Q ("September 30, 1999 Form 10-Q") and incorporated by reference
            herein)

  10.80     Stock Purchase Agreement dated as of July 8, 1999, by and among
            Solveson Crane Rental, Inc., Solveson Family Revocable Trust, and
            Crescent Machinery Company (filed as Exhibit 10.80 to September 30,
            1999 Form 10-Q and incorporated by reference herein)

  10.81     Second Amendment to Credit Agreement effective as of August 27,
            1999, among Crescent Operating, Inc., Bank of America, N. A.
            (formerly NationsBank, N. A.), and the Support Parties identified
            therein (filed as Exhibit 10.81 to September 30, 1999 Form 10-Q and
            incorporated by reference herein)

  10.82     First Amendment to 1997 Crescent Operating, Inc. Management Stock
            Incentive Plan (filed as Exhibit 10.82 to the Company's December 31,
            1999 Form 10-K ("December 31, 1999 Form 10-K") and incorporated by
            reference herein)

  10.83     Form of Sales and Service Agreement between BLAW KNOX Construction
            Equipment Corporation and certain of Crescent Machinery Company and
            its subsidiaries (filed as Exhibit 10.83 to December 31, 1999 Form
            10-K and incorporated by reference herein)

  10.84     Form of Heavy Equipment Distributor Agreement between Compaction
            America, Inc. and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.84 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.85     Form of Gradall Equipment Distributor Agreement between The Gradall
            Company and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.85 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.86     Form of Distributor Selling Agreement between Ingersoll-Rand Company
            and certain of Crescent Machinery Company and its subsidiaries
            (filed as Exhibit 10.86 to December 31, 1999 Form 10-K and
            incorporated by reference herein)

  10.87     Form of JCB Dealership Agreement between JCB Inc. and certain of
            Crescent Machinery Company and its subsidiaries (filed as Exhibit
            10.87 to December 31, 1999 Form 10-K and incorporated by reference
            herein)

  10.88     Form of Distributor Agreement between LBX Company, LLC, and certain
            of Crescent Machinery Company and its subsidiaries (filed as Exhibit
            10.88 to December 31, 1999 Form 10-K and incorporated by reference
            herein)

  10.89     Form of Distributor Agreement between Liebherr Construction
            Equipment Co. and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.89 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.90     Form of Distributor Agreement between Link-Belt Construction
            Equipment Company and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.90 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.91     Form of Dealer Floor Plan Financing and Security Agreement between
            General Electric Capital Corporation and certain of Crescent
            Machinery Company and its subsidiaries (filed as Exhibit 10.91 to
            December 31, 1999 Form 10-K and incorporated by reference herein)
</TABLE>

                                       58
<PAGE>
<TABLE>
<S>         <C>
  10.92     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            Development Management Corp. (filed as Exhibit 10.92 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.93     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            CS Holdings II Corp. (filed as Exhibit 10.93 to December 31, 1999
            Form 10-K and incorporated by reference herein)

  10.94     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            CS Holdings Corp. (filed as Exhibit 10.94 to December 31, 1999 Form
            10-K and incorporated by reference herein)

  10.95     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Desert
            Mountain Development Corp. (filed as Exhibit 10.95 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.96     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and The
            Woodlands Land Company, Inc. (filed as Exhibit 10.96 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.97     $19.5 Million Credit and Security Agreement affective as of March
            11, 1999, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. with related Promissory Note (filed as
            Exhibit 10.97 to December 31, 1999 Form 10-K and incorporated by
            reference herein)

  10.98     First Amendment to Credit and Security Agreement effective as of
            March 11, 1999, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.98 to
            December 31, 1999 Form 10-K and incorporated by reference herein)

  10.99     Third Amendment to Amended and Restated Credit and Security
            Agreement effective as of March 11, 1999, between Crescent Real
            Estate Equities Limited Partnership and Crescent Operating, Inc.
            (filed as Exhibit 10.99 to December 31, 1999 Form 10-K and
            incorporated by reference herein)

  10.100    Third Amendment to Line of Credit Credit and Security Agreement
            effective as of March 11, 1999, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. (filed as
            Exhibit 10.100 to December 31, 1999 Form 10-K and incorporated by
            reference herein)

  10.101    Agreements for Wholesale Financing (with Addendum) between Deutsche
            Financial Services Corporation and, respectively, Western Traction
            Company, Machinery Inc., Solveson Crane Rentals Inc., Harvey
            Equipment Center Inc., and Crescent Machinery Company, with
            Guarantees (filed as Exhibit 10.101 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.102    Master Security Agreements between Associates Commercial Corporation
            and, respectively, Crescent Machinery Company and Western Traction
            Company; Security Agreement between Associates Commercial
            Corporation and Western Traction Company; Addendum; and Continuing
            Guaranty by Crescent Machinery Company (filed as Exhibit 10.102 to
            December 31, 1999 Form 10-K and incorporated by reference herein)
</TABLE>

                                       59
<PAGE>
<TABLE>
<S>         <C>
  10.103    First Amendment to Amended and Restated Credit Agreement dated as of
            December 20, 1999, between Crescent Real Estate Equities Limited
            Partnership and Crescent Development Management Corp. with related
            Line of Credit Note and letter amendment to related security
            agreement (filed as Exhibit 10.103 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.104    $5,600,000 Promissory Note dated February 28, 2000, made by East
            West Resorts, LLC payable to Crescent Real Estate Equities Limited
            Partnership (filed as Exhibit 10.104 to the Company's March 31, 2000
            Form 10-Q ("March 31, 2000 Form 10-Q") and incorporated by reference
            herein)

  10.105    Mutual Termination of Asset Management Agreement for Omni Austin
            Hotel, Austin, Texas, effective January 31, 2000, between Crescent
            Real Estate Equities Limited Partnership and COI Hotel Group, Inc.
            (filed as Exhibit 10.105 to March 31, 2000 Form 10-Q and
            incorporated by reference herein)

  10.106    Master Asset Management and Administrative Services Agreement dated
            February 1, 2000, by and among Sonoma Management Corp. I, Crescent
            Operating, Inc. and each of its subsidiaries identified therein
            (filed as Exhibit 10.106 to March 31, 2000 Form 10-Q and
            incorporated by reference herein)

  10.107    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate Funding
            VIII, L.P., as Owner and assignor to the Company, relating to
            Ventana Inn & Spa (filed as Exhibit 10.107 to March 31, 2000 Form
            10-Q and incorporated by reference herein)

  10.108    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate Funding
            VIII, L.P., as Owner and assignor to the Company, relating to Sonoma
            Mission Inn Golf and Country Club (filed as Exhibit 10.108 to March
            31, 2000 Form 10-Q and incorporated by reference herein)

  10.109    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate funding
            VIII, L.P., as Owner and assignor to the Company, relating to Sonoma
            Mission Inn and Spa (filed as Exhibit 10.109 to March 31, 2000 Form
            10-Q and incorporated by reference herein)

  10.110    Termination of Lease Agreement for The Four Seasons Hotel, Houston,
            effective November 3, 2000, between COI Hotel Group, Inc. and
            Crescent Real Estate Funding IX, L.P. (filed as Exhibit 10.110 to
            the Company's September 30, 2000 Form 10-Q ("September 30, 2000 Form
            10-Q") and incorporated by reference herein)

  10.111    First Amendment to Credit and Security agreement effective February
            1, 2000, between Crescent Realty Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 Million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.111
            to September 30, 2000 Form 10-Q and incorporated by reference
            herein)

  10.112    Second Amendment to Credit and Security Agreement effective February
            1, 2000, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9 Million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.112 to September 30, 2000 Form 10-Q and incorporated by reference
            herein)

  10.113    Fourth Amendment to Amended and Restated Credit and Security
            Agreement effective February 1, 2000, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.113 to September 30, 2000 Form 10-Q
            and incorporated by reference herein)
</TABLE>

                                       60
<PAGE>

<TABLE>
<S>         <C>
  10.114    Fourth Amendment to Line of Credit Credit and Security Agreement
            effective February 1, 2000, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.114 to September 30, 2000 Form 10-Q and incorporated
            by reference herein)

  10.115    Credit Agreement dated September 21, 2000, between Crescent
            Development Management Corp., as borrower, and Crescent Real Estate
            Equities Limited Partnership, as lender, and related Line of Credit
            Note and Security Agreement *

  10.116    Assignment of Interest in East West Resorts, LLC (CDMC to COPI);
            Assignment of Interest in East West Resorts, LLC (COPI to CDMC); and
            Assignment, Assumption and Consent Agreement dated December 31,
            2000, among Crescent Development Management Corp., Crescent
            Development Management Corp. II, and Crescent Real Estate Equities
            Limited Partnership *

  10.117    Assignment of Membership Interest dated December 29, 2000 between
            Crescent Operating, Inc. and Rockwood Financial Group, Inc.;
            Assignment of Membership Interest dated December 29, 2000 between
            COPI CBHS Holdings, L.P. and Rockwood Financial Group, Inc.; and
            related Indemnification Agreement dated December 29, 2000 among COPI
            CBHS Holdings, L.P., Crescent Operating, Inc. and Rockwood Financial
            Group, Inc. *

  10.118    Severance Agreement dated February 5, 2001, between Richard P.
            Knight and Crescent Operating, Inc. and Crescent Machinery Company
            (filed as Exhibit 10.118 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.119    Second Amendment to Credit and Security Agreement effective January
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.119
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.120    Third Amendment to Credit and Security Agreement effective January
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.120 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.121    Fifth Amendment to Line of Credit Credit and Security Agreement
            effective January 31, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.121 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.122    Fifth Amendment to Amended and Restated Credit and Security
            Agreement effective January 31, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.122 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.123    Third Amendment to Credit and Security Agreement effective February
            15, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.123
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.124    Fourth Amendment to Credit and Security Agreement effective February
            15, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.124 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.125    Sixth Amendment to Line of Credit Credit and Security Agreement
            effective February 15, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
</TABLE>


                                       61
<PAGE>

<TABLE>
<S>         <C>
            as Exhibit 10.125 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.126    Sixth Amendment to Amended and Restated Credit and Security
            Agreement effective February 15, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.126 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.127    Fourth Amendment to Credit and Security Agreement effective March 5,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.127
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.128    Fifth Amendment to Credit and Security Agreement effective March 5,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.128 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.129    Seventh Amendment to Line of Credit Credit and Security Agreement
            effective March 5, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.129 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.130    Seventh Amendment to Amended and Restated Credit and Security
            Agreement effective March 5, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.130 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.131    Management Rights Agreement dated as of February 6, 2001, by and
            among Crescent Operating, Inc., Crescent Machinery Company, Crescent
            Machinery Company, LP, and SunTX Capital Management Corp. (filed as
            Exhibit 10.131 to June 30, 2001 Form 10-Q and incorporated by
            reference herein)

  10.132    Fifth Amendment to Credit and Security Agreement effective June 28,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 *

  10.133    Sixth Amendment to Credit and Security Agreement effective June 28,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 *

  10.134    Eighth Amendment to Line of Credit Credit and Security Agreement
            effective June 28, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 *

  10.135    Eighth Amendment to Amended and Restated Credit and Security
            Agreement effective June 28, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 *

  10.136    Sixth Amendment to Credit and Security Agreement effective October
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 *

  10.137    Seventh Amendment to Credit and Security Agreement effective October
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 *

  10.138    Ninth Amendment to Line of Credit Credit and Security Agreement
            effective October 31,
</TABLE>


                                       62
<PAGE>

<TABLE>
<S>         <C>
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to Line of Credit Credit and
            Security Agreement effective May 21, 1997 *

  10.139    Ninth Amendment to Amended and Restated Credit and Security
            Agreement effective October 31, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 *

  10.140    Agreement for the Purchase and Sale of Assets and Stock dated June
            28, 2001 by and among Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc., Rosestar Management LLC,
            Canyon Ranch Leasing, L.L.C., Wine Country Hotel, LLC, Rosestar
            Southwest, LLC, COI Hotel Group, Inc. and COPI Colorado, LP (filed
            as Annex A to Proxy Statement for 2001 Annual Meeting of
            Shareholders and incorporated by reference herein)

  10.141    Amended and Restated Securities Purchase Agreement, made and entered
            into as of June 28, 2001, amended and restated as of October 31,
            2001 by and among Crescent Machinery Company, L.P., Crescent
            Machinery Holdings, L.P., CMC GP, LLC, Crescent Machinery Company,
            Crescent Operating, Inc., COPI Colorado, LP, CRE Equipment Holdings,
            LLC, Crescent Real Estate Equities Limited Partnership, and SunTX
            CMLP, Inc. (filed as Annex E to Proxy Statement for 2001 Annual
            Meeting of Shareholders and incorporated by reference herein)

  10.142    Third Amendment to Credit Agreement effective as of August 27, 2001,
            among Crescent Operating, Inc., Bank of America, N.A. (formerly
            NationsBank, N.A.), and the Support Parties identified therein *

  10.143    Fourth Amendment to Credit Agreement effective as of November 27,
            2001, among Crescent Operating, Inc., Bank of America, N.A.
            (formerly NationsBank, N.A.), and the Support Parties identified
            therein, together with related $15.0 million promissory note *

  10.144    Fifth Amendment to Credit Agreement effective as of December 31,
            2001, among Crescent Operating, Inc., Bank of America, N.A.
            (formerly NationsBank, N.A.), and the Support Parties identified
            therein, together with related $15.0 million promissory note,
            modified and extended as of December 31, 2001 *

  10.145    Assignment/Pledge (Security Agreement) effective as of December 31,
            2001 by Crescent Operating to Bank of America, N.A. (formerly
            NationsBank, N.A.) *

    21      List of Subsidiaries of Crescent Operating, Inc. *

   23.1     Consent of Ernst & Young LLP (filed herewith)

   23.2     Consent of Deloitte & Touche LLP (filed herewith)

    99      Notice Regarding Arthur Andersen LLP (filed herewith)

     *      Filed with corresponding exhibit number as listed on the
            Registrant's Form 10-K for the year ended December 31,
            2001 and incorporated by reference herein
</TABLE>


(b)    Reports on Form 8-K:

       No reports on Form 8-K were filed during the last quarter of the year
       ended December 31, 2001.

                                       63
<PAGE>
(c)    Exhibits Required by Item 601 of Regulation S-K:

       Exhibits required are listed under Item 14(a)(3).

(d)    Financial Statement Schedules Required by Regulation S-X:


       Information with respect to this Item is contained on Pages F-1 to F-79
       of this Amendment No. 1 to the Annual Report on Form 10-K/A.


                                       64
<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 15th day of
January, 2003.


                                      CRESCENT OPERATING, INC.
                                      (Registrant)


                                      By     /s/ JEFFREY L. STEVENS
                                        ________________________________________
                                                 Jeffrey L. Stevens
                                        President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
          SIGNATURE                                       TITLE                          DATE
          ---------                                       -----                          ----
<S>                                      <C>                                          <C>
   /s/ JEFFREY L. STEVENS
____________________________________
       Jeffrey L. Stevens                President, Chief Executive Officer, Chief    January 15, 2003
                                         Financial and Accounting Officer and Sole
                                         Director
</TABLE>


                                       65
<PAGE>

      CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER



I, Jeffrey L. Stevens, certify that:



         1.       I have reviewed this annual report on Form 10-K/A of Crescent
                  Operating, Inc.;



         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;



         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this annual report.



Date: January 15, 2003



  /s/ JEFFREY L. STEVENS
________________________
Jeffrey L. Stevens
President, Chief Executive Officer, Chief Financial and Accounting Officer and
Sole Director


                                       66
<PAGE>
                           CRESCENT OPERATING, INC.
                        INDEX TO FINANCIAL STATEMENTS

The following Consolidated Financial Statements of the Registrant are submitted
herewith in response to Item 8 and Item 14(a)1:

<TABLE>
<CAPTION>
                                                                                                            PAGE
                                                                                                            ----
<S>                                                                                                         <C>
CRESCENT OPERATING, INC.

   Reports of Independent Auditors.....................................................................      F-3

   Consolidated Balance Sheets.........................................................................     F-10

   Consolidated Statements of Operations...............................................................     F-11

   Consolidated Statements of Changes in Shareholders' Equity (Deficit)................................     F-12

   Consolidated Statements of Cash Flows...............................................................     F-13

   Notes to Consolidated Financial Statements..........................................................     F-14

   The following financial statement schedule of the Registrant and its
   subsidiaries is submitted herewith in response to Item 14(a)2:

   Schedule I - Condensed Financial Information of the Registrant......................................      S-1
</TABLE>

The following Consolidated Financial Statements are submitted herewith in
response to Rule 3-09 of Regulation S-X:


<TABLE>
<S>                                                                                                         <C>
VORNADO CRESCENT LOGISTICS OPERATING PARTNERSHIP AND SUBSIDIARY

   Independent Auditors Report........................................................................      F-43

   Consolidated Balance Sheets........................................................................      F-44

   Consolidated Statements of Operations..............................................................      F-46

   Consolidated Statements of Partners' Capital.......................................................      F-47

   Consolidated Statements of Cash Flows..............................................................      F-48

   Notes to Consolidated Financial Statements.........................................................      F-50
</TABLE>


                                      F-1
<PAGE>

<TABLE>
<S>                                                                                                         <C>
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY

   Report of Independent Public Accountants...........................................................      F-60

   Consolidated Balance Sheets........................................................................      F-61

   Consolidated Statements of Earnings................................................................      F-62

   Consolidated Statements of Changes in Partners' Equity (Deficit)...................................      F-63

   Consolidated Statements of Cash Flows..............................................................      F-64

   Notes to Consolidated Financial Statements.........................................................      F-65

THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY

   Report of Independent Public Accountants...........................................................      F-68

   Consolidated Balance Sheets........................................................................      F-69

   Consolidated Statements of Earnings................................................................      F-70

   Consolidated Statements of Changes in Partners' Equity.............................................      F-71

   Consolidated Statements of Cash Flows..............................................................      F-72

   Notes to Consolidated Financial Statements.........................................................      F-73
</TABLE>


All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

                                      F-2
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


Board of Directors and Shareholders
Crescent Operating, Inc.


We have audited the accompanying consolidated balance sheets of Crescent
Operating, Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 2001. Our audits also included the financial statement schedule
listed in the index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits. We
did not audit the financial statements of The Woodlands Land Development
Company, L.P., The Woodlands Operating Company, L.P., Crescent Resort
Development, Inc. and subsidiaries or Vornado Crescent Logistics Operating
Partnership and Subsidiary, which statements reflect total assets constituting
51.9% and 44.6%, respectively, of consolidated assets as of December 31, 2001
and 2000, and (loss) from continuing operations of $(1.4) million, $(4.4)
million and $(2.2) million of consolidated net (loss) from continuing operations
of $(30.1) million, $(0.9) million and $(1.6) million, and income from
discontinued operations of $3.0 million, $3.2 million and $0.8 million of
consolidated net (loss) from discontinued operations of $(38.5) million, $(2.8)
million and $(1.1) million for years 2001, 2000 and 1999, respectively. Those
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to data included for The Woodlands
Land Development Company, L.P., The Woodlands Operating Company, L.P., Crescent
Resort Development, Inc. and subsidiaries and Vornado Crescent Logistics
Operating Partnership, is based solely on the reports of the other auditors. The
financial statements for the Woodlands Land Development Company, L.P., The
Woodlands Operating Company, L.P. and Crescent Resort Development, Inc. and
subsidiaries, were audited by auditors who have ceased operations.


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 and the reports of other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Crescent Operating, Inc. and subsidiaries
at December 31, 2001 and 2000, and the consolidated 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. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

The accompanying financial statements have been prepared assuming that Crescent
Operating, Inc. will continue as a going concern. The Company has incurred
recurring net losses, has a net capital deficiency and has debts in default and
other liabilities which it is unable to liquidate in the normal course of
business. In addition, as more fully discussed in Note 3, the Company has
entered into an agreement with Crescent Equities (CEI) in which substantially
all of the assets and operations which comprise the hospitality and land
development segments of the Company have been transferred to CEI subsequent to
December 31, 2001. This agreement also provides for the Company to file a
prepackaged bankruptcy plan. On February 6, 2002, Crescent Machinery Company, a
wholly owned subsidiary of the Company, filed for bankruptcy protection under
Chapter 11 of the federal bankruptcy laws. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.

As discussed in Note 15 of the financial statements, in 2001, the Company
changed its method of accounting for warrants.


                                              /s/ ERNST & YOUNG LLP


Dallas, Texas


April 19, 2002, except for Note
 4, as to which the date
 is December 19, 2002


                                      F-3
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Operating Company, L.P.:

We have audited the consolidated balance sheets of The Woodlands Operating
Company, L.P. (a Texas limited partnership) and subsidiary as of December 31,
2001 and 2000 and the related consolidated statements of earnings, changes in
partners' deficit and cash flows for each of the three years ended December 31,
2001 not presented separately herein). These financial statements are the
responsibility of The Woodlands Operating Company, L.P.'s management. Our
responsibility is to express an opinion on these financial statements 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 The Woodlands Operating
Company, L.P. and subsidiary as of December 31, 2001 and 2000 and the results of
their operations and their cash flows for each of the three years ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 25, 2002


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-4
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Land Development Company, L.P.:

We have audited the consolidated balance sheets of The Woodlands Land
Development Company, L.P. (a Texas limited partnership) and subsidiaries as of
December 31, 2001 and 2000 and the related consolidated statements of earnings
and comprehensive income, changes in partners' equity and cash flows for each of
the three years ended December 31, 2001 (not presented separately herein). These
financial statements are the responsibility of The Woodlands Land Development
Company, L.P.'s management. Our responsibility is to express an opinion on these
financial statements 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 The Woodlands Land Development
Company, L.P. 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 ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 25, 2002


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-5
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Operating Company, L.P.:

We have audited the accompanying consolidated balance sheets of The Woodlands
Operating Company, L.P. (a Texas limited partnership) and subsidiary as of
December 31, 2000 and 1999 and the related consolidated statements of earnings,
changes in partners' equity and cash flows for each of the three years ended
December 31, 2000. These financial statements are the responsibility of The
Woodlands Operating Company, L.P.'s management. Our responsibility is to express
an opinion on these financial statements 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 The Woodlands Operating
Company, L.P. and subsidiary as of December 31, 2000 and 1999 and the results of
their operations and their cash flows for each of the three years ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 15, 2001


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-6
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Land Development Company, L.P.:

We have audited the accompanying consolidated balance sheets of The Woodlands
Land Development Company, L.P. (a Texas limited partnership) and subsidiary as
of December 31, 2000 and 1999 and the related consolidated statements of
earnings, changes in partners' equity and cash flows for each of the three years
ended December 31, 2000. These financial statements are the responsibility of
The Woodlands Land Development Company, L.P.'s management. Our responsibility is
to express an opinion on these financial statements 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 The Woodlands Land Development
Company, L.P. and subsidiaries as of December 31, 2000 and 1999 and the results
of their operations and their cash flows for each of the three years ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 15, 2001


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-7
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Crescent Resort Development, Inc.

We have audited the consolidated balance sheets of CRESCENT RESORT DEVELOPMENT,
INC. (a Delaware corporation and formerly known as Crescent Development
Management Corp.) AND SUBSIDIARIES as of December 31, 2001 and 2000 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 Resort Development,
Inc. 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.

                              /s/   ARTHUR ANDERSEN LLP

Denver, Colorado,
January 25, 2002.


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-8
<PAGE>
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Crescent Development Management Corp. II:

We have audited the consolidated balance sheet of CRESCENT DEVELOPMENT
MANAGEMENT CORP. II (a Delaware corporation) AND SUBSIDIARY as of December 31,
2000 and the related consolidated statement of shareholders' equity for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Crescent
Development Management Corp. II and subsidiary as of December 31, 2000 for the
year then ended in conformity with accounting principles generally accepted in
the United States.

                              /s/   ARTHUR ANDERSEN LLP

Denver, Colorado,
February 9, 2001.


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-9
<PAGE>

                           CRESCENT OPERATING, INC.
                         CONSOLIDATED BALANCE SHEETS
                            (AMOUNTS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                                            December 31, 2001    December 31, 2000
                                                                                           -------------------  -------------------
                                                        ASSETS
<S>                                                                                        <C>                  <C>
CURRENT ASSETS
  Cash and cash equivalents                                                                  $          492       $        1,000
  Accounts receivable, net                                                                           14,581               25,797
  Inventories                                                                                        18,965               37,429
  Notes receivable                                                                                       58                  122
  Prepaid expenses and other current assets                                                           1,875                4,595
  Current assets to be transferred pursuant to Settlement Agreement                                  94,161              123,719
                                                                                             --------------       --------------
     Total current assets                                                                           130,132              192,662
                                                                                             --------------       --------------
PROPERTY AND EQUIPMENT, NET                                                                          70,094              110,939

INVESTMENTS                                                                                           4,833                7,409

OTHER ASSETS
  Intangible assets, net                                                                                  -               14,011
  Deferred tax assets                                                                                24,715               10,115
  Other assets                                                                                          636                  156
  Long-term assets to be transferred pursuant to Settlement Agreement                               714,994              575,236
                                                                                             --------------       --------------
     Total other assets                                                                             740,345              599,518
                                                                                             --------------       --------------

TOTAL ASSETS                                                                                 $      945,404       $      910,528
                                                                                             ==============       ==============

                                           LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES NOT SUBJECT TO COMPROMISE
  CURRENT LIABILITIES
      Accounts payable and accrued expenses                                                  $       15,525       $       15,360
      Accounts payable and accrued expenses - CEI                                                    48,875               15,964
      Current portion of long-term debt - CEI                                                        69,041                8,578
      Current portion of long-term debt                                                             101,870               53,953
      Deferred revenue                                                                                  641                  626
      Current liabilities to be transferred pursuant to Settlement Agreement                        554,356              208,246
                                                                                             --------------       --------------
         Total current liabilities                                                                  790,308              302,727

     LONG-TERM DEBT - CEI, NET OF CURRENT PORTION                                                         -               52,620

     LONG-TERM DEBT, NET OF CURRENT PORTION                                                             790               93,352

     LONG-TERM LIABILITIES TO BE TRANSFERRED PURSUANT TO SETTLEMENT AGREEMENT                        88,805              310,834
                                                                                             --------------       --------------

     Total liabilities                                                                              879,903              759,533

MINORITY INTERESTS TO BE TRANSFERRED PURSUANT TO SETTLEMENT AGREEMENT                               158,889              174,528

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
Preferred stock, $.01 par value, 10,000 shares authorized,
    no shares issued or outstanding                                                                       -                    -
Common stock, $.01 par value, 22,500 shares authorized,
    11,490 and 11,443 shares issued, respectively                                                       115                  114
Additional paid-in capital                                                                           17,781               17,754
Deferred compensation on restricted shares                                                                -                 (177)
Accumulated other comprehensive loss                                                                 (1,436)              (9,509)
Accumulated deficit                                                                                (105,542)             (27,409)
Treasury stock at cost, 662 and 1,103 shares, respectively                                           (4,306)              (4,306)
                                                                                             --------------       --------------
     Total shareholders' deficit                                                                    (93,388)             (23,533)
                                                                                             --------------       --------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                                  $      945,404       $      910,528
                                                                                             ==============       ==============
</TABLE>



        See accompanying notes to the consolidated financial statements.


                                      F-10
<PAGE>

                           CRESCENT OPERATING, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)




<TABLE>
<CAPTION>
                                                                        For the            For the               For the
                                                                      Year Ended         Year Ended             Year Ended
                                                                   December 31, 2001    December 31, 2000    December 31, 1999
                                                                  -------------------  -------------------  -------------------
<S>                                                               <C>                  <C>                  <C>
REVENUES
    Equipment sales & leasing                                        $      67,521        $      69,976        $      62,311
    Hospitality                                                                  -               32,615               35,304
                                                                     -------------        -------------        -------------

      Total revenues                                                        67,521              102,591               97,615
                                                                     -------------        -------------        -------------

OPERATING EXPENSES
    Equipment sales & leasing                                               71,113               68,710               58,799
    Hospitality                                                                  -               22,582               24,649
    Hospitality properties rent-CEI                                              -                8,102                9,105
    Land development                                                             -                    -                   18
    Corporate general and administrative                                     6,969                4,224                2,604
    Impairment of assets                                                    12,332                    -                    -
                                                                     -------------        -------------        -------------

         Total operating expenses                                           90,414              103,618               95,175
                                                                     -------------        -------------        -------------

(LOSS) INCOME FROM OPERATIONS                                              (22,893)              (1,027)               2,440

INVESTMENT INCOME                                                            1,135                  722                1,890

EQUITY IN LOSS OF
    UNCONSOLIDATED SUBSIDIARIES                                             (2,275)              (6,952)              (3,472)

OTHER EXPENSE (INCOME)
    Interest expense                                                        13,241               14,123               11,993
    Interest income                                                              -                 (439)                (458)
    Gain on lease termination of hotel and sale of club                          -              (19,852)                   -
    Other                                                                    1,417                  762                   19
                                                                     -------------        -------------        -------------

         Total other expense (income)                                       14,658               (5,406)              11,554
                                                                     -------------        -------------        -------------

LOSS FROM CONTINUING OPERATIONS BEFORE TAXES                               (38,691)              (1,851)             (10,696)
                                                                     -------------        -------------        -------------

INCOME TAX BENEFIT                                                          (8,591)                (929)              (9,102)
                                                                     -------------        -------------        -------------

LOSS FROM CONTINUING OPERATIONS                                            (30,100)                (922)              (1,594)

DISCONTINUED OPERATIONS (NOTE 4)
    (Loss) income from operations of discontinued
    hospitality and land development segments
    (less applicable income tax expense of $7,966,
    $14,664 and $6,505 and minority interests of
    $(13,588), $(26,018), and $(14,112))                                    (5,817)                 106                  319

    Loss from operations of discontinued
    equipment sales and leasing branches
    (less applicable income tax benefit of $(1,968),
    $(1,988), $(874))                                                      (32,707)              (2,874)              (1,420)
                                                                     -------------        -------------        -------------

         LOSS FROM DISCONTINUED OPERATIONS                                 (38,524)              (2,768)              (1,101)
                                                                     -------------        -------------        -------------

LOSS BEFORE ACCOUNTING CHANGE                                              (68,624)              (3,690)              (2,695)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                         (9,509)                   -                    -
                                                                     -------------        -------------        -------------

NET LOSS                                                             $     (78,133)       $      (3,690)       $      (2,695)
                                                                     =============        =============        =============

BASIC AND DILUTED LOSS PER SHARE

    Loss before discontinued operations and accounting change        $       (2.91)       $       (0.09)       $       (0.15)
    Discontinued operations                                                  (3.72)               (0.27)               (0.11)
    Change in accounting principle                                           (0.92)                   -                    -
                                                                     -------------        -------------        -------------

   Net loss per share                                                $       (7.55)       $       (0.36)       $       (0.26)
                                                                     =============        =============        =============

WEIGHTED AVERAGE SHARES OUTSTANDING
   Basic                                                                    10,344               10,326               10,363
                                                                     =============        =============        =============
   Diluted                                                                  10,344               10,326               10,363
                                                                     =============        =============        =============
</TABLE>



        See accompanying notes to the consolidated financial statements.


                                      F-11
<PAGE>

                           CRESCENT OPERATING, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
                            (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              Common stock           Treasury stock
                                                         ---------------------   --------------------       Additional
                                                          Shares       Amount     Shares      Amount      paid-in capital
                                                         --------     --------   --------    --------    -----------------
<S>                                                      <C>          <C>        <C>         <C>         <C>
DECEMBER 31, 1998                                         11,402          114        (700)      (2,852)         17,667
Comprehensive income (loss):
  Net loss                                                     -            -           -            -               -
  Unrealized loss on Magellan warrants                         -            -           -            -               -

Comprehensive income (loss)
Stock options exercised                                        7            -           -            -               7
Issuance of restricted common stock                            6            -           -            -              40
Amortization of restricted common stock                        -            -           -            -               -
Purchase of treasury stock                                     -            -        (403)      (1,454)              -
                                                          ------      -------      ------    ---------       ---------

DECEMBER 31, 1999                                         11,415          114      (1,103)      (4,306)         17,714

Comprehensive income (loss):
  Net loss                                                     -            -           -            -               -
  Unrealized gain on Magellan warrants                         -            -           -            -               -

Comprehensive income (loss)

Issuance of restricted common stock                           28            -           -            -              40
Amortization of restricted common stock                        -            -           -            -               -
                                                          ------      -------      ------    ---------       ---------

DECEMBER 31, 2000                                         11,443      $   114      (1,103)   $  (4,306)      $  17,754

Comprehensive income (loss):
  Net loss                                                     -            -           -            -               -
  Proportionate share of other comprehensive
    loss of equity method investee entity                      -            -           -            -               -
  Cumulative effect of change in accounting principle          -            -           -            -               -

Comprehensive income (loss)

Issuance of restricted common stock                           47            1           -            -              27

Amortization of restricted common stock                        -            -           -            -               -
                                                          ------      -------      ------    ---------       ---------

DECEMBER 31, 2001                                         11,490      $   115      (1,103)   $  (4,306)      $  17,781
                                                          ======      =======      ======    =========       =========
</TABLE>

<TABLE>
<CAPTION>
                                                            Deferred         Accumulated
                                                          compensation          other
                                                          on restricted     comprehensive      Accumulated
                                                              shares        income (loss)        deficit        Total
                                                         ---------------   ---------------    -------------   ---------
<S>                                                      <C>               <C>                <C>             <C>
DECEMBER 31, 1998                                             (210)               (9,763)         (21,024)      (16,068)
Comprehensive income (loss):
  Net loss                                                       -                     -           (2,695)       (2,695)
  Unrealized loss on Magellan warrants                           -                  (364)               -          (364)
                                                                                                              ---------
Comprehensive income (loss)                                                                                      (3,059)
Stock options exercised                                          -                     -                -             7
Issuance of restricted common stock                            (40)                    -                -             -
Amortization of restricted common stock                         52                     -                -            52
Purchase of treasury stock                                       -                     -                -        (1,454)
                                                         ---------           -----------       ----------     ---------

DECEMBER 31, 1999                                             (198)              (10,127)         (23,719)      (20,522)

Comprehensive income (loss):
  Net loss                                                       -                     -           (3,690)       (3,690)
  Unrealized gain on Magellan warrants                           -                   618                -           618
                                                                                                              ---------
Comprehensive income (loss)                                                                                      (3,072)

Issuance of restricted common stock                              -                     -                -            40
Amortization of restricted common stock                         21                     -                -            21
                                                         ---------           -----------       ----------     ---------

DECEMBER 31, 2000                                        $    (177)          $    (9,509)      $  (27,409)    $ (23,533)

Comprehensive income (loss):
  Net loss                                                       -                     -          (78,133)      (78,133)
  Proportionate share of other comprehensive
    loss of equity method investee entity                        -                (1,436)               -        (1,436)
  Cumulative effect of change in accounting principle            -                 9,509                -         9,509
                                                                                                              ---------
Comprehensive income (loss)                                                                                     (70,060)

Issuance of restricted common stock                              -                     -                -            28

Amortization of restricted common stock                        177                     -                -           177
                                                         ---------           -----------       ----------     ---------

DECEMBER 31, 2001                                        $       -           $    (1,436)      $ (105,542)    $ (93,388)
                                                         =========           ===========       ==========     =========
</TABLE>

        See accompaning notes to the consolidated financial statements.


                                      F-12
<PAGE>

                           CRESCENT OPERATING, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             For the              For the             For the
                                                                            Year Ended          Year Ended           Year Ended
                                                                        December 31, 2001    December 31, 2000    December 31, 1999
                                                                       -------------------  -------------------  -------------------
<S>                                                                    <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                $     (78,133)       $     (3,690)       $      (2,695)
 Adjustments to reconcile net income (loss)
   to net cash provided by (used in) operating activities:
    Depreciation                                                                26,636              25,863               21,388
    Amortization                                                                 4,585              11,962               12,354
    Provision for deferred income taxes                                         (6,646)            (12,198)             (24,636)
    Equity in net income of unconsolidated subsidiaries                        (31,080)            (25,980)             (18,963)
    Investment income                                                           (1,135)               (722)                   -
    Impairment of assets                                                        40,178                   -                    -
    Cumulative effect of change in accounting principle                          9,509                   -                    -
    Minority interests                                                          13,588              26,018               14,113
    Gain on sale of property and equipment                                      (1,398)             (3,421)              (4,491)
    Gain on sale of investments                                                   (201)                  -               (2,308)
    Gain on lease termination of hotel and sale of club                              -             (19,852)                   -
    Changes in assets and liabilities, net of effects from transfers:
      Accounts receivable                                                       11,216              (7,433)                (512)
      Inventories                                                               15,822               6,785               (8,162)
      Prepaid expenses and current assets                                          522                (871)                 601
      Other assets                                                                (480)                 97                   41
      Accounts payable and accrued expenses                                        165                (177)               2,059
      Accounts payable and accrued expenses - CEI                                  119               4,771                 (351)
      Deferred revenue, current and noncurrent                                      15                 291                    -
      Net assets / liabilities of discontinued operations                     (136,682)            (47,860)               2,418
                                                                         -------------        ------------        -------------
        Net cash (used in) operating activities                               (133,400)            (46,417)              (9,144)
                                                                         -------------        ------------        -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of business interests, net of cash acquired                             -                   -              (28,511)
 Purchases of property and equipment                                           (21,084)            (48,265)             (58,158)
 Proceeds from sale of investments                                                   -              17,848               22,691
 Proceeds from sale of property and equipment                                   22,370              34,527               30,492
 Net distributions from (contributions to) investments                               -                 441                 (184)
 Net investing activities of discontinued operations                            12,954              15,879                 (847)
                                                                         -------------        ------------        -------------
        Net cash provided by (used in) investing activities                     14,240              20,430              (34,517)
                                                                         -------------        ------------        -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds of long-term debt                                                     31,946             104,495              103,776
 Payments on long-term debt                                                    (77,374)           (102,786)             (70,617)
 Proceeds of long-term debt - CEI                                                7,842               1,675               37,628
 Payments on long-term debt - CEI                                                    -                   -              (39,480)
 Net financing activities of discontinued operations                           156,238              23,603                8,799
                                                                         -------------        ------------        -------------
        Net cash provided by financing activities                              118,652              26,987               40,106
                                                                         -------------        ------------        -------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              (508)              1,000               (3,555)

CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                                                            (1,000)                  -                3,555
                                                                         -------------        ------------        -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                 $         492        $      1,000        $           -
                                                                         =============        ============        =============
</TABLE>

        See accompanying notes to the consolidated financial statements.


                                      F-13
<PAGE>
                           CRESCENT OPERATING, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND NATURE OF BUSINESS:

     Crescent Operating, Inc. ("Crescent Operating") was formed on April 1,
     1997, by Crescent Real Estate Equities Company ("Crescent Equities" or
     "CEI") and its subsidiary Crescent Real Estate Equities Limited Partnership
     ("Crescent Partnership") to be the lessee and operator of certain assets
     owned or to be acquired by Crescent Partnership and perform an agreement
     ("Intercompany Agreement") between Crescent Operating and Crescent
     Partnership, pursuant to which each has agreed to provide the other with
     rights to participate in certain transactions. On May 8, 1997, Crescent
     Partnership contributed $14.1 million in cash to Crescent Operating.
     Effective June 12, 1997, Crescent Equities distributed shares of Crescent
     Operating common stock to shareholders of Crescent Equities and unit
     holders of Crescent Partnership of record on May 30, 1997.


     Crescent Operating is a diversified management company that, through
     various subsidiaries and affiliates (collectively with Crescent Operating,
     the "Company"), in 2001 operated primarily in four business segments:
     Equipment Sales and Leasing, Hospitality, Temperature Controlled Logistics
     and Land Development. Through these segments, Crescent Operating does
     business throughout the United States. In February 2002, Crescent Operating
     transferred all of its hotel operations and all of its land development
     interests to Crescent Equities pursuant to the Settlement Agreement (See
     Note 3 - Settlement Agreement).



     Accordingly, the December 31, 2001, December 31, 2000 and December 31, 1999
     financial statements have been restated to show discontinued operations for
     the Hospitality and Land Development segments pursuant to the Settlement
     Agreement described below and to show discontinued operations for the
     closed branch locations of the Equipment Sales and Leasing segment (see
     Note 4).


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements of Crescent Operating
     include the accounts of the Company and all subsidiaries controlled by the
     Company after elimination of material intercompany accounts and minority
     interests. Subsidiaries not controlled by the Company, but for which the
     Company has the ability to exercise significant influence, are accounted
     for on the equity method.


     The financial results of the Company include the following (see - Notes 3
     and 4):


     -   Subsidiaries which are wholly owned and consolidated:


         -   Crescent Machinery Company ("Crescent Machinery" or "CMC");


         -   Rosestar Management LLC ("Rosestar"); and

         -   COI Hotel Group, Inc. ("COI Hotel").

     -   Subsidiaries which are not wholly owned but the Company controls and
         therefore consolidates ("Controlled Subsidiaries"):

         -   A 5% economic interest, representing 100% of the voting stock, in:

             -   The Woodlands Land Company, Inc. ("LandCo") which has a 52.5%
                 (49.5% through November 2001) general partner interest in The
                 Woodlands Land Development Company, L.P. ("Landevco");

                                      F-14
<PAGE>
             -   Desert Mountain Development Corporation ("Desert Mountain
                 Development") which consolidates its 93% general partner
                 interest in Desert Mountain Properties Limited Partnership
                 ("DMPLP"); and

             -   CRL Investments, Inc. ("CRL"), which beneficially owns
                 approximately 65% of CR Las Vegas, LLC ("CR Las Vegas") and 30%
                 of CR License, LLC ("CR License").

     -   A 60% general partner interest in COPI Colorado, L.P. ("COPI Colorado")
         which owns 10% of Crescent Resort Development, Inc. ("CRDI"), formerly
         Crescent Development Management Corp. ("CDMC"). The 10% interest in
         CRDI represents 100% of the voting stock, and therefore, CRDI is
         consolidated into COPI Colorado.

-    Subsidiaries which the Company reports on the equity method of accounting:

     -   A 52.5% (42.5% in 2000 and 1999) non-controlling interest in the
         Woodlands Operating Company, L.P. ("Woodlands Operating" or "TWOC")
         which is controlled by a four member committee of which the Company
         controls two positions;

     -   A 40% interest in Vornado Crescent Logistics Operating Partnership
         ("AmeriCold Logistics");

     -   A direct 25% common membership interest in Charter Behavioral Health
         Systems, LLC ("CBHS") (sold in 2000);

     -   An indirect 65% common membership interest in CBHS held through a
         limited partner interest in COPI CBHS Holdings, L.P. (sold in 2000);
         and

     -   A 1% interest in each of Crescent CS Holdings Corporation ("CS I") and
         Crescent CS Holdings II Corporation ("CS II"), (collectively,
         "Temperature Controlled Logistics Partnerships" or "TCLP") (sold in
         2000).

-    A 15.8% common and 21.1% preferred interest in Transportal Network, Inc.
     ("Transportal Holding"), which has a 76% interest in Transportal Network
     LLC ("Transportal"), all of which the Company reports on the cost method of
     accounting (abandoned during 2000).

     USE OF ESTIMATES

     The financial statements include estimates and assumptions made by
     management that affect the carrying amounts of assets and liabilities,
     reported amounts of revenues and expenses and the disclosure of contingent
     assets and liabilities. Actual results may differ from these estimates.

     CASH AND CASH EQUIVALENTS


     The Company considers all highly liquid investments with a maturity of
     three months or less to be cash equivalents.


     INVENTORIES

     Inventories consist of new and used equipment held for sale, equipment
     parts, food, beverages and supplies, all of which are stated at the lower
     of cost or market using the first-in, first-out (FIFO) or specific
     identification methods.

     PROPERTY AND EQUIPMENT

     Property and equipment is recorded at cost. The Company uses the
     straight-line method of depreciation for financial statement purposes. The
     estimated useful lives used in computing depreciation are as follows:


<TABLE>
<S>                                                        <C>
     Land improvements...............................           10-15 years
     Rental equipment................................            2-10 years
     Building and improvements.......................              30 years
     Transportation equipment........................             3-5 years
     Furniture, fixtures, and other equipment........            5-10 years
</TABLE>


                                      F-15
<PAGE>
     From time-to-time, Crescent Machinery offers its rental customers the
     opportunity to purchase rented equipment for a stated value at a future
     point in time. In such instances, Crescent Machinery depreciates the
     specific rental item in accordance with the contract. Expenditures for
     maintenance and repairs are charged to expense as incurred. Expenditures
     for renewals or betterments are capitalized. The cost of property replaced,
     retired, or otherwise disposed of is removed from the asset account along
     with the related accumulated depreciation.


     Long-lived assets are evaluated when indications of impairment are present,
     and provisions for possible losses are recorded when undiscounted cash
     flows estimated to be generated by those assets are less than the assets'
     carrying value. Under the Capital Agreement, which terminated January 22,
     2002, the Company agreed upon a value for its investment in CMC. Such
     agreed upon value served as an indicator to the Company that the potential
     existed for the impairment of certain assets as it relates to its current
     investment in Crescent Machinery. As required under Statement of Financial
     Accounting Standards No. 121, using all information available, the Company
     determined that certain assets within Crescent Machinery have carrying
     values which exceed the estimated undiscounted cash flows of those assets.
     The Company estimated the undiscounted cash flow of these assets using all
     available information including: (i) industry knowledge of asset values,
     (ii) recent results in auctions of Crescent Machinery's equipment and (iii)
     return of equipment to creditors in exchange for debt credit as part of the
     bankruptcy process. As a result, the Company recorded an adjustment of $8.7
     million and $16.9 million as impairment of assets in the Company's results
     from continuing operations and discontinued operations, respectively, for
     the year ended December 31, 2001 related to property and equipment. The
     Company did not recognize any losses from impairment during 1999 or 2000.


     The Company will continue to evaluate the assets within Crescent Machinery
     for impairment and adjust such carrying values as necessary.

     REAL ESTATE


     Real estate (included in Long-term assets to be transferred pursuant to
     Settlement Agreement) represents raw land, developed land, homes
     constructed or under construction, repurchased lots, applicable capitalized
     interest, and applicable capitalized general and administrative costs. Real
     estate is recorded at cost.



     Interest was capitalized based on the estimated average yearly interest
     rate applied to cumulative capital expenditures for property under
     development. Approximately $15.3 million and $11.3 million of interest was
     capitalized for the years ended December 31, 2001 and 2000, respectively.
     Payroll and related costs associated with the development of a specific
     subdivision of land are capitalized. Once sales of property begin in a
     specific subdivision, capitalized costs are expensed as cost of sales.


     INTANGIBLE ASSETS


     Intangible assets consisted of goodwill and membership intangibles.
     Goodwill represented the excess of the acquisition costs over the fair
     value of net identifiable assets of businesses acquired and was amortized
     on a straight-line basis over 6-30 years. Membership intangibles represent
     the purchase price values allocated to club memberships to be sold.
     Intangibles are evaluated periodically as events or circumstances indicate
     a possible inability to recover their carrying amounts. Such evaluation is
     based on various analyses, including cash flow and profitability
     projections. The analyses involve significant management judgment to
     evaluate the capacity of an acquired operation to perform within
     projections.



     As required under Statement of Financial Accounting Standards No. 121,
     using all information available, the Company determined that certain assets
     within Crescent Machinery, and Rosestar had carrying values which exceed
     the estimated undiscounted cash flows of those assets. Goodwill impairment
     on Crescent Machinery is due to the recent bankruptcy filing and to the
     closure of certain locations. Goodwill impairment on Rosestar is due to the
     transfer of the hospitality properties to Crescent Partnership pursuant to
     the February 14, 2002 Settlement Agreement. As a result, the Company
     recorded an adjustment of $3.6 million and $10.0 million as impairment of
     assets in the Company's results from continuing operations and discontinued
     operations, respectively, for the year ended December 31, 2001 related


                                      F-16
<PAGE>

     to intangible assets at Crescent Machinery. A $1.0 million impairment
     adjustment for Rosestar is included in loss from discontinued operations
     for the year ended December 31, 2001. The Company will continue to evaluate
     the assets for impairment and adjust such carrying values as necessary.


     DEFERRED COMPENSATION ON RESTRICTED SHARES

     Deferred compensation on restricted shares issued to employees is being
     amortized to expense over the vesting period of the restricted shares.

     REVENUE RECOGNITION


     Revenues from equipment rentals under operating leases are recognized as
     the revenue becomes earned according to the provisions of the lease.
     Revenues from full-service hotels and luxury health resorts are recognized
     as services are provided. Club initiation fees and membership conversion
     fees at Desert Mountain Development are deferred and recognized on a
     straight-line basis over the number of months remaining until the Turnover
     Date as defined in the year 2010. Deposits for future services are deferred
     and recognized as revenue in the period services are provided. Revenues
     related to discontinued operations have been included in the net loss from
     discontinued operations.


     ADVERTISING AND MARKETING COSTS

     Advertising and marketing costs are expensed as incurred. Advertising and
     marketing costs expensed for the years ended December 31, 2001, 2000 and
     1999 were approximately $13.7 million, $14.9 million and $13.0 million.

     MINORITY INTERESTS


     Prior to February 14, 2002, Minority Interests represented the non-voting
     interests owned by shareholders in LandCo, Desert Mountain Development, and
     CRL, as well as the limited partners of COPI Colorado.


     INCOME TAX PROVISION

     Income taxes are provided for the tax effects of transactions reported in
     the financial statements and consist of taxes currently due plus deferred
     taxes related primarily to differences between the treatment of certain
     items for financial statement purposes and the treatment of those items for
     tax purposes. The deferred tax assets and liabilities represent the future
     tax return consequences of those differences, which will either be taxable
     or deductible when the assets and liabilities are recovered or settled.




     STOCK BASED COMPENSATION

     The Company measures compensation costs associated with the issue of share
     options using the intrinsic method under which compensation costs related
     to share options issued pursuant to compensatory plans are measured based
     on the difference between the quoted market price of the shares at the
     measurement date (originally the date of grant) and the exercise price and
     charged to expense over the periods during which the grantee performs the
     related services. All share options issued to date by the Company have
     exercise prices equal to the market price of the shares at the dates of
     grant.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
     Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and
     No. 142, Goodwill and other Intangible Assets, effective for fiscal years
     beginning after December 15, 2001. Under the new rules, goodwill and
     intangible assets deemed to have indefinite lives will no longer be
     amortized but will be subject to annual impairment tests in accordance with
     the Statements. Other intangible assets will continue to be amortized over
     their useful lives. The Company applied

                                      F-17
<PAGE>

     the new rules on accounting for goodwill and other intangible assets
     beginning in the first quarter 2002. The Company performed the first of the
     required impairment test of goodwill and indefinite lived intangible assets
     in 2002 which had no material effect on the earnings and financial position
     of the Company.


     As of January 1, 2001, the Company was required to adopt SFAS No. 133, as
     amended by SFAS No. 138. SFAS No. 133, Accounting for Derivative
     Instruments and Hedging Activities, provides that all derivative
     instruments be recognized as either assets or liabilities depending on the
     rights or obligations under the contract and that all derivative
     instruments be measured at fair value. Upon adoption, the Company was
     required to record the net accumulated comprehensive loss related to its
     investment in Magellan warrants as a charge in the statement of operations.
     Based on the value of the warrants on December 31, 2000, the Company
     expensed $9.5 million on January 1, 2001 as a cumulative effect of change
     in accounting principle. From January 1, 2001 forward, the Company records
     changes in the fair value of these warrants in the statement of operations
     as investment income (loss). For the year ended December 31, 2001, the
     Company recorded changes in the fair value of these warrants, as calculated
     using the Black-Scholes pricing model, as investment income of $1.1 million
     in the Company's statement of operations. See Note 15.


     In August 2001, the Financial Accounting Standards Board issued SFAS No.
     144 Accounting for the Impairment or Disposal of Long-Lived Assets which
     supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
     and for Long-Lived Assets to be Disposed Of. It also supersedes the
     accounting and reporting provisions of APB Opinion No. 30, Reporting the
     Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
     and Infrequently Occurring Events and Transactions. SFAS No. 144 retains
     the fundamental provisions of SFAS No. 121 for recognition and measurement
     of the impairment of long-lived assets to be held and used and measurement
     of the long-lived assets to be disposed of by sale, but broadens the
     definition of what constitutes a discontinued operation and how the results
     of a discontinued operation are to be measured and presented. SFAS No. 144
     is effective for fiscal years beginning after December 15, 2001. The
     Company has presented the results from branch locations that were closed
     during 2002 in discontinued operations, net of tax. Accordingly, prior year
     results have been restated to show discontinued operations for these branch
     locations. In addition, due to the Settlement Agreement discussed in Note
     3, the Land Development and Hospitality segments remaining at December 31,
     2001, are presented as discontinued operations in these financial
     statements.


3.   SETTLEMENT AGREEMENT:

     On June 28, 2001, Crescent Operating and Crescent Equities entered into an
     asset and stock purchase agreement (the "Purchase Agreement") in which
     Crescent Equities agreed to acquire the Company's hotel operations, land
     development interests and other assets in exchange for $78.4 million.
     Crescent Equities also entered into an agreement, subsequently amended and
     restated as of October 31, 2001, the Capital Agreement, to make a $10.0
     million investment in Crescent Machinery, which, along with capital from a
     third-party investment firm, was expected to put Crescent Machinery on
     solid financial footing. The transactions contemplated by the Purchase
     Agreement and Capital Agreement, called the "Restructuring Proposal" and
     described in the Company's Proxy Statement dated October 29, 2001, relating
     to its 2001 Annual Meeting of Stockholders, also included the future sale
     of the Company's 40% interest in AmeriCold Logistics. The Restructuring
     Proposal was approved by the stockholders of the Company on December 6,
     2001.

     Following the date of the agreements, the results of operations for the
     Company's hotel operations and land development interests declined due to
     the slowdown in the economy. 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, 2001.

     As disclosed in the Annual Meeting Proxy Statement and also in the
     Company's quarterly report on Form 10-Q filed November 14, 2001, Crescent
     Machinery was in payment default on certain major loans from commercial
     lending institutions. Among the conditions to the closing of the
     transactions included in the Restructuring Proposal was the consent of
     Crescent Machinery's secured lenders, including those institutions. As the
     Company stated in its press release regarding the results of the
     stockholders' meeting, Crescent Machinery was negotiating with these
     lenders regarding these defaults and the possible restructuring of the
     loans, but the

                                      F-18
<PAGE>
     differences in the positions of the lenders and Crescent Machinery were
     significant and, as a result, management was not optimistic that an
     agreement would be reached with these lenders. Without the consent of the
     lenders, it was unlikely that the Restructuring Proposal would be
     consummated, and any failure by the Company to consummate the transactions
     included in the Restructuring Proposal would greatly impair the Company's
     prospects to continue to operate as a going concern.

     Crescent Machinery was unable to reach satisfactory agreements with its
     lenders regarding restructuring of the loans. As a result, Crescent Real
     Estate advised the Company that it believed that substantial additional
     capital, beyond the investment called for in the Capital Agreement, would
     have to be made to Crescent Machinery to adequately capitalize Crescent
     Machinery and satisfy concerns of Crescent Machinery's lenders. Crescent
     Real Estate announced that it was "unwilling to make this non-core
     investment."

     On January 23, 2002, Crescent Real Estate terminated the Purchase Agreement
     pursuant to which Crescent Real Estate would have acquired the Crescent
     Operating hotel operations, the Crescent Operating land development
     interests and other assets. On February 4, 2002, Crescent Real Estate
     terminated the Capital Agreement relating to its planned investment in
     Crescent Machinery.

     On February 6, 2002, Crescent Machinery Company filed a voluntary petition
     under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court
     for the Northern District of Texas in Fort Worth, Texas.

     On February 13, 2002, Crescent Real Estate delivered default notices to
     Crescent Operating relating to approximately $49.0 million of unpaid rent
     and approximately $76.2 million of principal and accrued interest due to
     Crescent Real Estate under certain secured loans.

     On February 14, 2002, Crescent Operating entered into a Settlement
     Agreement (the "Settlement Agreement") with Crescent Real Estate. The
     Settlement Agreement also provided the basis for Crescent Operating to file
     a prepackaged bankruptcy plan that the Company believes will provide for a
     limited recovery to its stockholders. Pursuant to the Settlement Agreement,
     Crescent Operating has transferred the following assets to Crescent Real
     Estate:

     -   all of its hotel operations, in lieu of foreclosure, on February 14,
         2002 in exchange for a $23.6 million reduction in its rent obligations
         to Crescent Real Estate;

     -   all of its land development interests, through a strict foreclosure, on
         February 14, 2002, and March 22, 2002, in exchange for a $40.1 million
         reduction of its debt obligations to Crescent Real Estate.

     In addition, the Settlement Agreement provides as follows:

     -   Crescent Real Estate will make sufficient funds available to Crescent
         Operating to pay all of Crescent Operating's creditors, other than
         Crescent Real Estate, in full and to cover the expenses of implementing
         the Settlement Agreement and seeking to confirm the bankruptcy plan. To
         facilitate repayment of $15.0 million, plus interest, owed to Bank of
         America, Crescent Real Estate has allowed Crescent Operating to secure
         the Bank of America debt with a pledge of Crescent Operating's interest
         in AmeriCold Logistics, LLC. The bankruptcy plan contemplates that the
         AmeriCold Logistics interest will be purchased by a Crescent Real
         Estate affiliate for a sufficient amount to repay the Bank of America
         debt.

     -   If Crescent Operating's stockholders approve the bankruptcy plan at a
         special meeting of stockholders called for that purpose, Crescent Real
         Estate will issue common shares of Crescent Equities to the Crescent
         Operating stockholders pursuant to the formula contained in the
         bankruptcy plan. If the stockholders of Crescent Operating do not
         accept the bankruptcy plan, they will not receive a distribution of
         common shares of Crescent Real Estate. If the total amount of claims
         and expenses paid by Crescent Real Estate in connection with the
         Crescent Operating bankruptcy and reorganization transactions equals or
         exceeds $16.0 million, the stockholders of Crescent Operating will
         receive no common shares of Crescent Real Estate and will not be
         entitled to reconsider their approval of the bankruptcy plan. Crescent
         Operating stockholders receiving Crescent Real Estate shares will be
         deemed to have released all claims they may have against Crescent
         Operating and Crescent Real Estate and those acting on their behalf
         that arose before the effective

                                      F-19
<PAGE>
         date of the plan. If the Crescent Operating stockholders do not approve
         the Crescent Operating bankruptcy plan, Crescent Operating will still
         seek to have that bankruptcy plan confirmed by the bankruptcy court. If
         the bankruptcy court confirms the plan, Crescent Operating stockholders
         will not receive common shares of Crescent Equities and will still
         cease to be stockholders of Crescent Operating on the date the plan
         becomes effective.

     -   Crescent Operating will cancel all outstanding shares of its common
         stock.

     -   Pursuant to both the Settlement Agreement and the bankruptcy plan,
         Crescent Operating will transfer the remaining assets of Crescent
         Operating at the direction of Crescent Real Estate.


4.   DISCONTINUED OPERATIONS:



     Pursuant to the Settlement Agreement discussed in Note 3, Crescent
     Operating has transferred the following assets to Crescent Real Estate:



     -   all of its hotel operations, in lieu of foreclosure, on February 14,
         2002 in exchange for a $23.6 million reduction in its rent obligations
         to Crescent Real Estate; and



     -   all of its land development interests, through a strict foreclosure, on
         February 14, 2002, and March 22, 2002, in exchange for a $40.1 million
         reduction of its debt obligations to Crescent Real Estate.






     The carrying amounts of the major classes of asset and liabilities for the
     Hospitality and Land Development segments included in Current and Long-Term
     Assets or Liabilities to be transferred pursuant to Settlement Agreement on
     the balance sheet as of December 31, 2001, were (in thousands):



<TABLE>
<CAPTION>
                                            Hospitality           Land Development                Total
                                        --------------------    ----------------------     -------------------
<S>                                     <C>                     <C>                        <C>
     Current Assets.................       $     31,782           $       62,379             $       94,161
     Long-Term Assets...............             12,827                  702,167                    714,994

     Current Liabilities............             42,394                  511,962                    554,356
     Long-Term Liabilities..........              4,750                   84,055                     88,805
</TABLE>



     The carrying amounts of the major classes of asset and liabilities for the
     Hospitality and Land Development segments included in Current and Long-Term
     Assets or Liabilities to be transferred pursuant to Settlement Agreement on
     the balance sheet as of December 31, 2000, were (in thousands):



<TABLE>
<CAPTION>
                                            Hospitality           Land Development                Total
                                        --------------------    ----------------------     -------------------
<S>                                     <C>                     <C>                        <C>
     Current Assets.................       $     33,268            $      90,451             $      123,719
     Long-Term Assets...............             21,067                  554,169                    575,236

     Current Liabilities............             38,897                  169,349                    208,246
     Long-Term Liabilities..........             11,945                  298,889                    310,834
</TABLE>



     On January 1, 2002, the Company adopted Statements of Financial Accounting
     Standards SFAS No. 144, Accounting for the Impairment or Disposal of
     Long-Lived Assets (See Note 2). SFAS No.144 broadens the definition of what
     constitutes a discontinued operation and how the results of a discontinued
     operation are to be measured and presented. The Company has presented the
     results from branch locations that were closed during


                                      F-20
<PAGE>

     2002 in discontinued operations, net of tax. Accordingly, prior year
     results have been restated to show discontinued operations for these branch
     locations. All significant assets and liabilities were transferred to other
     branch locations or returned to secured creditors when the branches were
     closed.



5.   ACQUISITIONS AND DISPOSITIONS:


     Equipment Sales & Leasing

     Effective March 4, 1999, the Company acquired certain assets of Westco
     Tractor & Equipment, Inc. ("Westco"), a company engaged in equipment sales,
     leasing and servicing, located in Santa Rosa, California. The purchase
     price of approximately $2.6 million was comprised of $0.5 million cash and
     the assumption of liabilities of $2.1 million.

     Effective July 1, 1999, the Company acquired all of the stock of E. L.
     Lester and Company ("Lester"), a company engaged in equipment sales,
     leasing and servicing, located in Houston, Texas. The purchase price of
     approximately $17.2 million was comprised of $8.9 million cash, the
     issuance of notes payable by Crescent Operating in the amount of $6.0
     million and the assumption of liabilities of $2.3 million.

     Effective July 1, 1999, the Company acquired all of the stock of Solveson
     Crane Rental, Inc. ("Solveson"), a company engaged in equipment sales,
     leasing and servicing, located in Tracy, California. The purchase price of
     approximately $7.3 million was comprised of $3.0 million cash and the
     assumption of liabilities of $4.3 million.


     In 2002, the Franklin, Indiana, Van Wert, Ohio and Beaumont, Texas Crescent
     Machinery locations were closed and their assets were transferred to other
     locations for utilization.


     On February 6, 2002, Crescent Machinery Company filed a voluntary petition
     under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court
     in Fort Worth, Texas. CMC intends to continue its normal operations in the
     sale, rental and servicing of construction equipment, while attempting to
     reorganize and restructure its debt to emerge a financially stronger and
     more competitive business. CMC plans to continue with business as usual
     during this process, but certain locations will be evaluated and may be
     sold or closed to improve efficiency. Crescent Machinery has already moved
     to close four of its west coast branches immediately and, subject to
     Bankruptcy Court approval, plans to close all its locations outside of
     Texas and Oklahoma in 2002.

     Hospitality

     Effective June 19, 1999, the Company entered into a lease with Crescent
     Real Estate Funding III, L.P. ("Funding III") for the 389-room Renaissance
     Hotel located in Houston, Texas. The lease is for a term of 10 years and
     provides for base rent and percentage rent. Under the lease, Funding III
     may terminate the lease, at its option, for a period of one year under
     certain conditions. The other terms of the lease are generally consistent
     with those in hospitality leases with Crescent Partnership.

     Effective January 31, 2000, Houston Center Athletic Club Venture ("HCAC")
     sold substantially all of its assets to an unrelated party. Through a
     wholly owned subsidiary, the Company received proceeds from the sale of
     $2.4 million resulting in an approximate $1.5 million gain which was
     recognized by Crescent Operating in the first quarter of 2000.

     On November 3, 2000, Crescent Equities completed the sale of the Four
     Seasons Hotel in Houston and, in connection therewith, exercised its right
     under the lease agreement to terminate the lease. As required under the
     lease agreement, Crescent Equities paid the Company the fair market value
     of the remaining term of the lease in the fourth quarter of 2000 which was
     agreed to be $16.6 million and resulted in a gain of $18.3 million (the
     difference primarily consisting of the elimination of the straight-line
     rent liability related to the lease).

     On February 14, 2002, the Company transferred all of its interest in the
     Hospitality assets and related liabilities to Crescent Equities as provided
     in the Settlement Agreement.

                                      F-21
<PAGE>
     Temperature Controlled Logistics

     Effective March 12, 1999, the Company sold 80% of its 5% interest in the
     Temperature Controlled Logistics Partnerships to Crescent Partnership for
     $13.2 million and received the right to require Crescent Partnership to
     purchase the remaining 20% for approximately $3.4 million at any time
     during the next two years, subject to compliance with certain regulatory
     matters. This 5% interest represented a 2% interest in various corporations
     and limited liability companies owned by the Temperature Controlled
     Logistics Partnerships. Crescent Operating, through a wholly owned limited
     liability company, then became a 40% partner of AmeriCold Logistics, a
     newly formed partnership, the remaining 60% of which is owned by Vornado
     Operating, Inc. ("Vornado Operating"). This transaction required a capital
     contribution of approximately $15.5 million from Crescent Operating. As a
     result of the restructuring transaction, the operations formerly associated
     with the Temperature Controlled Logistics Partnerships are now conducted by
     AmeriCold Logistics.

     AmeriCold Logistics leases the refrigerated storage facilities used in its
     business. The leases, as amended, which commenced in March 1999, generally
     have a 15-year term with two five-year renewal options and provide for the
     payment of fixed base rent and percentage rent based on revenues AmeriCold
     Logistics receives from its customers. Fixed base rent is approximately
     $137.0 million per annum through 2003, $139.0 million per annum from 2004
     through 2008 and $141.0 million per annum from 2009 through February 28,
     2014. Percentage rent for each lease is based on a specified percentage of
     revenues in excess of a specified base amount. The aggregate base revenue
     amount under five of the six leases is approximately $350.0 million and the
     weighted average percentage rate is approximately 36% through 2003,
     approximately 38% for the period from 2004 through 2008 and approximately
     40% for the period from 2009 through February 28, 2014. The aggregate base
     revenue amount under the sixth lease is approximately $32.0 million through
     2001, and approximately $26.0 million for the period from 2002 through
     February 28, 2014, and the percentage rate is 24% through 2001, 37.5% for
     the period from 2002 through 2006, 40% from 2007 through 2011 and 41% from
     2012 through February 28, 2014. AmeriCold Logistics recognized $156.3
     million, $170.6 million and $135.8 million of rent expense for the years
     ended December 31, 2001, December 31, 2000 and from March 11, 1999
     (acquisition date) through December 31, 1999, respectively, which includes,
     effects of straight-lining, rent to parties other than the Landlord and is
     before the waiver of rent discussed below. AmeriCold Logistics is required
     to pay for all costs arising from the operation, maintenance and repair of
     the properties, including all real estate taxes and assessments, utility
     charges, permit fees and insurance premiums, as well as property capital
     expenditures in excess of $5.0 million annually. AmeriCold Logistics has
     the right to defer the payment of 15% of the fixed base rent and all
     percentage rent for up to three years beginning on March 11, 1999 to the
     extent that available cash, as defined in the leases, is insufficient to
     pay such rent. AmeriCold Logistics deferred rent obligations were $25.4
     million, $19.0 million and $5.4 million as of December 31, 2001, December
     31, 2000 and December 31, 1999, respectively.

     Under the terms of the partnership agreement for AmeriCold Logistics,
     Vornado Operating, Inc. ("Vornado Operating") has the right to make all
     decisions relating to the management and operations of AmeriCold Logistics
     other than certain major decisions that require the approval of both the
     Company and Vornado Operating. Vornado Operating must obtain Crescent
     Operating's approval for specified matters involving AmeriCold Logistics,
     including approval of the annual budget, requiring specified capital
     contributions, entering into specified new leases or amending existing
     leases, selling or acquiring specified assets and any sale, liquidation or
     merger of AmeriCold Logistics. If the partners fail to reach an agreement
     on such matters during the period from November 1, 2000 through October 30,
     2007, Vornado Operating may set a price at which it commits to either buy
     Crescent Operating's investment, or sell its own, and Crescent Operating
     will decide whether to buy or sell at that price. If the partners fail to
     reach agreement on such matters after October 30, 2007, either party may
     set a price at which it commits to either buy the other party's investment,
     or sell its own, and the other party will decide whether to buy or sell at
     that price. Neither partner may transfer its rights or interest in the
     partnership without the consent of the other partner. The partnership will
     continue for a term through October 30, 2027, except as the partners may
     otherwise agree.

     During the second quarter of 2000, the Company restructured its business
     venture with Vornado Operating, Inc. and Crescent Equities to pursue a
     business-to-business internet opportunity relating to the Temperature
     Controlled Logistics business. As a result of the restructuring, the
     Company was relieved of its previously reported obligation to fund initial
     startup costs previously reported, which resulted in net investment income
     of

                                      F-22
<PAGE>
     $1.2 million during the second quarter of 2000 and left no basis in the
     investment. In October 2000, operations were ceased after Transportal
     failed to secure outside funding. The closure has no impact on the
     financial statements of Crescent Operating, and the Company has no
     obligation for future cash funding.

     On December 1, 2000, the Company exercised a preexisting put option to sell
     the remaining 20% of its 5% interest in the Temperature Controlled
     Logistics Partnerships to Crescent Partnership for $4.1 million, which
     resulted in a gain of $0.7 million recognized in the fourth quarter of
     2000.

     On February 22, 2001, the AmeriCold Logistics leases were restructured to,
     among other things, (i) reduce 2001's contractual rent to $146.0 million
     ($14.5 million less than 2000's contractual rent), (ii) reduce 2002's
     contractual rent to $150.0 million (plus contingent rent in certain
     circumstances), (iii) increase the Landlord's share of annual maintenance
     capital expenditures by $4.5 million to $9.5 million effective January 1,
     2000 and (iv) extend the deferred rent period to December 31, 2003 from
     March 11, 2002.

     In the fourth quarter ended December 31, 2001, AmeriCold Logistics reversed
     $25.5 million of the rent expense recorded for 2001 resulting from
     Temperature Controlled Logistics Partnerships waiving of its rights to
     collect this portion of the rent. Further, Temperature Controlled Logistics
     Partnerships waived $14.3 million of the rent expense recorded by AmeriCold
     Logistics for 2000 which AmeriCold Logistics recorded as income in the
     fourth quarter ended December 31, 2001. The aggregate amount waived by the
     Landlord of $39.8 million represents a portion of the rent due under the
     leases which AmeriCold Logistics deferred in such years.

     On January 23, 2002, the leases with Temperature Controlled Logistics
     Partnerships were restructured to consolidate four of the non-encumbered
     leases into one non-encumbered lease. The restructuring did not affect
     total contractual rent due under the combined leases.

     On February 14, 2002, the Company agreed in the Settlement Agreement to
     sell its interest in AmeriCold Logistics to an affiliate of Crescent
     Equities for approximately $15.0 million to $15.5 million. It is
     anticipated that the interest in AmeriCold Logistics will be transferred
     during 2002.

     Land Development

     Effective September 11, 1998, the Company and Gerald W. Haddock, John C.
     Goff and Harry H. Frampton, III (collectively, the "CRDI Sellers") entered
     into a partnership agreement (the "Partnership Agreement") to form COPI
     Colorado. COPI Colorado's purpose is to hold and manage the voting stock of
     CRDI (and, consequently, to manage CRDI) and to invest in shares of
     Crescent Operating common stock. In September, 1998, the Company
     contributed to COPI Colorado $9.0 million in cash in exchange for a 50%
     general partner interest in COPI Colorado, and each CRDI Seller contributed
     to COPI Colorado approximately 667 shares of CRDI voting stock, which the
     CRDI Sellers owned individually, in exchange for an approximately 16.67%
     limited partner interest in COPI Colorado; as a result and until January
     2000, the Company owned a 50% managing interest in COPI Colorado and the
     CRDI Sellers collectively owned a 50% investment interest in COPI Colorado.

     In accordance with an agreement between Gerald Haddock and the Company,
     COPI Colorado redeemed the limited partnership interest of Mr. Haddock, the
     Company's former Chief Executive Officer and President, in January 2000.
     COPI Colorado paid Mr. Haddock approximately $2.8 million for his
     approximate 16.67% limited partner interest (determined from an independent
     appraisal of the value of COPI Colorado). See Note 16.

     On April 29, 1999, a partnership in which CRDI has a 64% economic interest
     finalized the purchase of Riverfront Park (previously known as "The
     Commons"), a master planned residential development on 23 acres in the
     Central Platte Valley near downtown Denver, Colorado, for approximately
     $25.0 million. The acreage is in close proximity to several major
     entertainment and recreational facilities, including, Coors Field (home to
     the Major League Baseball's Colorado Rockies), Elitch Gardens (an amusement
     park), the new Pepsi Center (home to the National Hockey League's Colorado
     Avalanche and the National Basketball Association's Denver Nuggets) and the
     new downtown Commons Park. An adjacent 28 acres is expected to be
     commercially developed by another company, thus providing a major mixed-use
     community adjacent to the lower downtown area of Denver.

                                      F-23
<PAGE>
     On August 27, 1999 and October 27, 1999, the Company sold its investments
     in Hillwood and Corporate Arena, respectively, for an aggregate sales price
     of approximately $1.4 million. Together, the sales resulted in an
     approximate $0.2 million gain in 1999.

     On September 22, 2000, a limited partnership in which CRDI is a majority
     limited partner acquired a majority interest in the Northstar-at-Tahoe
     resort, a premier, up-scale ski resort located in North Lake Tahoe,
     California. The development is expected to span ten years and include an
     enhanced core village with new restaurants and retail shops, hotels and
     spas, and an extensive residential product mix of over 2,000 condominium
     and townhome units.

     In December 2000, CRDI transferred its investment in a real estate company
     that specializes in the management of resort properties in Colorado, Utah,
     South Carolina and Montana to CDMC II. CDMC II is a newly formed entity
     having the same owners, board of directors and officers as CRDI. In
     connection with that transfer, CDMC II assumed the indebtedness of CRDI
     incurred in connection with that investment, all of which is owed to
     Crescent Partnership.

     On February 14, 2002, the Company transferred all of its interest in the
     Land Development assets and related liabilities to Crescent Equities as
     provided in the Settlement Agreement.

     Healthcare

     On September 9, 1999, Crescent Operating, Magellan, Crescent Partnership
     and CBHS completed a recapitalization of CBHS and restructuring of the
     relationships among the parties. In connection with the restructuring,
     Magellan transferred its remaining hospital-based assets (including Charter
     Advantage, Charter Franchise Services, LLC, the call center assets, the
     Charter name and related intellectual property and certain other assets) to
     CBHS, and released CBHS from all accrued and future franchise fees. As a
     result of the transfer, Magellan is no longer obligated to provide
     franchise services to CBHS. Magellan also transferred 80% of its CBHS
     common membership interest and all of its CBHS preferred membership
     interest to CBHS, leaving Magellan with a 10% common membership interest.
     Simultaneously, Crescent Operating reorganized its holdings leaving
     Crescent Operating with a 25% common membership interest and 100% of the
     preferred membership interest in CBHS, and a limited partnership controlled
     by individual officers of Crescent Operating and in which Crescent
     Operating owns 100% of the economic interests, with a 65% common membership
     interest in CBHS. Prior to the restructuring, Crescent Operating and
     Magellan each held a 50% common membership interest, and a 50% preferred
     membership interest in CBHS.

     On February 16, 2000, CBHS petitioned for relief under Chapter 11 of the
     United States Bankruptcy Code. Under the protection of the bankruptcy
     court, CBHS is engaged in efforts to sell and liquidate, in a controlled
     fashion, all of its ongoing business. On April 16, 2000, the asset purchase
     agreement to which a newly formed, wholly-owned subsidiary of Crescent
     Operating had agreed to acquire, for $24.5 million, CBHS's core business
     assets used in the operation of 37 behavioral healthcare facilities,
     subject to certain conditions, terminated by its own terms because not all
     of the conditions precedent to closing had been met by that date.

     On December 29, 2000 the Company sold its 25% common interest and its 100%
     preferred membership interest in CBHS, and COPI CBHS Holdings sold its 65%
     common interest in CBHS, to The Rockwood Financial Group, Inc. ("Rockwood")
     for a nominal sum. The Rockwood Financial Group, Inc. is wholly owned by
     Jeffrey L. Stevens, Crescent Operating's Chief Executive Officer, Chief
     Operating Officer and sole director. The sale of CBHS to the Rockwood was
     effected as part of the Company's tax planning strategy. For the year 2000,
     the Company was faced with a potentially large minimum tax liability. The
     Company sold its interest in CBHS in order to trigger a loss that would
     significantly reduce, if not eliminate any minimum tax liability, as CBHS
     was in bankruptcy and liquidation and the interest held by the Company was
     worthless.

     Other

     On March 31, 1999, the Company sold its investment in Hicks-Muse Tate &
     Furst II, LP for $8.1 million to an unrelated party. The sale resulted in a
     $0.3 million gain which was recognized in the first quarter of 1999.

                                      F-24
<PAGE>
     All of the acquisitions were accounted for as purchases and operations have
     been included in the consolidated financial statements of the Company from
     the date that management took over the operational control of the acquired
     entity.


6.   PROPERTY & EQUIPMENT, NET:


     Property and equipment consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                                December 31, 2001           December 31, 2000
                                                            ------------------------    ------------------------
<S>                                                         <C>                         <C>
Rental equipment (Crescent Machinery)...............            $       88,929               $     124,818
Land and improvements...............................                     5,193                       5,380
Furniture, fixtures, and other equipment............                     2,268                       3,327
Transportation equipment............................                     3,438                       4,601
                                                                --------------               -------------
                                                                        99,828                     138,126
Less accumulated depreciation.......................                   (29,734)                    (27,187)
                                                                --------------               -------------
                                                                $       70,094               $     110,939
                                                                ==============               =============
</TABLE>



7.   INVESTMENTS:


     Investments consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                               December 31, 2001            December 31, 2000
                                                            ------------------------    ------------------------
<S>                                                         <C>                         <C>
Investment in Landevco.................................         $       43,577               $      44,027
Investment in CRDI projects............................                  8,124                       8,170
Investment in CR License...............................                  5,012                       5,485
Investment in Magellan warrants........................                  4,127                       2,992
Investment in AmeriCold Logistics......................                    706                       4,417
Investment in CR Las Vegas.............................                    450                       5,305
                                                                --------------               -------------
                                                                        61,996                      70,396
Less assets to be transferred pursuant to the
  Settlement Agreement...................................              (57,163)                    (62,987)
                                                                --------------               -------------
                                                                $        4,833               $       7,409
                                                                ==============               =============
</TABLE>


     Investment income (loss) consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                Year Ended              Year Ended              Year Ended
                                             December 31, 2001       December 31, 2000       December 31, 1999
                                             -----------------      ------------------      ------------------
<S>                                          <C>                    <C>                     <C>
Change in fair value of Magellan
  warrants.................................    $         1,135       $             -         $              -
Gain on sale of CSI and CSII...............                  -                   722                    1,493
Hicks-Muse income..........................                  -                     -                      239
Gain on sale of Corporate Arena............                  -                     -                      158
                                               ---------------       ---------------         ----------------
                                               $         1,135       $           722         $          1,890
                                               ===============       ===============         ================
</TABLE>


                                      F-25
<PAGE>
     Equity in earnings (loss) of unconsolidated subsidiaries consisted of the
     following (in thousands):


<TABLE>
<CAPTION>
                                                 Year Ended               Year Ended            Year Ended
                                              December  31, 2001       December 31, 2000     December 31, 1999
                                              ------------------     -------------------     ------------------
<S>                                           <C>                    <C>                     <C>
Equity in income of Landevco............      $        35,706           $        28,250        $        19,351
Equity in income of TWOC................                2,494                     4,485                    886
Equity in income (loss) of Transportal
  Network...............................                    -                       375                   (395)
Equity in income of TCLP................                    -                        40                    325
Equity in income of HCAC................                    -                         7                    296
Equity in income (loss) of
  CRDI Projects.........................                 (297)                    2,217                  3,431
Equity in loss of CR License............                 (473)                     (311)                  (203)
Equity in loss of
 AmeriCold Logistics....................               (2,275)                   (7,374)                (3,698)
Equity in loss of CR Las Vegas, LLC.....               (4,075)                   (1,709)                  (944)
                                              ---------------           ---------------        ---------------
                                                       31,080                    25,980                 19,049

Less equity in earnings of entities to
  be transferred pursuant to Settlement
  Agreement.............................              (33,355)                  (32,932)               (22,521)
                                              ---------------           ---------------        ---------------
                                              $        (2,275)          $        (6,952)       $        (3,472)
                                              ===============           ===============        ===============
</TABLE>



8.   INTANGIBLE ASSETS:


     Intangible assets, net of accumulated amortization, consisted of the
     following (in thousands):


<TABLE>
<CAPTION>
                                                                 December 31, 2001           December 31, 2000
                                                               --------------------        --------------------
<S>                                                            <C>                         <C>
Goodwill, net - Crescent Machinery.........................        $             -              $        14,011
Goodwill, net - Rosestar...................................                      -                        1,202
Goodwill, net - COPI Colorado / CDMC.......................                 14,664                       45,077
Membership intangible, net - DMPLP.........................                 27,488                       28,550
                                                                   ---------------              ---------------
                                                                            42,152                       88,840

Less assets to be transferred pursuant to the
  Settlement Agreement.....................................                (42,152)                     (74,829)
                                                                   ---------------              ---------------
                                                                   $             -              $        14,011
                                                                   ===============              ===============
</TABLE>


     Accumulated amortization as of December 31, 2001 and 2000 was $36,344 and
     $39,135, respectively.


9.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES:


     Accounts payable and accrued expenses consisted of the following (in
     thousands):


<TABLE>
<CAPTION>
                                                             December 31, 2001            December 31, 2000
                                                            -------------------          -------------------
<S>                                                         <C>                          <C>
Accounts payable...........................................     $        11,103               $       11,106
Accrued taxes..............................................               2,008                        2,126
Accrued interest...........................................                 806                          665
Accrued salaries and bonuses...............................               1,144                          865
Deferred liabilities.......................................                   -                            -
Property management payable................................                   -                            -
Land development construction accrual......................                   -                            -
Other accrued expenses.....................................                 464                          598
                                                                ---------------               --------------
                                                                $        15,525               $       15,360
                                                                ===============               ==============
</TABLE>


                                      F-26
<PAGE>
10.  LONG-TERM DEBT:

     The Company's long-term debt facilities are composed of (i) corporate and
     wholly owned debt, and (ii) non wholly owned debt. Corporate and wholly
     owned debt relates to debt facilities at the Crescent Operating level or
     owed by entities which are owned 100% by Crescent Operating. Non wholly
     owned debt represents non-recourse debt owed by entities which are
     consolidated in the Company's financial statements but are not 100% owned
     by the Company; the Company's economic investment in these entities is 6%
     or less. Following is a summary of the Company's debt financing (amounts in
     thousands):

<TABLE>
<CAPTION>
                                                                                       December 31, 2001          December 31, 2000
                                                                                    ----------------------       -------------------
<S>                                                                                 <C>                          <C>
LONG-TERM DEBT - CORPORATE AND WHOLLY OWNED SUBSIDIARIES

Equipment notes payable to finance companies due 2002, payments of
principal and interest due monthly, bear interest from 4.5% to 9.5%,
collateralized by equipment (Crescent Machinery) (in default)....................      $      80,683               $      115,091

Floor plan debt payable, three to twelve month terms at 0%
interest (Crescent Machinery) (in default).......................................              4,190                       12,632

Line of credit in the amount of $19.5 million payable to Crescent
Partnership due May 2002, bears interest at 9%, payments of interest only
due quarterly, cross collateralized and cross-defaulted with the Company's
other borrowing from Crescent Partnership (Crescent Operating)
(in default).....................................................................             22,025                       19,949

Line of credit in the amount of $17.2 million payable to Crescent
Partnership due the later of May 2002 or five years after the last draw
(in no event shall the maturity date be later than June 2007), bears
interest at 12%, payments of interest only due quarterly, collateralized,
to the extent not prohibited by pre-existing arrangements, by a first lien
on the assets which the Company now owns or may acquire in the future
(Crescent Operating) (in default)................................................             20,205                       17,727

Note payable to Crescent Partnership due May 2002, bears interest at 12%,
payments of principal and interest due quarterly, collateralized, to the
extent not prohibited by pre-existing arrangements, by a first lien on the
assets which the Company now owns or may acquire in the future (Crescent
Operating) (in default)..........................................................             16,238                       14,247

Line of credit in the amount of $15.0 million payable to Bank of America
due August 2002, bears interest at LIBOR plus 1% (3.4% and 7.0% at
December 31, 2001 and December 31, 2000, respectively), payments of
interest only due monthly (Crescent Operating)...................................             15,000                       15,000

Note payable to Crescent Partnership due May 2002, bears interest at 12%,
payments of interest only due quarterly, collateralized by a first lien on
the assets which the Company now owns or may acquire in the future
(Crescent Operating) (in default)................................................             10,572                        9,276

Notes payable to the sellers of E. L. Lester and Company due
July 1, 2003, bear interest at 7.5%, payments of principal and
interest due semi-annually, collateralized by stock of Lester
</TABLE>

                                      F-27
<PAGE>
<TABLE>
<S>                                                                                    <C>                         <C>
(Crescent Operating).............................................................              2,463                        3,957

Note payable to Crescent Partnership maturing August 2003, bears interest
at 10.75%, payments of principal and interest due monthly, collateralized
by a deed of trust for certain personal property and certain real property
(Rosestar).......................................................................                749                        1,106

Notes payable to the sellers of Harvey Equipment due July 31, 2002, bear
interest at 8%, payments of principal and interest due semi-annually
(Crescent Operating).............................................................                324                          625

Note payable to Crescent Partnership maturing August 2003, bears interest
at 10.75%, payments of principal and interest due monthly, collateralized
by a deed of trust in certain real property and certain personal property
(Rosestar).......................................................................                203                          299

Note payable to Crescent Partnership due November 2006, bears interest at
7.5%, payments of interest only due annually (Rosestar)..........................                191                          191
                                                                                       -------------               --------------
     Total debt - corporate and wholly owned subsidiaries........................            172,843                      210,100
                                                                                       -------------               --------------

LONG-TERM DEBT - NON WHOLLY OWNED SUBSIDIARIES

Construction loans for various East West Resort Development partnership
projects, maturing through 2003, bear interest from 4.4% to 11.3%, payments
of principal and interest or interest only payable monthly, collateralized
by deeds of trust, security agreements and a first lien on the related
assets (CRDI)....................................................................            136,620                       62,316

Line of credit in the amount of $100.0 million payable to Crescent
Partnership, due September 2008, bearing interest at 11.5%, principal and
interest payments due as distributions are received, collateralized by
CRDI's interests in East West Resort Development partnerships, East West
Resorts LLC, and other CRDI property (CRDI)......................................             72,250                       32,155

Junior note payable to Crescent Partnership maturing December 2010, bears
interest at 14%, payments of principal and interest due quarterly based on
sales proceeds from DMPLP, collateralized by land, improvements and
equipment owned by DMPLP (DMPLP).................................................             59,000                       59,000

Line of credit in the amount of $56.2 million payable to Crescent
Partnership due August 2004, bears interest at 11.5% with principal and
interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CRDI's
interests in East West Resort Development partnerships, East West Resorts,
LLC, and other CRDI property  (CRDI).............................................             48,354                       39,342
</TABLE>

                                      F-28
<PAGE>
<TABLE>
<S>                                                                                    <C>                         <C>
Line of credit in the amount of  $70.0  million payable to Crescent
Partnership due December 2006, bears interest at 11.5% with principal and
interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CRDI's
interests in East West Resort Development partnerships, East
West Resorts, LLC, and other CRDI property  (CRDI)...............................             36,571                            -

Line of credit in the amount of $50.0 million payable to National Bank of
Arizona due November 2003, bears interest at rates from prime to prime plus
1% (4.75% to 5.75% and 9.5% to 10.5% at December 31, 2001 and 2000,
respectively), payments of interest only due monthly, collateralized by
certain land owned by DMPLP, deeds of trusts on lots sold and home
construction (DMPLP).............................................................             29,910                        9,808

Line of credit in the amount of $40.0 million payable to Crescent
Partnership due December 2006, bears interest at 11.5% with principal and
interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CRDI's
interests in East West Resort Development partnerships, East West Resorts
LLC, and other CRDI property (CRDI)..............................................             23,396                       33,903

Line of credit in the amount of $7.0 million payable to Crescent
Partnership due August 2003, bears interest at 12% with principal and
interest payments due as distributions are received, collateralized by a
first lien on the assets which the Company now owns or may acquire in the
future (CRL).....................................................................              7,000                        7,000

Note payable to Crescent Partnership maturing December 2002, bears interest
at 10%, payments of interest due quarterly (DMPLP)...............................              1,000                            -

Term note in the amount of $0.2 million payable to Crescent Partnership,
due August 2003, bears interest at 12% with principal and interest payments
due as distributions are received, collateralized by a first lien on the
assets which the Company now owns or may acquire in the future (CRL).............                166                          166

Line of credit in the amount of $22.9 million payable to Crescent
Partnership due January 2003, bears interest at 12.0%, principal and
interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CRDI's
interests in East West Resort Development partnerships, East West Resorts
LLC, and other CRDI property  (CRDI).............................................                  -                       17,379

Note payable to Crescent Partnership maturing June 2005, bears interest at
12%, with payments of interest only due quarterly and payments of principal
payable annually in accordance with an increasing amortization schedule,
collateralized by CRDI's interests in East West Resort Development
partnerships, East West Resorts LLC and other CRDI property  (CRDI)..............                  -                        2,348

                                                                                       -------------               --------------
     Total debt - non wholly owned subsidiaries..................................            414,267                      263,417
                                                                                       -------------               --------------
</TABLE>

                                      F-29
<PAGE>

<TABLE>
<S>                                                                                    <C>                         <C>
     Total long-term debt........................................................      $     587,110               $      473,517
                                                                                       =============               ==============

Current portion of long-term debt - CEI..........................................      $      69,041               $        8,578

Current portion of long-term debt................................................            101,870                       53,953

Long-term debt - CEI, net of current portion.....................................                  -                       52,620

Long-term debt, net of current portion...........................................                790                       93,352

Current and long-term debt to be transferred pursuant
  to the Settlement Agreement....................................................            415,409                      265,014
                                                                                       -------------               --------------
     Total long-term debt........................................................      $     587,110               $      473,517
                                                                                       =============               ==============
</TABLE>


    The weighted average interest rate on long-term debt at December 31, 2001
    was approximately 11.0%. Substantially all of the Company's assets are
    pledged as collateral under various debt agreements. Payment of dividends on
    Crescent Operating common stock is prohibited under certain of the debt
    agreements. The debt agreements contain certain reporting requirements and
    financial covenants, including requirements that the Company maintain
    certain financial ratios. As of December 31, 2001, the Company had not
    complied with all debt covenants. The Company has modified certain debt
    agreements with Crescent Equities extending the timing of principal and
    interest payments until December 31, 2001. Interest payments accrued but
    deferred as of December 31, 2001 of $6.4 million is included in Accounts
    payable and accrued expenses - CEI within the Company's consolidated
    financial statements. On February 13, 2002, the Company received notice from
    CEI that it was in default of its loan agreements covering approximately
    $76.2 million of principal and accrued interest. On February 14, 2002, the
    Company entered into the Settlement Agreement whereby the Company
    transferred to Crescent Equities its assets related to the hospitality
    business for extinguishment of $23.6 million in deferred rent and allowed
    CEI to foreclose on its equity interests in the residential land development
    entities for extinguishment of indebtedness of $40.1 million in notes
    payable. Along with the transfer of the equity interests in land
    development, all non wholly owned debt, totaling $414.3 million at December
    31, 2001, will no longer be reported in the Company's financial statements -
    (See Note 3 - Settlement Agreement).


    As of December 31, 2001, combined aggregate principal maturities of all
    long-term debt, excluding debt transferred pursuant to the Settlement
    Agreement, were as follows (in thousands):



<TABLE>
<S>                                           <C>
     2002..............................       $       170,911
     2003..............................                   790
                                              ---------------
        Total                                 $       171,701
                                              ===============
</TABLE>


11.  SHAREHOLDERS' EQUITY:

     Common Stock

     The Company's authorized capital stock consists of 10.0 million shares of
     preferred stock, par value $0.01 per share and 22.5 million shares of
     common stock, par value $0.01 per share. As of December 31, 2001, there
     were 11,490,015 shares of common stock issued and no shares of preferred
     stock issued.

     Preferred Share Purchase Rights

     The Board of Directors has adopted a rights plan that provides that each
     holder of Crescent Operating common stock also receives a right to purchase
     from the Company one-hundredth of a share of Series A Junior Preferred
     Stock, par value $0.01, at a price of $5.00 per share, subject to
     adjustment. These rights can only be exercised in certain events and are
     intended to provide the Company certain anti-takeover protection. The
     Company had reserved 225,000 shares of Series A Junior Preferred Stock for
     this plan.

                                      F-30
<PAGE>
     Warrants

     In conjunction with the acquisition of a 50% member interest in CBHS, the
     Company issued warrants to acquire 282,508 shares of Crescent Operating
     common stock at an exercise price of $18.29 per share.

     Treasury Stock

     As of December 31, 2001, COPI Colorado had purchased 1,102,530 million
     shares of Crescent Operating common stock, which has been recorded as
     treasury stock, at a total purchase price of approximately $4.3 million.
     The average price paid, including broker commissions, was $3.88 per share.

     On February 13, 2002, in anticipation of the Company's entering into the
     Settlement Agreement (See Note 3 - Settlement Agreement) - pursuant to
     which the Company transferred its 60% general partnership interest in COPI
     Colorado to Crescent Partnership - the partners of COPI Colorado caused it
     to distribute among its partners, in accordance with their respective
     ownership percentage, all of the shares of the Company's stock it held.
     Messrs. Goff and Frampton each received 220,506 shares, while the Company
     received 661,518 shares.

12.  STOCK OPTION PLANS:

     The Company has two stock incentive plans, the 1997 Amended Stock Incentive
     Plan (the "Amended Plan") and the 1997 Management Stock Incentive Plan (the
     "Management Plan").

     The Amended Plan, effective May 8, 1997, initially established the maximum
     number of options and/or shares of restricted stock that the Company may
     grant at 1.0 million shares. The maximum aggregate number of shares
     issuable under the Amended Plan shall increase automatically on January 1
     of each year by an amount equal to 8.5% of the increase in the number of
     shares of common stock outstanding since January 1 of the preceding year,
     subject to certain adjustment provisions. As of December 31, 2001, the
     number of shares the Company may have outstanding under the Amended Plan is
     1,019,694. All stock options granted by the Company are out-of-the-money
     and will not have value under the Settlement Agreement or in bankruptcy.

     On May 13, 1997, each holder of shares of restricted stock in Crescent
     Equities or options in Crescent Equities or Crescent Partnership was
     granted an equivalent number of shares of restricted stock or options in
     Crescent Operating, based on a ratio of one share of restricted stock or
     option to purchase Crescent Operating common stock for each 10 shares of
     restricted stock in Crescent Equities or options for Crescent Equities
     common shares, and one option to purchase Crescent Operating common stock
     for each 5 options for units in Crescent Partnership. Under the Amended
     Plan, the Company has granted 857,185 options and 10,000 restricted shares,
     net of forfeitures, through December 31, 2001.

     The Management Plan provides that the maximum number of options and/or
     shares of restricted stock that the Company may grant to employees,
     officers, directors or consultants is 1.0 million shares. Under the
     Management Plan, the Company has granted 485,000 options and 81,328
     restricted shares, net of forfeitures through December 31, 2001.

     Under both Plans, options are granted at a price no less than the market
     value of the shares on the date of grant, vest over a period determined by
     the Board of Directors, and expire ten years from the date of grant. The
     Company has reserved 586,181 shares for future options, warrants and
     restricted shares.

     A summary of the stock option status of the Company's Amended and
     Management Plans as of December 31, 2001 and changes during the periods
     then ended is presented in the table below:

                                      F-31
<PAGE>
<TABLE>
<CAPTION>
                                                                                              Weighted Average
                                                                         Options               Exercise Price
                                                                   ---------------------    --------------------
<S>                                                                <C>                      <C>
Outstanding as of December 31, 1998.............................           864,344              $     2.52
   Granted......................................................           615,400                    3.13
   Exercised....................................................            (7,210)                   0.99
   Forfeited....................................................          (126,342)                   2.20
                                                                         ---------              ----------
Outstanding as of December 31, 1999.............................         1,346,192                    2.84
   Granted......................................................                 -                       -
   Exercised....................................................                 -                       -
   Forfeited....................................................           (26,358)                   3.92
                                                                         ---------              ----------
Outstanding as of December 31, 2000.............................         1,319,834                    2.81
   Granted......................................................                 -                       -
   Exercised....................................................                 -                       -
   Forfeited....................................................           (49,210)                   3.82
                                                                         ---------              ----------
Outstanding as of December 31, 2001.............................         1,270,624              $     2.77
                                                                         =========              ==========

Exercisable as of December 31, 2001.............................         1,270,624              $     2.77
</TABLE>

   Exercise prices, number of shares and the weighted-average remaining
   contractual life ("Average Life") at December 31, 2001 were as follows:

<TABLE>
<CAPTION>
                                          Options Outstanding                      Options Exercisable
                                 --------------------------------------    ------------------------------------
       Exercise Price                 Number            Average Life            Number           Average Life
----------------------------     -----------------    -----------------    -----------------    ---------------
<S>                              <C>                  <C>                  <C>                  <C>
       $ 0.99                        717,034              3 years               717,034             3 years
       $ 2.50 - 5.44                 485,000              8 years               485,000             8 years
       $ 15.50 - 20.50                68,600              6 years                68,600             6 years
</TABLE>

     The Company applies APB No. 25 in accounting for options granted pursuant
     to the Amended Plan and the Management 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 market
     value at the grant dates for awards under the Plans consistent with SFAS
     No. 123, the Company's net income (loss) and earning (loss) per share would
     have been the following pro forma amounts (in thousands). The following pro
     forma amounts may not be representative of the effects on reported net
     income for future years.

<TABLE>
<CAPTION>
                                                      As Reported                         Proforma
                                                     ---------------    ------------------------------------------
                                                          2001              2001          2000           1999
                                                     ---------------    ------------  ------------  --------------
<S>                                                  <C>                <C>           <C>           <C>
Net loss (in thousands)...........................      $ (78,133)        $(78,906)     $  (3,924)     $ (3,004)
Loss per share....................................      $   (7.55)        $  (7.63)     $   (0.38)     $  (0.29)
</TABLE>

     The Company did not grant any options during the years ended December 31,
     2001 and 2000. For the year ended December 31, 1999, the weighted average
     grant date fair value of each option granted was $2.29.

     The fair value of each option was estimated at the date of grant using the
     Black-Scholes option-pricing model with the following weighted average
     assumptions for 1999: risk-free interest rates of 5.6%; expected volatility
     of 91.6%; expected dividend yields of 0%; expected lives of five years.

13.  EARNINGS PER SHARE:

     Earnings (loss) per share ("EPS") is calculated as follows (in thousands,
     except per share data):


<TABLE>
<CAPTION>
                                                For the year ended       For the year ended       For the year ended
                                                December 31, 2001        December 31, 2000         December 31, 1999
                                                -----------------        -----------------        ------------------
<S>                                             <C>                      <C>                      <C>
Weighted average shares (basic).....                    10,344                   10,326                   10,363

Effect of Dilutive Securities:
  Stock Options.....................                         -                        -                        -
                                                  ------------             ------------             ------------
Weighted average shares (diluted)...                    10,344                   10,326                   10,363
                                                  ============             ============             ============
</TABLE>


                                      F-32
<PAGE>

<TABLE>
<S>                                               <C>                      <C>                      <C>
Loss from Continuing Operations.....              $    (30,100)            $       (922)            $     (1,594)
                                                  ------------             ------------             ------------
Basic and diluted EPS before
  discontinued operations and
  accounting change.................              $      (2.91)            $      (0.09)            $      (0.15)
                                                  ------------             ------------             ------------

Loss from Discontinued
  Operations........................              $    (38,524)            $     (2,768)            $     (1,101)

Basic and diluted EPS from
  Discontinued Operations...........              $      (3.72)            $      (0.27)            $      (0.11)
                                                  ------------             ------------             ------------

Accounting Change...................              $     (9,509)            $          -             $          -

Basic and diluted EPS from
  Accounting Change.................              $      (0.92)            $          -             $          -
                                                  ------------             ------------             ------------

Net loss............................              $    (78,133)            $     (3,690)            $     (2,695)
                                                  ============             ============             ============
Diluted EPS.........................              $      (7.55)            $      (0.36)            $      (0.26)
                                                  ============             ============             ============
</TABLE>


     The Company had 1,270,624, 1,319,834 and 1,344,792 options in 2001, 2000
     and 1999, respectively, which were not included in the calculation of
     diluted EPS as they were anti-dilutive.

14.  INCOME TAXES:

     The components of the Company's income tax provision (benefit) were as
     follows (in thousands):


<TABLE>
<CAPTION>
                                                                    Year Ended             Year Ended               Year Ended
                                                                 December 31, 2001      December 31, 2000        December 31, 1999
                                                                 -----------------      -----------------        -----------------
<S>                                                              <C>                    <C>                      <C>
CONTINUING OPERATIONS
Current:
   Federal................................................       $             -           $            -          $          247
   State..................................................                     -                        -                      35
                                                                 ---------------           --------------          --------------
                                                                               -                        -                     282
                                                                 ---------------           --------------          --------------
Deferred:
   Federal................................................                (7,517)                    (813)                 (8,211)
   State..................................................                (1,074)                    (116)                 (1,173)
                                                                 ---------------           --------------          --------------
                                                                          (8,591)                    (929)                 (9,384)
                                                                 ---------------           --------------          --------------
      Total income tax benefit............................       $        (8,591)          $         (929)         $       (9,102)
                                                                 ===============           ==============          ==============
</TABLE>



<TABLE>
<CAPTION>
                                                                   Year Ended               Year Ended               Year Ended
                                                                December 31, 2001        December 31, 2000        December 31, 1999
                                                                -----------------        -----------------        -----------------
<S>                                                             <C>                      <C>                      <C>
DISCONTINUED OPERATIONS
Current:
   Federal................................................       $         3,547           $       21,394          $       18,460
   State..................................................                   506                    2,551                   2,423
                                                                 ---------------           --------------          --------------
                                                                           4,053                   23,945                  20,883
                                                                 ---------------           --------------          --------------
Deferred:
   Federal................................................                 1,701                   (9,860)                (13,345)
   State..................................................                   244                   (1,409)                 (1,907)
                                                                 ---------------           --------------          --------------
                                                                           1,945                  (11,269)                (15,252)
                                                                 ---------------           --------------          --------------
      Total income tax provision..........................       $         5,998           $       12,676          $        5,631
                                                                 ===============           ==============          ==============
</TABLE>


                                      F-33
<PAGE>

<TABLE>
<CAPTION>
                                                                   Year Ended               Year Ended               Year Ended
                                                                December 31, 2001        December 31, 2000        December 31, 1999
                                                                -----------------        -----------------        -----------------
<S>                                                             <C>                      <C>                      <C>
COMBINED
Current:
   Federal..................................................     $         3,547           $       21,394          $       18,707
   State....................................................                 506                    2,551                   2,458
                                                                 ---------------           --------------          --------------
                                                                           4,053                   23,945                  21,165
                                                                 ---------------           --------------          --------------
Deferred:
   Federal..................................................              (5,816)                 (10,673)                (21,556)
   State....................................................                (830)                  (1,525)                 (3,080)
                                                                 ---------------           --------------          --------------
                                                                          (6,646)                 (12,198)                (24,636)
                                                                 ---------------           --------------          --------------
      Total income tax provision (benefit)..................     $        (2,593)          $       11,747          $       (3,471)
                                                                 ---------------           --------------          --------------
</TABLE>


     Reconciliations of the federal statutory income tax rate to the effective
     tax rate were as follows:

<TABLE>
<CAPTION>
                                                           Year Ended           Year Ended           Year Ended
                                                        December 31, 2001    December 31, 2000    December 31, 1999
                                                       ------------------    -----------------    -----------------
<S>                                                    <C>                   <C>                  <C>
Federal statutory income tax rate....................         35.0%                35.0%               35.0%
State income taxes, net of federal tax benefit.......          5.0                  5.0                 5.0
Minority interests...................................          4.1                 (6.8)              (23.1)
Change in valuation allowance........................        (34.2)                   -               (47.1)
Impairment / amortization............................         (7.2)                   -                   -

Net operating loss benefit...........................            -                    -                (8.5)
Other, net...........................................          1.2                  1.3                (5.0)
                                                             -----                 ----               -----
    Effective tax rate...............................          3.9%                34.5%              (43.7)%
                                                             =====                 ====               =====
</TABLE>

     Significant components of the Company's deferred tax assets and liabilities
     were as follows (in thousands):


<TABLE>
<CAPTION>
                                                                                  December 31, 2001
                                                         ----------------------------------------------------------
                                                            Continued              Discontinued
                                                            Operations              Operations         Combined
                                                         ----------------        ----------------   ---------------
<S>                                                      <C>                     <C>                <C>
Deferred tax assets:
   Equity in losses of subsidiaries..................     $           -           $       1,009       $      1,009
   Deferred revenue/rentals..........................              (167)                 29,868             29,701
   Accrued expenses..................................              (330)                  1,085                755
   Inventories.......................................              (700)                  1,981              1,281
   Net operating loss carryforwards..................            44,683                   4,478             49,161
   Other.............................................             3,756                     516              4,272
                                                          -------------           -------------       ------------
       Deferred tax assets...........................            47,242                  38,937             86,179
                                                          -------------           -------------       ------------

Deferred tax liabilities:
   Prepaid expenses..................................             1,108                  (2,216)            (1,108)
   Depreciable property and equipment................            (5,009)                 (5,498)           (10,507)
   Real estate.......................................                 -                 (10,981)           (10,981)
                                                          -------------           -------------       ------------
       Deferred tax liabilities......................            (3,901)                (18,695)           (22,596)
                                                          -------------           -------------       ------------

Valuation allowance..................................           (18,626)                 (4,328)           (22,954)
                                                          -------------           -------------       ------------
       Net deferred tax assets.......................     $      24,715           $      15,914       $     40,629
                                                          =============           =============       ============
</TABLE>


                                      F-34
<PAGE>

<TABLE>
<CAPTION>
                                                                             December 31, 2001
                                                         ----------------------------------------------------------
                                                            Continued              Discontinued
                                                            Operations              Operations         Combined
                                                         ----------------        ----------------   ---------------
<S>                                                      <C>                     <C>                <C>
Deferred tax assets:
   Equity in losses of subsidiaries..................     $         (63)          $         880       $        817
   Deferred revenue/rentals..........................             2,926                  30,754             33,680
   Accrued expenses..................................                 -                   3,559              3,559
   Inventories.......................................                 -                     894                894
   Net operating loss carryforwards..................            24,458                   1,823             26,281
   Other.............................................                75                       8                 83
                                                          -------------           -------------       ------------
       Deferred tax assets...........................            27,396                  37,918             65,314
                                                          -------------           -------------       ------------

Deferred tax liabilities:
   Prepaid expenses..................................             3,306                  (4,400)            (1,094)
   Depreciable property and equipment................           (20,181)                      -            (20,181)
   Real estate.......................................                 -                  (9,650)            (9,650)
                                                          -------------           -------------       ------------
       Deferred tax liabilities......................           (16,875)                (14,050)           (30,925)
                                                          -------------           -------------       ------------

Valuation allowance..................................              (406)                      -               (406)
                                                          -------------           -------------       ------------
       Net deferred tax assets.......................     $      10,115           $      23,868       $     33,983
                                                          =============           =============       ============
</TABLE>


     At December 31, 2001, the Company had net operating loss carryforwards
     ("NOL") of approximately $122.0 million, which will expire after years 2002
     through 2021. A portion of this NOL was acquired subject to restrictive tax
     limitations. Due to the anticipated restructuring of the Company (See Note
     3 - Settlement Agreement), significant amounts of taxable income are
     anticipated to be realized in future years due to cancellation of
     indebtedness and other transactions. Management has not been able to
     conclude that it is more likely than not that all of the deferred tax asset
     will be realized. Accordingly, management has established a $23.0 million
     valuation reserve for that portion of the deferred tax asset which may not
     be realized upon completion of the anticipated restructuring or may be
     subject to capital loss or other limitations. The investments held by the
     Company that are considered to be Controlled Subsidiary Transactions have
     entered into agreements to elect to become Taxable REIT Subsidiaries
     ("TRS") of Crescent Equities for federal income tax reporting purposes
     effective January 1, 2001.

15.  MAGELLAN WARRANTS:

     In connection with the transaction in which Crescent Operating acquired its
     50% membership interest in CBHS, the Company purchased, for $12.5 million,
     warrants to acquire 1,283,311 shares of Magellan common stock for an
     exercise price of $30.00 per share. The Magellan warrants are exercisable
     in varying increments over the period which began on May 31, 1998 and ends
     on May 31, 2009. Prior to January 1, 2001, the fair value of theses
     warrants, using the Black-Scholes pricing model, would be determined and
     the resulting difference between the cost and the estimated fair value of
     the warrants was included in the consolidated financial statements as
     accumulated comprehensive income (loss) for the period ended. As of January
     1, 2001, the Company was required to adopt SFAS No. 133, as amended by SFAS
     No. 138. Upon adoption, the Company was required to record the net
     accumulated comprehensive loss related to its investment in Magellan
     warrants as a charge in the statement of operations. Based on the value of
     the warrants on December 31, 2000, the Company expensed $9.5 million on
     January 1, 2001 as a cumulative effect of change in accounting principle.
     From January 1, 2001 forward, the Company recorded changes in the fair
     value of these warrants in the statement of operations as investment income
     (loss). For the year ended December 31, 2001, the Company

                                      F-35
<PAGE>
     recorded changes in the fair value of these warrants, as calculated using
     the Black-Scholes pricing model, as investment income of $1.1 million in
     the Company's statement of operations. See Note 2 for the discussion of
     the change in accounting for the Magellan warrants effective January 1,
     2001 as required under SFAS No. 133.


     The Company transferred the Magellan warrants to Crescent Machinery in 1999
     as a contribution to capital. On February 6, 2002, Crescent Machinery filed
     for protection under the federal bankruptcy laws. With the commencement of
     Crescent Machinery's bankruptcy proceedings, the Magellan warrants became
     part of Crescent Machinery's estate, subject to the claims of creditors.
     The Magellan warrants are not proposed to be treated in any manner in
     connection with the Company's bankruptcy plan, and, instead, will be part
     of the resolution of the Crescent Machinery bankruptcy.


16.  COMMITMENTS AND CONTINGENCIES:

     Lease Commitments


     Prior to February 14, 2002, the Hospitality segment leased eight hotel and
     resort properties (the "Hospitality Properties") from Crescent Equities.
     Generally, the leases were on a triple net basis during 120-month terms and
     expire from December 2004 to June 2009. The leases provide for the payment
     to Crescent Partnership or its subsidiaries of (i) base rent, with periodic
     rent increases, (ii) percentage rent based on a percentage of gross room
     revenues above a specified amount, and (iii) a percentage of gross food and
     beverage revenues above a specified amount. Base rental expense under the
     leases is recognized on a straight-line basis over the terms of the
     respective leases. The Land Development segment leases office space, model
     homes, housekeeping and laundry facilities and certain equipment. Pursuant
     to the Settlement Agreement, the Company transferred its hospitality assets
     and equity interests in land development to Crescent Equities in February
     and March 2002, therefore the future lease obligations related to these
     assets and interest are eliminated (See Note 3 - Settlement Agreement). The
     Equipment Sales and Leasing segment leases rental delivery and service
     trucks and land and buildings at various locations.



     Total lease expense for all segments, including lease expense for
     Hospitality and Land Development segments which are reflected in
     discontinued operations, during the periods ended December 31, 2001, 2000
     and 1999 was approximately $66.6 million, $74.2 million and $62.5 million,
     respectively. Included in lease expense was percentage rent for the
     Hospitality Properties for the periods ended December 31, 2001, 2000 and
     1999 of $14.2 million, $19.0 million and $14.7 million, respectively.
     Future minimum lease payments due under such remaining leases as of
     December 31, 2001, not including discontinued operations, were as follows
     (in thousands):



<TABLE>
<S>                                    <C>
     2002....................          $          3,695
     2003....................                     3,155
     2004....................                     2,734
     2005....................                     1,215
     2006....................                       303
     Thereafter..............                       450
                                       ----------------
                                       $         11,552
                                       ================
</TABLE>


     Contingencies

     CBHS became the subject of Chapter 11 bankruptcy proceedings by filing a
     voluntary petition on February 16, 2000, in United States Bankruptcy Court
     for the District of Delaware. Although CBHS is not a subsidiary of Crescent
     Operating, Crescent Operating did own a majority (90%) economic interest in
     CBHS, until December 29, 2000.

     As stated above under "Charter Behavioral Health Systems, LLC", as a result
     of the liquidation of CBHS through bankruptcy, the equity investment in
     CBHS became worthless. On December 29, 2000, as part of Crescent
     Operating's tax planning, Crescent Operating sold its 25% common interest
     and its 100% preferred

                                      F-36
<PAGE>
     membership interest in CBHS, and COPI CBHS Holdings sold its 65% common
     interest in CBHS to The Rockwood Financial Group, Inc. for a nominal sum.

     Crescent Operating held no funded or liquidated claims against the estate
     of CBHS. Crescent Operating filed proofs of claim against CBHS as a
     protective matter for potential indemnification or contribution for third
     party lawsuits and claims where Crescent Operating is a named defendant
     with CBHS, such as lawsuits based upon alleged WARN Act violations
     purported to have been committed by CBHS and/or its subsidiaries in closing
     behavioral health care facilities in 1999 and 2000. The only such lawsuits
     that have been brought against Crescent Operating arise from WARN Act
     claims. In connection with a settlement entered into among Crescent
     Operating, CBHS, the WARN Act plaintiffs, and others, Crescent Operating's
     indemnification and contribution claims against CBHS based on such lawsuits
     have been resolved. No other claims or lawsuits have been asserted against
     Crescent Operating that would give rise to indemnification or contribution
     claims by Crescent Operating against CBHS. In the event that, prior to the
     bar date for asserting claims against Crescent Operating in its bankruptcy
     case, no other claims or lawsuits are asserted against Crescent Operating
     that would give rise to indemnification or contribution claims by Crescent
     Operating against CBHS, Crescent Operating's claims for indemnification or
     contribution in the CBHS case will be disallowed. If any such lawsuits or
     claims are brought, Crescent Operating will pursue its indemnification and
     contribution claims in the CBHS case as appropriate.

     To date, several lawsuits, all of which seek class action certification,
     have been filed against CBHS alleging violations of the WARN Act in the
     closing of certain healthcare facilities in 1999 and 2000. Of those
     lawsuits, three also named Crescent Operating as a defendant, but all three
     of those suits have since been dismissed. An additional suit seeking
     similar relief was also filed against Crescent Operating and Crescent
     Partnership, as well as CBHS.

     A global Stipulation of Settlement of all WARN matters was reached and
     filed with the United States District Court and Bankruptcy Court for the
     District of Delaware by the WARN Act claimants, CBHS, Crescent Operating,
     Crescent Partnership and the Creditors Committee in the CBHS case. The
     settlement was approved by the District Court by order dated March 18,
     2002. As it applies to Crescent Operating, the settlement provides that
     either Crescent Operating or Crescent Partnership was required to deposit
     into escrow $500,000 for the benefit of the WARN Act claimants and, upon
     the settlement becoming final, Crescent Operating will receive a complete
     release for all WARN Act claims and any other claims in the CBHS case other
     than potential claims from those CBHS employees who have opted out of the
     Settlement. It appears that a maximum of three such employees have opted
     out and none have made claims against Crescent Operating to date. Crescent
     Partnership has paid the $500,000 into escrow. This payment will not be
     included as an expense for the purposes of calculating the aggregate value
     of the Crescent Real Estate shares to be distributed to the Crescent
     Operating shareholders.

     In accordance with an agreement between Gerald Haddock and the Company,
     COPI Colorado redeemed the limited partnership interest of Mr. Haddock, the
     Company's former Chief Executive Officer and President, in January 2000,
     COPI Colorado paid Mr. Haddock approximately $2.6 million for his
     approximate 16.67% limited partner interest (determined from an independent
     appraisal of the value of COPI Colorado). Mr. Haddock has challenged the
     valuation performed by the independent appraiser and the procedures
     followed by the Company with respect to the redemption and valuation
     process. The Company believes that it has complied with all terms of the
     agreement as it relates to the liquidation of Mr. Haddock from the
     partnership. In February 2001, the Company filed a lawsuit seeking a
     declaratory judgment to assist in resolution of the Company's dispute with
     Mr. Haddock. This lawsuit has been settled and the order dismissing the
     suit was filed on January 2, 2002.

     The Company is a party to other legal actions related to certain of its
     investments. Material losses related to such cases have not been deemed
     probable by management after consultation with outside counsel, and no
     financial statement accruals have been made. Based on the status of the
     cases, the Company is unable to determine a range of possible losses, if
     any, that might be incurred in connection with this litigation. The Company
     believes it is not probable that the ultimate resolution of this litigation
     will have a material adverse effect on its financial position and results
     of operations.

                                      F-37
<PAGE>
17.  SUPPLEMENTAL CASH FLOW INFORMATION:

     Supplemental cash flow information is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               December 31,
                                                           -----------------------------------------------------
                                                                2001                2000               1999
                                                           ---------------     ---------------    --------------
<S>                                                        <C>                 <C>                <C>
Interest paid, net of amounts capitalized................    $    28,564          $   29,729        $   27,422
                                                             ===========          ==========        ==========
Income taxes paid........................................    $    19,468          $   17,293        $   24,755
                                                             ===========          ==========        ==========

Non-cash investing and financing activities:
    In conjunction with the acquisitions by the
      Company, liabilities were assumed as follows:
         Fair value of assets acquired...................    $         -          $        -        $   43,178
         Stock issued for the acquisitions...............              -                   -                 -
         Notes payable issued for acquisitions...........              -                   -            (6,000)
         Cash paid for the acquisitions..................              -                   -           (28,511)
                                                             -----------          ----------        ----------
             Liabilities assumed.........................    $         -          $        -        $    8,667
                                                             ===========          ==========        ==========

    Decrease in intangible and deferred income for
      amount associated with sales of club memberships...    $    1,062           $    6,387        $    7,172
                                                             ===========          ==========        ==========
</TABLE>

18.  FAIR VALUES OF FINANCIAL INSTRUMENTS:

     The carrying amount of cash and cash equivalents, accounts receivable,
     inventories, notes receivable, prepaid expenses and other current assets,
     and accounts payable and accrued expenses approximates fair value as of
     December 31, 2001 because of the short maturity of these instruments.
     Similarly, the carrying value of line of credit borrowings approximates
     fair value as of that date because the applicable interest rates fluctuate
     based on published market rates. In the opinion of management, without
     consideration of the financial position of the Company, the interest rates
     associated with the long-term debt approximates the market interest rates
     for this type of instrument, and as such, the carrying values approximate
     fair value at December 31, 2001.

19.  BUSINESS SEGMENT INFORMATION:

     Crescent Operating's assets and operations are located entirely within the
     United States and are comprised of four business segments: (i) Equipment
     Sales and Leasing, (ii) Hospitality, (iii) Temperature Controlled Logistics
     and (iv) Land Development. In addition to these four business segments, the
     Company has grouped its investment in Magellan warrants, its previous
     investment in CBHS, interest expense on corporate debt and general
     corporate overhead costs such as legal and accounting costs, insurance
     costs and corporate salaries as "Other" for segment reporting purposes.
     Because the Company sold its investment in CBHS in 2000 and did not
     recognize income or loss from CBHS in 1999 or 2000, the Company no longer
     reports its operations related to CBHS as a separate segment. The Company
     uses net income as the measure of segment profit or loss.

     The Equipment Sales and Leasing segment is engaged in the sale, leasing and
     service of construction equipment and accessories to the construction and
     utility industries located primarily in seven states. Crescent Machinery's
     leasing activities consist principally of leasing construction equipment
     and accessories under various leases, which are primarily short-term
     operating leases.

                                      F-38
<PAGE>

     Prior to February 14, 2002, the Hospitality segment generally consisted of
     the operations of the Hospitality Properties. Each of such properties is
     owned by Crescent Partnership or its affiliates and all were leased to
     subsidiaries of the Company under long term leases. In addition to these
     properties, the Company also has other investments in CRL.


     The Temperature Controlled Logistics segment consists primarily of a 40%
     interest in the operations of AmeriCold Logistics. Prior to reorganization
     of this segment effective March 12, 1999, this segment consisted of a 2%
     economic interest in the operations of The Temperature Controlled Logistics
     Partnerships. AmeriCold Logistics is the largest operator of public
     refrigerated storage space in the country in terms of public storage space
     operated.


     Prior to February 14, 2002, the Land Development segment consisted of (i) a
     4.65% economic interest in Desert Mountain, a master planned, luxury
     residential and recreational community in northern Scottsdale, Arizona,
     (ii) a 52.5% general partner interest in Woodlands Operating, which
     provides management, advisory, landscaping and maintenance services to
     entities affiliated with Crescent Operating and Crescent Equities, (iii) a
     2.625% economic interest in Landevco, which owns approximately 6,600 acres
     for commercial and residential development as well as a realty office, an
     athletic center, and an interest in a title company and (iv) a 6% economic
     interest in CRDI, whose operations consist principally of investing in
     partnerships and other entities that directly or indirectly develop and
     manage residential and resort properties (primarily in Colorado) or provide
     related services.



     In February and March 2002, pursuant to the Settlement Agreement, the
     Company's Hospitality and Land Development segments were transferred to
     Crescent Partnership. Accordingly, their results are reflected in
     discontinued operations, as well as the operations of the CMC branches
     closed in 2002. The Company's remaining business segments' information is
     summarized as follows (in thousands):



<TABLE>
<CAPTION>
                                             For the Year Ended     For the Year Ended     For the Year Ended
                                             December 31, 2001      December 31, 2000      December 31, 1999
                                             ------------------     ------------------     ------------------
<S>                                          <C>                    <C>                    <C>
Revenues:
   Equipment Sales and Leasing...........     $       67,521          $       69,976         $        62,311
   Hospitality...........................                  -                  32,615                  35,304
   Temperature Controlled Logistics......                  -                       -                       -
   Other.................................                  -                       -                       -
                                              --------------          --------------         ---------------
   Total revenues........................     $       67,521          $      102,591         $        97,615
                                              ==============          ==============         ===============

(Loss) income from operations:
   Equipment Sales and Leasing...........     $      (15,924)         $        1,266         $         3,512
   Hospitality...........................                  -                   1,931                   1,550
   Land Development......................                  -                       -                     (18)
   Temperature Controlled Logistics......                (21)                    (27)                     (2)
   Other.................................             (6,948)                 (4,197)                 (2,602)
                                              --------------          --------------         ---------------
   Total (loss) income from operations...     $      (22,893)         $       (1,027)        $         2,440
                                              ==============          ==============         ===============

Depreciation and amortization:
   Equipment Sales and Leasing...........     $       19,193          $       18,254         $        15,041
   Temperature Controlled Logistics......                  -                       -                       -
   Other.................................                (75)                    (71)                   (133)
                                              --------------          --------------         ---------------
   Total depreciation and amortization...     $       19,118          $       18,183         $        14,908
                                              ==============          ==============         ===============

Investment income (loss):
   Equipment Sales and Leasing...........     $            -          $            -         $             -
   Land Development......................                  -                       -                     158
   Temperature Controlled Logistics......                  -                     722                   1,493
   Other.................................              1,135                       -                     239
                                              --------------          --------------         ---------------
     Total investment income (loss)......     $        1,135          $          722         $         1,890
                                              ==============          ==============         ===============

Equity (loss) in income of unconsolidated
 subsidiaries:
   Equipment Sales and Leasing...........     $            -          $            -         $             -
   Hospitality...........................                  -                       7                     296
   Temperature Controlled Logistics......             (2,275)                 (6,959)                 (3,768)
   Other.................................                  -                       -                       -
</TABLE>


                                      F-39
<PAGE>

<TABLE>
<S>                                           <C>                     <C>                    <C>
                                              --------------          --------------         ---------------
     Total investment income (loss)......     $       (2,275)         $       (6,952)        $        (3,472)
                                              ==============          ==============         ===============

Interest expense, net:
   Equipment Sales and Leasing...........     $        4,125          $        5,672         $         3,497
   Temperature Controlled Logistics......                  -                       -                       -
   Other.................................              9,116                   8,012                   8,038
                                              --------------          --------------         ---------------
   Total interest expense, net...........     $       13,241          $       13,684         $        11,535
                                              ==============          ==============         ===============

Income tax expense (benefit)
   Equipment Sales and Leasing...........     $       (1,816)         $       (1,775)        $          (207)
   Hospitality...........................                  -                   8,234                     739
   Temperature Controlled Logistics......               (919)                 (2,960)                 (1,480)
   Other.................................             (5,856)                 (4,428)                 (8,154)
                                              --------------          --------------         ---------------
   Total income tax (benefit)............     $       (8,591)         $         (929)        $        (9,102)
                                              ==============          ==============         ===============

Capital expenditures:
   Equipment Sales and Leasing...........     $       21,064          $       48,228         $        58,107
   Temperature Controlled Logistics......                  -                       -                       -
   Other.................................                 20                      37                      51
                                              --------------          --------------         ---------------
   Total capital expenditures............     $       21,084          $       48,265         $        58,158
                                              ==============          ==============         ===============

Investment in unconsolidated subsidiaries:
   Equipment Sales and Leasing...........     $            -          $            -         $             -
   Temperature Controlled Logistics......                706                   4,417                  14,859
   Other.................................              4,127                   2,992                   2,374
                                              --------------          --------------         ---------------
   Total investment in
          unconsolidated subsidiaries....     $        4,833          $        7,409         $        17,233
                                              ==============          ==============         ===============

Identifiable assets:
   Equipment Sales and Leasing...........     $       93,647          $      192,151         $       184,964
   Temperature Controlled Logistics......              6,015                   8,829                  16,337
   Hospitality...........................             40,416                  44,810                  44,805
   Land Development......................            761,984                 643,514                 535,911
   Other.................................             43,342                  21,224                  13,636
                                              --------------          --------------         ---------------
   Total identifiable assets.............     $      945,404          $      910,528         $       795,653
                                              ==============          ==============         ===============
</TABLE>


20.  RELATED PARTY TRANSACTIONS:

     INTERCOMPANY AGREEMENT

     Generally, Crescent Operating is involved with Crescent Equities in two
     types of transactions: "Lessee Transactions" and "Controlled Subsidiary
     Transactions". Lessee Transactions are those in which Crescent Operating
     enters into a transaction to lease and operate real property that is owned
     by Crescent Partnership but which cannot be operated by Crescent
     Partnership due to Crescent Equities status as a REIT. Controlled
     Subsidiary Transactions are those in which Crescent Operating invests
     alongside Crescent Partnership in acquisitions where Crescent Operating
     owns all of the voting stock, and Crescent Partnership owns all of the
     non-voting stock of a corporate acquisition vehicle which in turn acquires
     a target business which cannot be operated by Crescent Partnership due to
     Crescent Equities' status as a REIT. The voting stock represents the
     control of the entity being purchased and due to its status as a REIT, up
     until the REIT Modernization Act which became effective January 1, 2001,
     Crescent Equities could not have such ownership.

     Crescent Operating and Crescent Partnership have entered into the
     Intercompany Agreement to provide each other with rights to participate in
     the types of transactions mentioned above. The Intercompany Agreement
     provides, subject to certain terms, that Crescent Partnership will provide
     Crescent Operating with a right of first refusal to become the lessee of
     any real property acquired by Crescent Partnership if Crescent Partnership
     determines that, consistent with Crescent Equities' status as a REIT, it is
     required to enter into a "master" lease arrangement. Crescent Operating's
     right of first refusal under the Intercompany Agreement is conditioned upon
     the ability of Crescent Operating and Crescent Partnership to negotiate a
     mutually satisfactory lease

                                      F-40
<PAGE>
     arrangement and the determination of Crescent Partnership, in its sole
     discretion, that Crescent Operating is qualified to be the lessee. In
     general, a master lease arrangement is an arrangement pursuant to which an
     entire property or project (or a group of related properties or projects)
     is leased to a single lessee. If a mutually satisfactory agreement cannot
     be reached within a 30-day period (or such longer period to which Crescent
     Operating and Crescent Partnership may agree), Crescent Partnership may
     offer the opportunity to others.

     Under the Intercompany Agreement, Crescent Operating has agreed not to
     acquire or make (i) investments in real estate which, for purposes of the
     Intercompany Agreement, includes the provision of services related to real
     estate and investment in hotel properties, real estate mortgages, real
     estate derivatives or entities that invest in real estate assets or (ii)
     any other investments that may be structured in a manner that qualifies
     under the federal income tax requirements applicable to REITs. Crescent
     Operating has agreed to notify Crescent Partnership of, and make available
     to Crescent Partnership, investment opportunities developed by Crescent
     Operating, or of which Crescent Operating becomes aware but is unable or
     unwilling to pursue.

     Effective February 14, 2002, the Company entered into the Settlement
     Agreement with Crescent Equities. The Settlement Agreement provided for the
     cancellation of the Intercompany Agreement.

     OTHER TRANSACTIONS


     Prior to February 14, 2002, the Company leased full service hotels and
     destination health and fitness resorts from Crescent Partnership, or other
     subsidiaries of Crescent Equities, under operating leases. Crescent
     Partnership has agreed to fund all capital expenditures relating to
     furniture, fixtures and equipment reserves required under applicable
     management agreements on all properties except for Canyon Ranch-Tucson.
     Total rent expense related to these leases totaled approximately $55.7
     million, $63.3 million and $54.0 million for the years ended December 31,
     2001, 2000 and 1999, respectively.



     The Company had various debt instruments payable to Crescent Partnership
     with an aggregate amount outstanding at December 31, 2001 and 2000 of
     $317.9 million and $259.7 million, respectively. See Note 10 for additional
     information.


     Included in notes receivable is a note from Landevco payable to Landco in
     the amount of $10.6 million as of December 31, 2001. The note bears
     interest at 15.0% per annum with quarterly interest payments and principal
     due upon maturity of July 2007. Interest income recognized for the years
     ended December 31, 2001, 2000 and 1999 was $1.9 million, $1.6 million and
     $1.7 million, respectively.

     Effective February 1, 2000, The Varma Asset Management Agreements were
     terminated by mutual agreement of the parties; at the same time, Crescent
     Operating and its hospitality subsidiaries entered into a Master Asset
     Management and Administrative Services Agreement with the Sonoma Management
     Company ("SMC") to manage the Hyatt Albuquerque, the Four Seasons Hotel
     Houston, the Renaissance Hotel Houston and the Denver City Center Marriott.
     At the same time, the Company's hospitality subsidiaries accepted
     assignment from the owners of the Sonoma Mission Inn and Spa, the Sonoma
     Mission Inn Golf and Country Club and the Ventana Inn and Spa of its
     property management agreements with SMC. The principals of SMC are Sanjay
     and Johanna Varma and Crescent Equities is an equity owner in SMC. Payment
     of obligations under the Master Asset Management and Administrative
     Services Agreement (the "SMC Management Agreement") are guaranteed by the
     Company. For each property for which it provides asset management services,
     SMC will receive a base fee equal to 0.85% of gross revenues of the
     property managed plus an incentive fee of 50% of actual net income in
     excess of budgeted net income. For each property for which it provides
     property management services, SMC will receive a base fee equal to 2.0% of
     gross revenues of the property plus an incentive fee of 20% of net
     operating income in excess of 12% annual return on investment to owner. As
     consideration for its services under the SMC Management Agreement, Sonoma
     Management received an annual base fee (and no incentive fee) for 2001 of
     approximately $0.6 million, for its asset management services related to
     the Hyatt Albuquerque, the Renaissance Houston Hotel and the Denver City
     Center Marriott. Pursuant to the Settlement Agreement, the Company's
     obligations under the SMC Management Agreement with SMC were transferred to
     Crescent Equities (See Note 3 - Settlement Agreement).

                                      F-41
<PAGE>
21.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

     Amounts in thousands, except per share amounts:


<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 2001
                                                         -------------------------------------------------------
                                                            First         Second        Third          Fourth
                                                         ------------  ------------  ------------  -------------
<S>                                                      <C>           <C>           <C>           <C>
Revenues.............................................     $  17,062      $  14,821     $  19,001      $  16,637
Loss from continuing operations before taxes,
   discontinued operations and accounting change.....        (1,092)       (14,358)      (10,597)       (12,644)
Income tax benefit...................................        (2,142)        (1,046)       (1,183)        (4,220)
                                                          ---------      ---------     ---------      ---------
Loss from continuing operations......................         1,050        (13,312)       (9,414)        (8,424)
Loss from discontinued operations....................          (661)        (3,910)       (7,683)       (26,270)
Loss from accounting change..........................        (9,509)             -             -              -
Net (loss)...........................................        (9,120)       (17,222)      (17,097)       (34,694)
Basic and Diluted (loss) per share
Income (Loss) before discontinued operations and
   accounting change.................................          0.10          (1.29)        (0.91)         (0.81)
Discontinued operations..............................         (0.06)         (0.38)        (0.74)         (2.54)
Change in accounting.................................         (0.92)             -             -              -
                                                          ---------      ---------     ---------      ---------
Net loss per share...................................     $   (0.88)     $   (1.67)    $   (1.65)     $   (3.35)
</TABLE>



<TABLE>
<CAPTION>
                                                                       Year Ended December 31, 2000
                                                         -------------------------------------------------------
                                                             First         Second        Third         Fourth
                                                         ------------  ------------  -------------  ------------
<S>                                                      <C>           <C>           <C>            <C>
Revenues.............................................     $  29,311      $  27,772     $  25,855      $  19,653
Loss from continuing operations before taxes,
   discontinued operations and accounting change.....        (3,802)        (4,337)       (5,019)        11,307
Income tax provision (benefit).......................        (1,528)        (1,744)       (2,028)         4,371
                                                          ---------      ---------     ---------      ---------
Loss from continuing operations......................        (2,274)        (2,593)       (2,991)         6,936
(Loss) Income from discontinued operations...........           292           (819)       (1,179)        (1,062)
Loss from accounting change..........................             -              -             -              -
Net (loss) income....................................        (1,982)        (3,412)       (4,170)         5,874
Basic and Diluted (loss) per share
(Loss) before discontinued operations and accounting
   change............................................         (0.22)         (0.25)        (0.29)          0.67
Discontinued operations..............................          0.03          (0.08)        (0.11)         (0.11)
Change in accounting.................................             -              -             -              -
                                                          ---------      ---------     ---------      ---------
Net (loss) income per share..........................     $   (0.19)     $   (0.33)    $   (0.40)     $    0.56
</TABLE>





                                      F-42
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Partners
Vornado Crescent Logistics Operating Partnership and Subsidiary:

We have audited the accompanying consolidated balance sheets of Vornado Crescent
Logistics Operating Partnership and Subsidiary (the "Partnership") as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, partners' capital, and cash flows for the years ended December 31,
2001 and 2000 and for the period from March 11, 1999 (date of inception) to
December 31, 1999. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, such financial statements present fairly, in all material
respects, the consolidated financial position of Vornado Crescent Logistics
Operating Partnership and Subsidiary at December 31, 2001 and 2000, and their
consolidated results of operations and cash flows for the years ended December
31, 2001 and 2000 and for the period from March 11, 1999 (date of inception) to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America.


/s/ DELOITTE & TOUCHE LLP



Atlanta, Georgia
February 20, 2002
(March 11, 2002 as to Note 4)


                                      F-43
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2001 AND 2000
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         2001               2000
<S>                                                                 <C>                <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                         $     28,189       $      6,215
  Restricted cash                                                         21,388             14,736
  Trade accounts receivable, net of allowance for doubtful
     accounts of $2,442 and $3,502, respectively                          67,415             79,780
  Other current assets                                                     4,559              4,930
  Working capital to be collected on behalf of                            (5,358)            (7,507)
                                                                    ------------       ------------
    AmeriCold Corporation

Total current assets                                                     116,193             98,154

PROPERTY, PLANT, AND EQUIPMENT:
  Land                                                                    14,794             16,831
  Buildings and improvements                                               2,880              2,476
  Machinery and equipment                                                 49,270             44,131
                                                                    ------------       ------------

                                                                          66,944             63,438

  Less accumulated depreciation                                          (19,574)           (10,722)
                                                                    ------------       ------------

    Property, plant, and equipment, net                                   47,370             52,716

OTHER ASSETS                                                              11,544             12,988
                                                                    ------------       ------------
                                                                    $    175,107       $    163,858
                                                                    ============       ============
</TABLE>

                                                                     (Continued)

See notes to consolidated financial statements.

                                      F-44
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2001 AND 2000
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         2001               2000
<S>                                                                 <C>                <C>
LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Accounts payable                                                  $     14,039       $     23,277
  Accrued expenses                                                        50,006             36,017
  Current portion of long-term debt                                        1,906                577
  Current portion of capitalized lease obligations                           967                398
  Unearned revenue                                                         8,373              9,242
  Due to AmeriCold Corporation                                            32,216             27,074
                                                                    ------------       ------------

      Total current liabilities                                          107,507             96,585
                                                                    ------------       ------------

LONG-TERM DEBT                                                            22,840              6,360

LONG-TERM CAPITALIZED LEASE OBLIGATIONS                                    4,449              1,351

DEFERRED RENT OBLIGATIONS TO AMERICOLD
  CORPORATION                                                              8,335             24,411

STRAIGHT-LINE RENT LIABILITY TO AMERICOLD
  CORPORATION                                                             10,811              6,762

OTHER LIABILITIES                                                         13,399             12,176
                                                                    ------------       ------------

      Total liabilities                                                  167,341            147,645

COMMITMENTS

PARTNERS' CAPITAL:
  Partners' capital                                                       44,723             48,723
  Accumulated deficit                                                    (33,368)           (27,680)
  Accumulated other comprehensive loss - minimum pension charge           (3,589)              (830)
                                                                    ------------       ------------

Less: capital contribution receivable                                          -             (4,000)
                                                                    ------------       ------------

      Total partners' capital                                              7,766             16,213
                                                                    ------------       ------------

                                                                    $    175,107       $    163,858
                                                                    ============       ============
</TABLE>

                                                                     (Concluded)

See notes to consolidated financial statements.

                                      F-45
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
             FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        2001               2000               1999
<S>                                                                 <C>                <C>                <C>
REVENUES                                                            $    647,259       $    676,158       $   557,708

OPERATING EXPENSES:
  Cost of operations (not including depletion, depreciation,
    and amortization)                                                    474,663            478,809           399,615
  Rent expense on leases with AmeriCold Corporation,
    net of $25,469 in reduction in 2001 contractual rents                130,807            170,640           135,811
  Reduction in 2000 contractual rents                                    (14,343)                 -                 -
  General and administrative                                              37,691             35,933            26,542
  Severance and other charges                                              8,895                  -                 -
  Depletion, depreciation, and amortization                               11,477              7,803             4,789
                                                                    ------------       ------------       -----------

      Total operating expenses                                           649,190            693,185           566,757
                                                                    ------------       ------------       -----------

OPERATING LOSS                                                            (1,931)           (17,027)           (9,049)

OTHER INCOME (EXPENSE):
  Interest expense                                                        (4,702)            (2,136)             (534)
  Other                                                                      945                727               339
                                                                    ------------       ------------       -----------

NET LOSS                                                            $     (5,688)      $    (18,436)      $    (9,244)
                                                                    ============       ============       ===========
</TABLE>

See notes to consolidated financial statements.

                                      F-46
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
               FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
             FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                     ACCUMULATED
                                                                                        OTHER
                                                                                    COMPREHENSIVE        CAPITAL
                                                      PARTNERS'     ACCUMULATED     LOSS - MINIMUM    CONTRIBUTION
                                                       CAPITAL        DEFICIT       PENSION CHARGE      RECEIVABLE        TOTAL
<S>                                                 <C>             <C>             <C>               <C>              <C>
Capital contribution                                $    38,723     $         -     $           -     $         -      $   38,723
  Net loss                                                    -          (9,244)                -               -          (9,244)
                                                    -----------     -----------     -------------     -----------      ----------
BALANCE - December 31, 1999                              38,723          (9,244)                -               -          29,479

Capital contribution                                     10,000               -                 -          (4,000)          6,000

COMPREHENSIVE LOSS:

  Net loss                                                    -         (18,436)                -               -         (18,436)

  Adjustment for minimum pension liability                    -               -              (830)              -            (830)
                                                                                                                       ----------

  Total comprehensive loss                                    -               -                 -               -         (19,266)
                                                    -----------     -----------     -------------     -----------      ----------

BALANCE - December 31, 2000                              48,723         (27,680)             (830)         (4,000)         16,213

  Cancellation of capital commitment                     (4,000)              -                 -           4,000               -

COMPREHENSIVE LOSS:

  Net loss                                                    -          (5,688)                -               -          (5,688)

  Adjustment for minimum pension liability                    -               -            (2,759)              -          (2,759)
                                                                                                                       ----------

  Total comprehensive loss                                    -               -                 -               -          (8,447)
                                                    -----------     -----------     -------------     -----------      ----------

BALANCE - December 31, 2001                         $    44,723     $   (33,368)    $      (3,589)    $         -      $    7,766
                                                    ===========     ===========     =============     ===========      ==========
</TABLE>

See notes to consolidated financial statements.

                                      F-47
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
             FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            2001            2000              1999
<S>                                                                   <C>              <C>               <C>
OPERATING ACTIVITIES:
  Net loss                                                            $     (5,688)    $    (18,436)     $    (9,244)
  Adjustments to reconcile net loss
    to net cash provided by operating activities:
    Provision for bad debts                                                  2,653            1,645            1,685
    Depletion, depreciation and amortization                                11,477            7,803            4,789
    Straight line rent expense                                               4,049            3,673            3,089
    Reduction in 2000 contractual rent                                     (14,343)               -                -
    Gain on settlement and curtailment of benefit plan                           -                -           (1,363)
    Changes in assets and liabilities, net of acquisitions:
      Restricted cash                                                       (6,652)           2,151                -
      Trade accounts receivable                                             10,843           (2,524)             239
      Other assets                                                            (522)              (9)          (6,420)
      Accounts payable and accrued expenses                                  2,071           (8,081)          (1,493)
      Due to AmeriCold Corporation                                           7,028           (2,158)          29,232
      Deferred rent obligations                                             (1,733)          19,011            5,400
      Other liabilities                                                        354              (69)             (11)
                                                                      ------------     ------------      -----------

        Net cash provided by operating activities                            9,537            3,006           25,903

INVESTING ACTIVITIES:
  Purchase of non-real estate assets                                             -                -          (38,723)
  Additions to property, plant, and equipment                               (2,368)         (12,302)          (9,666)
                                                                      ------------     ------------      -----------

        Net cash provided by investing activities                           (2,368)         (12,302)         (48,389)

FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                                  18,940            7,014                -
  Repayment of long-term debt                                               (1,131)             (47)               -
  Repayment of capital lease obligation                                       (855)               -                -
  Repayment of due to AmeriCold Corporation                                 (2,149)          (5,444)          (8,249)
  Capital contributions                                                          -            6,000           38,723
                                                                      ------------     ------------      -----------

        Net cash provided by financing activities                           14,805            7,523           30,474
                                                                      ------------     ------------      -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                     21,974           (1,773)           7,988

CASH AND CASH EQUIVALENTS:
  Beginning of period                                                        6,215            7,988                -
                                                                      ------------     ------------      -----------

  End of period                                                       $     28,189     $      6,215      $     7,988
                                                                      ============     ============      ===========
</TABLE>

                                                                     (Continued)

See notes to consolidated financial statements.

                                      F-48
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
             FOR THE PERIOD FROM MARCH 11, 1999 (DATE OF INCEPTION)
                              TO DECEMBER 31, 1999
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           2001            2000             1999
<S>                                                                   <C>              <C>               <C>
SUPPLEMENTAL DISCLOSURES:
  Interest paid                                                       $      2,787     $        753      $       331
                                                                      ============     ============      ===========

SUPPLEMENTAL INFORMATION ABOUT NONCASH
  ACTIVITIES:
  Acquisition of fixed assets under capital leases                    $      4,522                -                -
                                                                      ============     ============      ===========
  Liabilities assumed in connection with acquisition of
    non-real estate assets                                                       -                -      $    13,198
                                                                      ============     ============      ===========
  Initial working capital to be collected on behalf of
    AmeriCold Corporation                                                        -                -      $    21,200
                                                                      ============     ============      ===========
</TABLE>

                                                                     (Concluded)

See notes to consolidated financial statements.

                                      F-49
<PAGE>
                      VORNADO CRESCENT LOGISTICS OPERATING
                           PARTNERSHIP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS ENDED DECEMBER 31, 2001 AND
                   2000 AND FOR THE PERIOD FROM MARCH 11,1999
                    (DATE OF INCEPTION) TO DECEMBER 31,1999

1.   ORGANIZATION AND BUSINESS

     Vornado Crescent Logistics Operating Partnership (the "Partnership") was
     formed on March 11, 1999. The Partnership holds its assets and conducts
     its business through its wholly owned subsidiary AmeriCold Logistics, LLC
     (collectively "the Company" or "AmeriCold Logistics"). At December 31,
     2001, AmeriCold Logistics, headquartered in Atlanta, Georgia, has 5,900
     employees and operates 100 temperature controlled warehouse facilities
     nationwide with an aggregate of approximately 525 million cubic feet of
     refrigerated, frozen, and dry storage space. Of the 100 warehouses,
     AmeriCold Logistics leases 89 temperature controlled warehouses with an
     aggregate of approximately 445 million cubic feet from the Vornado
     REIT/Crescent REIT Partnership ("AmeriCold Corporation"), and manages 11
     additional warehouses containing approximately 80 million cubic feet of
     space. AmeriCold Logistics provides the frozen food industry with
     refrigerated warehousing and transportation management services.
     Refrigerated warehouses are comprised of production and distribution
     facilities. Production facilities typically serve one or a small number of
     customers, generally food processors, located nearby. These customers
     store large quantities of processed or partially processed products in the
     facility until they are shipped to the next stage of production or
     distribution. Distribution facilities primarily warehouse a wide variety
     of customers' finished products until future shipment to end-users. Each
     distribution facility generally services the surrounding regional 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. Additionally, AmeriCold Logistics mines
     limestone at two of its locations.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation - The consolidated financial statements of the
     Partnership include the accounts of the Partnership and its subsidiary.
     The Partnership is owned 60% by Vornado Operating L.P. ("Vornado") and 40%
     by COPI Cold Storage L.L.C. (an affiliate of Crescent Operating Inc.)
     ("Crescent"). The partnership agreement provides that net income and
     losses are allocated to each partner's account in relation to their
     ownership interests. Subject to certain provisions, the Partnership
     continues for a term through October 2027. Vornado's $6,000,000
     contribution to the Partnership in March 2000 was unmatched by Crescent,
     who recently filed for bankruptcy protection. Accordingly, the $4,000,000
     contribution receivable shown in partner's capital was cancelled at
     December 31, 2001. During the first quarter of 2002, Vornado's $6,000,000
     became a special equity contribution that: (i) has priority over the
     original equity amounts, with voting rights of Vornado not effected, (ii)
     is redeemable only at the Partnership's option, and (iii) accrues interest
     at 12% compounded annually from March 7, 2000. Vornado's share of the
     Partnership remains at 60%.

     Estimates - Management has made estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates.

                                      F-50
<PAGE>


     Subject to shareholder approval, Crescent Operating has agreed to transfer
     its interest in AmeriCold Logistics to an entity that will be owned by the
     shareholders of Crescent Real Estate Equities. It is uncertain at this time
     whether or when this plan will be approved and what effect, if any, this
     will have on the operation and management of AmeriCold Logistics.


     Cash and Cash Equivalents - Cash and cash equivalents consist of highly
     liquid investments with maturities when purchased of three months or less.

     Restricted Cash - Cash restricted for uses related to payment of rent
     ($7,229,000 at December 31, 2001 and 2000) and settlement of certain
     self-insured liabilities ($14,159,000 and $7,507,000 at December 31, 2001
     and 2000, respectively) are classified as restricted cash.

     Property, Plant, and Equipment - Depreciation and amortization are
     computed on the straight-line method over the estimated useful lives of the
     respective assets. Depreciation and amortization begin the month in which
     the asset is placed into service.

     The Company's long-lived assets are reviewed for impairment if events or
     changes in circumstances indicate that the carrying amounts may not be
     recoverable. In such an event, a comparison is made of the expected future
     operating cash flows of the long-lived assets on an undiscounted basis to
     the carrying amounts of long-lived assets. If the carrying amounts of the
     long-lived assets exceed the sum of the expected undiscounted cash flows,
     an impairment charge is recognized in an amount equal to the excess of the
     carrying amount over the estimated fair value of the long-lived assets.
     The Company also periodically reviews the appropriateness of the estimated
     useful lives of its long-lived assets.

     Capitalized Leases - Capitalized leases are recorded at the lower of the
     present value of future lease payments or the fair market value of the
     property. Capitalized leases are depreciated on a straight-line basis over
     the estimated asset life or lease term for equipment, whichever is
     shorter. Depreciation expense on capital leases is included in
     depreciation and amortization expense.

     Revenue Recognition - Revenues include storage, transportation and handling
     fees, and management fees for locations managed on behalf of third
     parties. Storage revenues are recognized as services are provided.
     Transportation fees and expenses are recognized upon tender of product to
     common carriers, which is not materially different than if such revenues
     and expenses were recognized upon delivery. Management fees are recognized
     when AmeriCold Logistics is contractually entitled to such fees. Costs
     related to managed facilities are included in operating expenses.
     AmeriCold Logistics charges customers for both inbound and outbound
     handling in advance but defers the outbound handling revenue until the
     product has been shipped. Revenues from the sale of limestone are
     recognized upon delivery to customers.

     Significant Customer - During 2001 and 2000, H.J. Heinz & Co. accounted for
     approximately 16% and 18% of total revenue, respectively.

     Income Taxes - AmeriCold Logistics has elected to be treated as a
     partnership for income tax purposes. Taxable income or loss of AmeriCold
     Logistics is reported in the income tax returns of the partners.
     Accordingly, no provision for income taxes is made in the financial
     statements of AmeriCold Logistics.

                                      F-51
<PAGE>
     Fair Value of Financial Instruments - All financial instruments of the
     Company are reflected in the accompanying consolidated balance sheets at
     historical cost which, in management's estimation, based upon an
     interpretation of available market information and valuation methodologies,
     reasonably approximates their fair values. Such fair values are not
     necessarily indicative of the amounts that would be realized upon
     disposition of the Company's financial instruments.

     Collective Bargaining Agreements - At December 31, 2001, approximately
     21% of the Company's labor force was covered by collective bargaining
     agreements. Collective bargaining agreements covering approximately 7% of
     the labor force will expire in 2002.

     Derivatives - In June 1998, the Financial Accounting Standards Board
     ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
     133, Accounting for Derivative Instruments and Hedging Activities, as
     amended in June 2000 by SFAS No. 138, Accounting for Certain Derivative
     Instruments and Certain Hedging Activities. SFAS No. 133, as amended,
     requires the Company to recognize all derivatives on the balance sheet at
     fair value. The Company adopted SFAS No. 133, as amended, on January 1,
     2001. The adoption of these standards did not have a material impact on
     the Company's consolidated financial statements, as the Company does not
     use derivatives.

     Recent Accounting Pronouncement - In August 2001, the FASB issued SFAS
     No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
     This Statement supersedes SFAS No. 121, Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No.
     144 also supercedes previous guidance for segments of a business to be
     disposed. The Company is required to adopt SFAS No. 144 on January 1,
     2002. The Company does not expect SFAS No. 144 to have a significant
     effect on its consolidated financial position or results of operations.

     Reclassifications - Certain reclassifications have been made to the 2000
     and 1999 balances to conform with the 2001 presentation.

3.   ACCRUED EXPENSES

     Detail of accrued expenses as of December 31, 2001 and 2000 is as follows:

<TABLE>
<CAPTION>
(amounts in thousands)                         2001              2000
<S>                                        <C>               <C>
Accrued payroll and related expense        $     10,127      $      9,854
Accrued workers' compensation                     8,580             8,443
Severance and other charges                       6,764                 -
Other accrued expenses                           24,535            17,720
                                           ------------      ------------

                                           $     50,006      $     36,017
                                           ============      ============
</TABLE>

                                      F-52
<PAGE>
4.   LONG-TERM DEBT

<TABLE>
<CAPTION>
(amounts in thousands)                         2001              2000
<S>                                        <C>               <C>
Notes payable to Vornado:
   12% promissory note payable             $      3,000      $      3,000
   12% promissory note payable                    3,840                 -
   14% promissory note payable                    4,856                 -

Notes payable to Crescent:
   12% promissory note payable                    2,000             2,000
   12% promissory note payable                    3,500                 -
   14% promissory note payable                    6,190                 -

Note payable to bank                              1,360             1,937
                                           ------------      ------------

                                                 24,746             6,937
Less: current maturities                         (1,906)             (577)
                                           ------------      ------------

                                           $     22,840      $      6,360
                                           ============      ============
</TABLE>

     The 12% promissory notes payable to Vornado and Crescent, as amended, are
     due December 31, 2004 and may be repaid at any time prior to their
     maturity. Until the notes are paid, aggregate interest-only payments of
     $123,000 are due on a monthly basis. These notes are secured by certain
     property and equipment with a net book value of approximately $15,606,000.

     The 14% promissory notes payable to Vornado and Crescent, as amended, are
     payable in aggregate monthly installments of principal and interest of
     $224,999 with a maturity date of December 31, 2004. The notes are secured
     by certain property and equipment with a net book value of approximately
     $22,483,000.

     Effective March 11, 2002, the Vornado and Crescent notes were amended to
     extend maturity dates to December 31, 2004.

     The note payable to the bank due January 2003 is payable in equal monthly
     installments of principal and interest and may be repaid prior to its
     maturity date, subject to certain prepayment penalties. This loan bears
     interest at the rate of 10.72% per annum. The note is secured by certain
     equipment with a net book value of approximately $1,287,000.

5.   TRANSACTIONS WITH AMERICOLD CORPORATION AND OWNERS

     During 2001 and 2000 and 1999, AmeriCold Logistics received a management
     fee of $268,000 and $255,000 and $201,000, respectively, from AmeriCold
     Corporation for administrative services performed. During 2001 and 2000
     and 1999, AmeriCold Logistics recorded a management fee of $487,000 and
     $487,000 and $329,000, respectively, to Vornado Realty L.P.

     At December 31, 2001 and 2000, other accrued liabilities included
     $1,303,000 and $816,000, respectively, owed to Vornado Realty L.P.

     At December 31, 2001 and 2000, $1,131,000 and $1,061,000, respectively,
     were receivable from Crescent for expenditures made on its behalf for a new
     business venture. Due to the uncertainty of collection, the Company
     established a reserve for this amount at December 31, 2001. Such amounts
     are included in other assets.

6.   LEASE COMMITMENTS

     AmeriCold Logistics has operating leases with the AmeriCold Corporation
     covering the warehouses used in this business. The leases, as amended,
     generally have a 15-year term with two five-year renewal options and
     provide for the payment of fixed base rent and percentage rent based on
     revenues AmeriCold Logistics receives from its customers. Fixed base rent
     is approximately $137,000,000 per annum through 2003, $139,000,000 per
     annum from 2004 through 2008, and $141,000,000 per annum from 2009 through
     2014. Percentage rent for each lease is based on a specified percentage of
     revenues in excess of a specified base amount. The aggregate base revenue

                                      F-53
<PAGE>
     amount under five of the six leases is approximately $350 million, and the
     weighted-average percentage rate is approximately 36% for the initial
     five-year period, approximately 38% for the period from 2004 through 2008,
     and approximately 40% for the period from 2009 through February 28, 2014.
     The aggregate base revenue amount under the sixth lease is approximately
     $32,000,000 through 2001, and approximately $26,000,000 for the period from
     2002 through February 28, 2014, and the percentage rate is 24% through
     2001, 37.5% for the period from 2002 through 2006, 40% from 2007 through
     2011, and 41% from 2012 through February 28, 2014.

     The fixed base rent for each of the two five-year renewal options is
     equal, generally, to the greater of the then fair market value rent or the
     fixed base rent for the immediately preceding lease year plus 5%.

     AmeriCold Logistics has the right to defer the payment of 15% of fixed
     base rent and all percentage rent for the period March 1999 to December 31,
     2003 to the extent that available cash, as defined in the leases, is
     insufficient to pay such rent. Pursuant to the agreement, AmeriCold
     Logistics exercised its deferral rights and deferred approximately
     $25,469,000 and $19,011,000 in 2001 and 2000, respectively, in fixed and
     percentage rent.

     As part of the February 2001 lease amendments, contractual rents due
     to AmeriCold Corporation were reduced to $146,000,000 for 2001 and
     $150,000,000 (plus additional contingent rent in certain circumstances) for
     2002. On December 27, 2001, the leases were amended to reduce fixed and
     percentage rent under the four non-encumbered leases by $25,469,000 to
     $17,918,000 for 2001 and by $14,343,000 to $38,223,000 for 2000.
     On January 23, 2002, the leases with AmeriCold Corporation were
     restructured to consolidate the four non-encumbered leases into one
     non-encumbered lease. The restructuring did not affect total contractual
     rent due under the combined leases.

     The Company anticipates that AmeriCold Corporation may further
     restructure the leases with the Company to provide additional cash flow to
     the Company.

     AmeriCold Logistics is also required to pay for all costs arising from
     the operation, maintenance and repair of the properties, including all real
     estate taxes and assessments, utility charges, permit fees, and insurance
     premiums, as well as property capital expenditures in excess of $9,500,000
     annually.

     AmeriCold Logistics also has both operating and capital lease
     agreements for equipment and other facilities. AmeriCold Logistics pays
     taxes, insurance, and maintenance costs on substantially all of the leased
     property. Lease terms generally range from five to 20 years with renewal or
     purchase options.

     At December 31, 2001, future minimum fixed lease payments under the
     leases with AmeriCold Corporation and future minimum lease payments under
     operating leases other than leases with AmeriCold Corporation were as
     follows:

          (amounts in thousands)

<TABLE>
<CAPTION>
YEAR ENDED                     AMERICOLD              OTHER
DECEMBER 31,                  CORPORATION            LESSORS              TOTAL
<S>                          <C>                   <C>                <C>
2002                         $     137,340         $    7,255         $     144,595
2003                               137,327              5,220               142,547
2004                               139,729              3,932               143,661
2005                               138,920              3,546               142,466
2006                               138,920              3,545               142,465
Thereafter                       1,011,241              2,748             1,013,989
                             -------------         ----------         -------------

                             $   1,703,477         $   26,246         $   1,729,723
                             =============         ==========         =============
</TABLE>

     Rent expense under leases with AmeriCold Corporation for 2001 was
     $115,780,000 for fixed rent, net of a $25,469,000 contractual rent
     adjustment, and $15,027,000 for percentage rent. Rent expense under leases
     with AmeriCold Corporation for 2000 was $139,723,000 for fixed rent and
     $30,917,000 for percentage rent. Rent expense under leases with AmeriCold
     Corporation for 1999 was $109,031,000 for fixed rent and $26,780,000 for
     percentage rent.

     Rent expense under leases with other lessors was $8,068,000, $6,407,000,
     and $4,739,000 for 2001, 2000, and 1999, respectively.

                                      F-54
<PAGE>
     At December 31, 2001, future minimum lease payments under capital leases
     are as follows:
        (amounts in thousands)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S>                                                   <C>
2002                                                  $       1,407
2003                                                          1,284
2004                                                          1,201
2005                                                          1,199
2006                                                          1,069
Thereafter                                                      638
                                                      -------------

Total minimum obligations                                     6,798
Less interest portion                                        (1,382)
                                                      -------------

Present value of net minimum payments                         5,416
Less current portion                                           (967)
                                                      -------------

Long term portion                                     $       4,449
                                                      =============
</TABLE>

     At December 31, 2001 and 2000, property leased under capital leases had a
     total cost of $7,974,000 and $2,751,000 and total accumulated depreciation
     of $2,976,000 and $1,171,000, respectively.

7.   SEVERANCE AND OTHER CHARGES

     During the year ended December 31, 2001, the Company recorded a charge of
     $8,895,000 comprised of (i) severance and relocation costs associated with
     a management restructuring, and (ii) expenses arising from the
     consolidation of a portion of the corporate office in Portland, Oregon
     into the Company's Atlanta headquarters. Severance related charges of
     $7,725,000 are for the termination of 199 employees, located primarily in
     the Atlanta and Portland offices. Through December 31, 2001, the Company
     had terminated 30 of the employees. The remaining charges of $1,170,000
     consist primarily of a signing bonus, recruitment and other exit costs.
     These charges and the related liability at December 31, 2001 are
     summarized below:

(amounts in thousands)

<TABLE>
<CAPTION>
                                 SEVERANCE          OTHER               TOTAL
<S>                            <C>               <C>                <C>
Charges                        $     7,725       $     1,170        $      8,895
Expenditures                          (961)           (1,170)             (2,131)
                               -----------       -----------        ------------

Severance Liability            $     6,764       $         -        $      6,764
                               ===========       ===========        ============
</TABLE>

8.   CONTINGENCIES

     In the normal course of business, the Company is party to a number of
     lawsuits. The Company does not believe that the resolution of these
     lawsuits will have a material effect on its financial position, results of
     operations or cash flows.

9.   EMPLOYEE BENEFIT PLANS

     Defined Benefit Pension and Postretirement Plans - AmeriCold Logistics has
     defined benefit pension plans that cover substantially all employees, other
     than union employees covered by union pension plans under collective
     bargaining agreements. Benefits under AmeriCold Logistics' plans are based
     on years of credited service and compensation during the years preceding
     retirement, or on years of credited service and established monthly
     benefit levels. The Company also has postretirement health care plans that
     provide medical and life insurance coverage to eligible retired employees.

                                      F-55
<PAGE>
     Actuarial information regarding the defined benefit pension plans and
     postretirement benefits other than pensions as of December 31, 2001 and
     2000 is as follows:

<TABLE>
<CAPTION>
                                                                                     2001
                                                                -----------------------------------------------
                                                                        PENSION BENEFITS
                                                                ------------------------------
                                                                                    NATIONAL         OTHER
                                                                  RETIREMENT        SERVICE      POSTRETIREMENT
(amounts in thousands)                                           INCOME PLAN      RELATED PLAN     BENEFITS
<S>                                                              <C>              <C>            <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                           $    35,424     $     8,633     $     1,289
Service cost                                                            2,977             223              55
Interest cost                                                           2,562             632             126
Participant contributions                                                   -               -               7
Actuarial (gain) loss                                                   2,090            (327)            292
Settlements                                                                 -               -               -
Plan amendments                                                             -             187               -
Benefits paid                                                          (4,777)           (524)            (37)
                                                                  -----------     -----------     -----------
Benefit obligation at end of year                                 $    38,276     $     8,824     $     1,732
                                                                  ===========     ===========     ===========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year                    $    26,218     $     9,377     $         -
Actual return on plan assets                                             (122)            (81)              -
Employer contributions                                                  4,650             115              30
Participant contributions                                                   -               -               7
Benefits paid                                                          (4,777)           (524)            (37)
                                                                  -----------     -----------     -----------
Fair value of plan assets at end of year                          $    25,969     $     8,887     $         -
                                                                  ===========     ===========     ===========

Funded status                                                     $   (12,307)    $        63     $    (1,732)
Unrecognized actuarial (gain) loss                                      7,423           1,830              18
Unrecognized prior service cost                                         1,182             332            (518)
Minimum liability adjustment                                           (4,771)              -               -
                                                                  -----------     -----------     -----------
(Accrued) prepaid benefit cost                                    $    (8,473)    $     2,225     $    (2,232)
                                                                  ===========     ===========     ===========

Amounts recognized in the consolidated balance sheet
consist of:
  Accrued benefit liability                                       $    (8,473)    $         -     $    (2,232)
  Prepaid asset                                                             -           2,225               -
  Intangible asset                                                      1,182               -               -
  Accumulated other comprehensive loss                                  3,589               -               -
                                                                  -----------     -----------     -----------
Net amount recognized                                             $    (3,702)    $     2,225     $    (2,232)
                                                                  ===========     ===========     ===========

Weighted-average assumptions as of
  December 31, 2001:
Discount rate                                                            7.25%           7.25%           7.25%
Expected return                                                          9.50%           9.50%            N/A
Rate of compensation increase                                            4.00%            N/A             N/A
</TABLE>

                                      F-56
<PAGE>
<TABLE>
<CAPTION>
                                                                                     2000
                                                                -----------------------------------------------
                                                                        PENSION BENEFITS
                                                                ------------------------------
                                                                                    NATIONAL         OTHER
                                                                  RETIREMENT        SERVICE      POSTRETIREMENT
(amounts in thousands)                                           INCOME PLAN      RELATED PLAN     BENEFITS
<S>                                                              <C>              <C>            <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                           $    33,710     $     9,351     $     1,920
Service cost                                                            1,641             211              45
Interest cost                                                           2,518             707             106
Actuarial (gain) loss                                                   2,826          (1,168)           (257)
Settlements                                                                 -               -            (521)
Benefits paid                                                          (5,271)           (468)             (4)
                                                                  -----------     -----------     -----------
Benefit obligation at end of year                                 $    35,424     $     8,633     $     1,289
                                                                  ===========     ===========     ===========

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year                    $    28,774     $     9,635     $         -
Actual return on plan assets                                            1,475             (38)              -
Employer contributions                                                  1,240             248               4
Benefits paid                                                          (5,271)           (468)             (4)
                                                                  -----------     -----------     -----------
Fair value of plan assets at end of year                          $    26,218     $     9,377     $         -
                                                                  ===========     ===========     ===========

Funded status                                                     $    (9,205)    $       743     $    (1,289)
Unrecognized actuarial (gain) loss                                      2,805           1,283            (260)
Unrecognized prior service cost                                         1,264             152            (582)
Minimum liability adjustment                                           (2,091)              -               -
                                                                  -----------     -----------     -----------
(Accrued) prepaid benefit cost                                    $    (7,227)    $     2,178     $    (2,131)
                                                                  ===========     ===========     ===========

Amounts recognized in the consolidated balance sheet
consist of:
  Accrued benefit liability                                       $    (7,227)    $         -     $    (2,131)
  Prepaid asset                                                             -           2,178               -
  Intangible asset                                                      1,261               -               -
  Accumulated other comprehensive loss                                    830               -               -
                                                                  -----------     -----------     -----------
Net amount recognized                                             $    (5,136)    $     2,178     $    (2,131)
                                                                  ===========     ===========     ===========

Weighted-average assumptions as of
  December 31, 2000:
Discount rate                                                            7.75%           7.75%           7.50%
Expected return                                                          9.50%           9.50%            N/A
Rate of compensation increase                                            4.00%            N/A             N/A
</TABLE>

                                      F-57
<PAGE>
<TABLE>
<CAPTION>
                                                                                        2001
                                                                 ----------------------------------------------
                                                                        PENSION BENEFITS
                                                                 -----------------------------
                                                                                   NATIONAL         OTHER
                                                                   RETIREMENT      SERVICE      POSTRETIREMENT
                                                                  INCOME PLAN    RELATED PLAN      BENEFITS
<S>                                                               <C>            <C>            <C>
(amounts in thousands)
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
  Service cost                                                    $     2,977     $       223     $        55
  Interest cost                                                         2,562             632             126
  Expected return on plan assets                                       (2,591)           (876)              -
  Recognized net actuarial loss (gain)                                    186              84              15
  Amortization of prior service cost                                       81               6             (65)
                                                                  -----------     -----------     -----------

                                                                  $     3,215     $        69     $       131
                                                                  ===========     ===========     ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                        2000
                                                                 ----------------------------------------------
                                                                        PENSION BENEFITS
                                                                 -----------------------------
                                                                                   NATIONAL         OTHER
                                                                   RETIREMENT      SERVICE      POSTRETIREMENT
                                                                  INCOME PLAN    RELATED PLAN      BENEFITS
<S>                                                               <C>            <C>            <C>
(amounts in thousands)
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
  Service cost                                                    $     1,641     $       211     $        45
  Interest cost                                                         2,518             707             106
  Expected return on plan assets                                       (3,153)         (1,094)              -
  Recognized net actuarial loss (gain)                                   (119)             90               -
  Amortization of prior service cost                                       80               6             (65)
                                                                  -----------     -----------     -----------

                                                                  $       967     $       (80)    $        86
                                                                  ===========     ===========     ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                                        1999
                                                                 ----------------------------------------------
                                                                        PENSION BENEFITS
                                                                 -----------------------------
                                                                                   NATIONAL         OTHER
                                                                   RETIREMENT      SERVICE      POSTRETIREMENT
                                                                  INCOME PLAN    RELATED PLAN      BENEFITS
<S>                                                               <C>            <C>            <C>
(amounts in thousands)
COMPONENTS OF NET PERIODIC
  BENEFIT COST:
  Service cost                                                    $     1,297     $       254     $       147
  Interest cost                                                         2,461             576             346
  Expected return on plan assets                                       (2,531)           (820)              -
  Recognized net actuarial loss (gain)                                    338              18              67
  Amortization of prior service cost                                      104               5             (56)
                                                                  -----------     -----------     -----------
                                                                  $     1,669     $        33     $       504
                                                                  ===========     ===========     ===========
</TABLE>

                                      F-58
<PAGE>
     The medical plan for retirees provides a fixed dollar benefit for each year
     that the retiree is receiving benefits. All increases in medical costs are
     paid by the retiree; thus, there is no assumed health care cost trend.

     Multiemployer Plans - Americold Logistics contributes to defined benefit
     multiemployer plans that cover substantially all union employees. Amounts
     charged to pension cost and contributed to the plans in 2001, 2000, and
     1999 were approximately $1,235,000, $1,252,000, and $1,211,000,
     respectively.

     Profit Sharing - AmeriCold Logistics has defined contribution employee
     benefit plans, which cover all eligible employees. The plans also allow
     contributions by plan participants in accordance with Section 401(k) of the
     Internal Revenue Code. Profit sharing expense for 2001 and 2000 and 1999
     was approximately $5,403,000 and $3,084,000 and $4,060,000, respectively.

     Deferred Compensation - AmeriCold Logistics has deferred compensation and
     supplemental retirement plan agreements with certain of its executives. The
     agreements provide for certain benefits at retirement or disability, and
     also provide for survivor benefits in the event of death of the employee.
     AmeriCold Logistics charges expense for the accretion of the liability each
     year.

     The net (income) expense for all deferred compensation and supplemental
     retirement plans for 2001 and 2000 and 1999 was approximately ($12,000) and
     $123,000 and $164,000, respectively.





10.  SUBSEQUENT EVENT - UNAUDITED



     On November 5, 2002, the Company issued a $6,000,000 note to Vornado,
     effective March 11, 2002, in exchange for Vornado's $6,000,000 special
     equity contribution, described in Note 2. Certain of the Company's trade
     receivables collateralize the loan. The loan bears interest of 12% and
     requires monthly interest payments until maturity on December 31, 2004.

     On December 31, 2002, the Company sold it interests in its Carthage,
     Missouri and Kansas City, Kansas quarries to a joint venture owned 56% by
     Crescent Real Estate Equities Company and 44% by Vornado Realty Trust for
     approximately $20 million. The Company will continue to manage these assets
     on behalf of the new owners.


                                      F-59
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Operating Company, L.P.:

We have audited the accompanying consolidated balance sheets of The Woodlands
Operating Company, L.P. (a Texas limited partnership) and subsidiary as of
December 31, 2000 and 1999 and the related consolidated statements of earnings,
changes in partners' equity and cash flows for each of the three years ended
December 31, 2000. These financial statements are the responsibility of The
Woodlands Operating Company, L.P.'s management. Our responsibility is to express
an opinion on these financial statements 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Woodlands Operating Company, L.P. and subsidiary as of December 31, 2000 and
1999 and the consolidated results of their operations and cash flows for each of
the three years ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 15, 2001


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-60
<PAGE>
             THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
                        DECEMBER 31, 2000 AND 1999
                         (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                2000                   1999
                                                             ----------             ---------
<S>                                                          <C>                    <C>
ASSETS
Cash and cash equivalents..............................      $    3,817             $   1,677
Trade receivables, net of allowance for doubtful
   accounts of $295 and $302...........................           6,071                 6,839
Inventory..............................................           1,217                 1,046
Prepaid and other current assets.......................             432                   264
Property and equipment, at cost less accumulated
   depreciation of $1,172 and $673.....................           2,430                 2,109
Other assets...........................................             738                 1,200
                                                             ----------             ---------
                                                             $   14,705             $  13,135
                                                             ==========             =========

LIABILITIES AND EQUITY
Liabilities
   Accounts payable....................................      $   10,857             $   8,113
   Accrued liabilities.................................           2,636                 2,273
   Deferred revenue....................................           7,045                 5,300
   Other liabilities...................................             336                   468
                                                             ----------             ---------
                                                                 20,874                16,154

Commitments and contingencies (Note 2)

Partners' deficit (Note 3).............................          (6,169)               (3,019)
                                                             ----------             ---------
                                                             $   14,705             $  13,135
                                                             ==========             =========
</TABLE>

                                      F-61
<PAGE>
             THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF EARNINGS
             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                           (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              2000               1999              1998
                                                         ---------------    ---------------   ---------------
<S>                                                      <C>                <C>               <C>
REVENUES
   Conference Center and Country Club operations.....       $  53,355          $  47,945         $  47,609
   Management fees and other.........................          29,394             26,690            27,151
                                                            ---------          ---------         ---------
                                                               82,749             74,635            74,760
                                                            ---------          ---------         ---------

OPERATING EXPENSES
   Conference Center and Country Club operations.....          52,166             47,325            46,162
   Operating, general and administrative.............          26,712             24,531            25,246
DEPRECIATION AND AMORTIZATION........................           1,035                863               751
                                                            ---------          ---------         ---------
                                                               79,913             72,719            72,159
                                                            ---------          ---------         ---------

OPERATING EARNINGS...................................           2,836              1,916             2,601

OTHER INCOME.........................................             (14)               (28)              (37)
                                                            ---------          ---------         ---------

NET EARNINGS.........................................       $   2,850          $   1,944         $   2,638
                                                            =========          =========         =========
</TABLE>

                                      F-62
<PAGE>
             THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
       CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           WOCOI         MS/TWC
                                                        Investment        Joint        MS/TWC,
                                                         Company         Venture        Inc.             Total
                                                     --------------   ------------   -----------     -------------
<S>                                                  <C>              <C>            <C>             <C>
Balance, December 31, 1997.....................        $      594       $      790      $    15        $    1,399

Distributions..................................            (2,550)          (3,390)         (60)           (6,000)

Earnings.......................................             1,121            1,491           26             2,638
                                                       ----------       ----------      -------        ----------

Balance, December 31, 1998.....................              (835)          (1,109)         (19)           (1,963)

Distributions..................................            (1,275)          (1,695)         (30)           (3,000)

Earnings.......................................               826            1,098           20             1,944
                                                       ----------       ----------      -------        ----------

Balance, December 31, 1999.....................            (1,284)          (1,706)         (29)           (3,019)

Distributions..................................            (3,266)          (2,679)         (55)           (6,000)

Earnings.......................................             1,927              900           23             2,850
                                                       ----------       ----------      -------        ----------

Balance, December 31, 2000.....................        $   (2,623)       $  (3,485)      $  (61)        $  (6,169)
                                                       ==========       ==========      =======        ==========
</TABLE>

                                      F-63
<PAGE>
             THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                          (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            2000             1999             1998
                                                                        ------------    -------------    -------------
<S>                                                                     <C>             <C>              <C>
OPERATING ACTIVITIES
Net earnings .................................................          $    2,850        $    1,944       $    2,638
Adjustments to reconcile net earnings to
   cash provided by (used for) operating activities
     Depreciation and amortization ...........................               1,035               863              751
     Deferred Country Club initiation fees, net ..............               1,745             2,468            2,062
     Other ...................................................                (671)             (329)            (113)
                                                                        ----------        ----------       ----------
                                                                             4,959             4,946            5,338
     Changes in operating assets and liabilities
       Trade receivables, inventory and prepaid assets .......                 429            (2,167)             656
       Other assets ..........................................                 462               522           (1,687)
       Accounts payable ......................................               2,744            (3,826)           6,388
       Accrued liabilities ...................................                 363               458           (2,360)
                                                                        ----------        ----------       ----------
Cash provided by (used for) operating activities .............               8,957               (67)           8,335
                                                                        ----------        ----------       ----------

INVESTING ACTIVITIES
Capital expenditures .........................................                (817)           (1,106)            (519)
                                                                        ----------        ----------       ----------

FINANCING ACTIVITIES
Distributions to partners ....................................              (6,000)           (3,000)          (6,000)
                                                                        ----------        ----------       ----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............               2,140            (4,173)           1,816
CASH AND CASH EQUIVALENTS, beginning of year .................               1,677             5,850            4,034
                                                                        ----------        ----------       ----------

CASH AND CASH EQUIVALENTS, end of year .......................          $    3,817        $    1,677       $    5,850
                                                                        ==========        ==========       ==========
</TABLE>

                                      F-64
<PAGE>
              THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CONTROL. The Woodlands Operating Company, L.P. ("Woodlands Operating"), The
Woodlands Land Development Company, L.P. ("Woodlands Development") and The
Woodlands Commercial Properties Company, L.P. ("Woodlands Commercial") are owned
by entities controlled by Crescent Real Estate Equities Limited Partnership or
Crescent Operating, Inc. (together "Crescent") and Morgan Stanley Real Estate
Fund II, L.P. ("Morgan Stanley"). Woodlands Development and Woodlands Commercial
are successors to The Woodlands Corporation. Prior to July 31, 1997, The
Woodlands Corporation was a wholly owned subsidiary of Mitchell Energy &
Development Corp. On July 31, 1997 The Woodlands Corporation was acquired by
Crescent and Morgan Stanley and merged into Woodlands Commercial, a Texas
limited partnership. Woodlands Commercial was then divided into two
partnerships: Woodlands Commercial and Woodlands Development. WECCR General
Partnership ("WECCR GP") is a wholly owned subsidiary of Woodlands Operating.
Woodlands Operating manages assets owned by Woodlands Commercial and Woodlands
Development.

     PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Woodlands Operating and WECCR GP. All significant intercompany
transactions and accounts are eliminated in consolidation.

     BUSINESS. Woodlands Operating's activities are concentrated in The
Woodlands, a planned community located north of Houston, Texas. Consequently,
these operations and the associated credit risks may be affected, either
positively or negatively, by changes in economic conditions in this geographical
area. Woodlands Operating provides services to Woodlands Development and
Woodlands Commercial under management and advisory services agreements. These
agreements are automatically renewed annually. Woodlands Development and
Woodlands Commercial pay Woodlands Operating an advisory fee equal to 3% above
cost. In addition, they reimburse Woodlands Operating for all cost and expenses
incurred on their behalf. For the years ended December 31, 2000, 1999 and 1998,
Woodlands Operating recorded revenues of $12,606,000, $10,597,000 and
$11,050,000 for services provided to Woodlands Development and $6,398,000,
$7,480,000 and $7,343,000 for services provided to Woodlands Commercial.

     WECCR GP leases The Woodlands Conference Center, Resort and Country Club
("the Facilities") from Woodlands Commercial. This agreement has an eight-year
term ending July 31, 2005. WECCR GP operates the Facilities and pays Woodlands
Commercial a base rent of $750,000 per month and a quarterly percentage rent
based on the gross receipts of the Facilities. For the years ended December 31,
2000, 1999 and 1998, rent under the lease agreement totaled $14,349,000,
$13,011,000 and $12,799,000.

     DEPRECIATION. Depreciation of property and equipment is provided on the
straight-line method over the estimated useful lives of the assets, which range
from three to ten years.

     INVENTORY. Inventory is carried at replacement cost and consists of
golf-related clothing and equipment sold at golf course pro shops in The
Woodlands.

     INCOME TAXES. No provision for Federal income taxes is included in the
accompanying financial statements since Woodlands Operating is not a tax-paying
entity and all income and expenses are reported by the partners for tax
reporting purposes.

     The tax returns, the qualification of Woodlands Operating for tax purposes
and the amount of distributable partnership income or loss are subject to
examination by Federal taxing authorities. If such examinations result in
changes with respect to partnership qualification or in changes to distributable
partnership income or loss, the tax liability of the partners could be changed
accordingly.

                                      F-65
<PAGE>
     STATEMENTS OF CASH FLOWS. Short-term investments with maturities of three
months or less are considered to be cash equivalents. There were no significant
non-cash investing or financing activities for the years ended December 31,
2000, 1999 and 1998.

     REVENUE RECOGNITION. Country club initiation fees are deferred and
recognized over the estimated life of membership, which is approximately nine
years.

     USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

     RECENT ACCOUNTING PRONOUNCEMENTS. Staff Accounting Bulletin No. 101 ("SAB
101") provides interpretive guidance on the proper revenue recognition,
presentation and disclosure in financial statements. Woodlands Operating has
reviewed its revenue recognition policies and determined that it is in
compliance with generally accepted accounting principles and the related
interpretive guidance set forth in SAB 101.

(2) COMMITMENTS AND CONTINGENCIES

     LEGAL ACTIONS. Woodlands Operating is a party to claims and legal actions
arising in the ordinary course of business and to recurring examinations by the
Internal Revenue Service and other regulatory agencies. Management believes,
after consultation with outside counsel, that adequate financial statement
accruals have been provided for all known litigation contingencies where losses
are deemed probable. Woodlands Operating believes it is not probable that the
ultimate resolution of this litigation will have a material adverse effect on
its financial position and results of operations.

     LEASES. Woodlands Operating has various facility and equipment lease
agreements including the Facility lease described in Note 1. Rental expenses for
operating leases for the years ended December 31, 2000, 1999 and 1998 total
$15,419,000, $14,364,000 and $13,898,000. Lease terms extend to 2009 and have an
average remaining term of seven years. Minimum rentals for the five years
subsequent to December 31, 2000 total approximately $10,032,000; $9,950,000;
$9,571,000; $9,442,000, $5,712,000 and $1,739,000 thereafter.

     INCENTIVE PLAN. Woodlands Operating instituted an incentive compensation
plan for certain employees effective January 1, 1998. The plan is unfunded and
while certain payments are made currently, a portion of the payment is deferred
and paid only upon the occurrence of certain future events. Woodlands
Development and Woodlands Commercial will reimburse any incentive plan payments
made in the future.

(3) PARTNERS' DEFICIT

     Crescent's ownership interest in Woodlands Operating is WOCOI Investment
Company, which holds a 42.5% general partner interest. Morgan Stanley's
ownership interests are MS/TWC Joint Venture, which holds a 56.5% limited
partner interest, and MS TWC, Inc., which holds a 1% general partner interest.

     The partnership agreement provides, among other things, the following:

         (i) Woodlands Operating is governed by an Executive Committee composed
of equal representation from its respective general partners.

         (ii) Net income and losses from operations are currently allocated so
that partners' capital accounts stand in the ratio of the percentage interest
listed above.

         (iii) Distributions are made to partners based on specified payout
percentages and include cumulative preferred returns to Morgan Stanley's
affiliates. The payout percentage to Morgan Stanley's affiliates is 57.5% until
the affiliates receive distributions equal to their capital contributions and a
12% cumulative preferred return compounded quarterly. Then, the payout
percentage to Morgan Stanley's affiliates is 50.5% until the affiliates

                                      F-66
<PAGE>
receive distributions equal to their capital contributions and an 18% cumulative
preferred return compounded quarterly. Thereafter, the payout percentage to
Morgan Stanley's affiliates is 47.5%.

         (iv) Woodlands Operating will continue to exist until December 31, 2040
unless terminated earlier due to specified events.

         (v) No additional partners may be admitted to Woodlands Operating
unless specific conditions in the partnership agreements are met. Partnership
interests may be transferred to affiliates of Crescent or Morgan Stanley.
Crescent has the right of first refusal to buy the partnership interests of the
Morgan Stanley affiliates at the same terms and conditions offered to a third
party purchaser, or sell its affiliates' interests to the same third party
purchaser.

         (vi) Crescent and Morgan Stanley have the right to offer to purchase
the other partner's affiliates' partnership interests in the event of failure to
make specified capital contributions or a specified default by the other.
Specified defaults include bankruptcy, breach of partnership covenants, transfer
of partnership interests except as permitted by the partnership agreements, and
fraud or gross negligence.

(4) EMPLOYEE SAVINGS PLAN

     Woodlands Operating has a 401(k) defined contribution plan that is
available to all full-time employees who meet specified service requirements.
The plan is administered by a third party. Contributions to the plan are based
on a match of employee contributions up to a specified limit. For the years
ended December 31, 2000, 1999 and 1998 Woodlands Operating contributions totaled
$634,000, $547,000 and $582,000.

                                      F-67
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Executive Committee of
The Woodlands Land Development Company, L.P.:

We have audited the accompanying consolidated balance sheets of The Woodlands
Land Development Company, L.P. (a Texas limited partnership) and subsidiary as
of December 31, 2000 and 1999 and the related consolidated statements of
earnings, changes in partners' equity and cash flows for each of the three years
ended December 31, 2000. These financial statements are the responsibility of
The Woodlands Land Development Company, L.P.'s management. Our responsibility is
to express an opinion on these financial statements 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Woodlands Land Development Company, L.P. and subsidiary as of December 31, 2000
and 1999 and the consolidated results of their operations and cash flows for
each of the three years ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States.


/s/ ARTHUR ANDERSEN LLP


Houston, Texas
January 15, 2001


THIS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS IS A COPY OF THE REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP. THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.


                                      F-68
<PAGE>
     THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY
                     CONSOLIDATED BALANCE SHEETS
                      DECEMBER 31, 2000 AND 1999
                        (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          2000             1999
                                                                      -----------       ---------
<S>                                                                   <C>               <C>
ASSETS
Cash and cash equivalents.......................................       $   10,739       $     486
Trade receivables...............................................              989             465
Inventory.......................................................               56              36
Prepaid and other current assets................................            2,072             727
Notes and contracts receivable (Notes 2 and 10).................           30,471          35,787
Real estate (Notes 3 and 4).....................................          395,940         375,663
Other assets....................................................            4,342           4,391
                                                                       ----------       ---------
                                                                       $  444,609       $ 417,555
                                                                       ==========       =========

LIABILITIES AND EQUITY
Liabilities
     Accounts payable...........................................       $   27,935       $  19,264
     Accrued liabilities........................................            3,598           3,148
     Credit facility (Notes 5 and 10)...........................          217,000         237,000
     Other debt (Notes 5 and 10)................................           38,356           3,285
     Deferred revenue...........................................            6,272           1,603
     Other liabilities..........................................            7,128           8,250
     Note payable to affiliated company (Note 8)................           15,880          23,303
     Notes payable to partners (Notes 6 and 10).................           25,000          25,000
                                                                       ----------       ---------
                                                                          341,169         320,853

Commitments and contingencies (Notes 4 and 7)

Partners' equity (Note 9).......................................          103,440          96,702
                                                                       ----------       ---------
                                                                       $  444,609       $ 417,555
                                                                       ==========       =========
</TABLE>

                                      F-69
<PAGE>
          THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        2000              1999            1998
                                                     ----------       -----------     -----------
<S>                                                  <C>              <C>             <C>
REVENUES
Residential lot sales............................     $ 127,435        $   92,904      $   77,824
Commercial land sales............................        39,486            24,820          43,778
Other (Notes 3 and 4)............................         9,963            13,135          10,349
                                                      ---------        ----------      ----------
                                                        176,884           130,859         131,951
                                                      ---------        ----------      ----------
COSTS AND EXPENSES
Residential lot cost of sales....................        64,269            51,352          45,203
Commercial land cost of sales....................        15,411            10,024          17,533
Operating expenses (Note 8)......................        25,249            18,705          19,471
Depreciation and amortization....................         1,267               753             464
                                                      ---------        ----------      ----------
                                                        106,196            80,834          82,671
                                                      ---------        ----------      ----------

OPERATING EARNINGS...............................        70,688            50,025          49,280
                                                      ---------        ----------      ----------

OTHER (INCOME) EXPENSE

Interest expense (Notes 5, 6 and 8)..............        29,424            23,833          24,000
Interest capitalized.............................       (26,438)          (21,659)        (22,106)
Amortization of debt costs.......................         1,083             1,211           1,243
Other............................................           149               226             329
                                                      ---------        ----------      ----------
                                                          4,218             3,611           3,466
                                                      ---------        ----------      ----------

EARNINGS BEFORE EXTRAORDINARY CHARGE AND
    CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
    PRINCIPLE....................................        66,470            46,414          45,814

EXTRAORDINARY CHARGE (Note 5)....................             -               883               -

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
    PRINCIPLE (Note 11)..........................             -                 -             639
                                                      ---------        ----------      ----------

NET EARNINGS.....................................     $  66,470        $   45,531      $   45,175
                                                      =========        ==========      ==========
</TABLE>

                                      F-70
<PAGE>
         THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY
             CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             The
                                          Woodlands         MS/TWC
                                            Land             Joint          MS/TWC,
                                        Company, Inc.       Venture           Inc.           Total
                                      ---------------   --------------    ------------   --------------
<S>                                   <C>               <C>               <C>            <C>
Balance, December 31, 1997......        $    31,405      $    41,748       $     739      $    73,892

Contributions...................              2,575            3,423              60            6,058

Distributions...................            (15,299)         (20,338)           (360)         (35,997)

Net earnings....................             19,199           25,524             452           45,175
                                        -----------      -----------       ---------      -----------

Balance, December 31, 1998......             37,880           50,357             891           89,128

Contributions...................              2,550            3,390              60            6,000

Distributions...................            (18,682)         (24,836)           (439)         (43,957)

Net earnings....................             19,351           25,725             455           45,531
                                        -----------      -----------       ---------      -----------

Balance, December 31, 1999......             41,099           54,636             967           96,702

Contributions...................              2,550            3,390              60            6,000

Distributions...................            (27,947)         (37,129)           (656)         (65,732)

Net earnings....................             28,260           37,547             663           66,470
                                        -----------      -----------       ---------      -----------
Balance, December 31, 2000......        $    43,962      $    58,444       $   1,034      $   103,440
                                        ===========      ===========       =========      ===========
</TABLE>

                                      F-71
<PAGE>
     THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS
         FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      2000          1999          1998
                                                                   ----------    ----------    ----------
<S>                                                                <C>           <C>           <C>
OPERATING ACTIVITIES
Net earnings...................................................    $ 66,470      $  45,531      $ 45,175
Adjustments to reconcile net earnings to
   cash provided by operating activities
     Cost of land sold.........................................      79,680         61,376        62,736
     Depreciation and amortization.............................       1,267            753           464
     Gain on sale of property..................................           -         (4,239)         (699)
     Partnership distributions greater (less) than earnings....         184            365           (61)
     (Increase) decrease in notes and contracts receivable.....       5,316         (5,747)       (9,108)
     Other.....................................................       5,301          4,750        (4,697)
                                                                   --------      ---------      --------
                                                                    158,218        102,789        93,810
     Land development capital expenditures.....................     (58,060)       (71,969)      (50,035)
     Changes in operating assets and liabilities
        Trade receivables, inventory and prepaid assets........      (1,889)        (1,075)            1
        Other assets...........................................          49         (2,383)        1,855
        Accounts payable and accrued liabilities...............       9,610          7,153        (1,118)
                                                                   --------      ---------      --------
Cash provided by operating activities..........................     107,928         34,515        44,513
                                                                   --------      ---------      --------

INVESTING ACTIVITIES
Capital expenditures...........................................     (45,591)             -             -
Acquisition of commercial property.............................           -              -       (10,100)
Proceeds from sale of property.................................           -          5,398         4,819
                                                                   --------      ---------      --------
Cash provided by (used for) investing activities...............     (45,591)         5,398        (5,281)
                                                                   --------      ---------      --------

FINANCING ACTIVITIES
Contributions from partners....................................       6,000          6,000         6,058
Distributions to partners......................................     (65,732)       (43,957)      (35,997)
Debt borrowings................................................       3,513        252,438         3,263
Debt repayments................................................     (20,169)      (251,308)      (30,250)
Repayment of affiliated company note...........................      (7,423)        (2,697)            -
Subsidiary debt financing......................................      31,727              -             -
                                                                   --------      ---------      --------
Cash used for financing activities.............................     (52,084)       (39,524)      (56,926)
                                                                   --------      ---------      --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...............      10,253            389       (17,694)
CASH AND CASH EQUIVALENTS, beginning of year...................         486             97        17,791
                                                                   --------      ---------      --------

CASH AND CASH EQUIVALENTS, end of year.........................    $ 10,739      $     486      $     97
                                                                   ========      =========      ========
</TABLE>

                                      F-72
<PAGE>
           THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CONTROL. The Woodlands Land Development Company, L.P. ("Woodlands
Development"), The Woodlands Commercial Properties Company, L.P. ("Woodlands
Commercial"), WECCR General Partnership ("WECCR GP"), and The Woodlands
Operating Company, L.P. ("Woodlands Operating") are owned by entities controlled
by Crescent Real Estate Equities Limited Partnership or Crescent Operating, Inc.
(together "Crescent") and Morgan Stanley Real Estate Fund II, L.P. ("Morgan
Stanley"). Woodlands Development and Woodlands Commercial are successors to The
Woodlands Corporation. Prior to July 31, 1997, The Woodlands Corporation was a
wholly owned subsidiary of Mitchell Energy & Development Corp. On July 31, 1997
The Woodlands Corporation was acquired by Crescent and Morgan Stanley and merged
into Woodlands Commercial, a Texas limited partnership. Woodlands Commercial was
then divided into two partnerships: Woodlands Commercial and Woodlands
Development. Woodlands Operating manages assets owned by Woodlands Development
as described in Note 8. In July 2000, Woodlands Development and Woodlands
Commercial established Woodlands VTO 2000 Land, LP ("VTO Land"), a subsidiary of
Woodlands Development, and Woodlands VTO 2000 Commercial, LP ("VTO Commercial"),
a subsidiary of Woodlands Commercial. These subsidiaries purchased certain
commercial properties owned by Woodlands Development and Woodlands Commercial.

     PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Woodlands Development and its subsidiary. All significant
intercompany transactions and accounts are eliminated in consolidation.

     BUSINESS. Woodlands Development's real estate activities are concentrated
in The Woodlands, a planned community located north of Houston, Texas.
Consequently, these operations and the associated credit risks may be affected,
either positively or negatively, by changes in economic conditions in this
geographical area. Activities associated with The Woodlands include residential
and commercial land sales and the construction of commercial buildings.

     REAL ESTATE. Costs associated with the acquisition and development of real
estate, including holding costs consisting principally of interest and ad
valorem taxes, are capitalized as incurred. Capitalization of such holding costs
is limited to properties for which active development continues. Capitalization
ceases upon completion of a property or cessation of development activities.
Where practicable, capitalized costs are specifically assigned to individual
assets; otherwise, costs are allocated based on estimated values of the affected
assets.

     LAND SALES. Earnings from sales of real estate are recognized when a
third-party buyer has made an adequate cash down payment and has attained the
attributes of ownership. Notes received in connection with land sales are
discounted when the stated purchase prices are significantly different from
those that would have resulted from similar cash transactions. The cost of land
sold is generally determined as a specific percentage of the sales revenues
recognized for each land development project. These percentages are based on
total estimated development costs and sales revenues for each project.

     DEPRECIATION. Depreciation of operating assets is provided on the
straight-line method over the estimated useful lives of the assets, which range
from three to fifty years.

     INCOME TAXES. No provision for Federal income taxes is included in the
accompanying financial statements since the Woodlands Development is not a
tax-paying entity and all income and expenses are reported by the partners for
tax reporting purposes.

     The tax returns, the qualification of Woodlands Development for tax
purposes and the amount of distributable partnership income or loss are subject
to examination by Federal taxing authorities. If such examinations result in

                                      F-73
<PAGE>
changes with respect to partnership qualification or in changes to distributable
partnership income or loss, the tax liability of the partners could be changed
accordingly.

     STATEMENTS OF CASH FLOWS. Short-term investments with original maturities
of three months or less are considered to be cash equivalents. The reported
amounts for proceeds from issuance of debt and debt repayments exclude the
impact of borrowings with initial terms of three months or less. For the years
ended December 31, 2000, 1999 and 1998, Woodlands Development paid interest
totaling $30,018,000, $22,541,000 and $25,361,000 related to debt described in
Notes 5, 6 and 8.

     USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

     RECENT ACCOUNTING PRONOUNCEMENTS. On January 1, 2001, Woodlands Development
adopted 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". These standards establish accounting and reporting standards for
derivative instruments and hedging activities. In particular, they require a
company to record derivative instruments on the balance sheet at fair value and
recognize changes in fair value currently in earnings unless specific hedge
accounting criteria are satisfied. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally document
and assess the effectiveness of transactions that receive hedge accounting. The
adoption of these standards will result in a reduction of its derivative
instruments by $206,000. See Note 5 for additional information regarding the
Woodlands Development's derivative instruments and hedging activities.

     Staff Accounting Bulletin No. 101 ("SAB 101") provides interpretive
guidance on the proper revenue recognition, presentation and disclosure in
financial statements. Woodlands Development has reviewed its revenue recognition
policies and determined that it is in compliance with generally accepted
accounting principles and the related interpretive guidance set forth in SAB
101.

(2) NOTES AND CONTRACTS RECEIVABLE

     Notes receivable are carried at cost, net of discounts. At December 31,
2000 and 1999, Woodlands Development held utility district receivables totaling
$30,471,000 and $33,559,000. Utility district receivables, the collection of
which is dependent on the ability of utility districts in The Woodlands to sell
bonds, have a market interest rate of approximately 5.5% at December 31, 2000.

     In December 2000, Woodlands Development sold its remaining notes receivable
to a financial institution for $5,560,000. During 2000, Woodlands Development
sold $27,200,000 of its utility district receivables to a financial institution
under a factoring agreement. There was no gain or loss recognized.

(3) REAL ESTATE

     The following is a summary of real estate at December 31, 2000 and 1999 (in
thousands):

<TABLE>
<CAPTION>
                                              2000             1999
                                          ------------     -----------
<S>                                       <C>              <C>
Land ...............................          $320,110        $344,140
Commercial properties ..............            68,811          27,285
Equity investments (Note 4) ........             8,406           1,682
Other assets .......................               453           3,579
                                          ------------     -----------
                                               397,780         376,686
Accumulated depreciation ...........            (1,840)         (1,023)
                                          ------------     -----------
                                              $395,940        $375,663
                                          ============     ===========
</TABLE>

                                      F-74
<PAGE>
     LAND. The principal land development is The Woodlands, a mixed-use,
master-planned community located north of Houston, Texas. Residential land is
divided into seven villages in various stages of development. Each village has
or is planned to contain a variety of housing, neighborhood retail centers,
schools, parks and other amenities. Woodlands Development controls the
development of the residential communities and produces finished lots for sale
to qualified builders. Housing is constructed in a wide choice of pricing and
product styles.

     Commercial land is divided into distinct centers that serve or are planned
to serve as locations for office buildings, retail and entertainment facilities,
industrial and warehouse facilities, research and technology facilities, and
college and training facilities. Woodlands Development produces finished sites
for third parties or its own building development activities.

     COMMERCIAL PROPERTIES. Commercial properties owned by Woodlands Development
are leased to third-party tenants. At December 31, 2000, the net book value of
assets under operating leases totaled $55,304,000. Other commercial properties
are under development at December 31, 2000. Lease terms range from five to nine
years with an average term of six years. Leases are accounted for under the
operating method. Minimum future lease revenues from operating leases exclude
contingent rentals that may be received. Tenant rents include rent for
noncancelable operating leases. For the years ending December 31, 2000, 1999 and
1998, tenant rents totaled $2,589,000, $1,938,000 and $1,470,000 and are
included in other revenues. Contingent rents include pass-throughs of
incremental operating costs. For the years ending December 31, 2000, 1999 and
1998, contingent rents totaled $63,000, $144,000 and $155,000. Minimum future
lease revenues for the five years subsequent to December 31, 2000 are
$5,785,000; $5,805,000; $5,934,000; $6,083,000; and $6,113,000.

(4) EQUITY INVESTMENTS

     During 2000, Woodlands Development's principal partnership and corporation
interests included the following:

<TABLE>
<CAPTION>
                                                            Ownership               Nature of Operations
                                                          -------------   ------------------------------------
<S>                                                       <C>             <C>
Sterling Ridge Retail 2000 (completed December 2000)            50%          Retail property in The Woodlands
Stewart Title of Montgomery County, Inc. ...............        50%          Title company
</TABLE>

     Woodlands Development's net investment in these entities is included in the
real estate caption on the balance sheets and its share of these entities'
pretax earnings is included in other revenues on the statements of earnings. A
summary of the net investment as of December 31, 2000 and the share of pre-tax
earnings for the year then ended follows (in thousands):

<TABLE>
<CAPTION>
                                                                              Equity in Pre-Tax
                                                          Net Investment          Earnings
                                                        ------------------   -------------------
<S>                                                     <C>                  <C>
Sterling Ridge Retail 2000.........................             $6,953                 $   -
Stewart Title of Montgomery County, Inc. ..........              1,368                   555
Other..............................................                 85                  (130)
                                                          ------------         -------------
                                                                $8,406                 $ 425
                                                          ============         =============
</TABLE>

     In September 1999, Woodlands Development completed a sale of its 49%
interest in Mitchell Mortgage Company, LLC for $5,398,000 and recognized as
other revenue a $4,239,000 gain on the sale.

                                      F-75
<PAGE>
     Summarized financial statement information for partnerships and a
corporation in which Woodlands Development has an ownership interest at December
31, 2000 and for the year then ended follows (in thousands):

<TABLE>
<S>                                                                    <C>
Assets ...........................................................     $19,308
Debt payable to third parties
   Woodlands Development's proportionate share (nonrecourse) .....       1,837
   Other parties' proportionate share ............................       1,836
Accounts payable and deferred credits ............................       1,275
Owners' equity ...................................................      14,360

Revenues .........................................................     $ 4,938
Operating earnings ...............................................       1,912
Pre-tax earnings .................................................       1,597
Woodlands Development's proportionate share
      of pre-tax earnings.........................................         425
</TABLE>

(5) DEBT

     A summary of Woodlands Development's outstanding debt at December 31, 2000
and 1999 follows (in thousands):

<TABLE>
<CAPTION>
                                                     2000         1999
                                                  ----------   ----------
<S>                                               <C>          <C>
Bank credit agreement ......................        $217,000     $237,000

Subsidiary's credit agreement ..............          31,727            -

Mortgages payable, at an average
  interest rate of 8.4%  ...................           6,629        3,285
                                                  ----------   ----------
                                                    $255,356     $240,285
                                                  ==========   ==========
</TABLE>

     BANK CREDIT AGREEMENT. In November 1999, Woodlands Development and
Woodlands Commercial replaced their existing bank credit agreement and
construction loan agreement with a new facility, consisting of a $300,000,000
term loan and a $100,000,000 revolving loan. The transaction resulted in an
extraordinary charge of $883,000 for Woodlands Development. The charge consisted
of the write-off of previously deferred financing costs. The new bank credit
agreement has a three-year term expiring in November 2002 with two one-year
extension options. The interest rate, based on the London Interbank Offered Rate
plus a margin, is approximately 9.8% at December 31, 2000. Interest is paid
monthly. Commitment fees, based on .25% of the unused commitment, total $18,000,
$9,000 and $52,000 for the years ended December 31, 2000, 1999 and 1998. The
credit agreement contains certain restrictions which, among other things,
require the maintenance of specified financial ratios, restrict indebtedness and
sale, lease or transfer of certain assets, and limit the right of Woodlands
Development to merge with other companies and make distributions to its
partners. At December 31, 2000, Woodlands Development was in compliance with its
debt covenants. Certain assets of Woodlands Development, including cash,
receivables, commercial properties and equity investments in joint ventures and
partnerships, secure the credit agreement. Mandatory debt maturities are
$18,000,000 in 2001 and $199,000,000 in 2002. Payments may be made by Woodlands
Development or Woodlands Commercial or both at their option. Beginning in 2001,
additional principal payments are required based on distributions to Crescent
and Morgan Stanley. Additional prepayments can also be made at the discretion of
Woodlands Development. Prepayments on the term loan are subject to a prepayment
penalty of up to 2%.

     Woodlands Development and Woodlands Commercial entered into an interest
rate cap agreement with a commercial bank to reduce the impact of increases in
interest rates on their bank credit agreement. The interest cap agreement
effectively limits their interest rate exposure on a notional amount to a
maximum LIBOR rate of 9%. The notional amount is $134,000,000 at December 31,
2000 and will reduce to $121,000,000 in December 2001. The interest cap
agreement matures at the same time as the bank credit agreement. Woodlands
Development is exposed

                                      F-76
<PAGE>
to credit loss in the event of nonperformance by the other party with respect to
the interest cap agreement. However, management does not anticipate
nonperformance by the other party.

     SUBSIDIARY'S CREDIT AGREEMENT. VTO Land and VTO Commercial entered into a
$67,500,000 credit agreement that has a three-year term expiring in October 2003
with two one-year extension options. The interest rate, based on the London
Interbank Offered Rate plus a margin, is approximately 8.8% at December 31,
2000. Interest is paid monthly. The credit agreement contains certain
restrictions which, among other things, require the maintenance of specified
financial ratios and restrict indebtedness and leasing. At December 31, 2000,
VTO Land was in compliance with its debt covenants. Certain assets of the VTO
Land and VTO Commercial secure the agreement. Debt maturities for the three
years subsequent to December 31, 2000 are $82,000, $490,000 and $31,155,000. VTO
Land, VTO Commercial, or both may make payments at their option.

     VTO Land and VTO Commercial entered into an interest rate cap agreement
with a commercial bank to reduce the impact of increases in interest rates on
their credit agreement. The interest cap agreement effectively limits their
interest rate exposure on a notional amount to a maximum LIBOR rate of 9%. The
notional amount is $33,750,000. The interest cap agreement matures at the same
time as the credit agreement. VTO Land is exposed to credit loss in the event of
nonperformance by the other party with respect to the interest cap agreement.
However, management does not anticipate nonperformance by the other party.

     MORTGAGES PAYABLE. The mortgages payable have debt maturities for the five
years subsequent to December 31, 2000 totaling $356,000; $530,000; $577,000;
$3,017,000; $2,007,000 and $142,000 thereafter. Mortgages payable are secured by
certain tracts of land.

(6) NOTES PAYABLE TO PARTNERS

     Woodlands Development has notes payable to its partners totaling
$25,000,000. The notes bear interest at 15%. Interest is payable beginning in
October 1998 and quarterly thereafter. All outstanding balances are due in 2007.
These notes are subordinate to the bank credit agreement and mortgages payable
described above.

(7) COMMITMENTS AND CONTINGENCIES

     CONTINGENT LIABILITIES. At December 31, 2000 and 1999, Woodlands
Development had contingent liabilities totaling approximately $11,000,000 and
$4,600,000, consisting of letters of credit and commitments to complete certain
improvements in The Woodlands. Under the terms of a land sales agreement,
Woodlands Development has committed to construct, or cause to be constructed,
certain improvements in The Woodlands and is contingently liable for up to
$3,100,000 in liquidating damages if the improvements are not complete by
certain dates.

     LEASES. Rental expense for operating leases for the years ended December
31, 2000, 1999 and 1998 totaled $56,000, $19,000 and $14,000.

     LEGAL ACTIONS. The 221st Judicial District Court of Montgomery County,
Texas entered a judgment against Woodlands Development in October 1999 awarding
a total of $1,433,000 in damages to the plaintiffs. In addition to these
damages, the judgment also awards attorneys' fees to the plaintiff for
preparation, trial and subsequent appeals. The total present amount of the
judgment, including actual damages and attorneys' fees through the time of
trial, is approximately $1,468,000. The judgment awards postjudgment interest of
10% per annum. Woodlands Development appealed the ruling. Oral arguments have
been set by the Court of Appeals for February 2001.

     During 2000, Woodlands Development settled outstanding litigation, related
to flooding in the North Houston area in 1994, brought against it by various
homeowners in The Woodlands. No additional losses were incurred as a result of
this settlement.

     Woodlands Development is also a party to other claims and legal actions
arising in the ordinary course of their business and to recurring examinations
by the Internal Revenue Service and other regulatory agencies.

     Management believes, after consultation with outside counsel, that adequate
financial statement accruals have been provided for all known litigation
contingencies where losses are deemed probable. Since the ultimate cost will

                                      F-77
<PAGE>
depend on the outcomes of the uncertainties discussed in this note, it is
possible, however, that additional future charges might be required that would
be significant to the operating results of a particular period. Based on the
status of the cases, Woodlands Development is unable to determine a range of
such possible additional losses, if any, that might be incurred in connection
with this litigation. Woodlands Development believes it is not probable that the
ultimate resolution of this litigation will have a material adverse effect on
its financial position.

     INCENTIVE PLAN. Woodlands Operating instituted an incentive compensation
plan for certain employees effective January 1, 1998. The plan is unfunded and
while certain payments are made currently, a portion of the payment is deferred
and paid only upon the occurrence of certain future events. Woodlands
Development will reimburse a portion of any incentive plan payments made in the
future.

(8) RELATED PARTY TRANSACTIONS

     Woodlands Operating provides services to Woodlands Development under
management and advisory services agreements. These agreements are automatically
renewed annually. Woodlands Development pays Woodlands Operating an advisory fee
equal to cost plus 3%. In addition, Woodlands Development reimburses Woodlands
Operating for all cost and expenses incurred on their behalf. For the years
ended December 31, 2000, 1999 and 1998, Woodlands Development recorded expenses
of $12,606,000, $10,597,000 and $11,050,000 for services provided by Woodlands
Operating.

     In July 1999, Woodlands Development purchased approximately 1,000 acres of
land in The Woodlands from Woodlands Commercial for $33,090,000, the then
current fair market value which approximated the carrying cost. The transaction
consisted of cash and a $26,000,000 note. The note bears interest at 8.5% and
matures in August 2009. Principal and interest payments are due quarterly and
additional principal payments are due when a portion of the land is conveyed to
a third party or built upon. The note is unsecured and subordinate to the bank
credit agreement described in Note 5.

(9) PARTNERS' EQUITY

     Crescent's ownership interest in Woodlands Development is The Woodlands
Land Company, Inc., which holds a 42.5% general partner interest. Morgan
Stanley's ownership interests are MS/TWC Joint Venture, which holds a 56.5%
limited partner interest, and MS/TWC, Inc., which holds a 1% general partner
interest.

     The partnership agreement provides, among other things, the following:

         (i) Woodlands Development is governed by an Executive Committee
composed of equal representation from their respective general partners.

         (ii) Net income and losses from operations are currently allocated so
that partners' capital accounts stand in the ratio of the percentage interest
listed above.

         (iii) Distributions are made to partners based on specified payout
percentages and include cumulative preferred returns to Morgan Stanley's
affiliates. The payout percentage to Morgan Stanley's affiliates is 57.5% until
the affiliates receive distributions on a combined basis with Woodlands
Commercial equal to their capital contributions and a 12% cumulative preferred
return compounded quarterly. Then, the payout percentage to Morgan Stanley's
affiliates is 50.5% until the affiliates receive distributions equal to their
capital contributions and an 18% cumulative preferred return compounded
quarterly. Thereafter, the payout percentage to Morgan Stanley's affiliates is
47.5%.

         (iv) Woodlands Development will continue to exist until December 31,
2040 unless terminated earlier due to specified events.

         (v) No additional partners may be admitted to Woodlands Development
unless specific conditions in the partnership agreements are met. Partnership
interests may be transferred to affiliates of Crescent or Morgan Stanley.
Crescent has the right of first refusal to buy the partnership interests of the
Morgan Stanley affiliates at the same

                                      F-78
<PAGE>
terms and conditions offered to a third party purchaser, or sell its affiliates'
interests to the same third party purchaser.

         (vi) Crescent and Morgan Stanley have the right to offer to purchase
the other partner's affiliates' partnership interests in the event of failure to
make specified capital contributions or a specified default by the other.
Specified defaults include bankruptcy, breach of partnership covenants, transfer
of partnership interests except as permitted by the partnership agreements, and
fraud or gross negligence.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts and estimated fair values of Woodlands Development's
financial instruments as of December 31, 2000 follows (in thousands):

<TABLE>
<CAPTION>
                                                                   Carrying          Estimated Fair
                                                                    Amounts             Values
                                                                --------------      ----------------
<S>                                                             <C>                 <C>
Notes and contracts receivable.............................         $ 30,471            $ 30,471

Note payable to affiliated company.........................           15,880              15,880

Debt.......................................................          255,356             255,175

Notes payable to partners..................................           25,000              31,524
</TABLE>

     Fair values of notes and contracts receivable were estimated by discounting
future cash flows using interest rates at which similar loans currently could be
made for similar maturities to borrowers with comparable credit ratings. Fair
values of fixed-rate, long-term debt were based on current interest rates
offered to Woodlands Development for debt with similar remaining maturities. For
floating-rate debt obligations, carrying amounts and fair values were assumed to
be equal because of the nature of these obligations. The carrying amounts of
Woodlands Development's other financial instruments approximate their fair
values.

(11) CHANGE IN ACCOUNTING PRINCIPLE

     Effective January 1, 1998 Woodlands Development changed its method of
accounting for organization costs to conform to Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities." In 1998, Woodlands Development
expensed previously capitalized costs that totaled $639,000.

                                      F-79
<PAGE>

         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                 CRESCENT OPERATING, INC. (PARENT COMPANY)

                         CONDENSED BALANCE SHEETS
                          (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                           December 31, 2001           December 31, 2000
                                                                         ---------------------       ---------------------
<S>                                                                      <C>                         <C>
                                                        ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                    $      383                  $    760
   Accounts receivable                                                              10,606                       641
   Intercompany                                                                     13,737                     3,608
   Prepaid expenses and other current assets                                            10                       601
                                                                                ----------                  --------
     Total current assets                                                           24,736                     5,610
                                                                                ----------                  --------

PROPERTY AND EQUIPMENT, NET                                                             56                        66

INVESTMENTS                                                                        (42,712)                    3,959

OTHER ASSETS                                                                        19,461                     5,548
                                                                                ----------                  --------

TOTAL ASSETS                                                                    $    1,541                  $  5,183
                                                                                ==========                  ========

                                      LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Accounts payable and accrued expenses                                        $    1,133                  $  1,086
   Accounts payable and accrued expenses - CEI                                       6,968                     6,849
   Current portion of long-term debt - CEI                                          69,041                     8,578
   Current portion of long-term debt                                                16,997                    16,033
                                                                                ----------                  --------
     Total current liabilities                                                      94,139                    32,546

LONG-TERM DEBT, NET OF CURRENT PORTION                                                 790                    56,170

                                                                                ----------                  --------
Total liabilities                                                                   94,929                    88,716
                                                                                ----------                  --------

SHAREHOLDERS' EQUITY (DEFICIT)
   Preferred stock, $.01 par value, 10,000 shares authorized,                            -                         -
     no shares issued or outstanding
   Common stock, $.01 par value, 22,500 shares authorized,                             115                       114
     11,443 and 11,415 shares issued, respectively
   Additional paid-in capital                                                       17,781                    17,754
   Deferred compensation on restricted shares                                            -                      (177)
   Accumulated comprehensive income (loss)                                          (1,436)                   (9,509)
   Accumulated deficit                                                            (105,542)                  (27,409)
   Treasury Stock at cost, 1,103 shares                                             (4,306)                   (4,306)
                                                                                ----------                  --------
     Total shareholders' equity (deficit)                                          (93,388)                  (23,533)
                                                                                ----------                  --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                            $    1,541                  $ 65,183
                                                                                ==========                  ========
</TABLE>

        See accompanying notes to the condensed financial statements.


                                      S-1
<PAGE>

         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                 CRESCENT OPERATING, INC. (PARENT COMPANY)

                    CONDENSED STATEMENTS OF OPERATIONS
                          (AMOUNTS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                          For the             For the               For the
                                                        Year Ended           Year Ended            Year Ended
                                                     December 31, 2001    December 31, 2000    December 31, 1999
                                                   --------------------  -------------------  --------------------
<S>                                                <C>                   <C>                  <C>
COSTS AND EXPENSES
   General and administrative expenses                  $    6,947            $   4,197           $    2,602
   Interest expense                                          9,070                8,427                8,429
   Interest income                                              46                 (416)                (391)
   Other                                                        (3)                   2                    -
                                                        ----------            ---------           ----------

     Total costs and expenses                               16,060               12,210               10,640

INVESTMENT INCOME                                                -                2,721                1,890

EQUITY IN (LOSS) EARNINGS OF UNCONSOLIDATED
   SUBSIDIARIES                                            (58,218)               1,371               (2,098)
                                                        ----------            ---------           ----------

LOSS BEFORE INCOME TAXES,                                  (74,278)              (8,118)             (10,848)
   MINORITY INTERESTS AND ACCOUNTING CHANGE

INCOME TAX BENEFIT                                          (5,654)              (4,428)              (8,153)
                                                        ----------            ---------           ----------

LOSS BEFORE ACCOUNTING CHANGE                              (68,624)              (3,690)              (2,695)

CUMULATIVE EFFECT OF CHANGE
   IN ACCOUNTING PRINCIPLE                                  (9,509)                   -                    -
                                                        ----------            ---------           ----------

NET LOSS                                                $  (78,133)           $  (3,690)          $   (2,695)
                                                        ==========            =========           ==========
</TABLE>

        See accompanying notes to the condensed financial statements.


                                      S-2
<PAGE>

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                    CRESCENT OPERATING, INC. (PARENT COMPANY)

                       CONDENSED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         For the               For the               For the
                                                                        Year Ended           Year Ended            Year Ended
                                                                     December 31, 2001    December 31, 2000    December 31, 1999
                                                                     ------------------  -------------------  -------------------
<S>                                                                  <C>                 <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                             $  (78,133)          $  (3,690)            $   (2,695)
   Adjustments to reconcile net loss
     to net cash provided by (used in) operating activities:
     Depreciation                                                               27                  32                     22
     Amortization                                                             (103)               (103)                  (155)
     Intercompany                                                             (129)             (6,538)                (1,942)
     Loss on sale of equipment                                                   2                   4                      2
     Gain on sale of investments                                                 -                (722)                (1,963)
     Investment (income) loss                                               60,631              (3,370)                 2,171
     Impairment of assets                                                        -                   -                      -
     Change in accounting method                                             9,509                   -                      -
     Deferred compensation                                                     205                  60                     53
     Deferred taxes                                                         (5,355)              1,744                 (6,909)
     Changes in assets and liabilities, net of
       effects of acquisitions:
       Accounts receivable                                                  (9,965)               (996)                  (127)
       Prepaid expenses and current assets                                     591                (511)                   634
       Other assets                                                         (2,703)                101                    (27)
       Accounts payable and accrued expenses                                    47               1,240                   (315)
       Accounts payable and accrued expenses - CEI                             119               4,771                    480
                                                                        ----------           ---------             ----------
          Net cash provided by (used in) operating activities              (25,257)             (7,978)               (10,771)
                                                                        ----------           ---------             ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of business interests - net of cash acquired                      -                   -                (15,489)
   Purchases of property and equipment                                         (19)                (36)                   (51)
   Proceeds from sale of property and equipment                                  -               4,060                      -
   Proceeds from sale of investments                                             -                   -                 22,691
   Net distribution from investments                                        18,852               7,028                  7,097
                                                                        ----------           ---------             ----------
          Net cash provided by (used in) investing activities               18,833              11,052                 14,248
                                                                        ----------           ---------             ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds of long-term debt - CEI                                          7,842               1,675                 37,628
   Payments of long-term debt - CEI                                              -                   -                (39,480)
   Payments of long-term debt                                               (1,795)             (2,673)                (5,942)
   Other                                                                         -                   -                      7
                                                                        ----------           ---------             ----------
          Net cash provided by (used in) financing activities                6,047                (998)                (7,787)
                                                                        ----------           ---------             ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (377)              2,076                 (4,310)

CASH AND CASH EQUIVALENTS,
   BEGINNING OF PERIOD                                                         760              (1,316)                 2,994
                                                                        ----------           ---------             ----------

CASH AND CASH EQUIVALENTS,
   END OF PERIOD                                                        $      383           $     760             $   (1,316)
                                                                        ==========           =========             ==========
</TABLE>

          See accompanying notes to the condensed financial statements.


                                      S-3
<PAGE>
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                    CRESCENT OPERATING, INC. (PARENT COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         Crescent Operating, Inc.'s (the "Company") investment in subsidiaries
         is stated at cost plus or minus equity in undistributed earnings
         (losses) of subsidiaries since the date of acquisition. The Company's
         share of net income (loss) of its unconsolidated subsidiaries is
         included in consolidated income (loss) using the equity method. The
         parent company-only financial statements should be read in conjunction
         with the Company's consolidated financial statements.

                                      S-4
<PAGE>
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBITS
------      --------------------------------------------------------------------
<S>         <C>
  3.1       First Amended and Restated Certificate of Incorporation (filed as
            Exhibit 3.3 to the Company's registration statement on Form S-1
            dated July 12, 1997 ("Form S-1") and incorporated by reference
            herein)

  3.2       First Amended and Restated Bylaws (filed as Exhibit 3.4 to Form S-1
            and incorporated by reference herein)

  3.3       Amendment of Article V of First Amended and Restated Bylaws (filed
            as Exhibit 3.3 to the Company's June 30, 1998 Form 10-Q ("June 30,
            1998 Form 10-Q") and incorporated by reference herein)

  3.4       Repeal of Amendment of Article V of First Amended and Restated
            Bylaws (filed as Exhibit 3.4 to the Company's September 30, 1998
            Form 10-Q ("September 30, 1998 Form 10-Q") and incorporated by
            reference herein)

  4.1       Specimen stock certificate (filed as Exhibit 4.1 to Form S-1 and
            incorporated by reference herein)

  4.2       Preferred Share Purchase Rights Plan (filed as Exhibit 4.2 to Form
            S-1 and incorporated by reference herein)

  4.3       First Amendment to Preferred Share Purchase Rights Agreement dated
            as of September 25, 1998, between Crescent Operating, Inc. and Bank
            Boston, N.A., as Rights Agent (filed as Exhibit 4.3 to September 30,
            1998 Form 10-Q and incorporated by reference herein)

  4.4       Second Amendment to Preferred Share Purchase Rights Agreement dated
            as of March 4, 1999, between Crescent Operating, Inc. and Bank
            Boston, N.A., as Rights Agent (filed as Exhibit 4.4 to March 31,
            1999 Form 10-Q ("March 31, 1999 Form 10-Q") and incorporated by
            reference herein)

  10.1      Amended Stock Incentive Plan (filed as Exhibit 10.1 to Form S-1 and
            incorporated by reference herein)

  10.2      Intercompany Agreement between Crescent Operating, Inc. and Crescent
            Real Estate Equities Limited Partnership (filed as Exhibit 10.2 to
            the Company's Quarterly Report on Form 10-Q for the Quarter Ended
            June 30, 1997 ("June 30, 1997 Form 10-Q") and incorporated by
            reference herein)

  10.3      Amended and Restated Operating Agreement of Charter Behavioral
            Health Systems, LLC (filed as Exhibit 10.3 to June 30, 1997 Form
            10-Q and incorporated by reference herein)

  10.5      Amended and Restated Credit and Security Agreement, dated as of May
            30, 1997, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc., together with related Note (filed as
            Exhibit 10.5 to the Company's September 30, 1997 Form 10-Q
            ("September 30, 1997 Form 10-Q") and incorporated by reference
            herein)

  10.6      Line of Credit and Security Agreement, dated as of May 21, 1997,
            between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc., together with related Line of Credit Note
            (filed as Exhibit 10.6 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.7      Acquisition Agreement, dated as of February 10, 1997, between
            Crescent Real Estate Equities Limited Partnership and Carter-Crowley
            Properties, Inc. (filed as Exhibit 10.7 to Form S-1 and incorporated
            by reference herein)

  10.10     Security Agreement dated September 22, 1997 between COI Hotel Group,
            Inc., as debtor, and Crescent Real Estate Equities Limited
            Partnership, as lender, together with related $1 million promissory
            note (filed as Exhibit 10.10 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.11     Security Agreement dated September 22, 1997 between COI Hotel Group,
            Inc., as debtor, and Crescent Real Estate Equities Limited
            Partnership, as lender, together with related $800,000 promissory
            note (filed as Exhibit 10.11 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.12     Amended and Restated Asset Management dated August 31, 1997, to be
            effective July 31, 1997, between Wine Country Hotel, LLC and The
            Varma Group, Inc. (filed as Exhibit 10.12 to September 30, 1997 Form
            10-Q and incorporated by reference herein)

  10.13     Amended and Restated Asset Management Agreement dated August 31,
            1997, to be effective July 31, 1997, between RoseStar Southwest, LLC
            and The Varma Group, Inc. (filed as Exhibit 10.13 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.14     Amended and Restated Asset Management Agreement dated August 31,
            1997, to be effective July 31, 1997, between RoseStar Management LLC
            and The Varma Group, Inc. (filed as Exhibit 10.14 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.15     Agreement for Financial Services dated July 1, 1997, between
            Crescent Real Estate Equities Company and Petroleum Financial, Inc.
            (filed as Exhibit 10.15 to September 30, 1997 Form 10-Q and
            incorporated by reference herein)

  10.16     Credit Agreement dated August 27, 1997, between Crescent Operating,
            Inc. and NationsBank of Texas, N.A. together with related $15.0
            million promissory note (filed as Exhibit 10.16 to September 30,
            1997 Form 10-Q and incorporated by reference herein)

  10.17     Support Agreement dated August 27, 1997, between Richard E.
            Rainwater, John Goff and Gerald Haddock in favor of Crescent Real
            Estate Equities Company and NationsBank of Texas, N.A. (filed as
            Exhibit 10.17 to September 30, 1997 Form 10-Q and incorporated by
            reference herein)

  10.18     1997 Crescent Operating, Inc. Management Stock Incentive Plan (filed
            as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the
            year ended December 31, 1997 ("December 31, 1997 Form 10-K") and
            incorporated by reference herein)

  10.19     Memorandum of Agreement executed November 16, 1997, among Charter
            Behavioral Health Systems, LLC, Charter Behavioral Health Systems,
            Inc. and Crescent Operating, Inc. (filed as Exhibit 10.19 to
            December 31, 1997 Form 10-K and incorporated by reference herein)

  10.20     Purchase Agreement dated August 31, 1997, by and among Crescent
            Operating, Inc., RoseStar Management LLC, Gerald W. Haddock, John C.
            Goff and Sanjay Varma (filed as Exhibit 10.20 to December 31, 1997
            Form 10-K and incorporated by reference herein)

  10.21     Stock Purchase Agreement dated August 31, 1997, by and among
            Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and Sanjay
            Varma (filed as Exhibit 10.21 to December 31, 1997 Form 10-K and
            incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.22     Amended and Restated Lease Agreement, dated June 30, 1995 between
            Crescent Real Estate Equities Limited Partnership and RoseStar
            Management LLC, relating to the Denver Marriott City Center (filed
            as Exhibit 10.17 to the Annual Report on Form 10-K of Crescent Real
            Estate Equities Company for the Fiscal Year Ended December 31, 1995
            (the "1995 CEI 10-K") and incorporated by reference herein)

  10.23     Lease Agreement, dated December 19, 1995 between Crescent Real
            Estate Equities Limited Partnership and RoseStar Management LLC,
            relating to the Hyatt Regency Albuquerque (filed as Exhibit 10.16 to
            the 1995 CEI 10-K and incorporated by reference herein)

  10.24     Form of Amended and Restated Lease Agreement, dated January 1, 1996,
            among Crescent Real Estate Equities Limited Partnership, Mogul
            Management, LLC and RoseStar Management LLC, relating to the Hyatt
            Regency Beaver Creek (filed as Exhibit 10.12 to the 1995 CEI 10-K
            and incorporated by reference herein)

  10.25     Lease Agreement, dated July 26, 1996, between Canyon Ranch, Inc. and
            Canyon Ranch Leasing, L.L.C., assigned by Canyon Ranch, Inc. to
            Crescent Real Estate Equities Limited Partnership pursuant to the
            Assignment and Assumption Agreement of Master Lease, dated July 26,
            1996 (filed as Exhibit 10.24 to the Quarterly Report on Form 10-Q/A
            of Crescent Real Estate Equities Company for the Quarter Ended June
            30, 1997 (the "1997 CEI 10-Q") and incorporated by reference herein)

  10.26     Lease Agreement, dated November 18, 1996 between Crescent Real
            Estate Equities Limited Partnership and Wine Country Hotel, LLC
            (filed as Exhibit 10.25 to the Annual Report on Form 10-K of
            Crescent Real Estate Equities Company for the Fiscal Year Ended
            December 31, 1996 and incorporated by reference herein)

  10.27     Lease Agreement, dated December 11, 1996, between Canyon
            Ranch-Bellefontaine Associates, L.P. and Vintage Resorts, L.L.C., as
            assigned by Canyon Ranch-Bellefontaine Associates, L.P. to Crescent
            Real Estate Funding VI, L.P. pursuant to the Assignment and
            Assumption Agreement of Master Lease, dated December 11, 1996 (filed
            as Exhibit 10.26 to the 1997 CEI 10-Q and incorporated by reference
            herein)

  10.28     Master Lease Agreement, dated June 16, 1997, between Crescent Real
            Estate Funding VII, L.P. and Charter Behavioral Health Systems, LLC
            and its subsidiaries, relating to the Facilities (filed as Exhibit
            10.27 to the 1997 CEI 10-Q and incorporated by reference herein)

  10.29     Form of Indemnification Agreement (filed as Exhibit 10.29 to
            December 31, 1997 Form 10-K and incorporated by reference herein)

  10.30     Purchase Agreement, dated as of September 29, 1997, between Crescent
            Operating, Inc. and Crescent Real Estate Equities Limited
            Partnership, relating to the purchase of Desert Mountain Development
            Corporation (filed as Exhibit 10.30 to December 31, 1997 Form 10-K
            and incorporated by reference herein)

  10.31     Lease Agreement dated December 19, 1997, between Crescent Real
            Estate Equities Limited Partnership, as Lessor, and Wine Country
            Hotel, as Lessee, for lease of Ventana Inn (filed as Exhibit 10.31
            to the Company's March 31, 1998 Form 10-Q ("March 31, 1998 Form
            10-Q") and incorporated by reference herein)

  10.32     Lease Agreement dated September 22, 1997, between Crescent Real
            Estate Equities Limited Partnership, as Lessor, and COI Hotel Group,
            Inc., as lessee, for lease of Four Seasons Hotel, Houston (filed as
            Exhibit 10.32 to March 31, 1998 Form 10-Q and incorporated by
            reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.33     Asset Purchase Agreement dated December 19, 1997, among Crescent
            Operating, Inc., Preco Machinery Sales, Inc., and certain individual
            Preco shareholders (filed as Exhibit 10.33 to March 31, 1998 Form
            10-Q and incorporated by reference herein)

  10.34     Asset Purchase Agreement dated April 30, 1998, among Crescent
            Operating, Inc., Central Texas Equipment Company, and certain
            individual Central Texas shareholders (filed as Exhibit 10.34 to
            March 31, 1998 Form 10-Q and incorporated by reference herein)

  10.35     Credit Agreement dated August 29, 1997 between Crescent Real Estate
            Equities Limited Partnership, as lender, and Desert Mountain
            Properties Limited Partnership, as borrower, together with related
            Senior Note, Junior Note and deed of trust (filed as Exhibit 10.35
            to March 31, 1998 Form 10-Q and incorporated by reference herein)

  10.36     Buy-Out Agreement dated April 24, 1998, between Crescent Operating,
            Inc. and Crescent Real Estate Equities Limited Partnership (filed as
            Exhibit 10.36 to March 31, 1998 Form 10-Q and incorporated by
            reference herein)

  10.37     Stock Acquisition Agreement and Plan of Merger dated June 4, 1998,
            among Machinery, Inc., Oklahoma Machinery, Inc., Crescent Machinery
            Company, Crescent Operating, Inc. and certain individual Machinery
            shareholders (filed as Exhibit 10.37 to June 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.38     Master Revolving Line of Credit Loan Agreement (Borrowing Base and
            Warehouse) dated May 14, 1998, between Desert Mountain Properties
            Limited Partnership and National Bank of Arizona (filed as Exhibit
            10.38 to June 30, 1998 Form 10-Q and incorporated by reference
            herein)

  10.39     1997 Management Stock Incentive Plan (filed as Exhibit 10.39 to June
            30, 1998 Form 10-Q and incorporated by reference herein)

  10.40     Credit and Security Agreement, dated as of September 21, 1998,
            between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc., together with related Note (filed as
            Exhibit 10.40 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.41     First Amendment to Amended and Restated Pledge Agreement, dated as
            of September 21, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.41 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.42     First Amendment to Line of Credit and Security Agreement, dated as
            of August 11, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc., together with related Note
            (filed as Exhibit 10.42 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.43     First Amendment to Amended and Restated Credit and Security
            Agreement, dated as of August 11, 1998, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. (filed as
            Exhibit 10.43 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.44     Second Amendment to Amended and Restated Credit and Security
            Agreement, dated as of September 21, 1998, between Crescent Real
            Estate Equities Limited Partnership and Crescent Operating, Inc.
            (filed as Exhibit 10.44 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.45     Second Amendment to Line of Credit and Security Agreement, dated as
            of September 21, 1998, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.45 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.46     Agreement of Limited Partnership of COPI Colorado, L.P. (filed as
            Exhibit 10.1 to that Schedule 13D Statement dated September 28,
            1998, filed by COPI Colorado, L.P., Crescent Operating, Inc., Gerald
            W. Haddock, John C. Goff and Harry H. Frampton, III, and
            incorporated by reference herein)

  10.47     Contribution Agreement effective as of September 11, 1998, by and
            among Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and
            Harry H. Frampton, III (filed as Exhibit 10.2 to that Schedule 13D
            Statement dated September 28, 1998, filed by COPI Colorado, L.P.,
            Crescent Operating, Inc., Gerald W. Haddock, John C. Goff and Harry
            H. Frampton, III, and incorporated by reference herein)

  10.48     Agreement Regarding Schedules and Other Matters made as of September
            11, 1998, by and among Crescent Operating, Inc., Gerald W. Haddock,
            John C. Goff and Harry H. Frampton, III (filed as Exhibit 10.3 to
            that Schedule 13D Statement dated September 28, 1998, filed by COPI
            Colorado, L.P., Crescent Operating Inc., Gerald W. Haddock, John C.
            Goff and Harry H. Frampton, III, and incorporated by reference
            herein)

  10.49     Stock Purchase Agreement dated as of August 7, 1998 by and among
            Western Traction Company, The Carlston Family Trust, Ronald D.
            Carlston and Crescent Operating, Inc. (filed as Exhibit 10.49 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.50     Stock Purchase Agreement dated as of July 31, 1998 by and among
            Harvey Equipment Center, Inc., L and H Leasing Company, William J.
            Harvey, Roy E. Harvey, Jr., Betty J. Harvey and Crescent Operating,
            Inc. (filed as Exhibit 10.50 to September 30, 1998 Form 10-Q and
            incorporated by reference herein)

  10.51     Credit Agreement dated as of July 28, 1998, between Crescent Real
            Estate Equities Limited Partnership and CRL Investments, Inc.,
            together with the related Note (filed as Exhibit 10.51 to September
            30, 1998 Form 10-Q and incorporated by reference herein)

  10.52     Security Agreement dated as of July 28, 1998, between Crescent Real
            Estate Equities Limited Partnership and CRL Investments, Inc. (filed
            as Exhibit 10.52 to September 30, 1998 Form 10-Q and incorporated by
            reference herein)

  10.53     First Amendment to Credit Agreement effective as of August 27, 1998,
            among Crescent Operating, Inc., NationsBank, N. A., and the Support
            Parties identified therein (filed as Exhibit 10.53 to September 30,
            1998 Form 10-Q and incorporated by reference herein)

  10.54     Lease Agreement dated as of October 13, 1998, between Crescent Real
            Estate Equities Limited Partnership and Wine Country Golf Club,
            Inc., relating to Sonoma Golf Club (filed as Exhibit 10.54 to
            September 30, 1998 Form 10-Q and incorporated by reference herein)

  10.55     First Amendment to Lease Agreement effective December 31, 1998,
            between Canyon Ranch Leasing, L.L.C., and Crescent Real Estate
            Equities Limited Partnership, relating to Canyon Ranch - Tucson
            (filed as Exhibit 10.55 to the Company's Annual Report on Form 10-K
            for the year ended December 31, 1998 ("December 31, 1998 Form 10-K")
            and incorporated by reference herein)

  10.56     First Amendment to Lease Agreement effective April 1, 1996; Second
            Amendment to Lease Agreement effective November 22, 1996; Third
            Amendment to Lease Agreement effective August 12, 1998; and Fourth
            Amendment to Lease Agreement effective December 31, 1998 between
            RoseStar Southwest, LLC, and Crescent Real Estate Funding II L.P.,
            relating to Hyatt Regency Albuquerque (filed as Exhibit 10.56 to
            December 31, 1998 Form 10-K and incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.57     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC, and Crescent Real Estate Equities
            Limited Partnership, relating to Sonoma Mission Inn & Spa (filed as
            Exhibit 10.57 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.58     First Amendment to Amended and Restated Lease Agreement effective
            December 31, 1998, between RoseStar Management, LLC, and Crescent
            Real Estate Equities Limited Partnership, relating to Marriott City
            Center, Denver (filed as Exhibit 10.58 to December 31, 1998 Form
            10-K and incorporated by reference herein)

  10.59     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC, and Crescent Real Estate Equities
            Limited Partnership, relating to Ventana Inn (filed as Exhibit 10.59
            to December 31, 1998 Form 10-K and incorporated by reference herein)

  10.60     First Amendment to Amended and Restated Lease Agreement effective
            April 1, 1996 and Second Amendment to Amended and Restated Lease
            Agreement effective December 31, 1998, between RoseStar Southwest,
            LLC, and Crescent Real Estate Funding II, L.P., relating to Hyatt
            Regency Beaver Creek (filed as Exhibit 10.60 to December 31, 1998
            Form 10-K and incorporated by reference herein)

  10.61     First Amendment to Lease Agreement effective December 31, 1998,
            between COI Hotel Group, Inc. and Crescent Real Estate Equities
            Limited Partnership, relating to Four Seasons - Houston (filed as
            Exhibit 10.61 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.62     First Amendment to Lease Agreement effective December 31, 1998,
            between Wine Country Hotel, LLC and Crescent Real Estate Funding VI,
            L.P., relating to Canyon Ranch - Lenox (filed as Exhibit 10.62 to
            March 31, 1999 Form 10-Q and incorporated by reference herein)

  10.63     Master Guaranty effective December 31, 1998, by Crescent Operating,
            Inc. for the benefit of Crescent Real Estate Equities Limited
            Partnership, Crescent Real Estate Funding II, L.P., and Crescent
            Real Estate Funding VI, L.P., relating to leases for Hyatt Regency
            Albuquerque, Hyatt Regency Beaver Creek, Canyon Ranch-Lenox, Sonoma
            Mission Inn & Spa, Canyon Ranch - Tucson, and Marriott City Center
            Denver (filed as Exhibit 10.63 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.64     Guaranty of Lease effective December 19, 1997, by Crescent
            Operating, Inc. for the benefit of Crescent Real Estate Equities
            Limited Partnership, relating to Ventana Inn (filed as Exhibit 10.64
            to December 31, 1998 Form 10-K and incorporated by reference herein)

  10.65     Amended and Restated Guaranty of Lease effective December 31, 1998,
            by Crescent Operating, Inc. for the benefit of Crescent Real Estate
            Equities Limited Partnership, relating to Four Seasons Hotel -
            Houston (filed as Exhibit 10.65 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.66     Amended and Restated Guaranty of Lease effective December 31, 1998,
            by Crescent Operating, Inc. for the benefit of Crescent Real Estate
            Equities Limited Partnership, relating to Sonoma Golf Club (filed as
            Exhibit 10.66 to December 31, 1998 Form 10-K and incorporated by
            reference herein)

  10.67     Credit Agreement dated August 11, 1995, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender; First Amendment to Credit Agreement
            dated as of April 15, 1997; Second Amendment to Credit Agreement
            dated as of May 8, 1998; and related Note and Security Agreement
            (filed as Exhibit 10.67 to December 31, 1998 Form 10-K and
            incorporated by reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.68     Credit Agreement dated January 1, 1998, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender, and related Note and Security
            Agreement (filed as Exhibit 10.68 to December 31, 1998 Form 10-K and
            incorporated by reference herein)

  10.69     $3,100,000 Note dated February 29, 1996, made by Crescent
            Development Management Corp. payable to Crescent Real Estate
            Equities Limited Partnership (filed as Exhibit 10.69 to December 31,
            1998 Form 10-K and incorporated by reference herein)

  10.70     Credit Agreement dated January 1, 1999, between Crescent Development
            Management Corp., as borrower, and Crescent Real Estate Equities
            Limited Partnership, as lender, and related Line of Credit Note and
            Security Agreement (filed as Exhibit 10.70 to March 31, 1999 Form
            10-Q and incorporated by reference herein)

  10.71     Amended and Restated Credit Agreement dated January 1, 1999, between
            Crescent Development Management Corp., as borrower, and Crescent
            Real Estate Equities Limited Partnership, as lender, and related
            Line of Credit Note and Amended and Restated Security Agreement
            (filed as Exhibit 10.71 to March 31, 1999 Form 10-Q and incorporated
            by reference herein)

  10.72     Purchase Agreement dated March 12, 1999, between Crescent Operating,
            Inc. and Crescent Real Estate Equities Limited Partnership, relating
            to sale of interests in Crescent CS Holdings Corp., and Crescent CS
            Holdings II Corp., and related Put Agreement of same date (filed as
            Exhibit 10.72 to March 31, 1999 Form 10-Q and incorporated by
            reference herein)

  10.73     Second Amendment to Lease Agreement effective April 1, 1999, between
            Wine Country Hotel, LLC, and Crescent Real Estate Funding VI, L.P.,
            relating to Canyon Ranch-Lenox (filed as Exhibit 10.73 to March 31,
            1999 Form 10-Q and incorporated by reference herein)

  10.74     Master Revolving Line of Credit Loan Agreement (Borrowing Base and
            Warehouse) dated May 14, 1998, between Desert Mountain Properties
            Limited Partnership, as borrower, and National Bank of Arizona, as
            lender; Modification Agreement dated December 30, 1998; second
            Modification Agreement dated March 31, 1999; and related Promissory
            Note (Borrowing Base), Promissory Note (Warehouse), Pledge
            Agreement, Deed of Trust, and Amendment to Deed of Trust (filed as
            Exhibit 10.74 to March 31, 1999 Form 10-Q and incorporated by
            reference herein)

  10.75     Lease Agreement dated as of June 15, 1999, between Crescent Real
            Estate Funding III, L.P. and COI Hotel Group, Inc., relating to the
            Renaissance Houston Hotel (filed as Exhibit 10.75 to June 30, 1999
            Form 10-Q and incorporated by reference herein)

  10.76     Guaranty of Lease dated June 15, 1999, by Crescent Operating, Inc.
            for the benefit of Crescent Real Estate Funding III, L.P., relating
            to Renaissance Houston Hotel (filed as Exhibit 10.76 to June 30,
            1999 Form 10-Q and incorporated by reference herein)

  10.77     Asset Management Agreement dated as of January 1, 1999, between
            Crescent Real Estate Equities Limited Partnership and COI Hotel
            Group, Inc., relating to the Omni Austin Hotel (filed as Exhibit
            10.77 to June 30, 1999 Form 10-Q and incorporated by reference
            herein)

  10.78     Agreement dated June 11, 1999, by and between Gerald W. Haddock and
            Crescent Operating, Inc. and its subsidiaries and affiliates (filed
            as Exhibit 10.78 to June 30, 1999 Form 10-Q and incorporated by
            reference herein)
</TABLE>
<PAGE>
<TABLE>
<S>         <C>
  10.79     Stock Purchase Agreement dated as of July 15, 1999, by and among E.
            L. Lester & Company, Incorporated, E. L. Lester, Jr., Howard T.
            Tellepsen II, Karen Tellepsen, Tom Tellepsen II, Linda Lester
            Griffen, Crescent Operating, Inc. and Crescent Machinery Company
            (filed as Exhibit 10.79 to the Company's September 30, 1999 Form
            10-Q ("September 30, 1999 Form 10-Q") and incorporated by reference
            herein)

  10.80     Stock Purchase Agreement dated as of July 8, 1999, by and among
            Solveson Crane Rental, Inc., Solveson Family Revocable Trust, and
            Crescent Machinery Company (filed as Exhibit 10.80 to September 30,
            1999 Form 10-Q and incorporated by reference herein)

  10.81     Second Amendment to Credit Agreement effective as of August 27,
            1999, among Crescent Operating, Inc., Bank of America, N. A.
            (formerly NationsBank, N. A.), and the Support Parties identified
            therein (filed as Exhibit 10.81 to September 30, 1999 Form 10-Q and
            incorporated by reference herein)

  10.82     First Amendment to 1997 Crescent Operating, Inc. Management Stock
            Incentive Plan (filed as Exhibit 10.82 to the Company's December 31,
            1999 Form 10-K ("December 31, 1999 Form 10-K") and incorporated by
            reference herein)

  10.83     Form of Sales and Service Agreement between BLAW KNOX Construction
            Equipment Corporation and certain of Crescent Machinery Company and
            its subsidiaries (filed as Exhibit 10.83 to December 31, 1999 Form
            10-K and incorporated by reference herein)

  10.84     Form of Heavy Equipment Distributor Agreement between Compaction
            America, Inc. and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.84 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.85     Form of Gradall Equipment Distributor Agreement between The Gradall
            Company and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.85 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.86     Form of Distributor Selling Agreement between Ingersoll-Rand Company
            and certain of Crescent Machinery Company and its subsidiaries
            (filed as Exhibit 10.86 to December 31, 1999 Form 10-K and
            incorporated by reference herein)

  10.87     Form of JCB Dealership Agreement between JCB Inc. and certain of
            Crescent Machinery Company and its subsidiaries (filed as Exhibit
            10.87 to December 31, 1999 Form 10-K and incorporated by reference
            herein)

  10.88     Form of Distributor Agreement between LBX Company, LLC, and certain
            of Crescent Machinery Company and its subsidiaries (filed as Exhibit
            10.88 to December 31, 1999 Form 10-K and incorporated by reference
            herein)

  10.89     Form of Distributor Agreement between Liebherr Construction
            Equipment Co. and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.89 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.90     Form of Distributor Agreement between Link-Belt Construction
            Equipment Company and certain of Crescent Machinery Company and its
            subsidiaries (filed as Exhibit 10.90 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.91     Form of Dealer Floor Plan Financing and Security Agreement between
            General Electric Capital Corporation and certain of Crescent
            Machinery Company and its subsidiaries (filed as Exhibit 10.91 to
            December 31, 1999 Form 10-K and incorporated by reference herein)
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  10.92     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            Development Management Corp. (filed as Exhibit 10.92 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.93     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            CS Holdings II Corp. (filed as Exhibit 10.93 to December 31, 1999
            Form 10-K and incorporated by reference herein)

  10.94     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Crescent
            CS Holdings Corp. (filed as Exhibit 10.94 to December 31, 1999 Form
            10-K and incorporated by reference herein)

  10.95     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and Desert
            Mountain Development Corp. (filed as Exhibit 10.95 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.96     Taxable REIT Subsidiary Election Agreement dated December 17, 1999,
            among Crescent Real Estate Equities Company, Crescent Real Estate
            Equities Limited Partnership, Crescent Operating, Inc. and The
            Woodlands Land Company, Inc. (filed as Exhibit 10.96 to December 31,
            1999 Form 10-K and incorporated by reference herein)

  10.97     $19.5 Million Credit and Security Agreement affective as of March
            11, 1999, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. with related Promissory Note (filed as
            Exhibit 10.97 to December 31, 1999 Form 10-K and incorporated by
            reference herein)

  10.98     First Amendment to Credit and Security Agreement effective as of
            March 11, 1999, between Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc. (filed as Exhibit 10.98 to
            December 31, 1999 Form 10-K and incorporated by reference herein)

  10.99     Third Amendment to Amended and Restated Credit and Security
            Agreement effective as of March 11, 1999, between Crescent Real
            Estate Equities Limited Partnership and Crescent Operating, Inc.
            (filed as Exhibit 10.99 to December 31, 1999 Form 10-K and
            incorporated by reference herein)

  10.100    Third Amendment to Line of Credit Credit and Security Agreement
            effective as of March 11, 1999, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. (filed as
            Exhibit 10.100 to December 31, 1999 Form 10-K and incorporated by
            reference herein)

  10.101    Agreements for Wholesale Financing (with Addendum) between Deutsche
            Financial Services Corporation and, respectively, Western Traction
            Company, Machinery Inc., Solveson Crane Rentals Inc., Harvey
            Equipment Center Inc., and Crescent Machinery Company, with
            Guarantees (filed as Exhibit 10.101 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.102    Master Security Agreements between Associates Commercial Corporation
            and, respectively, Crescent Machinery Company and Western Traction
            Company; Security Agreement between Associates Commercial
            Corporation and Western Traction Company; Addendum; and Continuing
            Guaranty by Crescent Machinery Company (filed as Exhibit 10.102 to
            December 31, 1999 Form 10-K and incorporated by reference herein)
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  10.103    First Amendment to Amended and Restated Credit Agreement dated as of
            December 20, 1999, between Crescent Real Estate Equities Limited
            Partnership and Crescent Development Management Corp. with related
            Line of Credit Note and letter amendment to related security
            agreement (filed as Exhibit 10.103 to December 31, 1999 Form 10-K
            and incorporated by reference herein)

  10.104    $5,600,000 Promissory Note dated February 28, 2000, made by East
            West Resorts, LLC payable to Crescent Real Estate Equities Limited
            Partnership (filed as Exhibit 10.104 to the Company's March 31, 2000
            Form 10-Q ("March 31, 2000 Form 10-Q") and incorporated by reference
            herein)

  10.105    Mutual Termination of Asset Management Agreement for Omni Austin
            Hotel, Austin, Texas, effective January 31, 2000, between Crescent
            Real Estate Equities Limited Partnership and COI Hotel Group, Inc.
            (filed as Exhibit 10.105 to March 31, 2000 Form 10-Q and
            incorporated by reference herein)

  10.106    Master Asset Management and Administrative Services Agreement dated
            February 1, 2000, by and among Sonoma Management Corp. I, Crescent
            Operating, Inc. and each of its subsidiaries identified therein
            (filed as Exhibit 10.106 to March 31, 2000 Form 10-Q and
            incorporated by reference herein)

  10.107    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate Funding
            VIII, L.P., as Owner and assignor to the Company, relating to
            Ventana Inn & Spa (filed as Exhibit 10.107 to March 31, 2000 Form
            10-Q and incorporated by reference herein)

  10.108    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate Funding
            VIII, L.P., as Owner and assignor to the Company, relating to Sonoma
            Mission Inn Golf and Country Club (filed as Exhibit 10.108 to March
            31, 2000 Form 10-Q and incorporated by reference herein)

  10.109    Management Agreement effective February 1, 2000, between Sonoma
            Management Corp. I, as Manager, and Crescent Real Estate funding
            VIII, L.P., as Owner and assignor to the Company, relating to Sonoma
            Mission Inn and Spa (filed as Exhibit 10.109 to March 31, 2000 Form
            10-Q and incorporated by reference herein)

  10.110    Termination of Lease Agreement for The Four Seasons Hotel, Houston,
            effective November 3, 2000, between COI Hotel Group, Inc. and
            Crescent Real Estate Funding IX, L.P. (filed as Exhibit 10.110 to
            the Company's September 30, 2000 Form 10-Q ("September 30, 2000 Form
            10-Q") and incorporated by reference herein)

  10.111    First Amendment to Credit and Security agreement effective February
            1, 2000, between Crescent Realty Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 Million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.111
            to September 30, 2000 Form 10-Q and incorporated by reference
            herein)

  10.112    Second Amendment to Credit and Security Agreement effective February
            1, 2000, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9 Million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.112 to September 30, 2000 Form 10-Q and incorporated by reference
            herein)

  10.113    Fourth Amendment to Amended and Restated Credit and Security
            Agreement effective February 1, 2000, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.113 to September 30, 2000 Form 10-Q
            and incorporated by reference herein)
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  10.114    Fourth Amendment to Line of Credit Credit and Security Agreement
            effective February 1, 2000, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.114 to September 30, 2000 Form 10-Q and incorporated
            by reference herein)

  10.115    Credit Agreement dated September 21, 2000, between Crescent
            Development Management Corp., as borrower, and Crescent Real Estate
            Equities Limited Partnership, as lender, and related Line of Credit
            Note and Security Agreement *

  10.116    Assignment of Interest in East West Resorts, LLC (CDMC to COPI);
            Assignment of Interest in East West Resorts, LLC (COPI to CDMC); and
            Assignment, Assumption and Consent Agreement dated December 31,
            2000, among Crescent Development Management Corp., Crescent
            Development Management Corp. II, and Crescent Real Estate Equities
            Limited Partnership *

  10.117    Assignment of Membership Interest dated December 29, 2000 between
            Crescent Operating, Inc. and Rockwood Financial Group, Inc.;
            Assignment of Membership Interest dated December 29, 2000 between
            COPI CBHS Holdings, L.P. and Rockwood Financial Group, Inc.; and
            related Indemnification Agreement dated December 29, 2000 among COPI
            CBHS Holdings, L.P., Crescent Operating, Inc. and Rockwood Financial
            Group, Inc. *

  10.118    Severance Agreement dated February 5, 2001, between Richard P.
            Knight and Crescent Operating, Inc. and Crescent Machinery Company
            (filed as Exhibit 10.118 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.119    Second Amendment to Credit and Security Agreement effective January
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.119
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.120    Third Amendment to Credit and Security Agreement effective January
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.120 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.121    Fifth Amendment to Line of Credit Credit and Security Agreement
            effective January 31, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.121 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.122    Fifth Amendment to Amended and Restated Credit and Security
            Agreement effective January 31, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.122 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.123    Third Amendment to Credit and Security Agreement effective February
            15, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.123
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.124    Fourth Amendment to Credit and Security Agreement effective February
            15, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.124 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.125    Sixth Amendment to Line of Credit Credit and Security Agreement
            effective February 15, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
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            as Exhibit 10.125 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.126    Sixth Amendment to Amended and Restated Credit and Security
            Agreement effective February 15, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.126 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.127    Fourth Amendment to Credit and Security Agreement effective March 5,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 (filed as Exhibit 10.127
            to March 31, 2001 Form 10-Q and incorporated by reference herein)

  10.128    Fifth Amendment to Credit and Security Agreement effective March 5,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 (filed as Exhibit
            10.128 to March 31, 2001 Form 10-Q and incorporated by reference
            herein)

  10.129    Seventh Amendment to Line of Credit Credit and Security Agreement
            effective March 5, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 (filed
            as Exhibit 10.129 to March 31, 2001 Form 10-Q and incorporated by
            reference herein)

  10.130    Seventh Amendment to Amended and Restated Credit and Security
            Agreement effective March 5, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 (filed as Exhibit 10.130 to March 31, 2001 Form 10-Q and
            incorporated by reference herein)

  10.131    Management Rights Agreement dated as of February 6, 2001, by and
            among Crescent Operating, Inc., Crescent Machinery Company, Crescent
            Machinery Company, LP, and SunTX Capital Management Corp. (filed as
            Exhibit 10.131 to June 30, 2001 Form 10-Q and incorporated by
            reference herein)

  10.132    Fifth Amendment to Credit and Security Agreement effective June 28,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999 *

  10.133    Sixth Amendment to Credit and Security Agreement effective June 28,
            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 *

  10.134    Eighth Amendment to Line of Credit Credit and Security Agreement
            effective June 28, 2001, between Crescent Real Estate Equities
            Limited Partnership and Crescent Operating, Inc. relating to Line of
            Credit Credit and Security Agreement effective May 21, 1997 *

  10.135    Eighth Amendment to Amended and Restated Credit and Security
            Agreement effective June 28, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997 *

  10.136    Sixth Amendment to Credit and Security Agreement effective October
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $19.5 million Credit and
            Security Agreement effective March 11, 1999*

  10.137    Seventh Amendment to Credit and Security Agreement effective October
            31, 2001, between Crescent Real Estate Equities Limited Partnership
            and Crescent Operating, Inc. relating to $9.0 million Credit and
            Security Agreement effective September 21, 1998 *

  10.138    Ninth Amendment to Line of Credit Credit and Security Agreement
            effective October 31,
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            2001, between Crescent Real Estate Equities Limited Partnership and
            Crescent Operating, Inc. relating to Line of Credit Credit and
            Security Agreement effective May 21, 1997 *

  10.139    Ninth Amendment to Amended and Restated Credit and Security
            Agreement effective October 31, 2001, between Crescent Real Estate
            Equities Limited Partnership and Crescent Operating, Inc. relating
            to Amended and Restated Credit and Security Agreement effective May
            21, 1997*

  10.140    Agreement for the Purchase and Sale of Assets and Stock dated June
            28, 2001 by and among Crescent Real Estate Equities Limited
            Partnership and Crescent Operating, Inc., Rosestar Management LLC,
            Canyon Ranch Leasing, L.L.C., Wine Country Hotel, LLC, Rosestar
            Southwest, LLC, COI Hotel Group, Inc. and COPI Colorado, LP (filed
            as Annex A to Proxy Statement for 2001 Annual Meeting of
            Shareholders and incorporated by reference herein)

  10.141    Amended and Restated Securities Purchase Agreement, made and entered
            into as of June 28, 2001, amended and restated as of October 31,
            2001 by and among Crescent Machinery Company, L.P., Crescent
            Machinery Holdings, L.P., CMC GP, LLC, Crescent Machinery Company,
            Crescent Operating, Inc., COPI Colorado, LP, CRE Equipment Holdings,
            LLC, Crescent Real Estate Equities Limited Partnership, and SunTX
            CMLP, Inc. (filed as Annex E to Proxy Statement for 2001 Annual
            Meeting of Shareholders and incorporated by reference herein)

  10.142    Third Amendment to Credit Agreement effective as of August 27, 2001,
            among Crescent Operating, Inc., Bank of America, N.A. (formerly
            NationsBank, N.A.), and the Support Parties identified therein*

  10.143    Fourth Amendment to Credit Agreement effective as of November 27,
            2001, among Crescent Operating, Inc., Bank of America, N.A.
            (formerly NationsBank, N.A.), and the Support Parties identified
            therein, together with related $15.0 million promissory note *

  10.144    Fifth Amendment to Credit Agreement effective as of December 31,
            2001, among Crescent Operating, Inc., Bank of America, N.A.
            (formerly NationsBank, N.A.), and the Support Parties identified
            therein, together with related $15.0 million promissory note,
            modified and extended as of December 31, 2001*

  10.145    Assignment/Pledge (Security Agreement) effective as of December 31,
            2001 by Crescent Operating to Bank of America, N.A. (formerly
            NationsBank, N.A.)*

    21      List of Subsidiaries of Crescent Operating, Inc. *

   23.1     Consent of Ernst & Young LLP (filed herewith)

   23.2     Consent of Deloitte & Touche LLP (filed herewith)

    99      Notice Regarding Arthur Andersen LLP (filed herewith)

     *      Filed with corresponding exhibit number as listed on the
            Registrant's Form 10-K for the year ended December 31,
            2001 and incorporated by reference herein
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