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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO
COMMISSION FILE NUMBER 1-13038
CRESCENT REAL ESTATE EQUITIES COMPANY
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(Exact name of registrant as specified in its charter)
TEXAS 52-1862813
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(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
777 Main Street, Suite 2100, Fort Worth, Texas 76102
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (817) 321-2100
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of each class: on Which Registered:
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Common Shares of Beneficial Interest New York Stock Exchange
par value $.01 per share
6 3/4% Series A Convertible Cumulative
Preferred Shares of Beneficial Interest
par value $.01 per share New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 11, 2002, the aggregate market value of the 96,368,621 common
shares and 8,000,000 preferred shares held by non-affiliates of the registrant
was approximately $1.8 billion and $156.0 million, respectively, based upon the
closing price of $18.51 for common shares and $19.50 for preferred shares on the
New York Stock Exchange.
Number of Common Shares outstanding as of March 11, 2002: 119,365,362
Number of Preferred Shares outstanding as of March 11, 2002: 8,000,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission for Registrant's 2002 Annual Meeting of Shareholders to be held in
June 2002 are incorporated by reference into Part III.
TABLE OF CONTENTS
PAGE
PART I.
Item 1. Business..................................................... 2
Item 2. Properties................................................... 14
Item 3. Legal Proceedings............................................ 25
Item 4. Submission of Matters to a Vote of Security Holders.......... 25
PART II.
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters.......................................... 26
Item 6. Selected Financial Data...................................... 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk... 59
Item 8. Financial Statements and Supplementary Data.................. 60
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 104
PART III.
Item 10. Trust Managers and Executive Officers of the Registrant...... 104
Item 11. Executive Compensation....................................... 105
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 105
Item 13. Certain Relationships and Related Transactions............... 105
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K..................................................... 105
1
PART I
ITEM 1. BUSINESS
THE COMPANY
Crescent Real Estate Equities Company ("Crescent Equities") operates as
a real estate investment trust for federal income tax purposes, (a "REIT"), and,
together with its subsidiaries, provides management, leasing and development
services for some of its properties.
The term "Company" includes, unless the context otherwise indicates,
Crescent Equities, a Texas REIT, and all of its direct and indirect
subsidiaries.
The direct and indirect subsidiaries of Crescent Equities at December
31, 2001 included:
o CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
The "Operating Partnership."
o CRESCENT REAL ESTATE EQUITIES, LTD.
The "General Partner" of the Operating Partnership.
o SUBSIDIARIES OF THE OPERATING PARTNERSHIP AND THE
GENERAL PARTNER
Crescent Equities conducts all of its business through the Operating
Partnership and its other subsidiaries. The Company is structured to facilitate
and maintain the qualification of Crescent Equities as a REIT.
As of December 31, 2001, the Company's assets and operations were
composed of four investment segments:
o Office Segment;
o Resort/Hotel Segment;
o Residential Development Segment; and
o Temperature-Controlled Logistics Segment.
2
Within these segments, the Company owned or had an interest in the
following real estate assets (the "Properties") as of December 31, 2001:
o OFFICE SEGMENT consisted of 74 office properties (collectively
referred to as the "Office Properties"), located in 26
metropolitan submarkets in six states, with an aggregate of
approximately 28.0 million net rentable square feet.
o RESORT/HOTEL SEGMENT consisted of five luxury and destination
fitness resorts and spas with a total of 1,028 rooms/guest
nights and four upscale business-class hotel properties with a
total of 1,769 rooms (collectively referred to as the
"Resort/Hotel Properties").
o RESIDENTIAL DEVELOPMENT SEGMENT consisted of the Company's
ownership of real estate mortgages and non-voting common stock
representing interests ranging from 90% to 95% in five
unconsolidated residential development corporations
(collectively referred to as the "Residential Development
Corporations"), which in turn, through joint venture or
partnership arrangements, owned 21 upscale residential
development properties (collectively referred to as the
"Residential Development Properties").
o TEMPERATURE-CONTROLLED LOGISTICS SEGMENT consisted of the
Company's 40% interest in a general partnership (the
"Temperature-Controlled Logistics Partnership"), which owns
all of the common stock, representing substantially all of the
economic interest, of AmeriCold Corporation (the
"Temperature-Controlled Logistics Corporation"), a REIT,
which, as of December 31, 2001, directly or indirectly owned
89 temperature-controlled logistics properties (collectively
referred to as the "Temperature-Controlled Logistics
Properties") with an aggregate of approximately 445.2 million
cubic feet (17.7 million square feet) of warehouse space.
See "Note 1. Organization and Basis of Presentation" included in "Item
8. Financial Statements and Supplementary Data" for a table that lists the
principal subsidiaries of Crescent Equities and the Properties owned by such
subsidiaries.
See "Note 4. Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies" included in "Item 8. Financial Statements and
Supplementary Data" for a table that lists the Company's ownership in
significant unconsolidated companies and equity investments as of December 31,
2001, including the four Office Properties in which the Company owned an
interest through unconsolidated companies and equity investments and the
Company's ownership interests in the Residential Development Segment and the
Temperature-Controlled Logistics Segment.
On February 14, 2002, the Company executed an agreement with Crescent
Operating, Inc. ("COPI"), pursuant to which COPI transferred to the Company, in
lieu of foreclosure, the lessee interests in the eight Resort/Hotel Properties
leased to subsidiaries of COPI and the voting common stock in three of the
Company's Residential Development Corporations. The Company will fully
consolidate the operations of the eight Resort/Hotel Properties and the three
Residential Development Corporations, beginning on the date of the transfers of
these assets. See "Note 20. Subsequent Events" included in "Item 8. Financial
Statements and Supplementary Data" for additional information regarding the
Company's agreement with COPI.
For purposes of investor communications, the Company classifies its
luxury and destination fitness resorts and spas and upscale Residential
Development Properties as a single group referred to as the "Resort and
Residential Development Sector" due to their similar targeted customer
characteristics. This group does not contain the four upscale business-class
hotel properties. Additionally, for investor communications, the Company
classifies its Temperature-Controlled Logistics Properties and its upscale
business-class hotel properties as the "Investment Sector." However, for
purposes of segment reporting as defined in Statement of Financial Accounting
Standard ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and
Related Information" and this Annual Report on Form 10-K, the Resort/Hotel
Properties, including the upscale business-class hotel properties, the
Residential Development Properties and the Temperature-Controlled Logistics
Properties are considered three separate reportable segments.
See "Note 3. Segment Reporting" included in "Item 8. Financial
Statements and Supplementary Data" for a table showing total revenues, funds
from operations, and equity in net income of unconsolidated companies for each
of these investment segments for the years ended December 31, 2001, 2000 and
1999 and identifiable assets for each of these investment segments at December
31, 2001 and 2000.
3
BUSINESS OBJECTIVES AND STRATEGIES
BUSINESS OBJECTIVES
The Company's primary business objective is to provide its shareholders
with an attractive yet predictable growth in cash flow and underlying asset
value. Additionally, the Company is focused on increasing funds from operations
and cash available for distribution, while optimizing the corresponding growth
rates. The Company also strives to attract and retain the best talent available
and to empower management through the development and implementation of a
cohesive set of operating, investing and financing strategies that will align
their interests with the interests of the Company's shareholders.
OPERATING STRATEGIES
The Company seeks to enhance its operating performance by
distinguishing itself as the leader in its core investment segments through
customer service and asset quality.
The Company's operating strategies include:
o operating the Office Properties as long-term investments;
o providing exceptional customer service;
o increasing occupancies, rental rates and same-store net
operating income; and
o emphasizing brand recognition of the Company's premier Class A
Office Properties and luxury and destination fitness resorts
and spas.
INVESTING STRATEGIES
The Company focuses on assessing investment opportunities and markets
considered "demand-driven," or to have high levels of in-migration by
corporations, affordable housing costs, moderate costs of living, and the
presence of centrally located travel hubs, primarily within the Office Segment.
These investment opportunities are evaluated in light of the Company's long-term
investment strategy of acquiring properties at a significant discount to
replacement cost in an environment in which the Company believes values will
appreciate and equal or exceed replacement costs. Investment opportunities are
expected to provide growth in cash flow after applying management skills,
renovation and expansion capital and strategic vision.
The Company's investment strategies include:
o capitalizing on strategic acquisition opportunities, primarily
within the Company's Office Segment;
o evaluating the expected returns on acquisition opportunities
in relation to the Company's cost of capital;
o selectively developing the Company's commercial land
inventory, primarily in its Office and Resort/Hotel Segments
in order to meet the needs of customers;
o selectively developing luxury and destination fitness resorts
and spas;
o monetizing the current investments of the Company in the five
Residential Development Corporations and reinvesting returned
capital from the Residential Development Segment primarily
into the Office Segment where the Company expects to achieve
favorable rates of return; and
o evaluating future repurchases of the Company's common shares,
considering stock price, cost of capital, alternative
investment options and growth implications.
4
FINANCING STRATEGIES
The Company implements a disciplined set of financing strategies in
order to fund its operating and investing activities.
The Company's financing strategies include:
o funding operating expenses, debt service payments and
distributions to shareholders and unitholders primarily
through cash flow from operations;
o taking advantage of market opportunities to refinance existing
debt and reduce interest cost, replace secured debt with
unsecured debt, manage the Company's debt maturity schedule
and expand the Company's lending group;
o actively managing the Company's exposure to variable-rate
debt;
o utilizing a combination of the debt, equity, joint venture
capital and selected asset disposition alternatives available
to the Company to finance acquisition and development
opportunities; and
o recycling capital within the Company through strategic sales
of non-core assets and through joint ventures of selected
Office Properties within the Company's portfolio while
maintaining a minority interest and continuing to lease and
manage the Properties.
EMPLOYEES
As of February 25, 2002, the Company had 794 employees. None of these
employees are covered by collective bargaining agreements. The Company considers
its employee relations to be good.
TAX STATUS
The Company elected under Section 856(c) of the Internal Revenue Code
of 1986, as amended (the "Code"), to be taxed as a REIT under the Code beginning
with its taxable year ended December 31, 1994. As a REIT for federal income tax
purposes, the Company generally is not subject to federal income tax on REIT
taxable income that it distributes to its shareholders. Under the Code, REITs
are subject to numerous organizational and operational requirements, including
the requirement to distribute at least 90% of REIT taxable income each year. The
Company will be subject to federal income tax on its REIT taxable income
(including any applicable alternative minimum tax) at regular corporate rates if
it fails to qualify as a REIT for tax purposes in any taxable year. The Company
will also not be permitted to qualify for treatment as a REIT for federal income
tax purposes for four years following the year during which qualification is
lost. Even if the Company qualifies as a REIT for federal income tax purposes,
it may be subject to certain state and local income and franchise taxes and to
federal income and excise taxes on its undistributed REIT taxable income. In
addition, certain of its subsidiaries are subject to federal, state and local
income taxes.
ENVIRONMENTAL MATTERS
The Company and its Properties are subject to a variety of federal,
state and local environmental, health and safety laws, including:
o Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA");
o Resource Conservation & Recovery Act;
o Federal Clean Water Act;
o Federal Clean Air Act;
o Toxic Substances Control Act; and
5
o Occupational Safety & Health Act.
The application of these laws to a specific property that the Company
owns will be dependent on a variety of property-specific circumstances,
including the former uses of the property and the building materials used at
each property. Under certain environmental laws, principally CERCLA, a current
or previous owner or operator of real estate may be required to investigate and
clean up certain hazardous or toxic substances, asbestos-containing materials,
or petroleum product releases at the property. They may also be held liable to a
governmental entity or third parties for property damage and for investigation
and clean up costs such parties incur in connection with the contamination,
whether or not the owner or operator knew of, or was responsible for, the
contamination. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. The owner or operator of a site also may be
liable under common law to third parties for damages and injuries resulting from
environmental contamination emanating from the site. Such costs or liabilities
could exceed the value of the affected real estate. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral.
Compliance by the Company with existing environmental, health and
safety laws has not had a material adverse effect on the Company's financial
condition and results of operations, and management does not believe it will
have such an impact in the future. In addition, the Company has not incurred,
and does not expect to incur any material costs or liabilities due to
environmental contamination at Properties it currently owns or has owned in the
past. However, the Company cannot predict the impact of new or changed laws or
regulations on its current Properties or on properties that it may acquire in
the future. The Company has no current plans for substantial capital
expenditures with respect to compliance with environmental, health and safety
laws.
INDUSTRY SEGMENTS
OFFICE SEGMENT
OWNERSHIP STRUCTURE
As of December 31, 2001, the Company owned or had an interest in 74
Office Properties located in 26 metropolitan submarkets in six states, with an
aggregate of approximately 28.0 million net rentable square feet. The Company,
as lessor, has retained substantially all of the risks and benefits of ownership
of the Office Properties and accounts for its leases as operating leases.
Additionally, the Company provides management and leasing services for some of
its Office Properties.
See "Item 2. Properties" for more information about the Company's
Office Properties. In addition, see "Note 1. Organization and Basis of
Presentation" included in "Item 8. Financial Statements and Supplementary Data"
for a table that lists the principal subsidiaries of the Company and the
Properties owned by such subsidiaries and "Note 4. Investments in Real Estate
Mortgages and Equity of Unconsolidated Companies" included in "Item 8. Financial
Statements and Supplementary Data" for a table that lists the Company's
ownership in significant unconsolidated companies or equity investments and the
four Office Properties in which the Company owned an interest through these
unconsolidated companies or equity investments.
JOINT VENTURE ARRANGEMENTS
5 Houston Center
On June 4, 2001, the Company entered into a joint venture arrangement
with a pension fund advised by JP Morgan Investment Management, Inc. ("JPM") to
construct the 5 Houston Center Office Property within the Company's Houston
Center mixed-use Office Property complex in Houston, Texas. The Class A Office
Property will consist of 577,000 net rentable square feet. The joint venture is
structured such that the fund holds a 75% equity interest, and the Company holds
a 25% equity interest. In addition, the Company is developing, and will manage
and lease, the Property on a fee basis.
6
Four Westlake Park and Bank One Tower
On July 30, 2001, the Company entered into joint venture arrangements
with an affiliate of General Electric Pension Fund ("GE") for two Office
Properties, Four Westlake Park in Houston, Texas, and Bank One Tower in Austin,
Texas. The joint ventures are structured such that GE holds an 80% equity
interest in each of the Office Properties, Four Westlake Park, a 560,000 square
foot Class A Office Property located in the Katy Freeway submarket of Houston,
and Bank One Tower, a 390,000 square foot Class A Office Property located in
downtown Austin. The Company continues to hold the remaining 20% equity
interests in each Office Property. In addition, the Company manages and leases
the Office Properties on a fee basis.
MARKET INFORMATION
The Office Properties reflect the Company's strategy of investing in
premier assets within markets that have significant potential for rental growth.
Within its selected submarkets, the Company has focused on premier locations
that management believes are able to attract and retain the highest quality
tenants and command premium rents. Consistent with its long-term investment
strategies, the Company has sought transactions where it was able to acquire
properties that have strong economic returns based on in-place tenancy and also
have a dominant position within the submarket due to quality and/or location.
Accordingly, management's long-term investment strategy not only demands
acceptable current cash flow return on invested capital, but also considers
long-term cash flow growth prospects. In selecting the Office Properties, the
Company analyzed demographic and economic data to focus on markets expected to
benefit from significant long-term employment growth as well as corporate
relocations.
The Company's Office Properties are located primarily in the
Dallas/Fort Worth and Houston, Texas, metropolitan areas, both of which are
projected to benefit from strong population and employment growth over the next
10 years. As indicated in the table below entitled "Projected Population Growth
and Employment Growth for all Company Markets," these core Company markets are
projected to outperform the 10-year averages for the United States. In addition,
the Company considers these markets "demand-driven" markets due to high levels
of in-migration by corporations, affordable housing costs, moderate cost of
living, and the presence of centrally located travel hubs, making all areas of
the country easily accessible.
Texas
As of December 2001, the Texas unemployment rate was 5.7%, slightly
better than the national unemployment rate of 5.8%. According to the Texas
Economic Update, Texas weathered the 2001 economic slowdown better than the
nation as a whole.
Dallas/Fort Worth ("DFW")
According to the Bureau of Labor Statistics, 2001 job growth slowed
considerably in the DFW area. As of December 2001, the DFW unemployment rate was
5.6%, compared with the Texas unemployment rate of 5.7% and the national
unemployment rate of 5.8%. As for DFW's 2001 commercial office market, according
to CoStar data, citywide net economic absorption, excluding space available for
sublease, was approximately 1.0 million square feet, primarily represented by a
positive 1.0 million square feet of absorption in Class A space. The city's
total net absorption, including space available for sublease, was approximately
(3.0) million square feet for 2001; however, Class A space represented only
approximately (700,000) square feet of the (3.0) million total square feet.
7
Houston
Houston's employment data held steady through much of 2001, despite the
slowdown in the economy. Approximately 23,000 jobs were created in 2001, an
increase of approximately 1.1% over 2000. As of December 2001, the Houston
unemployment rate was 4.4%, compared with the Texas unemployment rate of 5.7%
and the national unemployment rate of 5.8%. As for Houston's 2001 commercial
office market, according to CoStar data, citywide net economic absorption,
excluding space available for sublease, was 2.0 million square feet, with 2.75
million square feet in Class A space. The city's total net absorption, including
space available for sublease, was a (200,000) square feet for 2001; however,
Class A space had a positive total net absorption of 1.4 million square feet.
The demographic conditions, economic conditions and trends (population
growth and employment growth) favoring the markets in which the Company has
invested are projected to continue to exceed the national averages, as
illustrated in the following table.
PROJECTED POPULATION GROWTH AND EMPLOYMENT GROWTH FOR ALL COMPANY MARKETS
Population Employment
Growth Growth
Metropolitan Statistical Area 2002-2011 2002-2011
- ----------------------------- ---------- ----------
Albuquerque, NM 22.05% 14.15%
Austin, TX 26.02 36.61
Colorado Springs, CO 27.48 15.83
Dallas, TX 15.89 20.92
Denver, CO 11.34 19.76
Fort Worth, TX 19.03 22.31
Houston, TX 15.61 22.43
Miami, FL 9.03 15.90
Phoenix, AZ 27.24 33.41
San Diego, CA 17.35 17.29
UNITED STATES 8.49 12.01
- ----------
Source: Compiled from information published by Economy.com, Inc.
The Company does not depend on a single customer or a few major
customers within the Office Segment, the loss of which would have a material
adverse effect on the Company's financial condition or results of operations.
Based on rental revenues from office leases in effect as of December 31, 2001,
no single tenant accounted for more than 5% of the Company's total Office
Segment rental revenues for 2001.
The Company applies a well-defined leasing strategy in order to capture
the potential rental growth in the Company's portfolio of Office Properties as
occupancy and rental rates increase within the markets and the submarkets in
which the Company has invested. The Company's strategy is based, in part, on
identifying and focusing on investments in submarkets in which weighted average
full-service rental rates (representing base rent after giving effect to free
rent and scheduled rent increases that would be taken into account under
generally accepted accounting principles ("GAAP") and including adjustments for
expenses payable by or reimbursed from tenants) are significantly less than
weighted average full-service replacement cost rental rates (the rate management
estimates to be necessary to provide a return to a developer of a comparable,
multi-tenant building sufficient to justify construction of new buildings) in
that submarket. In calculating replacement cost rental rates, management relies
on available third-party data and its own estimates of construction costs
(including materials and labor in a particular market) and assumes replacement
cost rental rates are achieved at a 95% occupancy level. The Company believes
that the difference between the two rates is a useful measure of the additional
revenue that the Company may be able to obtain from a property, because the
difference should represent the amount by which rental rates would be required
to increase in order to justify construction of new properties. For the
Company's Office Properties, the weighted average full-service rental rate as of
December 31, 2001 was $22.42 per square foot, compared to an estimated weighted
average full-service replacement cost rental rate of $30.23 per square foot.
8
COMPETITION
The Company's Office Properties, primarily Class A properties located
within the southwest, individually compete against a wide range of property
owners and developers, including property management companies and other REITs,
that offer space in similar classes of office properties (for example, Class A
and Class B properties.) A number of these owners and developers may own more
than one property. The number and type of competing properties in a particular
market or submarket could have a material effect on the Company's ability to
lease space and maintain or increase occupancy or rents in its existing Office
Properties. Management believes, however, that the quality services and
individualized attention that the Company offers its customers, together with
its active preventive maintenance program and superior building locations within
markets, enhance the Company's ability to attract and retain customers for its
Office Properties. In addition, as of December 31, 2001, on a weighted average
basis, the Company owned 16% of the Class A office space in the 26 submarkets in
which the Company owned Class A office properties, and 24% of the Class B office
space in the two submarkets in which the Company owned Class B office
properties. Management believes that ownership of a significant percentage of
office space in a particular market reduces property operating expenses,
enhances the Company's ability to attract and retain customers and potentially
results in increases in Company net operating income.
DISPOSITIONS
During the year ended December 31, 2001, five of the Company's fully
consolidated Office Properties were disposed of. On September 18, 2001, the
Company completed the sale of the two Washington Harbour Office Properties. The
Washington Harbour Office Properties were the Company's only Office Properties
in Washington, D.C. On September 28, 2001, the Woodlands Office Equities - '95
Limited ("WOE"), owned by the Company and the Woodlands Commercial Properties
Company, L.P., sold two Office Properties located within The Woodlands, Texas.
On December 20, 2001, WOE sold another Office Property located within The
Woodlands, Texas.
During the year ended December 31, 2001, two of the unconsolidated
companies in which the Company has an equity interest, sold three office
properties and one retail property. On September 27, 2001, the Woodlands
Commercial Properties Company, L.P. ("Woodlands CPC"), owned by the Company and
an affiliate of Morgan Stanley, sold one office/venture tech property and
located within The Woodlands, Texas. On November 9, 2001, The Woodlands Land
Development Company, L.P., owned by the Company and an affiliate of Morgan
Stanley, sold two office properties and one retail property located within The
Woodlands, Texas.
DEVELOPMENT
Avallon IV Office Property
In May 2001, the Company completed the construction of the Avallon IV
Office Property in Austin, Texas. The property is a Class A Office Property with
86,315 net rentable square feet. Construction of this property commenced in
September 2000.
5 Houston Center Office Property
The Company is currently developing the 5 Houston Center Office
Property in Houston, Texas. Construction of the planned 27-story, Class A Office
Property consisting of 577,000 net rentable square feet commenced in November
2000, and is expected to be completed in the fourth quarter of 2002. In June
2001, the Company entered into a joint venture arrangement with a pension fund
advised by JPM to construct this Office Property. The joint venture is
structured such that the fund holds a 75% equity interest, and the Company holds
a 25% equity interest.
RESORT/HOTEL SEGMENT
OWNERSHIP STRUCTURE
Prior to enactment of the REIT Modernization Act, the Company's status
as a REIT for federal income tax purposes prohibited it from operating the
Resort/Hotel Properties. As of December 31, 2001, the Company owned nine
Resort/Hotel Properties, all of which, other than the Omni Austin Hotel, were
leased to subsidiaries of COPI pursuant to eight separate leases. The Omni
Austin Hotel was leased, under a separate lease, to HCD Austin Corporation.
Under the leases, each having a term of 10 years, the Resort/Hotel
Property lessees assumed the rights and obligations of the property owner under
the respective management agreements with the hotel operators, as well as the
obligation to pay all property taxes and other costs related to the Properties.
The leases provided for the payment by the Resort/Hotel Property
lessees of all or a combination of the following:
9
o base rent, with periodic rent increases if applicable;
o percentage rent based on a percentage of gross hotel receipts
or gross room revenues, as applicable, above a specified
amount; and
o a percentage of gross food and beverage revenues above a
specified amount.
On February 14, 2002, the Company executed an agreement with COPI,
pursuant to which COPI transferred to subsidiaries of the Company, in lieu of
foreclosure, COPI's lessee interests in the eight Resort/Hotel Properties leased
to subsidiaries of COPI. As a result, these subsidiaries of the Company became
the lessees of the eight Resort/Hotel Properties.
See "Note 20. Subsequent Events" included in "Item 8. Financial
Statements and Supplemental Data" for additional information regarding the
Company's agreement with COPI.
CR LICENSE, LLC AND CRL INVESTMENTS, INC.
As of December 31, 2001, the Company had a 28.5% interest in CR
License, LLC, the entity which owns the right to the future use of the "Canyon
Ranch" name. The Company also had a 95% economic interest, representing all of
the non-voting common stock, in CRL Investments, Inc., which has an
approximately 65% economic interest in the Canyon Ranch Spa Club in the Venetian
Hotel in Las Vegas, Nevada.
On February 14, 2002, the Company executed an agreement with COPI,
pursuant to which the Company acquired, in lieu of foreclosure, COPI's 1.5%
interest in CR License, LLC and 5.0% interest, representing all of the voting
stock, in CRL Investments, Inc.
MARKET INFORMATION
Lodging demand is highly dependent upon the global economy and volume
of business travel. The uncertainty surrounding the weak global economy and the
costs and fear resulting from the events of September 11, 2001 are expected to
result in weak performance for much of 2002. This is evidenced by declines in
both business and leisure travel in the United States. Although the hospitality
industry will be negatively impacted to the extent demand is less than expected
for much of 2002, management expects a recovery in 2003.
COMPETITION
Most of the Company's upscale business class Resort/Hotel Properties in
Denver, Albuquerque, Austin and Houston are business and convention center
hotels that compete against other business and convention center hotels. The
Company believes, however, that its luxury and destination fitness resorts and
spas are unique properties that have no significant direct competitors due
either to their high replacement cost or unique concept and location. However,
the luxury and destination fitness resorts and spas do compete against
business-class hotels or middle-market resorts in their geographic areas, as
well as against luxury resorts nationwide and around the world.
10
RESIDENTIAL DEVELOPMENT SEGMENT
OWNERSHIP STRUCTURE
As of December 31, 2001, the Company owned economic interests in five
Residential Development Corporations through the Residential Development
Property mortgages and the non-voting common stock of these Residential
Development Corporations. The Residential Development Corporations in turn,
through joint ventures or partnership arrangements, own interests in 21
Residential Development Properties. The Residential Development Corporations are
responsible for the continued development and the day-to-day operations of the
Residential Development Properties.
On February 14, 2002, the Company executed an agreement with COPI,
pursuant to which COPI transferred to subsidiaries of the Company, in lieu of
foreclosure, COPI's voting interests in three of the Residential Development
Corporations. These three Residential Development Corporations, Desert Mountain
Development Corporation ("Desert Mountain"), The Woodlands Land Company, Inc.
("The Woodlands") and Crescent Resort Development, Inc. ("CRD") own interests in
16 Residential Development Properties.
See "Note 20. Subsequent Events" included in "Item 8. Financial
Statements and Supplemental Data" for additional information regarding the
Company's agreement with COPI.
MARKET INFORMATION
A slowing economy, combined with the events of September 11, 2001
contributed to the reduction in lot absorption, primarily at Desert Mountain.
CRD (formerly "Crescent Development Management Corp.") was not significantly
impacted because most of its products were pre-sold. However, CRD did change its
strategy by delaying the commencement of certain projects, which will impact its
performance in 2002. In addition, The Woodlands experienced a reduction in lot
absorption of its higher priced lots, including Carlton Woods, The Woodlands'
new upscale gated residential development. However, The Woodlands was not
significantly impacted due to the higher prices of the lots sold offsetting
lower lot sales.
COMPETITION
The Company's Residential Development Properties compete against a
variety of other housing alternatives in each of their respective areas. These
alternatives include other planned developments, pre-existing single-family
homes, condominiums, townhouses and non-owner occupied housing, such as luxury
apartments. Management believes that the Properties owned by The Woodlands, CRD
and Desert Mountain, representing the Company's most significant investments in
Residential Development Properties, contain certain features that provide
competitive advantages to these developments.
The Woodlands, which is an approximately 27,000-acre, master-planned
residential and commercial community north of Houston, Texas, is unique among
developments in the Houston area, because it functions as a self-contained
community. Amenities contained in the development, which are not contained
within most other local developments, include a shopping mall, retail centers,
office buildings, a hospital, a community college, places of worship, a
conference center, 85 parks, 117 holes of golf, including a Tournament Players
Course and signature courses by Jack Nicklaus, Arnold Palmer, and Gary Player,
two man-made lakes and a performing arts pavilion. The Woodlands competes with
other master planned communities in the surrounding Houston market.
Desert Mountain, a luxury residential and recreational community in
Scottsdale, Arizona, which also offers five 18-hole Jack Nicklaus signature golf
courses and tennis courts, has few direct competitors due in part to the
superior environmental attributes and the types of amenities that it offers.
CRD invests primarily in mountain resort residential real estate in
Colorado and California, and residential real estate in downtown Denver,
Colorado. Management believes CRD does not have any direct competitors because
the projects and project locations are unique and the land is limited in most of
these locations.
11
TEMPERATURE-CONTROLLED LOGISTICS SEGMENT
OWNERSHIP STRUCTURE
Effective March 12, 1999, the Company, Vornado Realty Trust, COPI, the
Temperature-Controlled Logistics Partnership and the Temperature-Controlled
Logistics Corporation (including all affiliated entities that owned any portion
of the business operations of the Temperature-Controlled Logistics Properties at
that time) sold all of the non-real estate assets, encompassing the business
operations, for approximately $48.7 million to a subsidiary of a newly formed
partnership ("AmeriCold Logistics"), owned 60% by Vornado Operating L.P. and 40%
by a subsidiary of COPI. The Company has no interest in AmeriCold Logistics.
As of December 31, 2001, the Company held a 40% interest in the
Temperature-Controlled Logistics Partnership, which owns the
Temperature-Controlled Logistics Corporation, which directly or indirectly owns
the 89 Temperature-Controlled Logistics Properties, with an aggregate of
approximately 445.2 million cubic feet (17.7 million square feet) of warehouse
space.
AmeriCold Logistics, as sole lessee of the Temperature-Controlled
Logistics Properties, leases the Temperature-Controlled Logistics Properties
from the Temperature-Controlled Logistics Corporation under three triple-net
master leases, as amended on January 23, 2002. On February 22, 2001, the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics agreed to
restructure certain financial terms of the leases, including the adjustment of
the rental obligation for 2001 to $146.0 million, the adjustment of the rental
obligation for 2002 to $150.0 million (plus contingent rent in certain
circumstances), the increase of the Temperature-Controlled Logistics
Corporation's share of capital expenditures for the maintenance of the
properties from $5.0 million to $9.5 million (effective January 1, 2000) and the
extension of the date on which deferred rent was required to be paid to December
31, 2003.
AmeriCold Logistics' same-store earnings before interest, taxes,
depreciation and amortization, and rent declined 11% for the year ended December
31, 2001, compared to the same period in 2000. These declines are attributable
to a reduction in total customer inventory stored at the warehouses and a
reduction in the frequency of customer inventory turnover. AmeriCold Logistics
deferred $25.5 million of rent for the year ended December 31, 2001, of which
the Company's share was $10.2 million. AmeriCold Logistics also deferred $19.0
million and $5.4 million of rent for the years ended December 31, 2000 and 1999,
respectively, of which the Company's share was $7.5 million and $2.1 million,
respectively. In December 2001, the Temperature-Controlled Logistics Corporation
waived its rights to collect deferred rent of $39.8 million of the total $49.9
million of deferred rent, of which the Company's share was $15.9 million. The
Temperature-Controlled Logistics Corporation and the Company had recorded
adequate valuation allowances related to their portions of the waived deferred
rental revenue during the years ended December 31, 2000, and 2001; therefore,
there was no financial statement impact to the Temperature-Controlled Logistics
Corporation or to the Company related to the Temperature-Controlled Logistics
Corporation's decision to waive collection of the deferred rent.
12
BUSINESS AND INDUSTRY INFORMATION
AmeriCold Logistics provides frozen food manufacturers with
refrigerated warehousing and transportation management services. The
Temperature-Controlled Logistics Properties consist of production and
distribution facilities. Production facilities differ from distribution
facilities in that they typically serve one or a small number of customers
located nearby. These customers store large quantities of processed or partially
processed products in the facility until they are further processed or shipped
to the next stage of production or distribution. Distribution facilities
primarily serve customers who store a wide variety of finished products to
support shipment to end-users, such as food retailers and food service
companies, in a specific geographic market.
AmeriCold Logistics' transportation management services include freight
routing, dispatching, freight rate negotiation, backhaul coordination, freight
bill auditing, network flow management, order consolidation and distribution
channel assessment. AmeriCold Logistics' temperature-controlled logistics
expertise and access to both the frozen food warehouses and distribution
channels enable the customers of AmeriCold Logistics to respond quickly and
efficiently to time-sensitive orders from distributors and retailers.
AmeriCold Logistics' customers consist primarily of national, regional
and local frozen food manufacturers, distributors, retailers and food service
organizations. A breakdown of AmeriCold Logistics' largest customers include:
PERCENTAGE OF
2001 REVENUE
-------------
H.J. Heinz & Co. .......................... 16%
Con-Agra, Inc. ............................ 8
Sara Lee Corp. ............................ 5
McCain Foods, Inc. ........................ 5
Tyson Foods, Inc. ......................... 4
General Mills ............................. 4
J.R. Simplot .............................. 3
Flowers Food, Inc. ........................ 3
Pro-Fac Cooperative, Inc. ................. 2
Farmland Industries, Inc. ................. 2
Other ..................................... 48
---
TOTAL ..................................... 100%
===
Consolidation among retail and food service channels has limited the
ability of manufacturers to pass along cost increases by raising prices. Because
of this, manufacturers have been forced in the recent past to focus more
intensely on supply chain cost (such as inventory management, transportation and
distribution) reduction initiatives in an effort to improve operating
performance. As the economy continues to recover from the current recession and
stabilize 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. In addition, as socioeconomic events create spikes in demand and
upset the planning balance between manufacturers and retailers, AmeriCold will
experience variability in short term revenues. However, as Ameriold 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.
COMPETITION
AmeriCold Logistics is the largest operator of public refrigerated
warehouse space in North America and has more than twice the cubic feet of the
second largest operator. AmeriCold Logistics operated an aggregate of
approximately 18% of total cubic feet of public refrigerated warehouse space as
of December 31, 2001. No other person or entity operated more than 8% of total
public refrigerated warehouse space as of December 31, 2001. As a result,
AmeriCold Logistics does not have any competitors of comparable size. AmeriCold
Logistics operates in an environment in which competition is national,
13
regional and local in nature and in which the range of service,
temperature-controlled logistics facilities, customer mix, service performance
and price are the principal competitive factors.
DEVELOPMENT
The Temperature-Controlled Logistics Corporation completed the
acquisition of one facility in the first quarter of 2001 for $10.0 million and
completed the construction of one facility in the third quarter of 2001 for
$15.8 million, representing in aggregate approximately 8.5 million cubic feet
(0.2 million square feet) of additional warehouse space.
ITEM 2. PROPERTIES
The Company considers all of its Properties to be in good condition,
well-maintained and suitable and adequate to carry on the Company's business.
OFFICE PROPERTIES
As of December 31, 2001, the Company owned or had an interest in 74
Office Properties located in 26 metropolitan submarkets in six states with an
aggregate of approximately 28.0 million net rentable square feet. The Company's
Office Properties are located primarily in the Dallas/Fort Worth and Houston,
Texas, metropolitan areas. As of December 31, 2001, the Company's Office
Properties in Dallas/Fort Worth and Houston represented an aggregate of
approximately 77% of its office portfolio based on total net rentable square
feet (41% for Dallas/Fort Worth and 36% for Houston).
In pursuit of management's objective to dispose of non-strategic and
non-core assets, five of the Company's fully consolidated Office Properties were
disposed of during the year ended December 31, 2001. The Company completed the
sale of the two Washington Harbour Office Properties located in Washington,
D.C., and the Woodlands Office Equities - '95 Limited, owned by the Company and
the Woodlands Commercial Properties Company, L. P., sold three Office Properties
located within The Woodlands, Texas.
14
OFFICE PROPERTIES TABLES
The following table shows, as of December 31, 2001, certain information
about the Company's Office Properties. In the table below "CBD" means central
business district. Based on rental revenues from office leases in effect as of
December 31, 2001, no single tenant accounted for more than 5% of the Company's
total Office Segment rental revenues for 2001.
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
NO. OF YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
- --------------------------------------- ---------- ------------------------ --------- ---------- ------- -------------
TEXAS
DALLAS
Bank One Center(2) 1 CBD 1987 1,530,957 88% $ 23.11
The Crescent Office Towers 1 Uptown/Turtle Creek 1985 1,204,670 100 32.81
Fountain Place 1 CBD 1986 1,200,266 97 20.28
Trammell Crow Center(3) 1 CBD 1984 1,128,331 85 25.09
Stemmons Place 1 Stemmons Freeway 1983 634,381 87 17.67
Spectrum Center(4) 1 Far North Dallas 1983 598,250 88 24.05
Waterside Commons 1 Las Colinas 1986 458,739 100 20.84
125 E. John Carpenter Freeway 1 Las Colinas 1982 445,993 80 28.92
Reverchon Plaza 1 Uptown/Turtle Creek 1985 374,165 52 21.62
The Aberdeen 1 Far North Dallas 1986 320,629 100 19.42
MacArthur Center I & II 1 Las Colinas 1982/1986 294,069 92 23.89
Stanford Corporate Centre 1 Far North Dallas 1985 265,507 72 23.85
12404 Park Central 1 LBJ Freeway 1987 239,103 100 22.75
Palisades Central II 1 Richardson/Plano 1985 237,731 99(10) 22.50
3333 Lee Parkway 1 Uptown/Turtle Creek 1983 233,769 92 22.71
Liberty Plaza I & II 1 Far North Dallas 1981/1986 218,813 100 16.16
The Addison 1 Far North Dallas 1981 215,016 100 19.85
Palisades Central I 1 Richardson/Plano 1980 180,503 95 21.39
Greenway II 1 Richardson/Plano 1985 154,329 100 23.86
Greenway I & IA 2 Richardson/Plano 1983 146,704 100 24.22
Addison Tower 1 Far North Dallas 1987 145,886 95 20.61
5050 Quorum 1 Far North Dallas 1981 133,594 87 20.63
Cedar Springs Plaza(5) 1 Uptown/Turtle Creek 1982 110,923 92 19.63
----- ---------- ---- --------
Subtotal/Weighted Average 24 10,472,328 91% $ 23.54
----- ---------- ---- --------
FORT WORTH
Carter Burgess Plaza 1 CBD 1982 954,895 90%(10) $ 17.16
----- ---------- ---- --------
HOUSTON
Greenway Plaza Office Portfolio 10 Richmond-Buffalo 1969-1982 4,285,906 93% $ 20.30
Speedway
Houston Center 3 CBD 1974-1983 2,764,418 95 21.83
Post Oak Central 3 West Loop/Galleria 1974-1981 1,277,516 89 19.68
The Woodlands Office Properties(6) 8 The Woodlands 1980-1996 561,989 89 17.62
Four Westlake Park(7) 1 Katy Freeway 1992 561,065 100 21.06
Three Westlake Park 1 Katy Freeway 1983 414,206 94 22.45
1800 West Loop South 1 West Loop/Galleria 1982 399,777 69 19.53
----- ---------- ---- --------
Subtotal/Weighted Average 27 10,264,877 92% $ 20.62
----- ---------- ---- --------
15
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
NO. OF YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
- --------------------------------------- ---------- ------------------------ --------- ---------- ------- -------------
AUSTIN
Frost Bank Plaza 1 CBD 1984 433,024 97% $ 25.12
301 Congress Avenue(8) 1 CBD 1986 418,338 80 26.30
Bank One Tower(7) 1 CBD 1974 389,503 96 24.67
Austin Centre 1 CBD 1986 343,664 93 27.82
The Avallon I, II, III; IV; V 3 Northwest 1993/1997/2001 318,217 87(10) 23.74
Barton Oaks Plaza One 1 Southwest 1986 99,895 100 27.11
----- ---------- ---- --------
Subtotal/Weighted Average 8 2,002,641 91% $ 25.57
----- ---------- ---- --------
COLORADO
DENVER
MCI Tower 1 CBD 1982 550,807 99% $ 19.47
Ptarmigan Place 1 Cherry Creek 1984 418,630 100 19.36
Regency Plaza One 1 Denver Technology Center 1985 309,862 95 24.14
55 Madison 1 Cherry Creek 1982 137,176 97 20.79
The Citadel 1 Cherry Creek 1987 130,652 97 23.35
44 Cook 1 Cherry Creek 1984 124,174 91 20.71
----- ---------- ---- --------
Subtotal/Weighted Average 6 1,671,301 98% $ 20.80
----- ---------- ---- --------
COLORADO SPRINGS
Briargate Office
and Research Center 1 Colorado Springs 1988 252,857 64%(10) $ 19.72
----- ---------- ---- --------
FLORIDA
MIAMI
Miami Center 1 CBD 1983 782,686 95% $ 26.60
Datran Center 2 South Dade/Kendall 1986/1988 472,236 94 23.23
----- ---------- ---- --------
Weighted Average 3 1,254,922 95% $ 25.34
----- ---------- ---- --------
ARIZONA
PHOENIX
Two Renaissance Square 1 Downtown/CBD 1990 476,373 97% $ 25.43
6225 North 24th Street 1 Camelback Corridor 1981 86,451 34 21.98
----- ---------- ---- --------
Subtotal/Weighted Average 2 562,824 87% $ 25.23
----- ---------- ---- --------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza 1 CBD 1990 366,236 87% $ 19.35
----- ---------- ---- --------
CALIFORNIA
SAN DIEGO
Chancellor Park(9) 1 University Town Center 1988 195,733 84% $ 26.94
----- ---------- ---- --------
TOTAL/WEIGHTED AVERAGE 74 27,998,614 92%(10) $ 22.28(11)
===== ========== ===== ========
- ----------
(1) Calculated based on base rent payable as of December 31, 2001, without
giving effect to free rent or scheduled rent increases that would be
taken into account under GAAP and including adjustments for expenses
payable by or reimbursable from tenants.
(2) The Company has a 49.5% limited partner interest and a 0.5% general
partner interest in the partnership that owns Bank One Center.
(3) The Company owns the principal economic interest in Trammell Crow
Center through its ownership of fee simple title to the Property
(subject to a ground lease and a leasehold estate regarding the
building) and two mortgage notes encumbering the leasehold interests in
the land and building.
(4) The Company owns the principal economic interest in Spectrum Center
through an interest in Crescent Spectrum Center, L.P. which owns both
the mortgage notes secured by Spectrum Center and the ground lessor's
interest in the land underlying the office building.
(5) This Office Property was sold subsequent to December 31, 2001.
(6) The Company has a 75% limited partner interest and an approximate 10%
indirect general partner interest in the partnership that owns the
eight Office Properties that comprise The Woodlands Office Properties.
(7) The Company has a 0.1% general partner interest and a 19.9% limited
partner interest in the partnerships that own Four Westlake Park and
Bank One Tower.
(8) The Company has a 1% general partner interest and a 49% limited partner
interest in the partnership that owns 301 Congress Avenue.
(9) The Company owns Chancellor Park through its ownership of a mortgage
note secured by the building and through its direct and indirect
interests in the partnership, which owns the building.
(10) Leases have been executed at certain Office Properties but had not
commenced as of December 31, 2001. If such leases had commenced as of
December 31, 2001, the percent leased for all Office Properties would
have been 93%. The total percent leased for these Properties would have
been as follows: Palisades Central II - 100%; Carter Burgess Plaza -
95%; The Avallon - 100%; and Briargate Office and Research Center -
67%.
(11) The weighted average full-service rental rate per square foot
calculated based on base rent payable for Company Office Properties as
of December 31, 2001, giving effect to free rent and scheduled rent
increases that would be taken into consideration under GAAP and
including adjustments for expenses payable by or reimbursed from
tenants is $22.42.
16
The following table provides information, as of December 31, 2001, for
the Company's Office Properties by state, city and submarket.
PERCENT OFFICE
PERCENT OF LEASED AT SUBMARKET
TOTAL TOTAL COMPANY PERCENT
NUMBER OF COMPANY COMPANY OFFICE LEASED/
STATE, CITY, SUBMARKET PROPERTIES NRA(1) NRA(1) PROPERTIES OCCUPIED(2)
---------------------- ---------- ---------- ---------- ---------- -----------
CLASS A OFFICE PROPERTIES
TEXAS
DALLAS
CBD 3 3,859,554 13% 90% 86%
Uptown/Turtle Creek(6) 4 1,923,527 7 89 87
Far North Dallas 7 1,897,695 7 91 84
Las Colinas 3 1,198,801 4 91 86
Richardson/Plano 5 719,267 3 99(7) 93
Stemmons Freeway 1 634,381 2 87 90
LBJ Freeway 1 239,103 1 100 75
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 24 10,472,328 37% 91% 85%
--- ---------- ---------- ---------- ----------
FORT WORTH
CBD 1 954,895 3% 90%(7) 96%
--- ---------- ---------- ---------- ----------
HOUSTON
CBD 3 2,764,418 10% 95% 95%
Richmond-Buffalo Speedway 7 3,613,903 13 95 94
West Loop/Galleria 4 1,677,293 6 85 86
Katy Freeway 2 975,271 4 98 92
The Woodlands 6 427,364 1 86 87
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 22 9,458,249 34% 93% 92%
--- ---------- ---------- ---------- ----------
AUSTIN
CBD 4 1,584,529 6% 91% 90%
Northwest 3 318,217 1 87(7) 83
Southwest 1 99,895 0 100 90
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 8 2,002,641 7% 91% 87%
--- ---------- ---------- ---------- ----------
COLORADO
DENVER
Cherry Creek 4 810,632 3% 98% 97%
CBD 1 550,807 2 99 94
Denver Technology Center 1 309,862 1 95 81
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 6 1,671,301 6% 98% 90%
--- ---------- ---------- ---------- ----------
COLORADO SPRINGS
Colorado Springs 1 252,857 1% 64%(7) 86%
--- ---------- ---------- ---------- ----------
FLORIDA
MIAMI
CBD 1 782,686 3% 95% 95%
South Dade/Kendall 2 472,236 2 94 81
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 3 1,254,922 5% 95% 93%
--- ---------- ---------- ---------- ----------
ARIZONA
PHOENIX
Downtown/CBD 1 476,373 2% 97% 87%
Camelback Corridor 1 86,451 0 34 81
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 2 562,824 2% 87% 83%
--- ---------- ---------- ---------- ----------
NEW MEXICO
ALBUQUERQUE
CBD 1 366,236 1% 87% 89%
--- ---------- ---------- ---------- ----------
CALIFORNIA
SAN DIEGO
University Town Center 1 195,733 1% 84% 83%
--- ---------- ---------- ---------- ----------
WEIGHTED
AVERAGE
WEIGHTED COMPANY
AVERAGE COMPANY FULL-
COMPANY QUOTED QUOTED SERVICE
SHARE OF MARKET RENTAL RENTAL
OFFICE RENTAL RATE RATE PER RATE PER
SUBMARKET PER SQUARE SQUARE SQUARE
STATE, CITY, SUBMARKET NRA(1)(2) FOOT(2)(3) FOOT(4) FOOT(5)
---------------------- ---------- ----------- -------- --------
CLASS A OFFICE PROPERTIES
TEXAS
DALLAS
CBD 21% $20.66 $25.32 $22.70
Uptown/Turtle Creek(6) 33 24.28 31.85 29.51
Far North Dallas 15 24.48 24.26 21.12
Las Colinas 9 22.85 23.90 24.25
Richardson/Plano 13 20.64 24.61 22.88
Stemmons Freeway 26 23.75 19.30 17.67
LBJ Freeway 3 22.77 23.00 22.75
---------- ------ ------ ------
Subtotal/Weighted Average 16% $22.50 $25.70 $23.54
---------- ------ ------ ------
FORT WORTH
CBD 26% $22.59 $21.80 $17.16
---------- ------ ------ ------
HOUSTON
CBD 12% $24.05 $27.01 $21.83
Richmond-Buffalo Speedway 71 20.83 21.64 20.94
West Loop/Galleria 11 21.75 21.28 19.65
Katy Freeway 15 20.00 24.86 21.63
The Woodlands 88 18.34 18.28 17.87
---------- ------ ------ ------
Subtotal/Weighted Average 19% $21.74 $23.33 $20.95
---------- ------ ------ ------
AUSTIN
CBD 33% $28.34 $32.04 $25.83
Northwest 5 24.86 30.12 23.74
Southwest 3 24.93 29.59 27.11
---------- ------ ------ ------
Subtotal/Weighted Average 14% $27.62 $31.61 $25.57
---------- ------ ------ ------
COLORADO
DENVER
Cherry Creek 45% $23.31 $23.48 $20.43
CBD 5 24.25 25.00 19.47
Denver Technology Center 6 20.00 26.00 24.14
---------- ------ ------ ------
Subtotal/Weighted Average 9% $23.01 $24.45 $20.80
---------- ------ ------ ------
COLORADO SPRINGS
Colorado Springs 5% $20.60 $20.85 $19.72
---------- ------ ------ ------
FLORIDA
MIAMI
CBD 25% $31.46 $30.70 $26.60
South Dade/Kendall 78 24.97 23.96 23.23
---------- ------ ------ ------
Subtotal/Weighted Average 34% $29.02 $28.16 $25.34
---------- ------ ------ ------
ARIZONA
PHOENIX
Downtown/CBD 18% $25.73 $24.50 $25.43
Camelback Corridor 2 25.88 21.50 21.98
---------- ------ ------ ------
Subtotal/Weighted Average 8% $25.75 $24.04 $25.23
---------- ------ ------ ------
NEW MEXICO
ALBUQUERQUE
CBD 64% $18.15 $18.00 $19.35
---------- ------ ------ ------
CALIFORNIA
SAN DIEGO
University Town Center 6% $37.80 $35.50 $26.94
---------- ------ ------ ------
17
PERCENT OFFICE
PERCENT OF LEASED AT SUBMARKET
TOTAL TOTAL COMPANY PERCENT
NUMBER OF COMPANY COMPANY OFFICE LEASED/
STATE, CITY, SUBMARKET PROPERTIES NRA(1) NRA(1) PROPERTIES OCCUPIED(2)
---------------------- ---------- ---------- ---------- ---------- -----------
CLASS A OFFICE PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 69 27,191,986 97% 92% 88%
=== ========== ========== ========== ==========
CLASS B OFFICE PROPERTIES
TEXAS
HOUSTON
Richmond-Buffalo Speedway 3 672,003 2% 81% 84%
The Woodlands 2 134,625 1 98 47
--- ---------- ---------- ---------- ----------
Subtotal/Weighted Average 5 806,628 3% 84% 81%
--- ---------- ---------- ---------- ----------
CLASS B OFFICE PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 5 806,628 3% 84% 81%
=== ========== ========== ========== ==========
CLASS A AND CLASS B
OFFICE PROPERTIES
TOTAL/WEIGHTED AVERAGE 74 27,998,614 100% 92%(7) 88%
=== ========== ========== ========== ==========
WEIGHTED
AVERAGE
WEIGHTED COMPANY
AVERAGE COMPANY FULL-
COMPANY QUOTED QUOTED SERVICE
SHARE OF MARKET RENTAL RENTAL
OFFICE RENTAL RATE RATE PER RATE PER
SUBMARKET PER SQUARE SQUARE SQUARE
STATE, CITY, SUBMARKET NRA(1)(2) FOOT(2)(3) FOOT(4) FOOT(5)
---------------------- ---------- ----------- -------- --------
CLASS A OFFICE PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 16% $23.05 $25.10 $22.44
========== ====== ====== ======
CLASS B OFFICE PROPERTIES
TEXAS
HOUSTON
Richmond-Buffalo Speedway 22% $17.69 $16.80 $16.15
The Woodlands 47 16.60 16.60 16.92
---------- ------ ------ ------
Subtotal/Weighted Average 24% $17.51 $16.77 $16.30
---------- ------ ------ ------
CLASS B OFFICE PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 24% $17.51 $16.77 $16.30
========== ====== ====== ======
CLASS A AND CLASS B
OFFICE PROPERTIES
TOTAL/WEIGHTED AVERAGE 16% $22.89 $24.86 $22.28(8)
========== ====== ====== ======
- ----------
(1) NRA means net rentable area in square feet.
(2) Market information is for Class A office space under the caption "Class
A Office Properties" and for Class B office space under the caption
"Class B Office Properties." Sources are CoStar Group (for the Dallas
CBD, Uptown/Turtle Creek, Far North Dallas, Las Colinas,
Richardson/Plano, Stemmons Freeway, LBJ Freeway, Fort Worth CBD,
Houston Richmond-Buffalo Speedway, Houston CBD, West Loop/Galleria, and
Katy Freeway submarkets), The Woodlands Operating Company, L.P. (for
The Woodlands submarket), Costar (for the Austin CBD, Northwest and
Southwest submarkets), Cushman & Wakefield of Colorado, Inc. (for the
Denver Cherry Creek, CBD and Denver Technology Center submarkets),
Turner Commercial Research (for the Colorado Springs market), Grubb and
Ellis Company (for the Phoenix Downtown/CBD and Cammelback Corridor
submarkets), Building Interests, Inc. (for the Albuquerque CBD
submarket), RealData Information Systems, Inc. (for the Miami CBD and
South Dade/Kendall submarkets) and Costar/John Burnham & Co. (for the
San Diego University Town Center submarket).
(3) Represents full-service quoted market rental rates. These rates do not
necessarily represent the amounts at which available space at the
Office Properties will be leased. The weighted average subtotals and
total are based on total net rentable square feet of Company Office
Properties in the submarket.
(4) For Office Properties, represents weighted average rental rates per
square foot quoted by the Company, based on total net rentable square
feet of Company Office Properties in the submarket, adjusted, if
necessary, based on management estimates, to equivalent full-service
quoted rental rates to facilitate comparison to weighted average Class
A or Class B, as the case may be, quoted submarket rental rates per
square foot. These rates do not necessarily represent the amounts at
which available space at the Company's Office Properties will be
leased.
(5) Calculated based on base rent payable for Company Office Properties in
the submarket, without giving effect to free rent or scheduled rent
increases that would be taken into account under GAAP and including
adjustments for expenses payable by or reimbursed from tenants, divided
by total net rentable square feet of Company Office Properties in the
submarket.
(6) One Office Property in this submarket was sold subsequent to December
31, 2001.
(7) Leases have been executed at certain Office Properties in these
submarkets but had not commenced as of December 31, 2001. If such
leases had commenced as of December 31, 2001, the percent leased for
all Office Properties in the Company's submarkets would have been 93%.
The total percent leased for these Class A Company submarkets would
have been as follows: Richardson/Plano - 99%; Fort Worth CBD - 95%;
Austin-Northwest - 100%; and Colorado Springs - 67%.
(8) The weighted average full-service rental rate per square foot
calculated based on base rent payable for Company Office Properties,
giving effect to free rent and scheduled rent increases that would be
taken into consideration under GAAP and including adjustments for
expenses payable by or reimbursed from tenants is $22.42.
18
The following table shows, as of December 31, 2001, the principal
business conducted by the tenants at the Company's Office Properties, based on
information supplied to the Company from the tenants.
Percent of
Industry Sector Leased Sq. Ft.
--------------- --------------
Professional Services(1) 27%
Energy(2) 21
Financial Services(3) 19
Telecommunications 8
Technology 7
Manufacturing 3
Food Service 3
Government 3
Retail 2
Medical 2
Other(4) 5
---
TOTAL LEASED 100%
===
- ----------
(1) Includes legal, accounting, engineering, architectural and advertising
services.
(2) Includes oil and gas and utility companies.
(3) Includes banking, title and insurance and investment services.
(4) Includes construction, real estate, transportation and other
industries.
AGGREGATE LEASE EXPIRATIONS OF OFFICE PROPERTIES
The following tables show schedules of lease expirations for leases in
place as of December 31, 2001, for the Company's total Office Properties and for
Dallas, Houston and Austin, Texas, and Denver, Colorado, individually, for each
of the 10 years beginning with 2002, assuming that none of the tenants exercises
or has exercised renewal options.
TOTAL OFFICE PROPERTIES
PERCENTAGE
NET RENTABLE PERCENTAGE OF TOTAL OF ANNUAL FULL-
AREA LEASED NET ANNUAL ANNUAL FULL- SERVICE RENT
NUMBER OF REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT PER SQUARE
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
------------- ------------ ------------- -------------- ------------ ------------ -------------
2002 468 3,869,011(2) 15.3% $ 85,393,837 14.4% $ 22.07
2003 339 3,534,746(3) 14.0 76,445,243 12.9 21.63
2004 276 4,327,226 17.1 99,509,168 16.8 23.00
2005 237 3,385,760 13.4 79,321,957 13.4 23.43
2006 177 2,574,065 10.2 62,564,254 10.6 24.31
2007 71 2,066,023 8.2 48,576,388 8.2 23.51
2008 32 983,109 3.9 24,066,598 4.1 24.48
2009 19 676,981 2.7 17,305,474 2.9 25.56
2010 27 1,504,156 6.0 40,528,244 6.8 26.94
2011 26 723,362 2.9 19,573,471 3.3 27.06
2012 and thereafter 19 1,587,599 6.3 39,124,239 6.6 24.64
------------ ------------ ------------ ------------ ------------ ------------
1,691 25,232,038(4) 100.0% $592,408,873 100.0 % $ 23.48
============ ============ ============ ============ ============ ============
- ----------
(1) Calculated based on base rent payable under the lease for net rentable
square feet expiring, without giving effect to free rent or scheduled
rent increases that would be taken into account under GAAP and
including adjustments for expenses payable by or reimbursable from
tenants based on current expense levels.
(2) As of December 31, 2001, leases have been signed for approximately
1,471,592 net rentable square feet (representing approximately 38% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2002.
(3) As of December 31, 2001, leases have been signed for approximately
460,353 net rentable square feet (representing approximately 13% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2003.
19
(4) Reconciliation to the Company's total Office Property net rentable area
is as follows:
SQUARE PERCENTAGE
FEET OF TOTAL
---------- ----------
Square footage occupied by tenants 25,232,038 90.1%
Square footage reflecting
management offices, building use,
and remeasurement adjustments 387,158 1.4
Square footage vacant 2,379,418 8.5
---------- -----
Total net rentable square footage 27,998,614 100.0%
========== =====
DALLAS OFFICE PROPERTIES
PERCENTAGE
NET RENTABLE PERCENTAGE OF TOTAL OF ANNUAL FULL-
AREA LEASED NET ANNUAL ANNUAL FULL- SERVICE RENT
NUMBER OF REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT PER SQUARE
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
------------- ------------ ------------- ------------- ------------ ------------ -------------
2002 130 1,202,785(2) 12.8% $ 30,170,470 13.1% $ 25.08
2003 94 1,342,618(3) 14.3 29,997,695 13.0 22.34
2004 84 1,150,737 12.2 30,276,805 13.1 26.31
2005 91 1,795,101 19.1 41,139,066 17.8 22.92
2006 43 702,018 7.5 17,875,245 7.8 25.46
2007 26 1,048,063 11.2 25,470,093 11.1 24.30
2008 11 590,319 6.3 15,449,754 6.7 26.17
2009 6 376,473 4.0 9,744,552 4.2 25.88
2010 13 733,171 7.8 21,211,321 9.2 28.93
2011 7 198,876 2.1 5,684,743 2.5 28.58
2012 and thereafter 2 254,018 2.7 3,455,038 1.5 13.60
------------ ------------- ------------- ------------ ----------- -------------
507 9,394,179 100.0% $230,474,782 100.0% $ 24.53
============ ============= ============= ============ =========== =============
(1) Calculated based on base rent payable under the lease for net rentable
square feet expiring, without giving effect to free rent or scheduled
rent increases that would be taken into account under GAAP and
including adjustments for expenses payable by or reimbursable from
tenants based on current expense levels.
(2) As of December 31, 2001, leases have been signed for approximately
277,925 net rentable square feet (representing approximately 23% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2002.
(3) As of December 31, 2001, leases have been signed for approximately
84,062 net rentable square feet (representing approximately 6% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2003.
20
HOUSTON OFFICE PROPERTIES
PERCENTAGE
NET RENTABLE PERCENTAGE OF TOTAL OF ANNUAL FULL-
AREA LEASED NET ANNUAL ANNUAL FULL- SERVICE RENT
NUMBER OF REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT PER SQUARE
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
------------- ------------ ------------- ------------- ------------ ------------ -------------
2002 182 1,499,472(2) 15.9% $ 30,138,158 14.5% $ 20.10
2003 128 1,243,846(3) 13.2 25,424,330 12.2 20.44
2004 107 2,121,173 22.5 43,386,335 20.9 20.45
2005 71 576,838 6.1 12,801,669 6.2 22.19
2006 60 1,152,161 12.2 25,946,294 12.5 22.52
2007 22 754,456 8.0 16,571,175 8.0 21.96
2008 10 293,235 3.1 5,996,878 2.9 20.45
2009 3 74,984 0.8 1,729,655 0.8 23.07
2010 7 582,997 6.2 13,872,390 6.7 23.79
2011 10 416,487 4.4 10,130,045 4.9 24.32
2012 and thereafter 4 693,726 7.6 21,924,512 10.4 31.60
------------ ------------ ------- ------------ ------- -------
604 9,409,375 100.0% $207,921,441 100.0% $ 22.10
============ ============ ======= ============ ======= =======
- ----------
(1) Calculated based on base rent payable under the lease for net rentable
square feet expiring, without giving effect to free rent or scheduled
rent increases that would be taken into account under GAAP and
including adjustments for expenses payable by or reimbursable from
tenants based on current expense levels.
(2) As of December 31, 2001, leases have been signed for approximately
650,146 net rentable square feet (representing approximately 43% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2002.
(3) As of December 31, 2001, leases have been signed for approximately
269,229 net rentable square feet (representing approximately 22% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2003.
AUSTIN OFFICE PROPERTIES
PERCENTAGE
NET RENTABLE PERCENTAGE OF TOTAL OF ANNUAL FULL-
AREA LEASED NET ANNUAL ANNUAL FULL- SERVICE RENT
NUMBER OF REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT PER SQUARE
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
------------- ----------- ------------- -------------- ------------ ------------ -------------
2002 35 197,617(2) 11.3% $ 5,332,326 11.6% $26.98
2003 31 207,735(3) 11.9 5,223,132 11.4 25.14
2004 17 347,369 19.8 8,460,804 18.5 24.36
2005 25 531,494 30.3 13,832,510 30.2 26.03
2006 16 318,543 18.2 9,102,744 19.8 28.58
2007 5 42,266 2.4 1,142,580 2.5 27.03
2008 3 49,094 2.8 1,253,991 2.7 25.54
2009 1 21,447 1.2 541,751 1.2 25.26
2010 -- -- -- -- -- --
2011 2 3,773 0.2 145,987 0.3 38.69
2012 and thereafter 1 33,315 1.9 828,777 1.8 24.88
----------- ----------- ------ ----------- ------ ------
136 1,752,653 100.0% $45,864,602 100.0% $26.17
=========== =========== ====== =========== ====== ======
- ----------
(1) Calculated based on base rent payable under the lease for net rentable
square feet expiring, without giving effect to free rent or scheduled
rent increases that would be taken into account under GAAP and
including adjustments for expenses payable by or reimbursable from
tenants based on current expense levels.
(2) As of December 31, 2001, leases have been signed for approximately
103,637 net rentable square feet (representing approximately 52% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2002.
(3) As of December 31, 2001, leases have been signed for approximately
31,762 net rentable square feet (representing approximately 15% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2003.
21
DENVER OFFICE PROPERTIES
PERCENTAGE
NET RENTABLE PERCENTAGE OF TOTAL OF ANNUAL FULL-
AREA LEASED NET ANNUAL ANNUAL FULL- SERVICE RENT
NUMBER OF REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT PER SQUARE
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) LEASES EXPIRING(1)
------------- ------------ ------------- ------------- ------------ ------------ -------------
2002 41 604,619(2) 38.2% $12,076,836 35.9% $ 19.97
2003 36 469,416(3) 29.7 9,788,225 29.1 20.85
2004 17 198,332 12.5 4,308,220 12.8 21.72
2005 15 171,349 10.8 4,002,821 11.9 23.36
2006 10 71,586 4.5 1,781,483 5.3 24.89
2007 2 15,988 1.0 378,437 1.1 23.67
2008 1 21,351 1.4 603,806 1.8 28.28
2009 4 19,602 1.2 445,447 1.3 22.72
2010 2 7,611 0.5 183,357 0.6 24.09
2011 1 2,478 0.2 52,038 0.2 21.00
2012 and thereafter -- -- 0.0 -- 0.0 --
----------- ----------- ----------- ----------- ----------- -----------
129 1,582,332 100.0% $33,620,670 100.0% $ 21.25
=========== =========== =========== =========== =========== ===========
- ----------
(1) Calculated based on base rent payable under the lease for net rentable
square feet expiring, without giving effect to free rent or scheduled
rent increases that would be taken into account under GAAP and
including adjustments for expenses payable by or reimbursable from
tenants based on current expense levels.
(2) As of December 31, 2001, leases have been signed for approximately
343,913 net rentable square feet (representing approximately 57% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2002.
(3) As of December 31, 2001, leases have been signed for approximately
22,397 net rentable square feet (representing approximately 5% of
expiring square footage and including renewed leases and leases of
previously unleased space) commencing in 2003.
22
RESORT/HOTEL PROPERTIES
The following table shows certain information for the years ended
December 31, 2001, and 2000, with respect to the Company's Resort/Hotel
Properties. The information for the Resort/Hotel Properties is based on
available rooms, except for Canyon Ranch-Tucson and Canyon Ranch-Lenox, which
measure their performance based on available guest nights.
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
AVERAGE
OCCUPANCY
YEAR RATE
COMPLETED/ ----------------
RESORT/HOTEL PROPERTY(1) LOCATION RENOVATED ROOMS 2001 2000
- ------------------------ -------- ---------- -------- ------ -----
UPSCALE BUSINESS CLASS HOTELS:
Denver Marriott City Center Denver, CO 1982/1994 613 77% 84%
Hyatt Regency Albuquerque Albuquerque, NM 1990 395 69 69
Omni Austin Hotel Austin, TX 1986 372 68 81
Renaissance Houston Hotel Houston, TX 1975/2000 389 64 59
-------- ------ -----
TOTAL/WEIGHTED AVERAGE 1,769 71% 75%
======== ====== =====
LUXURY RESORTS AND SPAS:
Park Hyatt Beaver Creek Resort and Spa(2) Avon, CO 1989 276 57% 69%
Sonoma Mission Inn & Spa Sonoma, CA 1927/1987/1997 228 59 75
Ventana Inn & Spa Big Sur, CA 1975/1982/1988 62 73 78
-------- ------ -----
TOTAL/WEIGHTED AVERAGE 566 60% 72%
======== ====== =====
GUEST
DESTINATION FITNESS RESORTS AND SPAS: NIGHTS
------
Canyon Ranch-Tucson Tucson, AZ 1980 250(3)
Canyon Ranch-Lenox Lenox, MA 1989 212(3)
-------- ------ -----
TOTAL/WEIGHTED AVERAGE 462 81% 86%
======== ====== =====
GRAND TOTAL/WEIGHTED AVERAGE FOR RESORT/HOTEL PROPERTIES 70% 76%
====== =====
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
REVENUE
AVERAGE PER
DAILY AVAILABLE
RATE ROOM/GUEST
RESORT/HOTEL PROPERTY(1) ------------------ -----------------
- ------------------------ 2001 2000 2001 2000
------ ------ ------ ------
UPSCALE BUSINESS CLASS HOTELS:
Denver Marriott City Center
Hyatt Regency Albuquerque $ 123 $ 120 $ 95 $ 101
Omni Austin Hotel 108 106 74 73
Renaissance Houston Hotel 124 133 84 108
113 95 73 56
TOTAL/WEIGHTED AVERAGE ------ ------ ------ ------
$ 118 $ 116 $ 83 $ 86
====== ====== ====== ======
LUXURY RESORTS AND SPAS:
Park Hyatt Beaver Creek Resort and Spa(2)
Sonoma Mission Inn & Spa $ 278 $ 254 $ 159 $ 176
Ventana Inn & Spa 299 302 176 226
420 458 304 358
TOTAL/WEIGHTED AVERAGE ------ ------ ------ ------
$ 305 $ 298 $ 182 $ 216
====== ====== ====== ======
DESTINATION FITNESS RESORTS AND SPAS:
Canyon Ranch-Tucson
Canyon Ranch-Lenox
TOTAL/WEIGHTED AVERAGE ------ ------ ------ ------
$ 622 $ 593 $ 482 $ 487
====== ====== ====== ======
GRAND TOTAL/WEIGHTED AVERAGE FOR RESORT/HOTEL PROPERTIES $ 245 $ 238 $ 170 $ 180
====== ====== ====== ======
- ----------
(1) As of December 31, 2001, the Company had leased all of the Resort/Hotel
Properties, except the Omni Austin Hotel, to subsidiaries of COPI. As
of December 31, 2001, the Omni Austin Hotel was leased pursuant to a
separate lease to HCD Austin Corporation. On February 14, 2002, the
Company executed an agreement with COPI, pursuant to which COPI
transferred to subsidiaries of the Company, in lieu of foreclosure,
COPI's lessee interests in the eight Resort/Hotel Properties.
(2) The hotel is undergoing a $6.9 million renovation of all guestrooms.
The project is scheduled to be completed by the second quarter of 2002.
(3) Represents available guest nights, which is the maximum number of
guests that the resort can accommodate per night.
23
RESIDENTIAL DEVELOPMENT PROPERTIES
The following table shows certain information as of December 31, 2001,
relating to the Residential Development Properties.
TOTAL
RESIDENTIAL RESIDENTIAL TOTAL LOTS/UNITS
RESIDENTIAL DEVELOPMENT DEVELOPMENT LOTS/ DEVELOPED
DEVELOPMENT PROPERTIES TYPE OF CORPORATION'S UNITS SINCE
CORPORATION(1) (RDP) RDP(2) LOCATION OWNERSHIP % PLANNED INCEPTION
--------------- ----------- ------- -------- ------------- ------- ----------
Desert Mountain Desert Mountain SF Scottsdale, AZ 93.0% 2,665 2,338
------- --------
Development
Corporation
The Woodlands The Woodlands SF The Woodlands, TX 42.5% 37,554 26,027
------- --------
Land Company,
Inc.
Crescent Bear Paw Lodge CO Avon, CO 60.0% 53(6) 53
Resort Eagle Ranch SF