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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, 2002.
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 par value $0.01 per share New York Stock Exchange
Series A Convertible Cumulative Preferred Shares of
Beneficial Interest par value $0.01 per share New York Stock Exchange
Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest par value $0.01 per share New York Stock Exchange
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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
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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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
YES X NO
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As of June 30, 2002, the aggregate market value of the 94,886,691 common shares
held by non-affiliates of the registrant was approximately $1.8 billion.
Number of Common Shares outstanding as of March 21, 2003: 99,240,398
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Number of Series A Preferred Shares outstanding as of March 21, 2003: 10,800,000
Number of Series B Preferred Shares outstanding as of March 21, 2003 3,400,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission for Registrant's 2003 Annual Meeting of Shareholders to be held in
June 2003 are incorporated by reference into Part III.
TABLE OF CONTENTS
PAGE
PART I.
Item 1. Business................................................................................ 3
Item 2. Properties.............................................................................. 17
Item 3. Legal Proceedings....................................................................... 29
Item 4. Submission of Matters to a Vote of Security Holders..................................... 29
PART II.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters................... 30
Item 6. Selected Financial Data................................................................. 32
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................................... 33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............................. 84
Item 8. Financial Statements and Supplementary Data............................................. 85
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................................... 203
PART III.
Item 10. Trust Managers and Executive Officers of the Registrant................................. 203
Item 11. Executive Compensation.................................................................. 204
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.............................................. 204
Item 13. Certain Relationships and Related Transactions.......................................... 204
Item 14. Controls and Procedures................................................................. 204
PART IV.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 204
2
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 real estate investment trust, and all of its direct
and indirect subsidiaries.
The direct and indirect subsidiaries of Crescent Equities at December
31, 2002 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.
At December 31, 2002, the assets and operations of the Company were
divided into four investment segments as follows:
o Office Segment;
o Resort/Hotel Segment;
o Residential Development Segment; and
o Temperature-Controlled Logistics Segment.
Within these segments, the Company owned in whole or in part the
following real estate assets (the "Properties") as of December 31, 2002:
o OFFICE SEGMENT consisted of 73 office properties, including
three retail properties (collectively referred to as the
"Office Properties"), located in 25 metropolitan submarkets in
six states, with an aggregate of approximately 29.5 million
net rentable square feet.
o RESORT/HOTEL SEGMENT consisted of six luxury and destination
fitness resorts and spas with a total of 1,306 rooms/guest
nights and four upscale business-class hotel properties with a
total of 1,771 rooms (collectively referred to as the
"Resort/Hotel Properties").
o RESIDENTIAL DEVELOPMENT SEGMENT consisted of the Company's
ownership of real estate mortgages and voting and non-voting
common stock representing interests ranging from 94% to 100%
in five residential development corporations (collectively
referred to as the "Residential Development Corporations"),
which in turn, through partnership arrangements, owned in
whole or in part 22 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 Vornado Crescent Portland
Partnership (the "Temperature-Controlled Logistics
Partnership") and a 56% interest in the Vornado
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Crescent Carthage and KC Quarry, L.L.C. The
Temperature-Controlled Logistics Partnership owns all of the
common stock, representing substantially all of the economic
interest, of AmeriCold Corporation (the
"Temperature-Controlled Logistics Corporation"), a REIT. As of
December 31, 2002, the Temperature-Controlled Logistic
Corporation directly or indirectly owned 88
temperature-controlled logistics properties (collectively
referred to as the "Temperature-Controlled Logistics
Properties") with an aggregate of approximately 441.5 million
cubic feet (17.5 million square feet) of warehouse space. As
of December 31, 2002, Vornado Crescent Carthage and KC Quarry
L.L.C. owned two quarries and the related land.
See Note 3, "Segment Reporting," included in Item 8, "Financial
Statements and Supplementary Data," for a table showing total revenues,
operating expenses, equity in net income (loss) of unconsolidated companies and
funds from operations for each of these investment segments for the years ended
December 31, 2002, 2001 and 2000 and identifiable assets for each of these
investment segments at December 31, 2002 and 2001.
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.
See Note 9, "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 joint ventures and equity investments as of December
31, 2002, including seven Office Properties, one Resort/Hotel Property, two
Residential Development Corporations. See Note 8, "Temperature-Controlled
Logistics Segment," included in Item 8 "Financial Statements and Supplemental
Data," for information regarding the Company's ownership interest in the
Temperature-Controlled Logistics Properties.
For purposes of segment reporting as defined in Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of an
Enterprise and Related Information," and this Annual Report on Form 10-K, the
Office Properties, the Resort/Hotel Properties, the Residential Development
Properties and the Temperature-Controlled Logistics Properties are considered
four separate reportable segments. However, for purposes of investor
communications, the Company classifies its luxury and destination fitness
resorts and spas and Residential Development Properties as a single group
referred to as the "Resort and Residential Development Sector" due to the
similar characteristics of targeted customers. This group does not contain the
four business-class hotel properties. Instead, for investor communications, the
four business-class hotel properties are classified with the
Temperature-Controlled Logistics Properties as the Company's "Investment
Sector."
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
asset quality, customer service and economics of scale with dominant market
share.
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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 primarily
within the Office Segment in 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. 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 in
conjunction with joint venture capital, primarily within the
Company's Office Segment;
o selectively developing the Company's commercial land
inventory, primarily in its Office and Residential Development
Segments in order to meet the needs of customers;
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.
FINANCING STRATEGIES
The Company employs a disciplined set of financing strategies 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 to reduce interest cost, where appropriate replace
secured debt with unsecured debt, maintain a conservative debt
maturity schedule and expand the Company's lending group;
o minimizing the Company's exposure to market changes in
interest rates through fixed rate debt and interest rate swaps
as appropriate; and
o utilizing a combination of debt, equity, joint venture capital
and selected asset disposition alternatives to finance
acquisition and development opportunities.
5
EMPLOYEES
As of March 21, 2003, the Company had approximately 671 employees. None
of these employees are covered by collective bargaining agreements. The Company
considers its employee relations to be good.
TAX STATUS
The Company has elected to be taxed as a REIT under Sections 856
through 860 of the U.S. Internal Revenue Code of 1986, as amended (the "Code")
and operates in a manner intended to enable it to continue to qualify as a REIT.
As a REIT, the Company generally will not be subject to corporate federal income
tax on net income that it currently distributes to its shareholders, provided
that the Company satisfies certain organizational and operational requirements
including the requirement to distribute at least 90% of its REIT taxable income
to its shareholders each year. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
tax rates. The Company is subject to certain state and local taxes.
The Company has elected to treat certain of its corporate subsidiaries
as taxable REIT subsidiaries (each, a "TRS"). In general, a TRS of the Company
may perform additional services for tenants of the Company and generally may
engage in any real estate or non-real estate business (except for the operation
or management of health care facilities or lodging facilities or the provision
to any person, under a franchise, license or otherwise, of rights to any brand
name under which any lodging facility or health care facility is operated). A
TRS is subject to corporate federal income tax.
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, as amended ("CERCLA");
o Resource Conservation & Recovery Act;
o Clean Water Act;
o Clean Air Act;
o Toxic Substances Control Act; and,
o Occupational Safety & Health Act.
The application of these laws to a specific property that the 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 and
comparable state laws, a current or previous owner or operator of real estate
may be required to investigate and clean up certain hazardous or toxic
substances, asbestos-containing materials, or petroleum product releases at the
property. They may also be held liable to a governmental entity or third parties
for property damage and for investigation and clean up costs such parties incur
in connection with the contamination, whether or not the owner or operator knew
of, or was responsible for, the contamination. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The owner or
operator of a site also may be liable under certain environmental laws and
common law to third parties for damages and injuries resulting from
environmental contamination emanating from the site. Such costs or liabilities
could exceed the value of the affected real estate. The presence of
contamination or the failure to remediate contamination may adversely affect the
owner's ability to sell or lease real estate or to borrow using the real estate
as collateral.
Compliance by the 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
6
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, 2002, the Company owned or had an interest in 73
Office Properties located in 25 metropolitan submarkets in six states, with an
aggregate of approximately 29.5 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 the leases of its 66 Consolidated
Office Properties as operating leases. Additionally, the Company provides
management and leasing services for the majority of its Office Properties.
See Item 2, "Properties," for more information about the Company's
Office Properties. See Note 1, "Organization and Basis of Presentation," of 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. See Note 9, "Investments in Real Estate Mortgages and Equity of
Unconsolidated Companies," of Item 8, "Financial Statements and Supplementary
Data," for a table that lists the Company's ownership in the seven Office
Properties in which the Company owned an interest through unconsolidated joint
ventures.
2002 TRANSACTIONS
JOINT VENTURES
Three Westlake Park
On August 21, 2002, the Company entered into a joint venture
arrangement with an affiliate of General Electric Pension Fund (the affiliate is
referred to as "GE") in connection with which the Company contributed an Office
Property, Three Westlake Park in Houston, Texas. GE made a cash contribution.
The joint venture is structured such that GE holds an 80% equity interest in
Three Westlake Park, a 415,000 square feet Office Property located in the Katy
Freeway submarket of Houston. The Company continues to hold the remaining 20%
equity interest in the Office Property. The joint venture generated
approximately $47.1 million in net cash proceeds to the Company, resulting from
the sale of its 80% equity interest and $6.6 million from the Company's portion
of mortgage financing at the joint venture level.
Miami Center
On September 25, 2002, the Company entered into a joint venture
arrangement with an affiliate of a fund managed by JPMorgan Fleming Asset
Management (the affiliate is referred to as "JPM Fund I") in connection with
which JPM Fund I purchased a 60% interest in Crescent Miami Center, L.L.C. with
a cash contribution. Crescent Miami Center, L.L.C. owns an office property,
Miami Center, in Miami, Florida. The joint venture is structured such that JPM
Fund I holds a 60% equity interest in Miami Center, a 782,000 square foot Office
Property located in Miami, Florida. The Company holds the remaining 40% equity
interest in the Office Property. The joint venture generated approximately
$111.0 million in net cash proceeds to the Company, resulting from the sale of
its 60% equity interest and $32.4 million from the Company's portion of mortgage
financing at the joint venture level.
Five Post Oak Park
On December 20, 2002, the Company entered into a joint venture
arrangement, Five Post Oak Park, L.P., with GE. The joint venture purchased Five
Post Oak Park located in the Galleria area of Houston, Texas, for $64.8 million.
The Property is a 567,000 square foot Class A office building. GE owns a 70%
interest, and the Company owns a 30% interest, in the joint venture. The initial
7
cash equity contribution to the joint venture was $19.8 million, of which the
Company's portion was $5.9 million. The Company's equity contribution and an
additional working capital contribution of $0.3 million were funded through a
draw under the Company's credit facility. The remainder of the purchase price of
the Property was funded by a secured loan to the joint venture in the amount of
$45.0 million.
ACQUISITIONS
Johns Manville Plaza
On August 29, 2002, the Company acquired Johns Manville Plaza, a
29-story, 675,000 square foot Class A office building located in Denver,
Colorado. The Company acquired the Office Property for approximately $91.2
million, funded by a draw on the Company's credit facility.
Undeveloped Land
On November 26, 2002, the Company purchased Duddlesten Ventures-I,
Ltd.'s 20% interest in the Crescent Duddlesten Hotel Partnership for $11.1
million, funded by a draw on the Company's credit facility, and increasing the
Company's ownership percentage from 80% to 100%. This partnership owned 3.79
acres of undeveloped land in downtown Houston, and therefore the Company
recorded the $11.1 million as an increase to land.
DEVELOPMENT
5 Houston Center
On September 16, 2002, 5 Houston Center, a 27-story, Class A Office
Property consisting of 577,000 net rentable square feet located adjacent to the
Company's Houston Center mixed-use Office Property complex, was completed. The
Company has a 25% equity interest in this Property, with the remaining 75% owned
by a pension fund advised by JPMorgan Fleming Asset Management (the fund is
referred to as "JPM Fund II"). The building was financed with a construction
loan, which the Company fully guarantees, that can be drawn to a maximum of
$82.5 million. Approximately $63.0 million was outstanding under the
construction loan at December 31, 2002. The guaranteed amount reduces upon the
achievement of specified conditions.
DISPOSITIONS
Office Properties
During the year ended December 31, 2002, the Company disposed of seven
of its fully consolidated Office Properties. The sale of the seven Office
Properties generated approximately $68.6 million of net proceeds to the Company,
including cash payment on a note receivable of $10.6 million received on
February 19, 2003. On January 18, 2002, the Company completed the sale of the
Cedar Springs Plaza Office Property in Dallas, Texas. On May 29, 2002, the
Woodlands Office Equities - '95 Limited ("WOE") completed the sale of two Office
Properties located within The Woodlands, Texas. On August 1, 2002, the Company
completed the sale of the 6225 North 24th Street Office Property in Phoenix,
Arizona. On September 20, 2002 the Company completed the sale of the Reverchon
Plaza Office Property in Dallas, Texas. On December 31, 2002, WOE completed the
sale of two Office Properties located within The Woodlands, Texas.
Undeveloped Land
During the year ended December 31, 2002, the Company completed the sale
of approximately 10 acres of undeveloped land generating net proceeds of
approximately $53.4 million. On September 30, 2002, the Company completed the
sale of approximately 1.4 acres of undeveloped land, located in the Georgetown
submarket of Washington, D.C. On December 31, 2002, the Company completed the
sale of approximately 5.46 acres of undeveloped land near the Houston Convention
Center in downtown Houston. On December 31, 2002, the Company completed the sale
of approximately 3.12 acres of undeveloped land located in the Greenway Plaza
office complex of Houston, Texas.
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MARKET INFORMATION
The Office Property portfolio reflects the Company's strategy of
investing in first-class assets within markets that have significant potential
for long-term 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 and
Houston, Texas metropolitan areas, both of which are projected to benefit from
strong population and employment growth over the next ten years. As indicated in
the table 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" 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
According to the Bureau of Labor Statistics, the 2002 job market
weakened in Texas. Approximately 23,000 jobs were lost in 2002. As of December
2002, the Texas unemployment rate was 6.5%, compared to the national
unemployment rate of 5.8%.
DALLAS
According to the Bureau of Labor Statistics, the job market weakened
considerably in the Dallas area in 2002. Approximately 31,000 jobs were lost in
2002. As of December 31, 2002, the Dallas unemployment rate was 6.1%, compared
with the Texas unemployment rate of 6.5% and the national unemployment rate of
5.8%. As for Dallas' 2002 commercial office market, according to CoStar data,
citywide net economic absorption was approximately negative 2.8 million square
feet, including a negative 1.5 million square feet in Class A Office space. The
city's total net absorption, including space available for sublease, was
approximately a negative 4.4 million square feet for 2002, with Class A
representing a negative 2.7 million of the 4.4 million total.
HOUSTON
Houston's employment data held steady through much of 2002, despite
economic difficulties. Approximately 13,000 jobs were lost in 2002, an increase
of approximately 0.2% over 2001. As of December 2002, the Houston unemployment
rate was 5.4%, compared with the Texas unemployment rate of 6.5% and the
national unemployment rate of 5.8%. As for Houston's 2002 commercial office
market, according to CoStar data, citywide net economic absorption was
approximately negative 2.8 million square feet, including a negative 1.0 million
square feet in Class A office space. Houston's total net absorption, including
space available for sublease, was a negative approximately 4.8 million square
feet for 2002, with Class A Office space at a negative total net absorption of
2.6 million.
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.
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PROJECTED POPULATION GROWTH AND EMPLOYMENT GROWTH FOR ALL COMPANY MARKETS
Population Employment
Growth Growth
Metropolitan Statistical Area 2003-2012 2003-2012
- ----------------------------------- ---------- ----------
Albuquerque, NM 13.7 % 23.4 %
Austin, TX 25.5 30.2
Colorado Springs, CO 11.3 15.4
Dallas, TX 16.2 22.2
Denver, CO 10.8 16.7
Fort Worth, TX 19.0 23.0
Houston, TX 15.3 22.4
Miami, FL 8.2 16.7
Phoenix, AZ 26.1 34.7
San Diego, CA 17.9 19.9
United States 8.4 13.1
- ----------
Source: Compiled from information published by Economy.com, Inc.
The Office Segment does not depend on a single tenant or a few major
tenants, 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, 2002, no single tenant accounted for
more than 5% of the Company's total Office Segment rental revenues for 2002. The
Company's top five customers accounted for approximately 13% of the Company's
total Office Segment rental revenues for the year ended December 31, 2002.
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 in-place 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 in-place weighted average full-service rental
rate for the year ended December 31, 2002 was $22.60 per square foot, compared
to an estimated weighted average full-service replacement cost rental rate of
$30.31 per square foot, or a 25% discount to replacement cost.
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, 2002, on a weighted average
basis, the Company owned approximately 16% of the Class A office space in the 25
submarkets in which the Company owned Class A office properties, and 16% 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
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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 income.
RESORT/HOTEL SEGMENT
OWNERSHIP STRUCTURE
As of December 31, 2002, the Company owned or had an interest in ten
Resort/Hotel Properties. The Company holds two of the Resort/Hotel Properties,
the Sonoma Mission Inn & Spa and the Ritz Carlton Palm Beach, through joint
venture arrangements, pursuant to which the Company owns an 80.1% interest in
the limited liability company that owns the Sonoma Mission Inn & Spa and a 50%
interest in the limited liability company that owns the Ritz Carlton Palm Beach.
Nine of the Resort/Hotel Properties are leased to taxable REIT
subsidiaries that the Company owns or in which it has an interest. The Omni
Austin Hotel is leased to HCD Austin Corporation, an unrelated third party.
Third party operators manage nine of the Resort/Hotel Properties.
Ventana Inn and Spa is managed by Sonoma Management Company, or "Sonoma
Management," an entity in which the Company owned a 9.9% interest as of December
31, 2002. On March 14, 2003, the Company sold its 10% interest to the 90% owner
of Sonoma Management. In addition, five of the Resort/Hotel Properties that are
managed by third party operators also are subject to a Master Asset Management
and Administrative Services Agreement with Sonoma Management, pursuant to which
Sonoma Management receives asset management and incentive fees, payment of which
the Company guarantees.
2002 TRANSACTIONS
COPI TRANSACTION
Resort/Hotel Lease Transfers
Prior to February 14, 2002, the Company had leased eight of its
Resort/Hotel Properties to subsidiaries of COPI pursuant to eight separate
leases. 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.
CR License, LLC and CRL Investments, Inc.
Prior to February 14, 2002, the Company had a 28.5% interest in CR
License, LLC, the entity that 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 stock, in CRL Investments Inc., which owns a 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 COPI transferred to subsidiaries of the Company, in lieu of a
strict foreclosure, COPI's 1.5% interest in CR License, LLC and 5.0% interest,
representing all of the voting stock, in CRL Investments, Inc. As of December
31, 2002, the Company had a 30% interest in CR License, LLC and a 100% interest
in CRL Investments, Inc., a taxable REIT subsidiary.
JOINT VENTURES
Sonoma Mission Inn & Spa
On September 1, 2002, the Company entered into a joint venture
arrangement with a subsidiary of Fairmont Hotels & Resorts, Inc. (the subsidiary
is referred to as "FHR"), pursuant to which the Company contributed a
Resort/Hotel Property, the Sonoma Mission Inn & Spa in Sonoma County, California
and FHR purchased a 19.9% equity interest in the limited liability company that
owns the Resort/Hotel Property for $8.0 million. The Company continues to hold
the remaining 80.1% equity interest. The Company loaned $45.1 million to the
joint venture. FHR has a commitment to fund $10.0 million of future renovations
11
at Sonoma Mission Inn & Spa through a mezzanine loan. The Company manages the
limited liability company that owns the Sonoma Mission Inn & Spa and FHR
operates and manages the property for the tenant under the Fairmont brand. The
joint venture leases Sonoma Mission Inn & Spa to a taxable REIT subsidiary in
which the Company also holds an 80.1% equity interest.
Manalapan Hotel Partners
In October 2002, in a series of transactions, the Company acquired the
remaining 75% interest in Manalapan Hotel Partners, L.L.C. ("Manalapan"), which
owns the Ritz Carlton Palm Beach, a 270 room hotel located in Palm Beach,
Florida. The Company acquired the additional interest in Manalapan for $6.5
million. Subsequently, the Company entered into a joint venture arrangement with
WB Palm Beach Investors, L.L.C. ("Westbrook"), pursuant to which Westbrook
purchased a 50% equity interest in Manalapan. The Company holds the remaining
50% equity interest. Simultaneously with the admission of Westbrook into
Manalapan, the secured loan of $65.2 million was repaid with proceeds from a new
secured loan of $56.0 million with Corus Bank and additional equity
contributions from Westbrook and the Company. Westbrook's total equity
contribution into Manalapan was $13.6 million. The Company and Westbrook each
obtained a letter of credit to guarantee repayment of up to $3.0 million of the
Corus Bank loan. Manalapan leases the Ritz Carlton Palm Beach to its
wholly-owned taxable REIT subsidiary.
DISPOSITIONS
Undeveloped Land
On September 30, 2002, the Company completed the sale of 30 acres of
land adjacent to the Company's Canyon Ranch - Tucson Resort/Hotel Property
located in Tucson, Arizona to an affiliate of the third party management company
of the Company's Canyon Ranch Resort/Hotel Properties. The sales price of the
land was approximately $9.4 million, for which the Company received $1.9 million
of cash proceeds and a promissory note in the amount of $7.5 million. This land
was wholly-owned by the Company and was included in the Company's Resort/Hotel
Segment. The Company has committed to fund a $3.2 million construction loan to
the purchaser which will be secured by 20 developed lots and a $0.6 million
letter of credit. The Company had not funded any of the $3.2 million commitment
as of December 31, 2002.
MARKET INFORMATION
Lodging demand is highly dependent upon the global economy and volume
of business travel. Prior to 2001, the hospitality industry enjoyed record
profits. However, the uncertainty surrounding the weak global economy which
continued throughout 2002 and the costs and fear resulting from the events of
September 11, 2001 resulted in weak performance for much of 2002. This is
evidenced by declines in both business and leisure travel in the United States.
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 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.
12
RESIDENTIAL DEVELOPMENT SEGMENT
OWNERSHIP STRUCTURE
As of December 31, 2002, the Company owned real estate mortgages and
voting and non-voting common stock representing interests of 94% to 100% in five
Residential Development Corporations, which in turn, through joint ventures or
partnership arrangements, owned in whole or in part 22 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, pursuant to a
strict foreclosure, COPI's voting interests in three of the Residential
Development Corporations. These three Residential Development Corporations, The
Woodlands Land Company, Inc. ("TWLC"), Desert Mountain Development Corporation
("DMDC") and Crescent Resort Development, Inc. ("CRDI"), owned interests in 16
Residential Development Properties.
As of December 31, 2002, the Company owned 97.44% of DBL Holdings, Inc.
("DBL"). On January 3, 2003, the Company purchased the remaining 2.56% interest,
representing all of the voting stock, in DBL from John Goff, Vice-Chairman of
the Board of Trust Managers and Chief Executive Officer of the Company. DBL owns
66.7% of the voting stock in two of the Company's Residential Development
Corporations, Houston Area Development ("HADC") and Mira Vista Development
Corporation ("MVDC"). These two Residential Development Corporations own
interests in six Residential Development Properties.
On December 31, 2002, CRDI, a consolidated subsidiary of the Company,
completed the sale of its 50% interest in two Colorado transportation companies,
East West Resort Transportation I ("EWRT I") and East West Resort Transportation
II ("EWRT II"), to an affiliate of CRDI business partners for $7.0 million,
consisting of $1.4 million in cash and a $5.6 million note receivable.
MARKET INFORMATION
Residential development demand is highly dependent upon the national
economy, mortgage interest rates, and home sales. A slowing economy which
continued through 2002, combined with the events of September 11, 2001,
contributed to the reduction in lot absorption, primarily at Desert Mountain and
at The Woodlands. However, the increase in commercial lands sales at The
Woodlands partially offset the lower number of lot sales. Desert Mountain's lot
absorption is also impacted by a change in product mix as higher priced lots are
being completed during the latter phases of the development. The economic
downturn impacted CRDI Properties less than Desert Mountain and The Woodlands
during 2002 because most of CRDI's units were under contract at the end of 2001
with planned closing in 2002.
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 Woodlands, Desert Mountain and the
properties owned by CRDI, representing the Company's most significant
investments in Residential Development Properties, contain certain features that
provide competitive advantages to these developments.
The Woodlands is an approximately 27,000-acre master-planned
residential and commercial community north of Houston, Texas with over 70,000
residents. It 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. There are
over 1,000 employers in The Woodlands employing approximately 31,000 people. In
2002, over 3,400 jobs were created. TWLC estimates future build-out at
approximately 12,187 residential lots and approximately 1,473 acres of
commercial
13
land, of which approximately 1,437 residential lots and 1,107 acres are
currently in inventory. The Woodlands competes with other master planned
communities in the surrounding Houston market.
Desert Mountain, a luxury residential and recreational private
community in Scottsdale, Arizona, offers five 18-hole Jack Nicklaus signature
golf courses and tennis courts. During 2002, DMDC began the development of a
sixth golf course which is expected to be completed in 2003. Management believes
Desert Mountain has few direct competitors due in part to the superior
environmental attributes and the types of amenities that it offers. One source
of direct competition is the resale market of existing lots and homes within
Desert Mountain. However, management believes their current inventory is
superior to the inventory available on the resale market with the higher priced
product being completed during the latter phases of the development.
CRDI invests primarily in mountain resort residential real estate in
Colorado and California, and residential real estate in downtown Denver,
Colorado. Management believes that the Properties owned by CRDI do not have any
direct competitors because the projects and project locations are unique and
land availability is limited in most of these locations.
TEMPERATURE-CONTROLLED LOGISTICS SEGMENT
OWNERSHIP STRUCTURE
As of December 31, 2002, 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 88 Temperature-Controlled Logistics Properties, with an aggregate of
approximately 441.5 million cubic feet (17.5 million square feet) of warehouse
space.
The Temperature-Controlled Logistics Corporation leases the
Temperature-Controlled Logistics Properties to AmeriCold Logistics, a limited
liability company owned 60% by Vornado Operating L.P. and 40% by a subsidiary of
COPI. The Company has no economic interest in AmeriCold Logistics. See Note 23,
"COPI," in Item 8 "Financial Statements and Supplemental Data," for information
on the proposed acquisition of COPI's 40% interest in AmeriCold Logistics by a
new entity to be owned by the Company's shareholders.
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 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
a maximum of $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 is required to be paid to December 31, 2003. On March 7, 2003 the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics further
amended the leases to extend the date on which deferred rent is required to be
paid to December 31, 2004.
AmeriCold Logistics deferred $32.2 million of the total $143.9 million
of rent payable for the year ended December 31, 2002, of which the Company's
share was $12.9 million. AmeriCold Logistics also deferred $25.5 million and
$19.0 million of rent for the years ended December 31, 2001 and 2000,
respectively, of which the Company's share was $10.2 million and $7.5 million,
respectively. In December 2001, Temperature-Controlled Logistics Corporation
waived its right to collect $39.8 million of deferred rent, the Company's share
of which was $15.9 million.
Vornado Crescent Carthage and KC Quarry, L.L.C.
On December 30, 2002, the Company contributed $11.2 million of notes
receivable, relating to loans to AmeriCold Logistics, to purchase a 56% equity
interest in Vornado Crescent Carthage and KC Quarry, L.L.C. ("VCQ"). Vornado
Realty Trust L.P. ("Vornado") contributed $8.8 million of cash to purchase a 44%
equity interest. The assets of VCQ include two quarries and the related land,
acquired by VCQ from AmeriCold Logistics, LLC ("AmeriCold Logistics"), the
tenant of the Company's Temperature-Controlled Logistics Properties, for a
purchase price of $20.0 million. On December 31, 2002, VCQ purchased $5.7
million
14
of trade receivables from AmeriCold Logistics at a 2% discount. The Company
contributed approximately $3.1 million to VCQ for the purchase of the
receivables.
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, distribution
and public 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. Public facilities generally serve the needs of local and
regional customers under short-term agreements. Food manufacturers and
processors use public facilities to store capacity overflow from their
production facilities or warehouses.
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 includes:
PERCENTAGE OF
2002 REVENUE
-------------
H.J. Heinz & Co 16%
Con-Agra Foods, Inc. 11
Philip Morris Companies, Inc. 8
Sara Lee Corp. 5
Tyson Foods, Inc. 5
General Mills/Pillsbury 4
McCain Foods, Inc. 4
J.R. Simplot 3
Flowers Industries, Inc. 3
Farmland Industries, Inc. 2
Other 39
--------
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.
15
COMPETITION
AmeriCold Logistics is the largest operator of public refrigerated
warehouse space in North America and has approximately twice the cubic feet of
the second largest operator. AmeriCold Logistics operated an aggregate of
approximately 28% of total cubic feet of public refrigerated warehouse space as
of December 31, 2002. No other person or entity operated more than 14% of total
public refrigerated warehouse space as of December 31, 2002. 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.
16
ITEM 2. PROPERTIES
The Company considers all of its Properties to be in good condition,
well-maintained, suitable and adequate to carry on the Company's business.
OFFICE PROPERTIES
As of December 31, 2002, the Company owned or had an interest in 73
Office Properties, including three retail properties (collectively referred to
as the "Office Properties"), located in 25 metropolitan submarkets in six states
with an aggregate of approximately 29.5 million net rentable square feet. The
Company's Office Properties are located primarily in the Dallas and Houston,
Texas, metropolitan areas. As of December 31, 2002, the Company's Office
Properties in Dallas and Houston represented an aggregate of approximately 74%
of its office portfolio based on total net rentable square feet (35% for Dallas
and 39% for Houston).
In pursuit of management's objective to dispose of non-strategic and
non-core assets, the Company disposed of seven of its fully consolidated Office
Properties during 2002. On January 18, 2002, the Company completed the sale of
the Cedar Springs Plaza Office Property in Dallas, Texas. On May 29, 2002, the
Woodlands Office Equities - '95 Limited ("WOE") completed the sale of two Office
Properties located within The Woodlands, Texas. On August 1, 2002, the Company
completed the sale of the 6225 North 24th Street Office Property in Phoenix,
Arizona. On September 20, 2002, the Company sold the Reverchon Plaza Office
Property in Dallas, Texas, and on December 31, 2002, WOE completed the sale of
an additional two Office Properties located within The Woodlands, Texas.
In pursuit of management's long-term investment strategy to capitalize
on strategic acquisition opportunities, the Company acquired Johns Manville
Plaza, an Office Property located in Denver, Colorado on August 29, 2002.
17
OFFICE PROPERTIES TABLES(1)
The following table shows, as of December 31, 2002, certain information
about the Company's Office Properties. In the table, "CBD" means central
business district. Based on rental revenues from office leases in effect as of
December 31, 2002, no single tenant accounted for more than 5% of the Company's
total Office Segment rental revenues for 2002. Excluded from this table until
stabilized are two office properties, Five Post Oak Park which was acquired
December 20, 2002, and the 5 Houston Center development which was placed into
service September 16, 2002. Stabilization is deemed to occur upon the earlier of
(a) achieving 93% occupancy or (b) one year following the date placed in-service
or the acquisition date.
WEIGHTED
AVERAGE
FULL-
SERVICE
NET RENTAL
RENTABLE RATE PER
NO. OF YEAR AREA PERCENT LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT. (2)
- ---------------------------------- ---------- ------------------------- --------- ----------- ----------- -------------
TEXAS
DALLAS
Bank One Center (3) 1 CBD 1987 1,530,957 82%(4) $ 22.91
Fountain Place 1 CBD 1986 1,200,266 99 20.96
The Crescent Office Towers 1 Uptown/Turtle Creek 1985 1,134,826 88 33.53
Trammell Crow Center (5) 1 CBD 1984 1,128,331 87 24.95
Stemmons Place 1 Stemmons Freeway 1983 634,381 85 17.83
Spectrum Center (6) 1 Far North Dallas 1983 598,250 84 23.03
Waterside Commons 1 Las Colinas 1986 458,906 85 18.86
125 E. John Carpenter Freeway 1 Las Colinas 1982 446,031 52 (4) 22.66
The Aberdeen 1 Far North Dallas 1986 320,629 100 19.58
MacArthur Center I & II 1 Las Colinas 1982/1986 298,161 91 24.15
Stanford Corporate Centre 1 Far North Dallas 1985 275,372 68 23.30
12404 Park Central 1 LBJ Freeway 1987 239,103 100 19.83
Palisades Central II 1 Richardson/Plano 1985 237,731 86 18.69
3333 Lee Parkway 1 Uptown/Turtle Creek 1983 233,543 49 22.32
Liberty Plaza I & II 1 Far North Dallas 1981/1986 218,813 99 16.49
The Addison 1 Far North Dallas 1981 215,016 99 20.09
Palisades Central I 1 Richardson/Plano 1980 180,503 92 21.59
The Crescent Atrium 1 Uptown/Turtle Creek 1985 164,696 99 31.30
Greenway II 1 Richardson/Plano 1985 154,329 100 22.56
Greenway I & IA 2 Richardson/Plano 1983 146,704 100 20.72
Addison Tower 1 Far North Dallas 1987 145,886 75 21.52
Las Colinas Plaza 1 Las Colinas 1987 134,953 95 20.76
5050 Quorum 1 Far North Dallas 1981 133,799 72 19.49
------ ---------- -------- -----------
Subtotal/Weighted Average 24 10,231,186 86% $ 23.09
------ ---------- -------- -----------
FORT WORTH
Carter Burgess Plaza 1 CBD 1982 954,895 95% $ 17.58
------ ---------- -------- -----------
HOUSTON
Greenway Plaza Office Richmond-Buffalo
Portfolio 10 Speedway 1969-1982 4,348,052 88%(4) $ 21.03
Houston Center 3 CBD 1974-1983 2,764,417 89 22.41
Post Oak Central 3 West Loop/Galleria 1974-1981 1,279,759 84 19.86
Four Westlake Park (7) 1 Katy Freeway 1992 561,065 100 22.01
Three Westlake Park (7) 1 Katy Freeway 1983 414,792 100 23.36
1800 West Loop South 1 West Loop/Galleria 1982 399,777 67 20.04
The Woodlands Office
Properties (8) 4 The Woodlands 1981-1996 267,053 91 17.92
The Park Shops 1 CBD 1983 190,729 79 22.48
------ ---------- -------- -----------
Subtotal/Weighted Average 24 10,225,644 88% $ 21.35
------ ---------- -------- -----------
AUSTIN
Frost Bank Plaza 1 CBD 1984 433,024 96% $ 25.35
301 Congress Avenue (9) 1 CBD 1986 418,338 78 26.40
Bank One Tower (7) 1 CBD 1974 389,503 94 24.66
Austin Centre 1 CBD 1986 343,664 75 27.00
The Avallon 3 Northwest 1993/1997 318,217 93 (4) 24.77
Barton Oaks Plaza One 1 Southwest 1986 98,955 85 (4) 26.91
------ ---------- -------- -----------
Subtotal/Weighted Average 8 2,001,701 87% $ 25.59
------ ---------- -------- -----------
COLORADO
DENVER
Johns Manville Plaza (10) 1 CBD 1978 675,400 91% $ 20.68
MCI Tower 1 CBD 1982 550,805 46 (4) 22.21
Ptarmigan Place 1 Cherry Creek 1984 418,630 98 20.32
Regency Plaza One 1 Denver Technology Center 1985 309,862 84 23.88
18
WEIGHTED
AVERAGE
FULL-
SERVICE
NET RENTAL
RENTABLE RATE PER
NO. OF YEAR AREA PERCENT LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT. (2)
- ---------------------------------- ---------- ----------------------- --------- ----------- ----------- -------------
55 Madison 1 Cherry Creek 1982 137,176 99 21.19
The Citadel 1 Cherry Creek 1987 130,652 97 25.17
44 Cook 1 Cherry Creek 1984 124,174 95 21.13
------ ---------- -------- -----------
Subtotal/Weighted Average 7 2,346,699 82% $ 21.60
------ ---------- -------- -----------
COLORADO SPRINGS
Briargate Office and
Research Center 1 Colorado Springs 1988 258,766 74% $ 19.41
------ ---------- -------- -----------
FLORIDA
MIAMI
Miami Center (11) 1 CBD 1983 782,211 94% $ 28.62
Datran Center 2 South Dade/Kendall 1986/1988 476,412 93 24.39
------ ---------- -------- -----------
Subtotal/Weighted Average 3 1,258,623 94% $ 27.04
------ ---------- -------- -----------
ARIZONA
PHOENIX
Two Renaissance Square 1 Downtown/CBD 1990 476,373 98% $ 26.11
------ ---------- -------- -----------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza 1 CBD 1990 366,236 86% $ 18.71
------ ---------- -------- -----------
CALIFORNIA
SAN DIEGO
Chancellor Park (12) 1 University Town Center 1988 195,733 66% $ 28.06
------ ---------- -------- -----------
TOTAL/WEIGHTED AVERAGE (13) 71 28,315,856 87% (4) $ 22.50 (14)
====== ========== ======== ===========
- ----------
(1) Office Property Table data is presented at 100% without giving effect
to Crescent's actual ownership percentage in joint ventured properties.
(2) Calculated based on base rent payable as of December 31, 2002, 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 customers.
(3) The Company has a 49.5% limited partner interest and a 0.5% general
partner interest in the partnership that owns Bank One Center.
(4) Leases have been executed at certain Office Properties but had not
commenced as of December 31, 2002. If such leases had commenced as of
December 31, 2002, the percent leased for all Office Properties would
have been 90%. The total percent leased for these Properties would have
been as follows: Bank One Center - 89%, 125 E. John Carpenter Freeway -
63%, Greenway Plaza - 95%, The Avallon - 100%, Barton Oaks Plaza One -
93%, and MCI Tower - 61%.
(5) 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.
(6) 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.
(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, Three
Westlake Park, and Bank One Tower.
(8) The Company has a 75% limited partner interest and an approximate 11%
indirect general partner interest in the partnership owning the four
Office Properties that comprise The Woodlands Office Properties.
(9) The Company has a 1% general partner interest and a 49% limited partner
interest in the partnership that owns 301 Congress Avenue.
(10) Johns Manville Plaza was acquired on August 29, 2002.
(11) The Company has a 40.0% member interest in the limited liability
company that owns Miami Center.
(12) 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.
(13) Property statistics exclude 5 Houston Center (which was developed and
then placed into service on September 16, 2002) and Five Post Oak Park
(which was acquired on December 20, 2002). These office properties will
be included in statistics once stabilized. Stabilization is deemed to
occur upon the earlier of (a) achieving 93% occupancy or (b) one year
following the date placed into service or the acquisition date.
(14) The weighted average full-service rental rate per square foot
calculated based on base rent payable for Company Office Properties as
of December 31, 2002, giving effect to free rent and scheduled rent
increases that are taken into consideration under GAAP and also
including adjustments for expenses paid by or reimbursed from customers
is $22.60.
19
The following table provides information, as of December 31, 2002, for
the Company's Office Properties by state, city and submarket.
Weighted
Weighted Average
Average Company
Quoted Company Full-
Percent Percent Office Company Market Quoted Service
of Leased at Submarket Share of Rental Rental Rental
Number Total Total Company Percent Office Rate Per Rate Per Rate Per
of Company Company Office Leased/ Submarket Square Square Square
State, City, Submarket Properties NRA(1) NRA(1) Properties Occupied(2) NRA(1)(2) Foot(2)(3) Foot(4) Foot(5)
- ---------------------------------- ---------- ---------- ------- ---------- ----------- --------- ---------- --------- -------
CLASS A OFFICE PROPERTIES
TEXAS
DALLAS
CBD 3 3,859,554 14% 89% 83% 21% 19.77 $ 25.01 $ 22.81
Far North Dallas 7 1,907,765 7 86 79 13 23.03 21.08 20.81
Uptown/Turtle Creek 3 1,533,065 5 83 85 27 25.65 33.75 32.26
Las Colinas 4 1,338,051 5 76(6) 78 10 20.30 21.67 21.36
Richardson/Plano 5 719,267 3 94 82 13 19.77 18.67 20.74
Stemmons Freeway 1 634,381 2 85 89 26 18.74 17.80 17.83
LBJ Freeway 1 239,103 1 100 70 3 20.28 19.70 19.83
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 24 10,231,186 37% 86% 80% 15% 21.28 $ 24.13 $ 23.09
------- ----------- ------ ------ --------- ------- --------- -------- -------
FORT WORTH
CBD 1 954,895 3% 95% 90% 21% 20.79 $ 21.80 $ 17.58
------- ----------- ------ ------ --------- ------- --------- -------- -------
HOUSTON
CBD 4 2,955,146 10% 88% 85% 12% 20.58 $ 22.68 $ 22.41
Richmond-Buffalo Speedway 7 3,674,888 13 88(6) 92 71 19.64 21.52 21.79
West Loop/Galleria 4 1,679,536 6 80 85 10 20.30 19.96 19.89
Katy Freeway 2 975,857 3 100 92 15 19.66 24.36 22.58
The Woodlands 3 173,005 1 100 84 16 20.49 19.06 17.51
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 20 9,458,432 33% 88% 86% 18% 20.07 $ 21.85 $ 21.68
------- ----------- ------ ------ --------- ------- --------- -------- -------
AUSTIN
CBD 4 1,584,529 6% 86% 81% 30% 22.17 $ 23.36 $ 25.70
Northwest 3 318,217 1 93(6) 77 4 19.37 19.77 24.77
Southwest 1 98,955 85(6) 92 3 19.01 22.51 26.91
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 8 2,001,701 7% 87% 82% 13% 21.57 $ 22.75 $ 25.59
------- ----------- ------ ------ --------- ------- --------- -------- -------
COLORADO
DENVER
CBD (7) 2 1,226,205 4% 71% NA% NA% NA $ 20.90 $ 21.12
Cherry Creek 4 810,632 3 97 NA NA NA 20.73 21.36
Denver Technology Center 1 309,862 1 84 NA NA NA 20.00 23.88
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 7 2,346,699 8% 82% NA% NA% NA $ 20.72 $ 21.60
------- ----------- ------ ------ --------- ------- --------- -------- -------
COLORADO SPRINGS
Colorado Springs 1 258,766 1% 74% 89% 5% 19.29 $ 20.87 $ 19.41
------- ----------- ------ ------ --------- ------- --------- -------- -------
FLORIDA
MIAMI
CBD 1 782,211 3% 94% 90% 25% 31.83 $ 30.70 $ 28.62
South Dade/Kendall 2 476,412 2 93 93 79 24.52 23.96 24.39
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 3 1,258,623 5% 94% 90% 34% 29.06 $ 28.15 $ 27.04
------- ----------- ------ ------ --------- ------- --------- -------- -------
ARIZONA
PHOENIX
Downtown/CBD 1 476,373 2% 98% 87% 18% 25.22 $ 22.00 $ 26.11
------- ----------- ------ ------ --------- ------- --------- -------- -------
NEW MEXICO
ALBUQUERQUE
CBD 1 366,236 1% 86% 86% 62% 18.38 $ 17.50 $ 18.71
------- ----------- ------ ------ --------- ------- --------- -------- -------
CALIFORNIA
SAN DIEGO
University Town Center 1 195,733 1% 66% 82% 6% 36.60 $ 31.20 $ 28.06
------- ----------- ------ ------ --------- ------- --------- -------- -------
CLASS A OFFICE PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 67 27,548,644 98% 87% 83% 16% 21.35 $ 22.96 $ 22.65
======= =========== ====== ====== ========= ======= ========= ======== =======
20
CLASS B OFFICE PROPERTIES
WEIGHTED
WEIGHTED AVERAGE
AVERAGE COMPANY
QUOTED COMPANY FULL-
PERCENT PERCENT OFFICE COMPANY MARKET QUOTED SERVICE
OF LEASED AT SUBMARKET SHARE OF RENTAL RENTAL RENTAL
NUMBER TOTAL TOTAL COMPANY PERCENT OFFICE RATE PER RATE PER RATE PER
OF COMPANY COMPANY OFFICE LEASED/ SUBMARKET SQUARE SQUARE SQUARE
STATE, CITY, SUBMARKET PROPERTIES NRA(1) NRA(1) PROPERTIES OCCUPIED(2) NRA(1)(2) FOOT(2)(3) FOOT(4) FOOT(5)
- ------------------------------- ---------- ---------- ------- ---------- ----------- --------- ---------- --------- -------
TEXAS
HOUSTON
Richmond-Buffalo Speedway 3 673,164 2% 88%(6) 84% 23% 17.66 $ 17.59 $ 16.82
The Woodlands 1 94,048 76 72 5 16.64 20.25 18.96
------- ----------- ------ ------ --------- ------- --------- -------- -------
Subtotal/Weighted Average 4 767,212 2% 87% 79% 16% 17.53 $ 17.92 $ 17.05
------- ----------- ------ ------ --------- ------- --------- -------- -------
CLASS B OFFICE
PROPERTIES
SUBTOTAL/WEIGHTED
AVERAGE 4 767,212 2% 87% 79% 16% 17.53 $ 17.92 $ 17.05
======= =========== ====== ====== ========= ======= ========= ======== =======
CLASS A AND CLASS B
OFFICE PROPERTIES
TOTAL/WEIGHTED Average(8) 71 28,315,856 100% 87% 83% 16% 21.24 $ 22.82 $ 22.50(9)
======= =========== ====== ====== ========= ======= ========= ======== =======
(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 market information is 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, Katy Freeway, Austin CBD, Northwest and Southwest
submarkets), The Woodlands Operating Company, L.P. (for The Woodlands
submarket), Turner Commercial Research (for the Colorado Springs
market), Grubb and Ellis Company (for the Phoenix Downtown/CBD)
Building Interests, Inc. (for the Albuquerque CBD submarket), RealData
Information Systems, Inc. (for the Miami CBD and South Dade/Kendall
submarkets) and John Burnham & Company (for the San Diego University
Town Centre submarket). This table includes market information as of
December 31, 2002 for Dallas, Houston, Austin, and Denver submarkets.
Market information for all other submarkets is as of September 30,
2002.
(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) 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 full-service 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 as of December 31, 2002 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 customers, divided by total net rentable square feet of
Company Office Properties in the submarket.
(6) Leases have been executed at certain Office Properties in these
submarkets but had not commenced as of December 31, 2002. If such
leases had commenced as of December 31, 2002, the percent leased for
all Office Properties in the Company's submarkets would have been 90%.
The total percent leased for these Class A and Class B Company
submarkets would have been as follows: Las Colinas - 80%, Houston Class
A (Richmond - Buffalo Speedway) - 95%, Austin - (Northwest) - 100%,
Austin - (Southwest) - 93%, and Houston Class B (Richmond - Buffalo
Speedway) - 93%.
(7) Includes Johns Manville Plaza which was acquired by the Company on
August 29, 2002.
(8) Property statistics exclude 5 Houston Center (which was developed and
then placed into service on September 16, 2002) and Five Post Oak Park
(which was acquired on December 20, 2002). These office properties will
be included in statistics once stabilized. Stabilization is deemed to
occur upon the earlier of (a) achieving 93% occupancy or (b) one year
following the date placed in-service or acquisition date.
(9) 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 are taken
into consideration under GAAP and also including adjustments for
expenses payable by or reimbursed from customers is $22.60.
21
The following table shows, as of December 31, 2002, 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
Leased Sq.
Industry Sector Ft.
--------------------------- -----------
Professional Services (1) 28%
Energy(2) 20
Financial Services (3) 19
Telecommunications 7
Technology 7
Manufacturing 4
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 and other industries.
22
AGGREGATE LEASE EXPIRATIONS OF OFFICE PROPERTIES
The following tables show schedules of lease expirations for leases in
place as of December 31, 2002, 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 2003.
TOTAL OFFICE PROPERTIES(1)
PERCENTAGE ANNUAL FULL-
NET RENTABLE PERCENTAGE OF TOTAL OF SERVICE RENT
NUMBER OF AREA LEASED NET ANNUAL ANNUAL FULL- PER SQUARE
TENANTS REPRESENTED RENTABLE AREA FULL-SERVICE SERVICE RENT FOOT OF NET
WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED RENTABLE
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(2) LEASES EXPIRING(2)
- -------------- --------- ------------- ------------- ------------- ------------- ------------
2003 428 2,952,823(3)(4) 12.1% $ 61,779,451 10.6% $ 20.92
2004 280 3,464,757(5) 14.2 82,258,618 14.2 23.74
2005 288 3,474,818 14.3 80,244,260 13.8 23.09
2006 198 2,961,101 12.2 71,867,168 12.4 24.27
2007 200 3,301,324 13.6 77,033,377 13.3 23.33
2008 88 995,396 4.1 23,610,713 4.1 23.72
2009 47 1,234,305 5.1 30,556,614 5.3 24.76
2010 40 1,747,698 7.2 47,421,603 8.2 27.13
2011 28 899,859 3.7 23,836,137 4.1 26.49
2012 22 555,465 2.3 14,095,784 2.4 25.38
2013 and
thereafter 30 2,746,688 11.2 68,333,855 11.6 24.88
------- ----------- --------- ------------- ---------- ----------
1,649 24,334,234(6) 100.0% $ 581,037,580 100.0% $ 23.88
======= =========== ========= ============= ========== ==========
- ----------
(1) Lease expiration data is presented at 100% without giving effect to the
Company's actual ownership percentage in joint ventured properties.
In-place leases with signed renewals are shown to expire at the end of
the renewed term.
(2) Calculated based on base rent payable under leases 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
customers based on current expense levels.
(3) Expirations by quarter are as follows: Q1: 1,083,062 square feet Q2:
475,174 square feet Q3: 682,595 square feet Q4: 711,992 square feet.
(4) As of December 31, 2002, new leases have been signed for and will
commence during 2003 on 691,230 net rentable square feet (representing
approximately 23% of square footage expiring during 2003).
(5) Expirations by quarter are as follows: Q1: 1,352,712 square feet Q2:
578,211 square feet Q3: 856,623 square feet Q4: 677,211 square feet.
(6) Reconciliation of Occupied Square Feet to Net Rentable Area.
SQUARE
FEET
-----------
Occupied Square Footage, per above 24,334,234
Add: Occupied but Non-Revenue Generating Square Footage 354,562
Add: Vacant Square Footage 3,627,060
-----------
Total Office Portfolio Net Rentable Area 28,315,856
===========
23
DALLAS OFFICE PROPERTIES(1)
PERCENTAGE
OF TOTAL OF ANNUAL FULL-
NET RENTABLE LEASED NET ANNUAL SERVICE RENT
NUMBER OF AREA RENTABLE ANNUAL FULL- PER SQUARE
CUSTOMERS REPRESENTED AREA FULL-SERVICE SERVICE RENT FOOT OF NET
YEAR OF WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED RENTABLE
LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(2) LEASES EXPIRING(2)
- -------------- ------------- ------------- ------------- ------------- ------------- -------------
2003 115 1,147,168(3)(4) 13.1% $ 23,806,423 11.2% $ 20.75
2004 80 1,137,876(5) 13.0 30,174,021 14.2 26.52
2005 107 1,641,945 18.8 36,537,291 17.2 22.25
2006 52 896,172 10.2 22,342,714 10.5 24.93
2007 57 1,354,431 15.5 33,544,114 15.8 24.77
2008 25 271,881 3.1 7,098,300 3.3 26.11
2009 12 436,127 5.0 11,395,079 5.4 26.13
2010 14 779,050 8.9 22,431,149 10.6 28.79
2011 8 257,067 2.9 7,093,589 3.3 27.59
2012 12 172,913 2.0 3,874,545 1.8 22.41
2013 and
thereafter 5 660,776 7.5 14,086,817 6.7 21.32
------------- ------------- ------------- ------------- ------------- -------------
487 8,755,406 100.0% $ 212,384,042 100.0% $ 24.26
============= ============= ============= ============= ============= =============
(1) Lease expiration data is presented at 100% without giving effect to the
Company's actual ownership percentage in joint ventured properties.
In-place leases with signed renewals are shown to expire at the end of
the renewed term.
(2) Calculated based on base rent payable under leases 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
customers based on current expense levels.
(3) Expirations by quarter are as follows: Q1: 433,294 square feet Q2:
136,949 square feet Q3: 385,016 square feet Q4: 191,909 square feet.
(4) As of December 31, 2002, new leases have been signed for and will
commence during 2003 on 176,757 net rentable square feet (representing
approximately 15% of square footage expiring during 2003).
(5) Expirations by quarter are as follows: Q1: 227,147 square feet Q2:
186,916 square feet Q3: 356,762 square feet Q4: 367,051 square feet.
HOUSTON OFFICE PROPERTIES(1)
TOTAL OF
ANNUAL ANNUAL FULL-
NET RENTABLE PERCENTAGE OF FULL- SERVICE RENT
NUMBER OF AREA LEASED NET ANNUAL SERVICE PER SQUARE
CUSTOMERS REPRESENTED RENTABLE AREA FULL-SERVICE RENT FOOT OF NET
WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED RENTABLE
YEAR OF LEASE EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING AREA
EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(2) LEASES EXPIRING(2)
- -------------- ------------ ------------- ------------- ------------ ------------ ------------
2003 174 808,047(3)(4) 9.1% $ 15,450,999 7.6% $ 19.12
2004 106 1,470,300(5) 16.6 31,880,937 15.6 21.68
2005 92 660,482 7.5 14,898,568 7.3 22.56
2006 69 1,214,163 13.7 27,339,692 13.4 22.52
2007 77 1,435,737 16.2 31,329,955 15.3 21.82
2008 26 441,983 5.0 9,219,661 4.5 20.86
2009 14 333,569 3.8 7,322,629 3.6 21.95
2010 14 681,450 7.7 16,399,008 8.0 24.06
2011 12 526,770 5.9 12,541,944 6.1 23.81
2012 5 225,170 2.5 6,050,087 3.0 26.87
2013 and
thereafter 9 1,073,000 12.0 31,918,431 15.6 29.75
------------ ------------ ------------ ------------ ------------ ------------
598 8,870,671 100.0% $204,351,911 100.0% $ 23.04
============ ============ ============ ============ ============ ============
- ----------
(1) Lease expiration data is presented at 100% without giving effect to the
Company's actual ownership percentage in joint ventured properties.
In-place leases with signed renewals are shown to expire at the end of
the renewed term.
(2) Calculated based on base rent payable under leases 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
customers based on current expense levels.
(3) Expirations by quarter are as follows: Q1: 317,650 square feet Q2:
174,051 square feet Q3: 147,867 square feet Q4: 168,479 square feet.
(4) As of December 31, 2002, new leases have been signed for and will
commence during 2003 on 340,894 net rentable square feet (representing
approximately 42% of square footage expiring during 2003).
(5) Expirations by quarter are as follows: Q1: 826,094 square feet Q2:
241,654 square feet Q3: 190,445 square feet Q4: 212,107 square feet.
24
AUSTIN OFFICE PROPERTIES (1)
PERCENTAGE TOTAL OF
OF ANNUAL
NET RENTABLE LEASED NET FULL- ANNUAL FULL-
NUMBER OF AREA RENTABLE ANNUAL SERVICE SERVICE RENT
CUSTOMERS REPRESENTED AREA FULL-SERVICE RENT PER SQUARE
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 (2) LEASES EXPIRING (2)
- --------------- ------------ ------------- ------------ ------------ ------------ -------------
2003 38 259,184(3)(4) 15.5% $ 6,648,590 15.2% $ 25.65
2004 22 359,069(5) 21.4 8,694,157 19.9 24.21
2005 23 489,107 29.2 12,523,682 28.6 25.61
2006 15 304,447 18.2 8,711,518 19.9 28.61
2007 10 78,935 4.7 2,026,368 4.6 25.67
2008 11 93,269 5.6 2,627,673 6.0 28.17
2009 2 29,935 1.8 841,086 1.9 28.10
2010 3 6,937 0.4 174,697 0.4 25.18
2011 -- -- 0.0 -- 0.0 --
2012 -- -- 0.0 -- 0.0 --
2013
and thereafter 3 55,202 3.2 1,476,288 3.5 26.74
------------ ------------ ------------ ------------ ------------ ------------
127 1,676,085 100.0% $ 43,724,059 100.0% $ 26.09
============ ============ ============ ============ ============ ============
- ----------
(1) Lease expiration data is presented at 100% without giving effect to the
Company's actual ownership percentage in joint ventured properties.
In-place leases with signed renewals are shown to expire at the end of
the renewed term.
(2) Calculated based on base rent payable under leases 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
customers based on current expense levels.
(3) Expirations by quarter are as follows: Q1: 65,844 square feet Q2:
109,778 square feet Q3: 64,051 square feet Q4: 19,511 square feet.
(4) As of December 31, 2002, new leases have been signed for and will
commence during 2003 on 30,003 net rentable square feet (representing
approximately 12% of square footage expiring during 2003).
(5) Expirations by quarter are as follows: Q1: 83,448 square feet Q2:
12,528 square feet Q3: 249,405 square feet Q4: 13,688 square feet.
DENVER OFFICE PROPERTIES (1)
TOTAL OF
ANNUAL
NET RENTABLE PERCENTAGE OF FULL- ANNUAL FULL-
NUMBER OF AREA LEASED NET ANNUAL SERVICE SERVICE RENT
CUSTOMERS REPRESENTED RENTABLE AREA FULL-SERVICE RENT PER SQUARE
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 (2) LEASES EXPIRING (2)
- --------------------- ------------ ------------- ------------- ------------ ------------ ------------
2003 37 402,659(3)(4) 21.2% $ 8,379,184 19.1% $ 20.81
2004 25 253,757(5) 13.4 5,541,610 12.7 21.84
2005 19 337,917 17.8 7,569,711 17.3 22.40
2006 12 163,023 8.6 4,067,871 9.3 24.95
2007 20 160,267 8.4 3,743,822 8.5 23.36
2008 10 67,067 3.5 1,523,224 3.5 22.71
2009 11 219,349 11.6 5,544,223 12.7 25.28
2010 3 91,074 4.8 2,653,433 6.1 29.13
2011 2 3,859 0.2 74,038 0.2 19.19
2012 1 61,080 3.2 1,557,539 3.6 25.50
2013 and thereafter 1 139,254 7.3 3,166,632 7.0 22.74
------------ ------------ ------------ ------------ ------------ ------------
141 1,899,306 100.0% $ 43,821,287 100.0% $ 23.07
============ ============ ============ ============ ============ ============
- ----------
(1) Lease expiration data is presented at 100% without giving effect to the
Company's actual ownership percentage in joint ventured properties.
In-place leases with signed renewals are shown to expire at the end of
the renewal term.
(2) Calculated based on base rent payable under leases 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
customers based on current expense levels.
(3) Expirations by quarter are as follows: Q1: 70,566 square feet Q2:
26,635 square feet Q3: 42,462 square feet Q4: 262,996 square feet.
(4) As of December 31, 2002, new leases have been signed for and will
commence during 2003 on 84,675 net rentable square feet (representing
approximately 21% of square footage expiring during 2003).
(5) Expirations by quarter are as follows: Q1: 171,003 square feet Q2:
51,637 square feet Q3: 12,413 square feet Q4: 18,704 square feet.
25
OTHER OFFICE PROPERTIES (1)
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
CUSTOMERS 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 (2) LEASES EXPIRING (2)
- --------------------- -------------- ------------- ------------- ------------ ------------ -------------
2003 64 335,765(3)(4) 10.7% $ 7,494,255 9.8% $ 22.32
2004 47 243,755(5) 7.8 5,967,893 7.8 24.48
2005 47 345,367 11.0 8,715,008 11.4 25.23
2006 50 383,296 12.2 9,405,373 12.3 24.54
2007 36 271,954 8.7 6,389,118 8.3 23.49
2008 16 121,196 3.9 3,141,855 4.1 25.92
2009 8 215,325 6.9 5,453,597 7.1 25.33
2010 6 189,187 6.0 5,763,316 7.5 30.46
2011 6 112,163 3.6 4,126,566 5.4 36.79
2012 4 96,302 3.1 2,613,613 3.4 27.14
2013 and thereafter 12 818,456 26.1 17,685,687 22.9 21.61
------------ ------------ ------------ ------------ ------------ ------------
296 3,132,766 100.0% $ 76,756,281 100.0% $ 24.50
============ ============ ============ ============ ==