CRESCENT FINANCE CO - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR QUARTER ENDED March 31, 2004
COMMISSION FILE NO. 333-42293
333-89194-01

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CRESCENT FINANCE COMPANY*

-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 75-2531304
DELAWARE 42-1536518
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)

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

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

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 report) and (2) has been subject to such filing
requirements for the past ninety (90) days.

YES X NO _____

Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).

YES X NO _____

* Crescent Finance Company meets the conditions set forth in General Instruction
H (1) (a) and (b) of Form 10-Q and therefore is filing this form with the
reduced disclosure format

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
FORM 10-Q
TABLE OF CONTENTS

PAGE

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at March 31, 2004 (unaudited) and December 31, 2003
(unaudited).................................................................................. 3

Consolidated Statements of Operations for the three months ended
March 31, 2004 and 2003 (unaudited).......................................................... 4

Consolidated Statement of Partners' Capital for the three months ended
March 31, 2004 (unaudited)................................................................... 5

Consolidated Statements of Cash Flows for the three months ended March 31, 2004
and 2003 (unaudited)......................................................................... 6

Notes to Consolidated Financial Statements................................................... 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................................. 32

Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 55

Item 4. Controls and Procedures....................................................................... 55

PART II: OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.............................................................. 56

PART I

ITEM 1. FINANCIAL STATEMENTS

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)

MARCH 31, DECEMBER 31,
2004 2003
----------- ------------

ASSETS:
Investments in real estate:
Land $ 256,011 $ 235,608
Land improvements, net of accumulated depreciation of $20,177 and $19,256 at
March 31, 2004 and December 31, 2003, respectively 108,842 105,232
Building and improvements, net of accumulated depreciation of $620,750 and
$596,535 at March 31, 2004 and December 31, 2003, respectively 2,377,770 2,187,368
Furniture, fixtures and equipment, net of accumulated depreciation of $48,097
and $44,074 at March 31, 2004 and December 31, 2003, respectively 50,375 51,160
Land held for investment or development 465,502 450,279
Properties held for disposition, net 95,947 127,915
----------- -----------
Net investment in real estate 3,354,447 3,157,562

Cash and cash equivalents 61,277 74.885
Restricted cash and cash equivalents 69,495 217,329
Defeasance investments 177,552 9,620
Accounts receivable, net 48,936 40,455
Deferred rent receivable 66,053 62,184
Investments in unconsolidated companies 358,106 443,974
Notes receivable, net 74,242 78,453
Income tax asset-current and deferred 21,324 17,506
Other assets, net 235,986 203,650
----------- -----------
Total assets $ 4,467,418 $ 4,305,618
=========== ===========

LIABILITIES:
Borrowings under Credit Facility $ 169,000 $ 239,000
Notes payable 2,601,593 2,319,699
Accounts payable, accrued expenses and other liabilities 313,651 360,520
Current income tax payable -- 7,995
----------- -----------
Total liabilities 3,084,244 2,927,214
----------- -----------
COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS: $ 44,916 $ 47,123

PARTNERS' CAPITAL:
Series A Convertible Cumulative Preferred Units,
liquidation preference $25.00 per unit, 14,200,000 and 10,800,000 units issued and
outstanding, at March 31, 2004 and December 31, 2003, respectively $ 319,166 $ 248,160
Series B Cumulative Preferred Units,
liquidation preference $25.00 per unit, 3,400,000 units issued and outstanding, at
March 31, 2004 and December 31, 2003 81,923 81,923
Units of Partnership Interest, 58,516,868 and 58,510,500 issued and outstanding, at
March 31, 2004 and December 31, 2003, respectively:
General partner - outstanding 585,169 and 585,105 9,784 10,424
Limited partners - outstanding 57,931,699 and 57,925,395 941,308 1,004,603
Accumulated other comprehensive income (13,923) (13,829)
----------- -----------
Total partners' capital $ 1,338,258 $ 1,331,281
----------- -----------
Total liabilities and partners' capital $ 4,467,418 $ 4,305,618
=========== ===========

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

3

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
(unaudited)

FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
2004 2003
--------- ---------

REVENUE:
Office Property $ 123,450 $ 120,715
Resort/Hotel Property 61,396 63,721
Residential Development Property 47,688 43,721
--------- ---------
Total Property revenue $ 232,534 $ 228,157
--------- ---------
EXPENSE:
Office Property real estate taxes $ 17,071 $ 17,102
Office Property operating expenses 41,864 40,530
Resort/Hotel Property expense 49,343 49,740
Residential Development Property expense 40,562 41,430
--------- ---------
Total Property expense $ 148,840 $ 148,802
--------- ---------
Income from Property Operations $ 83,694 $ 79,355
--------- ---------
OTHER INCOME (EXPENSE):
Gain on joint venture of properties, net $ - $ 100
Interest and other income 2,764 1,455
Corporate general and administrative (6,917) (6,090)
Interest expense (45,008) (43,208)
Amortization of deferred financing costs (3,714) (2,424)
Extinguishment of debt (1,939) -
Depreciation and amortization (40,987) (36,597)
Impairment charges related to real estate assets - (1,200)
Other expenses (55) (127)
Equity in net income (loss) of unconsolidated companies:
Office Properties 942 1,458
Resort/Hotel Properties (231) 743
Residential Development Properties 87 970
Temperature-Controlled Logistics Properties (901) 1,507
Other (67) (1,029)
--------- ---------
Total other income (expense) $ (96,026) $ (84,442)
--------- ---------
LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY
INTERESTS AND INCOME TAXES $ (12,332) $ (5,087)
Minority interests 84 1,210
Income tax benefit 1,613 2,528
--------- ---------
LOSS BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE $ (10,635) $ (1,349)
Income from discontinued operations 704 2,466
Impairment charges related to real estate assets from discontinued operations (2,351) (15,828)
Loss on real estate from discontinued operations (55) (339)
Cumulative effect of a change in accounting principle (428) -
--------- ---------
NET LOSS $ (12,765) $ (15,050)
Series A Preferred Unit distributions (5,751) (4,556)
Series B Preferred Unit distributions (2,019) (2,019)
--------- ---------
NET LOSS AVAILABLE TO PARTNERS $ (20,535) $ (21,625)
========= =========
BASIC EARNINGS PER UNIT DATA:
Loss available to partners before discontinued operations and
cumulative effect of a change in accounting principle $ (0.31) $ (0.13)
Income from discontinued operations 0.01 0.04
Impairment charges related to real estate assets from discontinued operations (0.04) (0.27)
Loss on real estate from discontinued operations - (0.01)
Cumulative effect of a change in accounting principle (0.01) -
--------- ---------
Net loss available to partners - basic $ (0.35) $ (0.37)
========= =========
DILUTED EARNINGS PER UNIT DATA:
Loss available to partners before discontinued operations and
cumulative effect of a change in accounting principle $ (0.31) $ (0.13)
Income from discontinued operations 0.01 0.04
Impairment charges related to real estate assets from discontinued operations (0.04) (0.27)
Loss on real estate from discontinued operations - (0.01)
Cumulative effect of a change in accounting principle (0.01) -
--------- ---------
Net loss available to partners - diluted $ (0.35) $ (0.37)
========= =========

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

4

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(dollars in thousands)
(unaudited)

PREFERRED GENERAL LIMITED ACCUMULATED
PARTNERS' PARTNERS' PARTNERS' COMPREHENSIVE PARTNERS'
CAPITAL CAPITAL CAPITAL INCOME CAPITAL
--------- --------- ---------- ------------- ----------

PARTNERS' CAPITAL, December 31, 2003 $ 330,083 $ 10,424 $1,004,603 $ (13,829) $1,331,281

Issuance of Preferred Units A 71,006 - - - 71,006
Contributions, net - 2 228 - 230
Distributions - (440) (43,516) - (43,956)
Amortization of Deferred Compensation on Restricted Shares 3 323 - 326
Net Loss - (205) (20,330) - (20,535)
Unrealized Gain on Marketable Securities - - - 903 903
Unrealized Net Loss on Cash Flow Hedges - - - (997) (997)
--------- --------- ---------- ------------- ----------
PARTNERS' CAPITAL, March 31, 2004 $ 401,089 $ 9,784 $ 941,308 $ (13,923) $1,338,258
========= ========= ========= ============= ==========

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

5

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

FOR THE THREE MONTHS ENDED MARCH 31,
2004 2003
--------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (12,765) $ (15,050)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 44,701 39,021
Residential Development cost of sales 17,169 13,591
Residential Development capital expenditures (24,139) (16,664)
Impairment charges related to real estate assets from discontinued operations 2,351 15,828
Loss on real estate from discontinued operations 55 339
Discontinued operations - depreciation and minority interests 506 2,726
Extinguishment of debt 1,939 -
Impairment charges related to real estate assets - 1,200
Gain on joint venture of properties, net - (100)
Minority interests (84) (1,210)
Cumulative effect of a change in accounting principle 428 -
Non-cash compensation 265 62
Equity in (earnings) loss from unconsolidated companies:
Office Properties (942) (1,458)
Resort/Hotel Properties 231 (743)
Residential Development Properties (87) (970)
Temperature-Controlled Logistics Properties 901 (1,507)
Other 67 1,029
Distributions received from unconsolidated companies:
Office Properties 758 565
Residential Development Properties - 35
Other 284 -
Change in assets and liabilities, net of consolidations and acquisitions:
Restricted cash and cash equivalents 47,977 19,204
Accounts receivable (5,772) 1,087
Deferred rent receivable (3,897) (817)
Income tax asset - current and deferred, net (12,087) (2,578)
Other assets (7,895) 1,645
Accounts payable, accrued expenses and other liabilities (50,703) (70,452)
--------- ---------
Net cash used in operating activities $ (739) $ (15,217)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash impact of consolidation of previously unconsolidated entities $ 334 $ 11,374
Proceeds from property sales 30,659 1,116
Acquisition of investment properties (146,100) (2,000)
Development of investment properties (1,201) (522)
Property improvements - Office Properties (1,852) (2,211)
Property improvements - Resort/Hotel Properties (8,454) (2,404)
Tenant improvement and leasing costs - Office Properties (24,192) (12,456)
Residential Development Properties Investments (5,804) (7,064)
Decrease (increase) in restricted cash and cash equivalents 101,371 (1,341)
Defeasance investments (167,932) -
Return of investment in unconsolidated companies:
Office Properties 340 287
Resort/Hotel Properties 612 -
Temperature-Controlled Logistics Properties 90,000 -
Other 39 4,651
Investment in unconsolidated companies:
Office Properties (12) (52)
Resort/Hotel Properties - (2)
Residential Development Properties (621) (1,038)
Temperature-Controlled Logistics Properties (2,403) (828)
(Increase) decrease in notes receivable (152) 16,743
--------- ---------
Net cash (used in) provided by investing activities $(135,368) $ 4,253
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs $ (4,343) $ (68)
Borrowings under Credit Facility 141,500 136,000
Payments under Credit Facility (211,500) (15,000)
Notes payable proceeds 280,035 10,000
Notes payable payments (108,958) (66,750)
Residential Development Properties notes payable borrowings 15,939 17,529
Residential Development Properties notes payable payments (7,429) (20,724)
Capital distributions - joint venture partner (2,562) (5,471)
Capital contributions - joint venture partner 508 132
Capital contributions to the Operating Partnership 206 (10)
Issuance of preferred units - Series A 71,006 -
Series A Preferred Unit distributions (5,991) (4,556)
Series B Preferred Unit distributions (2,019) (2,019)
Distributions from the Operating Partnership (43,893) (43,135)
--------- ---------
Net cash provided by financing activities $ 122,499 $ 5,928
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS $ (13,608) $ (5,036)
CASH AND CASH EQUIVALENTS,
Beginning of period 74,885 75,418
--------- ---------
CASH AND CASH EQUIVALENTS,
End of Period $ 61,277 $ 70,382
========= =========

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

6

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership ("CREELP" and, together with its direct and indirect ownership
interests in limited partnerships, corporations and limited liability companies,
the "Operating Partnership"), was formed under the terms of a limited
partnership agreement dated February 9, 1994. The Operating Partnership is
controlled by Crescent Real Estate Equities Company, a Texas real estate
investment trust (the "Company" or "Crescent Equities"), through the Company's
ownership of all of the outstanding stock of Crescent Real Estate Equities,
Ltd., a Delaware corporation ("the General Partner"), which owns a 1% general
partner interest in the Operating Partnership. In addition, the Company owns an
approximately 84% limited partner interest in the Operating Partnership, with
the remaining approximately 15% limited partner interest held by other limited
partners.

All of the limited partners of the Operating Partnership, other than the
Company, own, in addition to limited partner interests, units. Each unit
entitles the holder to exchange the unit (and the related limited partner
interest) for two common shares of the Company or, at the Company's option, an
equivalent amount of cash. For purposes of this report, the term "unit" or "unit
of partnership interest" refers to the limited partner interest and, if
applicable, related units held by a limited partner. Accordingly, as of March
31, 2004, the Company's approximately 84% limited partner interest has been
treated as equivalent, for purposes of this report, to 49,067,388 units and the
remaining approximately 15% limited partner interest has been treated as
equivalent, for purposes of this report, to 8,864,311 units. In addition, the
Company's 1% general partner interest has been treated as equivalent, for
purposes of this report, to 585,169 units.

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

Crescent Finance Company, a Delaware corporation wholly-owned by the
Operating Partnership, was organized in March 2002 for the sole purpose of
acting as co-issuer with the Operating Partnership of $375.0 million aggregate
principal amount of 9.25% senior notes due 2009. Crescent Finance Company does
not conduct operations of its own.

The following are the consolidated subsidiaries of the Operating
Partnership that owned or had an interest in real estate assets as of March 31,
2004: Crescent Real Estate Funding I, L.P. ("Funding I"); Crescent Real Estate
Funding III, IV, and V, L.P. ("Funding III, IV, and V"); Crescent Real Estate
Funding VI, L.P. ("Funding VI"); Crescent Real Estate Funding VIII, L.P.
("Funding VIII"); Crescent Real Estate Funding X, L.P. ("Funding X"); Crescent
Real Estate Funding XII, L.P. ("Funding XII"); Crescent 707 17th Street, L.L.C.;
Crescent Spectrum Center, L.P.; Crescent Colonnade, L.L.C.; Mira Vista
Development Corp. ("MVDC"); Houston Area Development Corp. ("HADC"); Desert
Mountain Development Corporation ("DMDC"); Crescent Resort Development Inc.
("CRDI"); Crescent TRS Holdings Corp.

See Note 7, "Investments in Unconsolidated Companies," for a table that
lists the Operating Partnership's ownership in significant unconsolidated joint
ventures and investments as of March 31, 2004.

See Note 8, "Notes Payable and Borrowings Under Credit Facility," for a
list of certain other subsidiaries of the Operating Partnership and the Company,
all of which are consolidated in the Operating Partnership's or the Company's
financial statements and were formed primarily for the purpose of obtaining
secured debt or joint venture financing.

SEGMENTS

The assets and operations of the Operating Partnership were divided into
four investment segments at March 31, 2004, as follows:

- Office Segment;

- Resort/Hotel Segment;

- Residential Development Segment; and

- Temperature-Controlled Logistics Segment.

Within these segments, the Operating Partnership owned in whole or in part
the following real estate assets (the "Properties") as of March 31, 2004:

7

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- OFFICE SEGMENT consisted of 77 office properties (collectively
referred to as the "Office Properties"), located in 28 metropolitan
submarkets in seven states, with an aggregate of approximately 30.7
million net rentable square feet. Sixty seven of the Office
Properties are wholly-owned and ten are owned through joint
ventures, two of which are consolidated and eight of which are
unconsolidated.

- RESORT/HOTEL SEGMENT consisted of five luxury and destination
fitness resorts and spas with a total of 1,036 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"). Eight of the Resort/Hotel Properties are wholly-owned
and one is owned through a joint venture that is consolidated.

- RESIDENTIAL DEVELOPMENT SEGMENT consisted of the Operating
Partnership's ownership of common stock representing interests of
98% to 100% in four residential development corporations
(collectively referred to as the "Residential Development
Corporations"), which in turn, through partnership arrangements,
owned in whole or in part 25 upscale residential development
properties (collectively referred to as the "Residential Development
Properties").

- TEMPERATURE-CONTROLLED LOGISTICS SEGMENT consisted of the Operating
Partnership's 40% interest in Vornado Crescent Portland Partnership
(the "Temperature-Controlled Logistics Partnership") and a 56%
non-controlling interest in the Vornado Crescent Carthage and KC
Quarry L.L.C. ("VCQ"). The Temperature-Controlled Logistics
Partnership owns all of the common stock, representing substantially
all of the economic interest, of AmeriCold Realty Trust (the
"Temperature-Controlled Logistics Corporation"), a REIT. As of March
31, 2004, the Temperature-Controlled Logistics Corporation directly
or indirectly owned 87 temperature-controlled logistics properties
(collectively referred to as the "Temperature-Controlled Logistics
Properties") with an aggregate of approximately 440.7 million cubic
feet (17.5 million square feet) of warehouse space. As of March 31,
2004, the Vornado Crescent Carthage and KC Quarry, L.L.C. owned two
quarries and the related land. The Operating Partnership accounts
for its interests in the Temperature-Controlled Logistics
Partnership and in the Vornado Crescent Carthage and KC Quarry
L.L.C. as unconsolidated equity entities.

See Note 3, "Segment Reporting," for a table showing selected financial
information for each of these investment segments for the three months ended
March 31, 2004 and 2003, and total assets, consolidated property level
financing, consolidated other liabilities, and minority interests for each of
these investment segments at March 31, 2004 and December 31, 2003.

BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
("GAAP") for interim financial information, as well as in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the
information and footnotes required by GAAP for complete financial statements are
not included. In management's opinion, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
unaudited interim financial statements are included. Operating results for
interim periods reflected do not necessarily indicate the results that may be
expected for a full fiscal year. You should read these financial statements in
conjunction with the financial statements and the accompanying notes included in
the Operating Partnership's Form 10-K for the year ended December 31, 2003.

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

8

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This section should be read in conjunction with the more detailed
information regarding the Operating Partnership's significant accounting
policies contained in the Operating Partnership's Annual Report on Form 10-K for
the year ended December 31, 2003.

ADOPTION OF NEW ACCOUNTING STANDARDS

FASB INTERPRETATION 46. On January 15, 2003, the FASB approved the
issuance of Interpretation 46, "Consolidation of Variable Interest Entities"
("FIN 46"), as amended, an interpretation of Accounting Research Bulletin No.
51, "Consolidated Financial Statements." Under FIN 46, consolidation
requirements are effective immediately for new Variable Interest Entities
("VIEs") created after January 31, 2003. The consolidation requirements apply to
existing VIEs for financial periods ending after March 15, 2004, except for
Special Purpose Entities which had to be consolidated by December 31, 2003. VIEs
are generally a legal structure used for business enterprises that either do not
have equity investors with voting rights, or have equity investors that do not
provide sufficient financial resources for the entity to support its activities.
The objective of the new guidance is to improve reporting by addressing when a
company should include in its financial statements the assets, liabilities and
activities of other entities such as VIEs. FIN 46 requires VIEs to be
consolidated by a company if the company is subject to a majority of the
expected losses of the VIE's activities or entitled to receive a majority of the
entity's expected residual returns or both.

The adoption of FIN 46 did not have a material impact to the Operating
Partnership's financial condition or results of operations. Due to the adoption
of this Interpretation and management's assumptions in application of the
guidelines stated in the Interpretation, the Operating Partnership has
consolidated GDW LLC, a subsidiary of DMDC, as of December 31, 2003 and Elijah
Fulcrum Fund Partners, L.P. ("Elijah") as of January 1, 2004. Elijah is a
limited partnership whose purpose is to invest in the SunTx Fulcrum Fund, L.P.
SunTx Fulcrum Fund, L.P.'s objective is to invest in a portfolio of acquisitions
that offer the potential for substantial capital appreciation. While it was
determined that one of the Operating Partnership's unconsolidated joint
ventures, Main Street Partners, L.P., and its investments in Canyon Ranch Las
Vegas, L.L.C., CR License, L.L.C. and CR License II, L.L.C. (the "Canyon Ranch
Entities") are VIEs under FIN 46, the Operating Partnership is not the primary
beneficiary and is not required to consolidate these entities under other GAAP.
The Operating Partnership's maximum exposure to loss is limited to its equity
investment of approximately $53.3 million in Main Street Partners, L.P. and $5.1
million in the Canyon Ranch Entities at March 31, 2004.

Further, in connection with the Hughes Center acquisition, the Operating
Partnership entered into an exchange agreement with a third party intermediary
for six of the Office Properties and the nine retail parcels. This agreement is
for a maximum term of 180 days and allows the Operating Partnership to pursue
favorable tax treatment on other properties sold by the Operating Partnership
within this period. During the 180-day period, which will end on June 28, 2004,
the third party intermediary is the legal owner of the properties, although the
Operating Partnership controls the properties, retains all of the economic
benefits and risks associated with these properties and indemnifies the third
party intermediary and, therefore, the Operating Partnership is fully
consolidating these properties. On the expiration of the 180-day period, the
Operating Partnership will take legal ownership of the properties.

SIGNIFICANT ACCOUNTING POLICIES

STOCK-BASED COMPENSATION. Effective January 1, 2003, the Operating
Partnership adopted the fair value expense recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," on a prospective basis as
permitted by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition
and Disclosure," which requires that the fair value of stock options at the date
of grant be amortized ratably into expense over the appropriate vesting period.
During the three months ended March 31, 2004, the Company and the Operating
Partnership granted stock and unit options and the Operating Partnership
recognized compensation expense that was not significant to its results of
operations. With respect to the Company's stock options and the Operating
Partnership's unit options which were granted prior to 2003, the Operating
Partnership accounted for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations ("APB No. 25"). Had
compensation cost been determined based on the fair value at the grant dates for
awards under the Plans consistent with SFAS No. 123, the Operating Partnership's
net loss and loss per unit would have been reduced to the following pro forma
amounts:

9

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
(in thousands, except per unit amounts) 2004 2003
- ------------------------------------------------------------------------------ -------- --------

Net loss available to partners, as reported $(20,535) $(21,625)
Add: Stock-based employee compensation expense included in reported net income 350 1
Deduct: total stock-based employee compensation expense determined under fair
value based method for all awards (950) (843)
-------- --------
Pro forma net loss $(21,135) $(22,467)
(Loss) earnings per unit:
Basic/Diluted - as reported $ (0.35) $ (0.37)
Basic/Diluted - pro forma $ (0.36) $ (0.38)

MARKETABLE SECURITIES. The Operating Partnership has classified and
recorded its marketable securities in accordance with SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." Realized gains or losses
on the sale of securities are recorded based on average cost. When a decline in
the fair value of marketable securities is determined to be
other-than-temporary, the cost basis is written down to fair value and the
amount of the write-down is included in earnings for the applicable period. A
decline in the fair value of a marketable security is deemed
other-than-temporary if its cost basis has exceeded its fair value for a period
of six to nine months. Investments in securities of non-publicly traded
companies are reported at cost, as they are not considered marketable under SFAS
No. 115, and total $6.0 million and $6.1 million at March 31, 2004 and December
31, 2003, respectively.

The following tables present the carrying value, fair value and unrealized
gains and losses in Accumulated Other Comprehensive Income ("OCI") as of March
31, 2004 and December 31, 2003 and the realized gains, unrecognized holding
losses and change in OCI for the three months ended March 31, 2004 and 2003 for
the Operating Partnership's marketable securities.

AS OF MARCH 31, 2004 AS OF DECEMBER 31, 2003
--------------------------------- ----------------------------------
(in thousands) FAIR UNREALIZED FAIR UNREALIZED
TYPE OF SECURITY COST VALUE GAIN/(LOSS) COST VALUE GAIN/(LOSS)
--------- ---------- ---------- ---------- ---------- ----------

Held to maturity(1) $ 177,552 $ 177,827 $ 275 $ 9,620 $ 9,621 $ 1
Available for sale(2) 5,883 6,046 163 2,278 2,278 -
--------- ---------- --------- ---------- ---------- --------
Total $ 183,435 $ 183,873 $ 438 $ 11,898 $ 11,899 $ 1
========= ========== ========= ========== ========== ========

FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
MARCH 31, 2004 MARCH 31, 2003
-------------------------- --------------------------
(in thousands) REALIZED CHANGE REALIZED CHANGE
TYPE OF SECURITY GAIN IN OCI GAIN IN OCI
-------- ------ -------- ------

Held to maturity(1) $ - $ N/A $ - $ N/A
Available for sale(2) - 163 - (79)
-------- ------ -------- ------
Total $ - $ 163 $ - $ (79)
======== ====== ======== ======

- --------------------
(1) Held to maturity securities are carried at unamortized cost and consist of
U.S. Treasury and government sponsored agency securities purchased for the
sole purpose of funding debt service payments on the LaSalle Note II. See
Note 8, "Notes Payable and Borrowings Under Credit Facility," for
additional information on the defeasance of LaSalle Note II.

(2) Available for sale securities consist of marketable securities which the
Operating Partnership intends to hold for an indefinite period of time.
These securities are marked to market value on a monthly basis with the
corresponding unrealized gain or loss recorded in OCI.

10

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE. SFAS No. 128, "Earnings Per Share," ("EPS") specifies
the computation, presentation and disclosure requirements for earnings per
share.

Basic EPS is computed by dividing net income available to partners by the
weighted average number of units outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue units were exercised or converted into units, where such
exercise or conversion would result in a lower EPS amount. The Operating
Partnership presents both basic and diluted earnings per unit.

The following tables present reconciliations for the three months ended
March 31, 2004 and 2003 of basic and diluted earnings per unit from "Loss before
discontinued operations and cumulative effect of a change in accounting
principle" to "Net loss available to partners." The table also includes weighted
average units on a basic and diluted basis.

FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------
2004 2003
------------------------------- ------------------------------
Income Wtd. Avg. Per Unit Income Wtd. Avg. Per Unit
(in thousands, except per unit amounts) (Loss) Units(1) Amount (Loss) Units(1) Amount
- ----------------------------------------------------- ------- --------- -------- -------- --------- --------

BASIC/DILUTED EPS -
Loss before discontinued operations and
cumulative effect of a change in accounting
principle $(10,635) 58,363 $ (1,349) 58,485
Series A Preferred Unit distributions (5,751) (4,556)
Series B Preferred Unit distributions (2,019) (2,019)
------------------------------- ----------------------------
Net loss available to partners
before discontinued operations and cumulative
effect of a change in accounting principle $(18,405) 58,363 (0.31) $ (7,924) 58,485 (0.13)
Income from discontinued operations 704 0.01 2,466 0.04
Impairment charges related to real estate assets from
discontinued operations, (2,351) (0.04) (15,828) (0.27)
Loss on real estate from discontinued operations (55) - (339) (0.01)
Cumulative effect of a change in accounting principle (428) (0.01) - -
------------------------------- ----------------------------
Net loss available to partners $(20,535) 58,363 (0.35) $(21,625) 58,485 (0.37)
=============================== ============================

(1) Anti-dilutive units not included are 277 and 2 for the three months ended
March 31, 2004 and 2003, respectively.

11

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

This table presents supplemental cash flow disclosures for the three
months ended March 31, 2004 and 2003.

SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: 2004 2003
- ------------------------------------------------------------- --------- --------

(in thousands)
Interest paid on debt $ 36,946 $ 34,661
Interest capitalized - Resort/Hotel 75 -
Interest capitalized - Residential Development 3,829 4,239
Additional interest paid in conjunction with cash flow hedges 3,816 5,590
--------- --------
Total interest paid $ 44,666 $ 44,490
========= ========
Cash paid for income taxes $ 9,950 $ 223
========= ========

SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITIES:

Assumption of debt in conjunction with acquisitions of Office Properties and undeveloped land $ 102,307 $ -
Amortization of debt premium 418 -
Non-cash compensation 319 -

SUPPLEMENTAL SCHEDULE OF 2003 CONSOLIDATION OF DBL, MVDC, HADC, AND 2004
CONSOLIDATION OF ELIJAH:

Net investment in real estate $ - $ (9,692)
Accounts receivable, net (848) (3,057)
Investments in unconsolidated companies (2,478) 13,552
Notes receivable, net 4,363 (25)
Income tax asset - current and deferred, net (274) (3,564)
Other assets, net - (820)
Notes payable - 312
Accounts payable, accrued expenses and other liabilities - 12,696
Minority interest - consolidated real estate partnerships (140) 1,972
Other comprehensive income, net of tax 139 -
Cumulative effect of a change in accounting principle (428) -
--------- --------
Increase in cash $ 334 $ 11,374
========= ========

3. SEGMENT REPORTING

For purposes of segment reporting as defined in SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," the Operating
Partnership currently has four major investment segments based on property type:
the Office Segment; the Resort/Hotel Segment; the Residential Development
Segment; and the Temperature-Controlled Logistics Segment. Management utilizes
this segment structure for making operating decisions and assessing performance.

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

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

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

- excluding extraordinary items (as defined by GAAP);

- plus depreciation and amortization of real estate assets; and

- after adjustments for unconsolidated partnerships and joint
ventures.

The Operating Partnership calculates FFO-diluted in the same manner,
except that Net Income (Loss) is replaced by Net Income (Loss) Available to
Partners.

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

12

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and for its investment segments. However, FFO-diluted and FFO should not be
considered as alternatives to net income determined in accordance with GAAP as
an indication of the Operating Partnership's operating performance.

The Operating Partnership's measures of FFO-diluted and FFO may not be
comparable to similarly titled measures of REITs (other than the Company) if
those REITs apply the definition of FFO in a different manner than the Operating
Partnership.

Selected financial information related to each segment for the three
months ended March 31, 2004 and 2003, and total assets, consolidated property
level financing, consolidated other liabilities, and minority interests for each
of the segments at March 31, 2004 and December 31, 2003, are presented below:

FOR THE THREE MONTHS ENDED MARCH 31, 2004
------------------------------------------
RESIDENTIAL
SELECTED FINANCIAL INFORMATION: OFFICE RESORT/HOTEL DEVELOPMENT
(in thousands) SEGMENT(1) SEGMENT SEGMENT(2)
- -------------------------------------------------------- ---------- ------------ -----------

Total Property revenue $ 123,450 $ 61,396 $ 47,688
Total Property expense 58,935 49,343 40,562
---------- ------------ -----------

Income from Property Operations $ 64,515 $ 12,053 $ 7,126

Total other income (expense) (29,402) (6,849) (3,050)
Minority interests and income taxes (432) 1,466 1,236
Discontinued operations - income, loss on real estate
and impairment charges related to real estate assets (1,402) - 38
Cumulative effect of a change in accounting principle - - -
---------- ------------ -----------

Net income (loss) $ 33,279 $ 6,670 $ 5,350
---------- ------------ -----------

Depreciation and amortization of real estate assets $ 30,223 $ 6,360 $ 1,401
(Gain) loss on property sales, net (289) - -
Impairment charges related to real estate assets 2,351 - -
Adjustments for investment in unconsolidated companies 2,408 - (577)
Series A Preferred unit distributions - - -
Series B Preferred unit distributions - - -
---------- ------------ -----------
Adjustments to reconcile net income (loss) to funds from
operations-diluted $ 34,693 $ 6,360 $ 824
---------- ------------ -----------
Funds from operations before impairment charges related
to real estate assets-diluted $ 67,972 $ 13,030 $ 6,174
Impairment charges related to real estate assets (2,351) - -
---------- ------------ -----------
Funds from operations impairment charges related
to real estate assets-diluted $ 65,621 $ 13,030 $ 6,174
========== ============ ===========

FOR THE THREE MONTHS ENDED MARCH 31, 2004
-----------------------------------------
TEMPERATURE-
CONTROLLED
SELECTED FINANCIAL INFORMATION: LOGISTICS CORPORATE
(in thousands) SEGMENT AND OTHER TOTAL
- -------------------------------------------------------- ------------ --------- --------

Total Property revenue $ - $ - $232,534
Total Property expense - - 148,840
------------ --------- --------

Income from Property Operations $ - $ - $ 83,694

Total other income (expense) (901) (55,824) (3) (96,026)
Minority interests and income taxes - (573) 1,697
Discontinued operations - income, loss on real estate
and impairment charges related to real estate assets - (338) (1,702)
Cumulative effect of a change in accounting principle - (428) (428)
------------ --------- --------

Net income (loss) $ (901) $ (57,163) $(12,765)
------------ --------- --------

Depreciation and amortization of real estate assets $ - $ 57 $ 38,041
(Gain) loss on property sales, net - 345 56
Impairment charges related to real estate assets - - 2,351
Adjustments for investment in unconsolidated companies 5,795 - 7,626
Series A Preferred unit distributions - (5,751) (5,751)
Series B Preferred unit distributions - (2,019) (2,019)
------------ --------- --------
Adjustments to reconcile net income (loss) to funds from
operations-diluted $ 5,795 $ (7,368) $ 40,304
------------ --------- --------
Funds from operations before impairment charges related
to real estate assets-diluted $ 4,894 $ (64,531) $ 27,539
Impairment charges related to real estate assets - - (2,351)
------------ --------- --------
Funds from operations after impairment charges related
to real estate assets-diluted $ 4,894 $ (64,531) $ 25,188
============ ========= ========

See footnotes to the following table.

13

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2003
--------------------------------------------
RESIDENTIAL
SELECTED FINANCIAL INFORMATION: OFFICE RESORT/HOTEL DEVELOPMENT
(in thousands) SEGMENT(1) SEGMENT SEGMENT(2)
- ---------------------------------------------- ---------- ------------ -----------

Total Property revenue $ 120,715 $ 63,721 $ 43,721
Total Property expense 57,632 49,740 41,430
---------- ------------ -----------
Income from Property Operations $ 63,083 $ 13,981 $ 2,291

Total other income (expense) (25,398) (5,250) (1,674)
Minority interests and income taxes (154) 762 2,794
Discontinued operations -income, loss on real
estate and impairment charges related to
real estate assets (12,793) - 20
---------- ------------ -----------

Net income (loss) $ 24,738 $ 9,493 $ 3,431
---------- ------------ -----------
Depreciation and amortization of real estate
assets $ 29,439 $ 5,744 $ 1,118
(Gain) loss on property sales, net (64) - -
Impairment charges related to real estate
assets 15,000 - -
Adjustments for investment in unconsolidated
companies 2,822 394 739
Series A Preferred unit distributions - - -
Series B Preferred unit distributions - - -
---------- ------------ -----------
Adjustments to reconcile net income (loss) to
funds from operations-diluted $ 47,197 $ 6,138 $ 1,857
---------- ------------ -----------
Funds from operations before impairment
charges related to real estate
assets-diluted $ 71,935 $ 15,631 $ 5,288
Impairment charges related to real estate
assets (15,000) - -
---------- ------------ -----------
Funds from operations after impairment
charges related to real estate
assets-diluted $ 56,935 $ 15,631 $ 5,288
========== ============ ==========

FOR THE THREE MONTHS ENDED MARCH 31, 2003
-----------------------------------------------
TEMPERATURE-
CONTROLLED
SELECTED FINANCIAL INFORMATION: LOGISTICS CORPORATE
(in thousands) SEGMENT AND OTHER(3) TOTAL
- ---------------------------------------------- ------------ --------- -----------

Total Property revenue $ - $ - $ 228,157
Total Property expense - - 148,802
------------ --------- -----------
Income from Property Operations $ - $ - $ 79,355

Total other income (expense) 1,507 (53,627)(3) (84,442)
Minority interests and income taxes - 336 3,738
Discontinued operations -income, loss on real
estate and impairment charges related to
real estate assets - (928) (13,701)
------------ --------- -----------

Net income (loss) $ 1,507 $ (54,219) $ (15,050)
------------ --------- -----------
Depreciation and amortization of real estate
assets $ - $ - $ 36,301
(Gain) loss on property sales, net - 290 226
Impairment charges related to real estate
assets - 2,028 17,028
Adjustments for investment in unconsolidated
companies 5,510 22 9,487
Series A Preferred unit distributions - (4,556) (4,556)
Series B Preferred unit distributions - (2,019) (2,019)
------------ --------- -----------
Adjustments to reconcile net income (loss) to
funds from operations-diluted $ 5,510 $ (4,235) $ 56,467
------------ --------- -----------
Funds from operations before impairment
charges related to real estate
assets-diluted $ 7,017 $ (58,454) $ 41,417
Impairment charges related to real estate
assets - (2,028) (17,028)
------------ --------- -----------
Funds from operations after impairment
charges related to real estate
assets-diluted $ 7,017 $ (60,482) $ 24,389
============ ========= ===========

See footnotes to the following table.

TEMPERATURE-
RESORT/ RESIDENTIAL CONTROLLED CORPORATE
OFFICE HOTEL DEVELOPMENT LOGISTICS AND
(IN MILLIONS) SEGMENT SEGMENT SEGMENT(2)(4) SEGMENT OTHER TOTAL
- -------------------------------------- ---------- ---------- ---------- ------------ ------------ ----------

TOTAL ASSETS BY SEGMENT: (5)
Balance at March 31, 2004 $ 2,663 $ 495 $ 757 $ 212 $ 340 (6) $ 4,467
Balance at December 31, 2003 2,502 468 707 300 329 4,306
CONSOLIDATED PROPERTY LEVEL FINANCING:
Balance at March 31, 2004 (1,513) (133) (96) - (1,029)(7) (2,771)
Balance at December 31, 2003 (1,459) (138) (88) - (874)(7) (2,559)
CONSOLIDATED OTHER LIABILITIES:
Balance at March 31, 2004 (76) (44) (143) - (51) (314)
Balance at December 31, 2003 (119) (27) (109) - (114) (369)
MINORITY INTERESTS:
Balance at March 31, 2004 (9) (6) (30) - - (45)
Balance at December 31, 2003 (9) (7) (31) - - (47)

- --------------------
(1) The property revenue includes lease termination fees (net of the write-off
of deferred rent receivables) of approximately $1.3 million and $2.0
million for the three months ended March 31, 2004 and 2003, respectively.

(2) The Operating Partnership sold its interest in The Woodlands Land
Development Company, L.P. on December 31, 2003.

(3) For purposes of this Note, Corporate and Other includes the total of:
interest and other income, corporate general and administrative expense,
interest expense, amortization of deferred financing costs, extinguishment
of debt, other expenses, and equity in net income of unconsolidated
companies-other.

(4) The Operating Partnership's net book value for the Residential Segment
includes total assets, consolidated property level financing, consolidated
other liabilities and minority interest totaling $488 million at March 31,
2004. The primary components of net book value are $319 million for CRDI,
consisting of Tahoe Mountain Resort properties of $171 million, Denver
development properties of $60 million and Colorado Mountain development
properties of $88 million, $138 million for Desert Mountain and $31
million for other land development properties.

(5) Total assets by segment are inclusive of investments in unconsolidated
companies.

(6) Includes non-income producing land held for investment or development of
$80.8 million and U.S. Treasury and government sponsored agency securities
of $177.6 million.

(7) Inclusive of Corporate bonds, credit facility, the $75 million Fleet Term
Loan and Funding II defeasance.

14

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. ASSET ACQUISITIONS

OFFICE PROPERTIES

During January and February 2004, in accordance with the original purchase
contract, the Operating Partnership acquired an additional five Class A Office
Properties and seven retail parcels located within Hughes Center in Las Vegas,
Nevada from the Rouse Company. One of these Office Properties is owned through a
joint venture in which the Operating Partnership acquired a 67% interest. The
remaining four Office Properties are wholly-owned by the Operating Partnership.
The Operating Partnership acquired these five Office Properties and seven retail
parcels for approximately $175.3 million, funded by the Operating Partnership's
assumption of approximately $85.4 million in mortgage loans and by a portion of
the proceeds from the sale of the Operating Partnership's interests in The
Woodlands on December 31, 2003. The Operating Partnership recorded the loans
assumed at their fair value of approximately $93.2 million, which includes $7.8
million of premium. The five Office properties are included in the Operating
Partnership's Office Segment.

On March 31, 2004, the Operating Partnership acquired Dupont Centre, a
250,000 square foot Class A office property, located in the John Wayne Airport
submarket of Irvine, California. The Operating Partnership acquired the Office
Property for approximately $54.3 million, funded by a draw on the Operating
Partnership's credit facility. This Office Property is wholly-owned and included
in the Operating Partnership's Office Segment.

UNDEVELOPED LAND

On March 1, 2004, in accordance with the agreement to acquire the Hughes
Center Properties, the Operating Partnership completed the purchase of two
tracts of undeveloped land in Hughes Center from the Rouse Company for $10.0
million. The purchase was funded by a $7.5 million loan from the Rouse Company
and a draw on the Operating Partnership's credit facility.

5. DISCONTINUED OPERATIONS

In accordance with SFAS No. 144,"Accounting for the Impairment or Disposal
of Long-Lived Assets," the results of operations of the assets sold or held for
sale have been presented as "Income from discontinued operations," gain or loss
on the assets sold or held for sale have been presented as "Loss on real estate
from discontinued operations" and impairments on the assets sold or held for
sale have been presented as "Impairment charges related to real estate assets
from discontinued operations" in the accompanying Consolidated Statements of
Operations for the three months ended March 31, 2004 and 2003. The carrying
value of the assets held for sale has been reflected as "Properties held for
disposition, net" in the accompanying Consolidated Balance Sheets as of March
31, 2004 and December 31, 2003.

ASSETS SOLD

On March 23, 2004, the Operating Partnership completed the sale of the
1800 West Loop South Office Property in Houston, Texas. The sale generated net
proceeds of approximately $28.2 million and a net gain of approximately $0.2
million. The Operating Partnership previously recorded an impairment charge of
approximately $16.4 million, during the year ended December 31, 2003. The
proceeds from the sale were used primarily to pay down the Operating
Partnership's credit facility. This property was wholly-owned.

On March 31, 2004, the Operating Partnership sold its last remaining
behavioral healthcare property. The sale generated net proceeds of approximately
$2.0 million and a net loss of approximately $0.3 million.

15

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ASSETS HELD FOR SALE

OFFICE SEGMENT

The following Office Properties are classified as held for sale as of
March 31, 2004.

PROPERTY LOCATION
- ------------------ ----------------

Liberty Plaza(1) Dallas, Texas
12404 Park Central Dallas, Texas
3333 Lee Parkway Dallas, Texas
5050 Quorum(2) Dallas, Texas
Addison Tower(2) Dallas, Texas
Ptarmigan Place(2) Denver, Colorado

(1) This property was sold on April 13, 2004.

(2) The Operating Partnership has entered into contracts to sell these
properties. The sales are expected to close in the second quarter of 2004.

SUMMARY OF ASSETS HELD FOR SALE

The following table indicates the major asset classes of the properties
held for sale.

(in thousands) MARCH 31, 2004(1) DECEMBER 31, 2003(2)
- -------------- ----------------- --------------------

Land $ 10,320 $ 15,291
Buildings and improvements 105,873 138,017
Accumulated depreciation (23,558) (29,754)
Other assets, net 3,312 4,361
--------- ---------
Net investment in real estate $ 95,947 $ 127,915
========= =========

- --------------------
(1) Includes six Office Properties and other assets.

(2) Includes seven Office Properties, one behavioral healthcare property and
other assets.

The following tables present total revenues, operating and other expenses,
depreciation and amortization, impairments of real estate assets and realized
loss on sale of properties for the three months ended March 31, 2004 and 2003,
for properties included in discontinued operations.

FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
(in thousands) 2004 2003
- -------------- ------- --------

Total revenues $ 4,462 $ 9,367
Operating and other expenses (3,280) (4,271)
Depreciation and amortization (478) (2,630)
------- -------
Income from discontinued operations $ 704 $ 2,466
======= =======

FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
(in thousands) 2004 2003
- -------------- ------- --------

Impairment charges related to real estate assets from discontinued operations $(2,351) $(15,828)
======= ========

FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
(in thousands) 2004 2003
- -------------- ---- -----

Loss on sale of real estate from discontinued operations $(55) $(339)
==== =====

16

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. TEMPERATURE-CONTROLLED LOGISTICS SEGMENT

TEMPERATURE-CONTROLLED LOGISTICS PROPERTIES

AmeriCold Logistics, a limited liability company owned 60% by Vornado
Operating L.P. and 40% by a subsidiary of Crescent Operating, Inc. ("COPI"), 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 March
2, 2004, the Temperature-Controlled Logistics Corporation and AmeriCold
Logistics amended the leases to further extend the deferred rent period to
December 31, 2005, from December 31, 2004. The parties previously extended the
deferred rent period to December 31, 2004 from December 31, 2003, on March 7,
2003.

Under terms of the leases, AmeriCold Logistics elected to defer $10.8
million of the total $38.9 million of rent payable for the three months ended
March 31, 2004. The Operating Partnership's share of the deferred rent was $4.3
million. The Operating Partnership recognizes rental income from the
Temperature-Controlled Logistics Properties when earned and collected and has
not recognized the $4.3 million of deferred rent in equity in net income of the
Temperature-Controlled Logistics Properties for the three months ended March 31,
2004. As of March 31, 2004, the Temperature-Controlled Logistics Corporation's
deferred rent and valuation allowance from AmeriCold Logistics were $93.2
million and $85.1 million, respectively, of which the Operating Partnership's
portions were $37.3 million and $34.0 million, respectively.

On February 5, 2004, the Temperature-Controlled Logistics Corporation
completed a $254.4 million mortgage financing with Morgan Stanley Mortgage
Capital Inc., secured by 21 of its owned and seven of its leased
temperature-controlled logistics properties. The loan matures in April 2009,
bears interest at LIBOR plus 295 basis points (with a LIBOR floor of 1.5% with
respect to $54.4 million of the loan) and requires principal payments of $5.0
million annually. The net proceeds to the Temperature-Controlled Logistics
Corporation were approximately $225.0 million, after closing costs and the
repayment of approximately $12.9 million in existing mortgages. On February 6,
2004, the Temperature-Controlled Logistics Corporation distributed cash of
approximately $90.0 million to the Operating Partnership.

VORNADO CRESCENT CARTHAGE AND KC QUARRY, L.L.C.

On January 20, 2004, VCQ purchased $6.1 million of trade receivables from
AmeriCold Logistics at a 2% discount. VCQ used cash from a $6.0 million
contribution from its owners, of which approximately $2.4 million represented
the Operating Partnership's contribution for the purchase of the trade
receivables. The receivables were collected during the first quarter of 2004. On
March 29, 2004, VCQ purchased an additional $4.1 million of receivables from
AmeriCold Logistics at a 2% discount. VCQ used cash from collection of the trade
receivables previously purchased. The remaining $2.0 million was distributed to
its owners, of which $0.8 million was received by the Operating Partnership on
April 1, 2004.

17

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. INVESTMENTS IN UNCONSOLIDATED COMPANIES

The following is a summary of the Operating Partnership's ownership in
significant unconsolidated joint ventures and investments as of March 31, 2004.

OPERATING PARTNERSHIP'S
OWNERSHIP
ENTITY CLASSIFICATION AS OF MARCH 31, 2004
- ---------------------------------------------------- -------------------------------------- -----------------------

Main Street Partners, L.P. Office (Bank One Center-Dallas) 50.0% (1)
Crescent Miami Center, L.L.C. Office (Miami Center - Miami) 40.0% (2)
Crescent Five Post Oak Park L.P. Office (Five Post Oak - Houston) 30.0% (3)
Crescent One BriarLake Plaza, L.P. Office (BriarLake Plaza - Houston) 30.0% (4)
Crescent 5 Houston Center, L.P. Office (5 Houston Center-Houston) 25.0% (5)
Austin PT BK One Tower Office Limited Partnership Office (Bank One Tower-Austin) 20.0% (6)
Houston PT Three Westlake Office Limited Partnership Office (Three Westlake Park - Houston) 20.0% (6)
Houston PT Four Westlake Office Limited Partnership Office (Four Westlake Park-Houston) 20.0% (6)
Vornado Crescent Carthage and KC Quarry, L.L.C. Temperature-Controlled Logistics 56.0% (7)
Vornado Crescent Portland Partnership Temperature-Controlled Logistics 40.0% (8)
Blue River Land Company, L.L.C. Other 50.0% (9)
Canyon Ranch Las Vegas, L.L.C. Other 50.0% (10)
EW Deer Valley, L.L.C. Other 41.7% (11)
CR License, L.L.C. Other 30.0% (12)
CR License II, L.L.C. Other 30.0% (13)
SunTx Fulcrum Fund, L.P. Other 23.5% (14)
SunTx Capital Partners, L.P. Other 14.4% (15)
G2 Opportunity Fund, L.P. ("G2") Other 12.5% (16)

- --------------------
(1) The remaining 50% interest in Main Street Partners, L.P. is owned by
Trizec Properties, Inc.

(2) The remaining 60% interest in Crescent Miami Center, L.L.C. is owned by an
affiliate of a fund managed by JP Morgan Fleming Asset Management, Inc.

(3) The remaining 70% interest in Crescent Five Post Oak Park, L.P. is owned
by an affiliate of General Electric Pension Fund Trust.

(4) The remaining 70% interest in Crescent One BriarLake Plaza, L.P. is owned
by affiliates of JP Morgan Fleming Asset Management, Inc.

(5) The remaining 75% interest in Crescent 5 Houston Center, L.P. is owned by
a pension fund advised by JP Morgan Fleming Asset Management, Inc.

(6) The remaining 80% interest in each of Austin PT BK One Tower Office
Limited Partnership, Houston PT Three Westlake Office Limited Partnership
and Houston PT Four Westlake Office Limited Partnership is owned by an
affiliate of General Electric Pension Fund Trust.

(7) The remaining 44% in Vornado Crescent Carthage and KC Quarry, L.L.C. is
owned by Vornado Realty Trust, L.P.

(8) The remaining 60% interest in Vornado Crescent Portland Partnership is
owned by Vornado Realty Trust, L.P.

(9) The remaining 50% interest in Blue River Land Company, L.L.C. is owned by
parties unrelated to the Operating Partnership.

(10) Of the remaining 50% interest in Canyon Ranch Las Vegas, L.L.C., 35% is
owned by an affiliate of the management company of two of the Operating
Partnership's Resort/Hotel Properties and 15% is owned by the Operating
Partnership through its investment in CR License II, L.L.C.

(11) The remaining 58.3% interest in EW Deer Valley, L.L.C. is owned by parties
unrelated to the Operating Partnership. EW Deer Valley, L.L.C. was formed
to acquire, hold and dispose of its 3.3% ownership interest in Empire
Mountain Village, L.L.C.

(12) The remaining 70% interest in CR License, L.L.C. is owned by an affiliate
of the management company of two of the Operating Partnership's
Resort/Hotel Properties.

(13) The remaining 70% interest in CR License II, L.L.C is owned by an
affiliate of the management company of two of the Operating Partnership's
Resort/Hotel Properties.

(14) SunTx Fulcrum Fund, L.P.'s objective is to invest in a portfolio of
acquisitions that offer the potential for substantial capital
appreciation. Of the remaining 76.5% of SunTx Fulcrum Fund, L.P., 37.1% is
owned by SunTx Capital Partners, L.P. and the remaining 39.4% is owned by
a group of individuals unrelated to the Operating Partnership.

(15) The remaining 85.6% interest in SunTx Capital Partners, L.P. is owned by
parties unrelated to the Operating Partnership.

(16) G2 was formed for the purpose of investing in commercial mortgage backed
securities and other commercial real estate investments. The remaining
87.5% interest in G2 is owned by Goff-Moore Strategic Partners, L.P.
("GMSPLP") and by parties unrelated to the Operating Partnership. G2 is
managed and controlled by an entity that is owned equally by GMSPLP and
GMAC Commercial Mortgage Corporation ("GMACCM"). The ownership structure
of GMSLP consists of an approximately 86% limited partnership interest
owned directly and indirectly by Richard E. Rainwater, Chairman of the
Board of Trust Managers of the Company, and an approximately 14% general
partnership interest, of which approximately 6% is owned by Darla Moore,
who is married to Mr. Rainwater, and approximately 6% is owned by John C.
Goff, Vice-Chairman of the Company's Board of Trust Managers and Chief
Executive Officer of the Company and sole director and Chief Executive
Officer of the General Partner. The remaining approximately 2% general
partnership interest is owned by unrelated parties.

18

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY FINANCIAL INFORMATION

The Operating Partnership reports its share of income and losses based on
its ownership interest in its respective equity investments, adjusted for any
preference payments. The unconsolidated entities that are included under the
headings on the following tables are summarized below.

Balance Sheets as of March 31, 2004:

- Office - This includes Main Street Partners, L.P., Houston PT
Three Westlake Office Limited Partnership, Houston PT Four
Westlake Office Limited Partnership, Austin PT BK One Tower
Office Limited Partnership, Crescent 5 Houston Center, L.P.,
Crescent Miami Center, L.L.C., Crescent Five Post Oak Park
L.P. and Crescent One BriarLake Plaza, L.P.;

- Temperature-Controlled Logistics - This includes the
Temperature-Controlled Logistics Partnership and VCQ; and

- Other - This includes Manalapan Hotel Partners, L.L.C., Blue
River Land Company, L.L.C., EW Deer Valley, L.L.C., CR
License, L.L.C., CR License II, L.L.C., Canyon Ranch Las
Vegas, L.L.C., SunTx Fulcrum Fund, L.P., SunTx Capital
Partners, L.P. and G2.

Balance Sheets as of December 31, 2003:

- Office - This includes Main Street Partners, L.P., Houston PT
Three Westlake Office Limited Partnership, Houston PT Four
Westlake Office Limited Partnership, Austin PT BK One Tower
Office Limited Partnership, Crescent 5 Houston Center, L.P.,
Crescent Miami Center, L.L.C., Crescent Five Post Oak Park
L.P. and Crescent One BriarLake Plaza, L.P.;

- Temperature-Controlled Logistics - This includes the
Temperature-Controlled Logistics Partnership and VCQ; and

- Other - This includes Manalapan Hotel Partners, L.L.C., Blue
River Land Company, L.L.C., EW Deer Valley, L.L.C., CR
License, L.L.C., CR License II, L.L.C., Canyon Ranch Las
Vegas, L.L.C., SunTx Fulcrum Fund, L.P. and G2.

Summary Statements of Operations for the three months ended March 31,
2004:

- Office - This includes Main Street Partners, L.P., Houston PT
Three Westlake Office Limited Partnership, Houston PT Four
Westlake Office Limited Partnership, Austin PT BK One Tower
Office Limited Partnership, Crescent 5 Houston Center, L.P.,
Crescent Miami Center, L.L.C., Crescent Five Post Oak Park
L.P. and Crescent One BriarLake Plaza, L.P.;

- Temperature-Controlled Logistics - This includes the
Temperature-Controlled Logistics Partnership and VCQ; and

- Other - This includes the Blue River Land Company, L.L.C., EW
Deer Valley, L.L.C., CR License, L.L.C., CR License II,
L.L.C., Canyon Ranch Las Vegas, L.L.C., SunTx Fulcrum Fund,
L.P., SunTx Capital Partners, L.P. and G2.

Summary Statements of Operations for the three months ended March 31,
2003:

- Office - This includes Main Street Partners, L.P., Houston PT
Three Westlake Office Limited Partnership, Houston PT Four
Westlake Office Limited Partnership, Austin PT BK One Tower
Office Limited Partnership, Crescent 5 Houston Center, L.P.,
Crescent Miami Center, L.L.C, Crescent Five Post Oak Park L.P.
and Woodlands CPC;

- Temperature-Controlled Logistics - This includes the
Temperature-Controlled Logistics Partnership and VCQ;

- Other - This includes Manalapan Hotel Partners, L.L.C., the
Woodlands Land Development Company, L.P., Blue River Land
Company, L.L.C., CR License, L.L.C., CR License II, L.L.C.,
the Woodlands Operating Company and Canyon Ranch Las Vegas,
L.L.C., SunTx Fulcrum Fund, L.P. and G2.

19

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS:

AS OF MARCH 31, 2004
----------------------------------------------
TEMPERATURE-
CONTROLLED
(in thousands) OFFICE LOGISTICS OTHER TOTAL
- ----------------------------------- -------- -------------- ------- --------

Real estate, net $750,874 $ 1,172,980
Cash 24,344 20,501
Other assets 53,830 110,677
-------- --------------
Total assets $829,048 $ 1,304,158
======== ==============

Notes payable $514,153 $ 785,861
Notes payable to the Operating
Partnership - -
Other liabilities 21,062 7,179
Equity 293,833 511,118
-------- --------------
Total liabilities and equity $829,048 $ 1,304,158
======== ==============

Operating Partnership's share of
unconsolidated debt $172,018 $ 314,344 $ 2,357 $488,719
======== ============== ======= ========

Operating Partnership's investments
in unconsolidated companies $102,555 $ 212,392 $43,159 $358,106
======== ============== ======= ========

BALANCE SHEETS:

AS OF DECEMBER 31, 2003
---------------------------------------------
TEMPERATURE-
CONTROLLED
(in thousands) OFFICE LOGISTICS OTHER TOTAL
- ----------------------------------- -------- ------------- ------- --------

Real estate, net $754,882 $ 1,187,387
Cash 31,309 12,439
Other assets 51,219 88,668
-------- -------------
Total assets $837,410 $ 1,288,494
======== =============

Notes payable $515,047 $ 548,776
Notes payable to the Operating
Partnership - -
Other liabilities 29,746 11,084
Equity 292,617 728,634
-------- -------------
Total liabilities and equity $837,410 $ 1,288,494
======== =============

Operating Partnership's share of
unconsolidated debt $172,376 $ 219,511 $ 2,495 $394,382
======== ============= ======= ========

Operating Partnership's investments
in unconsolidated companies $102,519 $ 300,917 $40,538 $443,974
======== ============= ======= ========

20

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY STATEMENTS OF OPERATIONS:

FOR THE THREE MONTHS ENDED MARCH 31, 2004
---------------------------------------------
TEMPERATURE-
CONTROLLED
(in thousands) OFFICE LOGISTICS OTHER(1) TOTAL
- ----------------------------------------------- ------- ------------ -------- -----

Total revenues $26,893 $ 30,433
Expenses:
Operating expense 11,247 6,072 (2)
Interest expense 6,305 12,512
Depreciation and amortization 5,551 14,610
Other (income) expense - (863)
------- ------------
Total expenses $23,103 $ 32,331
------- ------------
Net income, impairments and gain (loss) on real
estate from discontinued operations $ 3,790 $ (1,898) $ (52)
======= ============ ========

Operating Partnership's equity in net income
(loss) of unconsolidated companies $ 942 $ (901) $ (211) $(170)
======= ============ ======== =====

SUMMARY STATEMENTS OF OPERATIONS:

FOR THE THREE MONTHS ENDED MARCH 31, 2003
----------------------------------------------
TEMPERATURE-
CONTROLLED
(in thousands) OFFICE LOGISTICS OTHER(1) TOTAL
- ----------------------------------------------- ------- ------------ -------- ------

Total revenues $34,373 $ 34,032
Expenses:
Operating expense 14,708 6,008 (2)
Interest expense 6,194 10,244
Depreciation and amortization 7,865 14,643
Other (income) expense - (615)
------- ------------
Total expenses $28,767 $ 30,280
------- ------------

Net income, impairments and gain (loss) on real
estate from discontinued operations $ 5,606 $ 3,752 $ 3,351
======= ============ ========

Operating Partnership's equity in net income
(loss) of unconsolidated companies $ 1,458 $ 1,507 $ 684 $3,649
======= ============ ======== ======

- --------------------
(1) The Operating Partnership sold its interest in The Woodlands Land
Development Company, L.P. on December 31, 2003.

(2) Inclusive of the preferred return paid to Vornado Realty Trust (1% per
annum of the total combined assets).

21

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNCONSOLIDATED DEBT ANALYSIS

The following table shows, as of March 31, 2004, information about the
Operating Partnership's share of unconsolidated fixed and variable rate debt and
does not take into account any extension options, hedge arrangements or the
entities' anticipated pay-off dates.

OPERATING
PARTNERSHIP
BALANCE SHARE OF INTEREST
OUTSTANDING AT BALANCE AT RATE AT FIXED/VARIABLE
MARCH 31, MARCH 31, MARCH 31, SECURED/
DESCRIPTION 2004 2004 2004 MATURITY DATE UNSECURED
- --------------------------------------------- -------------- ----------- -------------- -------------------- ----------------
(in thousands)

TEMPERATURE-CONTROLLED LOGISTICS SEGMENT:
Vornado Crescent-Portland Partnership - 40%
Operating Partnership
Goldman Sachs (1) $ 492,997 $ 197,199 6.89% 5/11/2023 Fixed/Secured
Morgan Stanley (2) 253,957 101,583 4.04% 4/9/2009 Variable/Secured
Various Capital Leases 35,857 14,342 4.84 to 13.63% 6/1/2006 to 4/1/2017 Fixed/Secured
Various Mortgage Notes 3,050 1,220 7.00 to 12.88% 4/1/2004 to 4/1/2009 Fixed/Secured
-------------- -----------
$ 785,861 $ 314,344
-------------- -----------
OFFICE SEGMENT:
Main Street Partners, L.P. - 50% Operating
Partnership(3)(4) $ 129,961 $ 64,980 5.47% 12/1/2004 Variable/Secured
Crescent 5 Houston Center, L.P. - 25%
Operating Partnership 90,000 22,500 5.00% 10/1/2008 Fixed/Secured
Crescent Miami Center, LLC - 40% Operating
Partnership 81,000 32,400 5.04% 9/25/2007 Fixed/Secured
Crescent One BriarLake Plaza, L.P. - 30%
Operating Partnership 50,000 15,000 5.40% 11/1/2010 Fixed/Secured
Houston PT Four Westlake Office Limited
Partnership - 20% Operating Partnership 47,921 9,584 7.13% 8/1/2006 Fixed/Secured
Crescent Five Post Oak Park, L.P. - 30%
Operating Partnership 45,000 13,500 4.82% 1/1/2008 Fixed/Secured
Austin PT BK One Tower Office Limited
Partnership - 20% Operating Partnership 37,272 7,454 7.13% 8/1/2006 Fixed/Secured
Houston PT Three Westlake Office Limited
Partnership - 20% Operating Partnership 33,000 6,600 5.61% 9/1/2007 Fixed/Secured
-------------- -----------
$ 514,154 $ 172,018
-------------- -----------
RESIDENTIAL SEGMENT:
Blue River Land Company, L.L.C. - 50%
Operating Partnership (5) $ 4,714 $ 2,357 4.10% 6/30/2004 Variable/Secured
-------------- -----------
TOTAL UNCONSOLIDATED DEBT $ 1,304,729 $ 488,719
============== ===========
FIXED RATE/WEIGHTED AVERAGE 6.63% 13.8 years
VARIABLE RATE/WEIGHTED AVERAGE 4.59% 3.3 years
-------------- --------------------
TOTAL WEIGHTED AVERAGE 5.93% 10.2 years
============== ====================

- --------------------
(1) URS Real Estate, L.P. and AmeriCold Real Estate, L.P., subsidiaries of the
Temperature-Controlled Logistics Corporation, expect to repay this note on
the Optional Prepayment Date of April 11, 2008. The overall weighted
average maturity would be 3.98 years based on this date.

(2) On February 5, 2004, the Temperature-Controlled Logistics Corporation
completed a mortgage financing with Morgan Stanley Mortgage Capital, Inc.,
secured by twenty-one of its owned and seven of its leased properties. The
loan bears interest at LIBOR + 295 basis points (with a LIBOR floor of
1.5% with respect to $54.4 million of the loan) and requires principal
payments of $5.0 million annually.

(3) Senior Note - Note A: $81.8 million at variable interest rate, LIBOR + 189
basis points, $4.8 million at variable interest rate, LIBOR + 250 basis
points with a LIBOR floor of 2.50%. Note B: $24.1 million at variable
interest rate, LIBOR + 650 basis points with a LIBOR floor of 2.50%.
Mezzanine Note - $19.3 million at variable interest rate, LIBOR + 890
basis points with a LIBOR floor of 3.0%. Interest-rate cap agreement
maximum LIBOR of 4.52% on all notes. All notes amortized based on a
25-year schedule.

(4) The Operating Partnership and its joint venture partner obtained separate
Letters of Credit to guarantee the repayment of up to $4.3 million each of
principal of the Main Street Partners, L.P. loan.

(5) The variable rate loan has an interest rate of LIBOR + 300 basis points. A
fully consolidated entity of CRDI, of which CRDI owns 88.3%, provides an
unconditional guarantee of up to 70% of the outstanding balance of up to a
$9.0 million loan to Blue River Land Company, L.L.C. There was
approximately $4.7 million outstanding at March 31, 2004 and the guarantee
was $3.3 million.

22

CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY

The following is a summary of the Operating Partnership's debt financing
at March 31, 2004:

MARCH 31, 2004
-------------
(in thousands)

SECURED DEBT

Bank of America Fund XII Term Loan due January 2006, bears interest at LIBOR plus 225 basis points
(at March 31, 2004, the interest rate was 3.35%), with a two-year interest-only term and a one-year extension
option, secured by the Funding XII Properties................................................................... $ 275,000

AEGON Partnership Note due July 2009, bears interest at 7.53% with monthly principal and interest payments
based on a 25-year amortization schedule, secured by the Funding III, IV and V Properties (Greenway Plaza)...... 258,765

LaSalle Note I(1) due August 2027, bears interest at 7.83% with monthly principal and interest payments
based on a 25-year amortization schedule through maturity in August 2027, secured by the Funding I
Properties.....................................