e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
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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
(Exact name of registrant as specified in its charter)
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TEXAS
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52-1862813 |
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(State or other jurisdiction of incorporation
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(I.R.S. Employer Identification Number) |
or organization) |
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777 Main Street, Suite 2100, Fort Worth, Texas
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76102 |
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(Address of principal executive offices)
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(Zip code) |
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Registrants telephone number, including area code (817) 321-2100
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange |
Title of each class: |
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on Which Registered: |
Common Shares of Beneficial Interest par value $0.01 per share |
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New York Stock Exchange |
Series A
Convertible Cumulative Preferred Shares of
Beneficial Interest par value $0.01 per share |
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New York Stock Exchange |
Series B Cumulative Redeemable Preferred Shares of
Beneficial Interest par value $0.01 per share |
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New York Stock Exchange |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
YES þ NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
YES o NO þ
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 þ NO o
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 registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO þ
As of June 30, 2006, the aggregate market value of the 94,283,113 common shares held by
non-affiliates of the registrant was approximately $1.8 billion.
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Number of
Common Shares outstanding as of March 5, 2007: |
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102,807,311 |
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Number of
Series A Preferred Shares outstanding as of March 5, 2007: |
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14,200,000 |
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Number of
Series B Preferred Shares outstanding as of March 5, 2007: |
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3,400,000 |
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange Commission for
Registrants 2007 Annual Meeting of Shareholders are incorporated by reference into Part
III.
PART I
Item 1. Business
References to we, us or our refer to Crescent Real Estate Equities Company and,
unless the context otherwise requires, Crescent Real Estate Equities Limited Partnership, which we
refer to as our Operating Partnership, and our other direct and indirect subsidiaries. We conduct
our business and operations through the Operating Partnership, our other subsidiaries and our joint
ventures. References to Crescent refer to Crescent Real Estate Equities Company. The sole
general partner of the Operating Partnership is Crescent Real Estate Equities, Ltd., a wholly-owned
subsidiary of Crescent Real Estate Equities Company, which we refer to as the General Partner.
Certain statements contained herein constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance.
Our future results, financial condition and business may differ materially from those expressed in
these forward-looking statements. You can find many of these statements by looking for words such
as plans, intends, estimates, anticipates, expects, believes or similar expressions in
this Form 10-K. These forward-looking statements are subject to numerous assumptions, risks and
uncertainties. Many of the factors that will determine these items are beyond our ability to
control or predict. For further discussion of these factors, see Item 1A. Risk Factors in this
Form 10-K.
For these statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned
not to place undue reliance on our forward-looking statements, which speak only as of the date of
this Form 10-K or the date of any document incorporated by reference. All subsequent written and
oral forward-looking statements attributable to us or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.
We do not undertake any obligation to release publicly any revisions to our forward-looking
statements to reflect events or circumstances after the date of this Form 10-K.
General
We operate as a real estate investment trust, or REIT, for federal income tax purposes
and provide management, leasing and development services for some of our properties.
At December 31, 2006, our assets and operations consisted of four investment segments:
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Office Segment; |
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Resort Residential Development Segment; |
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Resort/Hotel Segment; and |
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Temperature-Controlled Logistics Segment. |
Within these segments, we owned in whole or in part the following operating real estate
assets, which we refer to as the Properties, as of December 31, 2006:
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Office Segment consisted of 71 office properties, which we refer to as the Office
Properties, located in 26 metropolitan submarkets in eight states, with an aggregate of
approximately 27.6 million net rentable square feet. Fifty-four of the Office
Properties are wholly-owned and 17 are owned through joint ventures, one of which is
consolidated in our financial statements contained in Item 8, Financial Statements and
Supplementary Data, and 16 of which are unconsolidated. |
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Resort Residential Development Segment consisted of our ownership of common stock
representing interests of 98% to 100% in four Resort Residential Development
Corporations and two limited partnerships, which are consolidated. These Resort
Residential Development Corporations, through partnership arrangements, owned, in whole
or in part, 30 active and planned upscale resort residential development properties,
which we refer to as the Resort Residential Development Properties. |
3
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Resort/Hotel Segment consisted of five luxury and destination fitness resorts and spas
with a total of 949 rooms/guest nights and three upscale business-class hotel properties
with a total of 1,376 rooms, which we refer to as the Resort/Hotel Properties. Five of
the Resort/Hotel Properties are wholly-owned, one is owned through a joint venture that
is consolidated and two are owned through joint ventures that are unconsolidated. |
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Temperature-Controlled Logistics Segment consisted of our 31.7% interest in
AmeriCold Realty Trust, or AmeriCold, a REIT. As of December 31, 2006, AmeriCold
operated 104 facilities, of which 91 were wholly-owned or leased, one was partially-owned and 12
were managed for outside owners. The 92 owned or leased and partially-owned facilities, which we
refer to as the Temperature-Controlled Logistics Properties, had an aggregate of
approximately 497.8 million cubic feet (19.0 million square feet) of warehouse space.
AmeriCold also owned one quarry and the related land. |
See Note 3, Segment Reporting, included in Item 8, Financial Statements and Supplementary
Data, for a table showing selected financial information for each of these investment segments for
the three years ended December 31, 2006, 2005 and 2004, and total assets, consolidated property
level financing, consolidated other liabilities and minority interests for each of these investment
segments at December 31, 2006 and 2005.
See Note 1, Organization and Basis of Presentation, included in Item 8, Financial
Statements and Supplementary Data, for a table that lists our principal subsidiaries and the
properties that they own.
See Note 10, Investments in Unconsolidated Companies, included in Item 8, Financial
Statements and Supplementary Data, for a table that lists our ownership in significant
unconsolidated joint ventures and investments as of December 31, 2006.
Business Objectives and Strategies Overview
We are a REIT with assets and operations divided into four investment segments: Office,
Resort Residential Development, Resort/Hotel and Temperature-Controlled Logistics. Our strategy
has two key elements as outlined below.
First, we selectively invest in premier office properties in markets that offer attractive
returns on invested capital. We may align ourselves with institutional partners to enhance our
return on equity when compared to the returns we receive as a 100% owner. Where possible, we
negotiate performance-based incentives on our joint ventures that allow for additional equity to be earned if return
targets are exceeded. For example, we earned promoted interests on the sales of the Three Westlake and Four
Westlake joint venture Office Properties in 2006. We currently hold 43% of our office portfolio in joint ventures.
We selectively develop new office properties where the opportunity exists for attractive
returns. In August 2006, we completed, with JMI Realty, a 232,330 square-foot, three-building
complex in San Diego, California and sold our interest in the property in December 2006 for a $10.4
million gain. We are also developing a 239,000 square-foot office building as an addition to the
Hughes Center complex in Las Vegas, Nevada. We are co-developing with Hines a 267,000 square-foot
office building in Irvine, California, and with Champion Partners, a 144,380 square-foot,
two-building office complex in Austin, Texas.
Second, we invest in real estate businesses that offer returns equal to or superior to what we
are able to achieve in our office investments. We develop and sell residential properties in
resort locations primarily through Crescent Resort
Development, Inc., with Harry Frampton and his East West Partners development team, with
the most significant project in terms of future cash flow being our investment in Tahoe Mountain
Resorts in California. This development encompasses more than 2,500 total lots and units, of which
532 have been sold, 73 are currently in inventory and over 1,950 are scheduled for development over
the next 14 years, and is expected to generate in excess of $5.0 billion in sales. We view our resort residential developments as a business and believe
that, beyond the net present value of existing projects, there is value in our strategic
relationships with the development teams and our collective ability to identify and develop new
projects. In addition, we sometimes serve as the primary developer, such as The Ritz-Carlton
Phases I and II. Also, we provide mezzanine financing to other office, hotel and residential
investors where we see attractive returns relative to owning the equity. We currently have
approximately $124.3 million of mezzanine notes.
4
In
2005, we also completed the recapitalization of our Canyon
Ranch® investment. In addition to its
wellness facilities in Tucson, Arizona and Lenox, Massachusetts and
its Spa Club operation at the Venetian Resort in Las Vegas, Nevada, Canyon Ranch partners with developers to establish Canyon Ranch Living communities at which the focal point is a large, comprehensive wellness facility and earns fees for the licensing of
the brand name to these communities, providing design and technical services, and the ongoing management of the facilities. One
such development is under construction in Miami Beach and an agreement that will pave the way for
the development of a Canyon Ranch Living community in Chicago, Illinois, and others, are under
consideration or in negotiation.
During 2006, we conducted an extensive review of our strategic alternatives, and in late
August received an offer to purchase certain assets. Our Board of Trust Managers established a
special committee of independent trust managers to assist in its consideration of the strategic
alternatives and to respond to the offer that was received. The Special Committee hired an
independent investment banker and counsel to assist with its review. The Special Committee has
rejected the offer received, and on November 1, 2006, instituted a formal review of our strategic alternatives.
On March 1, 2007, we announced that we had concluded the review of strategic alternatives
first announced on November 1, 2006. Based on that review, we
adopted a plan, which we refer to as the Strategic Plan, designed to simplify our business model by concentrating on our core office properties business.
Key elements of the Strategic Plan include:
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Sale of all resort and hotel assets. Properties to be sold include the Fairmont Sonoma
Mission Inn & Spa®, Ventana Inn & Spa in Big Sur, California, the Park Hyatt Beaver
Creek Resort & Spa, and three business-class hotels. |
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Sale of resort residential developments. Properties and assets to be sold include
Crescent Resort Development and Desert Mountain Development Corporation. |
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Opportunistic sale of office properties. Properties to be sold include virtually all
suburban Dallas properties and all Austin properties, as well as our single assets in
Phoenix, Arizona, and in Seattle, Washington. |
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Reduction of general and administrative expenses by more
than $17.0 million, or $0.14 per
share. Implementation of savings began immediately on March 1, 2007 and is expected to be
fully phased in by the end of 2007. We expect to take a charge of
approximately $5.0 million for
severance costs. |
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Use of sales proceeds to retire debt. We plan to first use the proceeds from asset sales
to retire debt. We expect that our balance sheet will be significantly strengthened and our
cost of capital lowered, giving us capacity for growth. |
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Alignment of dividend. We intend to align our dividend
with industry-accepted pay-out ranges to allow for retention of
capital for growth. |
In addition to the above elements, we are considering alternatives for our interest in Canyon
Ranch®
in conjunction with the founders of Canyon Ranch®. We will communicate our dividend plans as we
execute asset sales. After completing these
dispositions, our remaining office portfolio is expected to consist of 22.6 million square feet, of
which 11.7 million square feet, or 52%, will be owned in joint venture. Our effective ownership
will be 14.0 million square feet.
Available Information
You can find our Web site on the Internet at www.crescent.com. We provide free of charge
on our Web site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports as soon as reasonably practicable after electronically
filed with or furnished to the Securities and Exchange Commission.
Employees
As
of March 5, 2007, we had approximately 748 employees. In
connection with our Strategic Plan, the number of employees is
expected to be reduced significantly by the end of 2007. None of these employees are
covered by collective bargaining agreements. We consider our employee relations to be good.
Tax Status
We have elected to be taxed as a REIT under Sections 856 through 860 of the U.S. Internal
Revenue Code of 1986, as amended, or the Code, and operate in a manner intended to enable us to
continue to qualify as a REIT. As a REIT, we generally will not be subject to corporate federal
income tax on net income that we currently distribute to our shareholders, provided that we satisfy
certain organizational and operational requirements including the requirement to distribute at
least 90% of our REIT taxable income to our shareholders each year. If we fail to qualify as a
REIT in any taxable year, we will be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate tax rates. We are subject to
certain state and local taxes.
We have elected to treat certain of our corporate subsidiaries as taxable REIT subsidiaries,
each of which we refer to as a TRS. In general, a TRS may perform additional services for our
tenants and 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.
5
Environmental
and Health and Safety Matters
We and our Properties are subject to a variety of federal, state and local environmental,
health and safety laws, including:
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Comprehensive Environmental Response, Compensation, and Liability Act, as amended
(CERCLA); |
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Resource Conservation & Recovery Act; |
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Clean Water Act; |
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Clean Air Act; |
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Toxic Substances Control Act; and |
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Occupational Safety & Health Act. |
The application of these laws to a specific property that we own 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 owners ability to sell or lease real estate or to borrow using the real estate as
collateral.
Our compliance with existing environmental, health and safety laws has not had a material
adverse effect on our financial condition or results of operations. To further protect our
financial interests regarding environmental matters, we have in place a Pollution and Remediation
Legal Liability insurance policy which will respond in the event of certain future environmental
liabilities. Certain of our properties contain asbestos-containing building materials, or ACBM.
Environmental law requires that ACBM be properly managed and maintained and may impose fines and
penalties on building owners or operators for failure to comply with these requirements. For
properties where ACBM have been identified or are suspected, an operations and maintenance plan has
been prepared and implemented. If properties undergo major renovations or are demolished, certain
environmental regulations are in place which specify the manner in which ACBM must be handled and
disposed. We believe that we are compliant with current environmental regulations and that any
ACBM have been appropriately contained.
6
INDUSTRY SEGMENTS
Office Segment
Ownership Structure
As of December 31, 2006, we owned or had an interest in 71 Office Properties located in
26 metropolitan submarkets in eight states, with an aggregate of approximately 27.6 million net
rentable square feet. As lessor, we have retained substantially all of the risks and benefits of
ownership of the Office Properties and account for the leases of our 55 consolidated
Office Properties as operating leases. Fifty-four of the Office Properties are wholly-owned and 17
are owned through joint ventures, one of which is consolidated and 16 of which are unconsolidated.
Additionally, we provide management and leasing oversight services for all of our Office
Properties.
Market Information
The Office Property portfolio reflects our strategy of investing in first-class assets within
markets that have significant potential for long-term rental growth. Within our selected
submarkets, we have focused on premier locations that management believes are able to attract and
retain the highest quality tenants and command premium rents. We have sought new acquisitions that
have strong economic returns based on in-place tenancy and/or strong value-creation potential given
the market and our core competencies. Moreover, we have also sought assets with dominant positions
within their markets and submarkets due to quality and/or location, which mitigates the risks of
market volatility. Accordingly, managements investment strategy not only demands an acceptable
current cash flow return on invested capital, but also considers cash flow growth prospects. We
apply a well-defined leasing strategy in order to capture the
potential revenue growth in our
portfolio of Office Properties from occupancy gains and rental rate increases in the markets and the submarkets in which
we have invested.
In selecting the Office Properties, we have analyzed demographic, economic and market data to
identify metropolitan areas expected to enjoy significant long-term employment and office demand
growth. The markets in which we are currently invested are projected to continue to exceed
national employment and population growth rates, as illustrated in the following table. In
addition, we consider these markets demand-driven. Our office investment strategy also includes
metropolitan regions with above national average economic expansion rates combined with significant
office development supply constraints. Additionally, our investment strategy seeks geographic and
regional economic diversification within the markets expected to experience excellent economic and
office demand growth.
Our major office markets, which include Dallas, Houston, Austin, Denver, Miami and Las Vegas,
currently enjoy rising employment and are anticipated to be among the leading metropolitan areas
for population and employment growth over the next three years.
Projected Population Growth and Employment Growth for all Company Markets
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Population |
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Employment |
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Growth |
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Growth |
Metropolitan Statistical Area |
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2007-2009 |
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2007-2009 |
United States |
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2.7 |
% |
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3.4 |
% |
Atlanta, GA |
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6.2 |
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6.0 |
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Austin, TX |
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8.6 |
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9.2 |
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Colorado Springs, CO |
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4.2 |
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5.7 |
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Dallas, TX |
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6.1 |
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6.1 |
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Denver, CO |
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3.6 |
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4.3 |
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Fort Worth, TX |
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6.1 |
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6.3 |
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Houston, TX |
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6.0 |
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6.2 |
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Las Vegas, NV |
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10.9 |
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10.1 |
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Miami, FL |
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3.6 |
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3.9 |
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Orange County, CA |
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3.1 |
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4.3 |
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Phoenix, AZ |
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7.0 |
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9.0 |
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Seattle, WA |
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4.9 |
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6.0 |
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Source: |
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Moodys | Economy.com, data represents total percentage change for years 2007, 2008
and 2009. |
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Unemployment Rates for Company Markets
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As of December 31, |
Market |
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2006 |
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2005 |
United States |
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4.3 |
% |
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4.6 |
% |
Texas |
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4.1 |
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4.8 |
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Dallas |
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4.0 |
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4.6 |
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Houston |
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4.0 |
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5.1 |
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Austin |
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3.2 |
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3.9 |
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Denver |
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3.9 |
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4.5 |
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Miami |
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3.5 |
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3.6 |
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Las Vegas |
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4.2 |
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3.5 |
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Source: |
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U.S. Bureau of Labor Statistics and Texas Workforce Commission.
Not seasonally adjusted. |
The performance of all of our office markets improved in 2006. Occupancy rose in all of our
major markets with the exception of Las Vegas. All markets had positive net absorption, and
Dallas, Houston, and Austin significantly outpaced 2005. Occupancy increases of 2.7 percentage
points in Houston and 3.8 percentage points in Austin were
particularly strong. Miami and Las
Vegas remain very healthy markets even though gains slowed from the 2005 pace.
Office Market Absorption and Occupancy for Major Company Markets
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Economic Net |
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Economic Net |
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Absorption(1) |
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Absorption(1) |
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All Classes |
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Class A |
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Economic Occupancy(2) |
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Economic Occupancy(2) |
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(in square feet) |
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(in square feet) |
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All Classes |
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Class A |
Market |
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2006 |
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2005 |
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2006 |
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2005 |
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2006 |
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2005 |
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2006 |
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2005 |
Dallas |
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3,514,000 |
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549,000 |
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2,707,000 |
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1,250,000 |
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78.3 |
% |
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77.5 |
% |
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82.6 |
% |
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80.9 |
% |
Houston |
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5,814,000 |
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1,007,000 |
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4,443,000 |
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(207,000 |
) |
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85.8 |
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83.1 |
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88.4 |
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83.7 |
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Austin |
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1,966,000 |
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1,177,000 |
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1,300,000 |
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458,000 |
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88.3 |
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84.5 |
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89.7 |
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83.7 |
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Denver |
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2,473,000 |
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2,761,000 |
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1,672,000 |
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887,000 |
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85.6 |
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84.5 |
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88.1 |
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85.5 |
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Miami |
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778,000 |
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1,998,000 |
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692,000 |
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757,000 |
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92.7 |
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91.4 |
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92.0 |
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88.7 |
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Las Vegas |
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900,000 |
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2,068,000 |
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241,000 |
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305,000 |
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89.8 |
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91.5 |
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92.6 |
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91.9 |
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Sources: |
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CoStar Group for non-medical and non-owner-occupied buildings greater than 15,000 square
feet (Dallas, Houston, Austin, Denver and Miami); Grubb & Ellis Las Vegas (Las Vegas). |
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(1) |
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Economic net absorption is the change in leased space from one period to
another. |
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(2) |
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Economic occupancy reflects the occupancy of all tenants paying rent. |
One of the reasons for the improved occupancy in 2006 is that all of our major markets, except
Dallas, have relatively low levels of Class A office construction and demand levels outpacing new
supply. Dallas has an active development arena, about on par with demand levels. Most markets
experienced increases in new supply delivered in 2006, and all of the major markets had much higher
levels of space under construction at the end of 2006.
8
Office Market Construction Activity for Major Company Markets
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Office Space |
|
Office Space |
|
Office Space Under |
|
|
Completions |
|
Completions |
|
Construction |
(in square feet) |
|
All Classes |
|
Class A |
|
2006 |
Market |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
All Classes |
|
Class A |
Dallas |
|
|
2,759,000 |
|
|
|
649,000 |
|
|
|
1,699,000 |
|
|
|
215,000 |
|
|
|
3,087,000 |
|
|
|
2,596,000 |
|
Houston |
|
|
1,377,000 |
|
|
|
970,000 |
|
|
|
850,000 |
|
|
|
192,000 |
|
|
|
2,514,000 |
|
|
|
889,000 |
|
Austin |
|
|
378,000 |
|
|
|
384,000 |
|
|
|
148,000 |
|
|
|
|
|
|
|
1,247,000 |
|
|
|
807,000 |
|
Denver |
|
|
1,677,000 |
|
|
|
454,000 |
|
|
|
596,000 |
|
|
|
|
|
|
|
803,000 |
|
|
|
292,000 |
|
Miami |
|
|
369,000 |
|
|
|
588,000 |
|
|
|
255,000 |
|
|
|
36,000 |
|
|
|
3,077,000 |
|
|
|
1,170,000 |
|
Las Vegas |
|
|
2,956,000 |
|
|
|
2,569,000 |
|
|
|
|
|
|
|
365,000 |
|
|
|
2,821,000 |
|
|
|
1,187,000 |
|
|
|
|
Sources: |
|
CoStar Group (Dallas, Houston, Austin, Denver and Miami); Restrepo Consulting Group, LLC
(Las Vegas). |
Competition
Our 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
(specifically Class A 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 our ability to lease space and maintain or increase occupancy or rents in
our existing Office Properties. We believe, however, that the quality services and individualized
attention that we offer our tenants, together with our active preventive maintenance program and
superior building locations within markets, enhance our ability to attract and retain tenants for
our Office Properties. In addition, as of December 31, 2006, on a weighted average basis, we owned
approximately 12% of the Class A office space in the 26 submarkets in which we owned Class A office
properties. We believe that ownership of a significant percentage of office space in a particular
market reduces property operating expenses, enhances our ability to attract and retain tenants and
potentially results in increases in our net income.
Diversified Tenant Base
Our top ten tenants accounted for approximately 13.5% of our total Office Segment revenues as
of December 31, 2006. The loss of major tenants could have a temporary adverse effect on our
financial condition and results of operations until we are able to re-lease the space previously
leased to these tenants. Based on rental revenues from office leases in effect as of December 31,
2006, no single tenant accounted for more than 2.5% of our total Office Segment revenues for 2006.
In June 2005, we entered into an agreement with our then largest office tenant, El Paso Energy
Services Company and certain of its subsidiaries, which terminated El Pasos leases totaling
888,000 square feet at Greenway Plaza in Houston, Texas, effective December 31, 2007. Under the
agreement, El Paso is required to pay us $65.0 million in termination fees in periodic installments
through December 31, 2007, and $62.0 million in rent according to the original lease terms from
July 1, 2005 through December 31, 2007. As of December 31, 2006, we have collected $35.0 million
of the lease termination fee. For the years ended December 31,
2006 and 2005, we recognized $38.8 million and
$8.5 million, respectively, in
net termination fees, which includes accelerated termination fees and contractual full-service
rents resulting from the re-lease of approximately 463,000 square feet. As of December 31, 2006,
El Paso was current on all rent obligations.
9
Resort Residential Development Segment
Ownership Structure
As of December 31, 2006, we owned equity interests of 98% to 100% in four Resort
Residential Development Corporations and two limited partnerships which are consolidated. These
Resort Residential Development Corporations, through partnership arrangements, owned in whole or in
part 30 active and planned upscale resort residential development properties, which we refer to as
the Resort Residential Development Properties. The partnerships, for the majority of which we are
not the general partner, are responsible for the continued development and the day-to-day
operations of the Resort Residential Development Properties.
Competition and Market Information
Our
Resort 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 and
townhouses. These developments focus primarily on the buying power of
aging baby boomers. Management believes that the properties owned by Crescent Resort Development
Inc., or CRDI, and Desert Mountain Development Corporation, or Desert Mountain, representing our
most significant investments in Resort Residential Development Properties, contain certain features
that provide competitive advantages to these developments.
CRDI invests primarily in mountain resort residential real estate in Colorado and California,
as well as in downtown Denver, Colorado. Management believes that the Properties owned by CRDI
have limited direct competitors because of the projects locations, unique product offerings,
limited land availability and restricted development rights.
Desert Mountain, a luxury resort residential and recreational private community in Scottsdale,
Arizona, offers six 18-hole Jack Nicklaus signature golf courses with adjacent clubhouses.
Management believes Desert Mountain has few direct competitors due in part to the superior natural
surroundings and the amenity package that Desert Mountain offers to its members. Sources of
competition come from the resale market of existing lots and homes within Desert Mountain and from
a few smaller projects in the area. In addition, future resort residential golf development in the
Scottsdale area is limited due to the lack of water available for golf course use.
Resort residential
development demand is highly dependent upon the national economy,
home sales and, to a lesser extent, on mortgage interest rates. The national economy achieved healthy economic expansion in 2006 as
a result of strong business growth, and mortgage rates rose only marginally (the 30-year average
mortgage rate rose by 50 basis points in the first half of the year and then declined by the same
in the second half). Nevertheless, the housing sector did slow down considerably. Our markets
were somewhat impacted by the housing slowdown, but less than most primary housing markets. In
general, we found that the volume of housing transactions declined in our markets, but the pricing
held up well or improved. For example, in Eagle County, Colorado where a large CRDI resort
development is located, sales volume fell 23% compared to 2005, but the average sales price climbed
due to the rising percentage of high end sales in the area.
Resort/Hotel Segment
Ownership Structure
As of December 31, 2006, we owned or had an interest in five luxury and destination
fitness resorts and spas and three upscale business-class hotel properties, which we refer to as
the Resort/Hotel Properties. We hold one of the Resort/Hotel Properties, the Fairmont Sonoma
Mission Inn & Spa, through a joint venture arrangement, pursuant to which we own an 80.1% interest
in the limited liability company, which is consolidated, that owns the property. We hold two of
the Resort/Hotel Properties, Canyon Ranch Tucson and Canyon Ranch Lenox, through an unconsolidated
joint-venture arrangement, pursuant to which we own a 48% interest in the limited liability
companies that own the properties. The remaining five Resort/Hotel Properties are wholly-owned.
Seven of the Resort/Hotel Properties are leased to taxable REIT subsidiaries that we own or in
which we have an interest. The Omni Austin Hotel is leased to HCD Austin Corporation, an unrelated
third party. Third-party operators manage all of the Resort/Hotel Properties.
10
Market Information
Lodging demand is highly dependent upon the global economy and volume of business travel
as well as leisure travel. The hospitality market has enjoyed three years of strong market
recovery as measured by occupancy, room rates and revenue per available room, or RevPAR, (RevPAR is
a combination of occupancy and room rates and is the chief measure of hotel market performance).
In 2006, the national occupancy rate, as reported by Smith Travel Research, experienced a 0.3
percentage point increase to 63.4%, a 7.5% gain in RevPAR and a 7.0% rise in average daily room
rates, or ADR. For the luxury section of the industry, the most comparable to our portfolio, hotel
occupancy rose 1.2 percentage points to 71.4%, RevPAR climbed 11.7% and ADR increased 9.1% . New
hotel construction is still very limited in the nation and in our markets, although it is rising.
In 2006, the increase to total hotel supply in the United States was a low 0.6%. The luxury hotel
inventory rose by 3.0%.
Competition
We
believe that our luxury and destination fitness resorts and spas are
unique properties due to location, concept and high replacement cost, all of which create barriers
for competition to enter. 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. Our upscale business-class
Resort/Hotel Properties in Denver, Austin and Houston are business and convention center hotels
that compete against other business and convention center hotels.
Temperature-Controlled Logistics Segment
Ownership Structure
As of December 31, 2006, the Temperature-Controlled Logistics Segment consisted of our
31.7% interest in AmeriCold Realty Trust, or AmeriCold, a REIT, which is unconsolidated. AmeriCold
operates 104 facilities, of which 91 are wholly-owned or leased, one is partially-owned and 12 are
managed for outside owners. The 92 owned or leased facilities, which we refer to as the
Temperature-Controlled Logistics Properties, have an aggregate of approximately 497.8 million cubic
feet (19.0 million square feet) of warehouse space. AmeriCold also owns one quarry and the
related land.
Business and Industry Information
AmeriCold provides the food industry with refrigerated warehousing, transportation
management services and other logistical services. The Temperature-Controlled Logistics Properties
consist of production, distribution and public facilities. In addition, AmeriCold manages
facilities owned by its customers for which it earns fixed and incentive fees. 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. These
facilities also provide a number of additional services such as blast freezing, import/export and
labeling.
AmeriCold provides supply chain management solutions to food manufacturers and retailers who
require multi-temperature storage, handling and distribution capability for their products.
Service offerings include comprehensive transportation management, supply chain network modeling
and optimization, consulting and grocery retail-based distribution strategies such as multi-vendor
consolidation, direct-store delivery (DSD) and seasonal product distribution. AmeriColds
technology provides food manufacturers with real-time detailed inventory information via the
Internet.
11
AmeriColds customers consist primarily of national, regional and local food manufacturers,
distributors, retailers and food service organizations. A breakdown of AmeriColds largest
customers includes:
|
|
|
|
|
|
|
Percentage of |
|
|
2006 Segment Revenue |
H.J. Heinz Company |
|
|
17.9 |
% |
ConAgra Foods, Inc. |
|
|
9.6 |
|
Altria Group Inc. (Kraft Foods) |
|
|
5.7 |
|
Schwan Corp. |
|
|
4.3 |
|
Tyson Foods, Inc. |
|
|
4.1 |
|
General Mills, Inc. |
|
|
3.5 |
|
Sara Lee Corp. |
|
|
3.3 |
|
McCain Foods Limited |
|
|
3.2 |
|
U.S. Government |
|
|
3.1 |
|
Smithfield Companies Inc. |
|
|
2.9 |
|
Wayne Farms LLC |
|
|
2.6 |
|
Rich Products Corp. |
|
|
2.4 |
|
Jack in the Box Inc. |
|
|
2.3 |
|
J. R. Simplot Company |
|
|
2.2 |
|
Other |
|
|
32.9 |
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
|
|
|
Competition
AmeriCold is the largest operator of temperature-controlled warehouse space in North
America. As a result, AmeriCold does not have any competitors of comparable size. AmeriCold
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.
Item 1A. Risk Factors
If we are unable to effectively implement the Strategic Plan, our business, financial condition, operating results and common share price could suffer.
The implementation of the Strategic
Plan requires us to complete sales of numerous
properties and businesses, and effect a substantial reduction in our general and administrative
expenses, which will include a significant reduction in personnel. No assurance can be given that
we will be able to fully implement the Strategic Plan, or that the implementation will not have an
adverse effect on our operations or financial condition. If we fail to implement the Strategic
Plan, or if the implementation is longer, more costly or otherwise less successful than projected,
we could be subject to various adverse consequences, including, but not limited to, the following:
|
|
|
we may face various disruptions to the operation of our business as a result of the
substantial time and effort invested by our management in connection with the Strategic
Plan, and may be unable to respond effectively to competitive pressures or take advantage
of new business opportunities; |
|
|
|
|
our decision to implement the Strategic Plan may cause harm
to relationships with our
employees and/or may divert employee attention away from day-to-day operations of our
business; |
|
|
|
|
our decision to implement the Strategic Plan requires
cooperation of our
strategic business partners, including our relationships with the management of Canyon
Ranch and East West Partners; |
|
|
|
|
regardless of our ability to consummate the Strategic Plan, we would remain liable for
significant costs relating thereto, including, among others, severance and retention
payments, and accounting, legal and financial advisory expenses; and |
|
|
|
|
an announcement that we have abandoned or cannot fully implement the Strategic Plan
could trigger a decline in our common share price to the extent that our share price
reflects a market assumption that we will complete the Strategic Plan. |
Our
Strategic Plan calls for us to make substantial divestitures. We may be unable to
make these divestitures on terms that are acceptable, or at all.
We anticipate making a number of divestitures of our hotel and resort properties, our non-core
office properties and our resort and residential development business in accordance with our
Strategic Plan. Real estate investments generally cannot be sold quickly. Our ability to do so on
favorable terms may be limited by the availability of interested purchasers and internal demand on
our resources. We, and our advisors, may not be able to identify purchasers and negotiate acceptable terms on a timely
basis or at all. We may not be able to sell these properties for a gain relative to current net
book value of such properties. To the extent we are unable to sell these properties for our book
value, we may be required to take a non-cash impairment charge or loss on the sale, either of which
would reduce our net income.
12
Our failure to have an effective system of internal controls over financial reporting could hinder
our ability to accurately or timely report our financial results, which could have an adverse
effect on our business, results of operations or financial condition.
Although we have received an opinion from our independent registered public accounting firm,
Ernst & Young LLP, that the financial statements included in this Annual Report on Form 10-K
present fairly, in all material respects, in conformity with U.S. generally accepted accounting
principles, our consolidated financial position, results of operations and cash flows for the
periods indicated therein, our management concluded, as of December 31, 2006, that our internal
control over financial reporting was not effective as a result of three incorrect accounting items,
described further in Item 8, Financial Statements and Supplementary Data, Note 1, Organization
and Basis of Presentation, that constituted material weaknesses. These accounting items, which are
highly complex and subject to interpretation, have since been corrected. You should note that any
control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance of achieving the desired control objectives, and there can be no assurance that
we will be able to maintain effective internal controls over financial reporting in the future. An
ineffective control environment, if not remedied, could result in a misstatement of our financial
statements that could cause a delay in periodic filings with the SEC and such delay could cause a
violation of debt covenants.
We derive the substantial majority of our office rental revenues from geographically concentrated
markets.
As of December 31, 2006, approximately 66% of our office portfolio, based on total net
rentable square feet, was located in the metropolitan areas of Houston and Dallas, Texas. Due to
our geographic concentration in these metropolitan areas, any deterioration in economic conditions
in the Houston or Dallas metropolitan areas, or in other geographic markets in which we in the
future may acquire substantial assets, could adversely affect our results of operations and our
ability to make distributions to our shareholders and could decrease our cash flow. In addition,
we compete for tenants based on rental rates, attractiveness and location of a property and quality
of maintenance and management services. An increase in the supply of properties competitive with
ours in these markets could have a material adverse effect on our ability to attract and retain
tenants in these markets.
Our performance and value are subject to general risks associated with the real estate industry.
Our economic performance and the value of our real estate assets, and consequently the value
of our investments, will be adversely affected if our Office, Resort Residential Development,
Resort/Hotel and Temperature-Controlled Logistics Properties do not generate revenues sufficient to
meet our operating expenses, including debt service and capital expenditures. Any reduction in the
revenues that our properties generate will adversely affect our cash flow and ability to meet our
obligations. As a real estate company, we are susceptible to the following real estate industry
risks:
|
|
|
downturns in the national, regional and local economic conditions where our properties
are located; |
|
|
|
|
competition from other Office, Resort Residential Development, Resort/Hotel and
Temperature-Controlled Logistics properties; |
|
|
|
|
adverse changes in local real estate market conditions, such as oversupply or reduction
in demand for office space, luxury residences, Resort/Hotel space or Temperature-Controlled
Logistics storage space; |
|
|
|
|
changes in tenant preferences that reduce the attractiveness of our properties to tenants; |
|
|
|
|
tenant defaults; |
|
|
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|
zoning or other regulatory restrictions; |
|
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|
decreases in market rental rates; |
|
|
|
|
costs associated with the need to periodically repair, renovate and re-lease space; |
|
|
|
|
increases in the cost of maintenance, insurance and other operating costs, including
real estate taxes, associated with one or more properties, which may occur even when
circumstances such as market factors and competition cause a reduction in revenues from one
or more properties; and |
|
|
|
|
illiquidity of real estate investments, which may limit our ability to vary our
portfolio promptly in response to changes in economic or other conditions. |
13
We depend on leasing office space to tenants on economically favorable terms and collecting rent
from our tenants, who may not be able to pay.
Our financial results depend significantly on leasing space in our office properties to
tenants on economically favorable terms. In addition, because a large portion of our income comes
from the renting of real property, our income, funds available to pay debt and funds available for
distribution to our shareholders will decrease if a significant number of our tenants cannot pay
their rent. If a tenant does not pay its rent, we might not be able to enforce our rights as
landlord without delays and might incur substantial legal costs.
A number of companies, including some of our tenants, have declared bankruptcy in recent
years, and other tenants may declare bankruptcy or become insolvent in the future. If a major
tenant declares bankruptcy or becomes insolvent, the rental property where it leases space may have
lower revenues and financial difficulties. Our leases generally do not contain restrictions
designed to ensure the creditworthiness of our tenants. As a result, the bankruptcy or insolvency
of a major tenant could result in a lower level of funds from operations available for distribution
to our shareholders or the payment of our debt.
We maintain an allowance for doubtful accounts that is reviewed for adequacy by assessing such
factors as the credit quality of our tenants, any delinquency in payment, historical trends and
current economic conditions. If our assumptions regarding the collectibility of tenant accounts
receivable prove incorrect, we could experience write-offs in excess of the allowance for doubtful
accounts, which would result in a decrease in our earnings. Bad debt as a percentage of office
rental revenue has averaged less than 0.3% over the last three years.
We may experience difficulty or delay in renewing leases or re-leasing space.
We derive most of our revenue in the form of rent received from our tenants. We are subject to
the risks that, upon expiration, leases for space in our office properties may not be renewed, the
space may not be re-leased, or the terms of renewal or re-lease, including the cost of required
renovations or concessions to tenants, may be less favorable than current lease terms. In the event
of any of these circumstances, our results of operations and our ability to meet our obligations
could be adversely affected.
As of December 31, 2006, leases of office space for approximately 2.0 million, 2.3 million and
2.5 million square feet, representing approximately 8.4%, 9.7% and 10.4% of net rentable area,
expire in 2007, 2008 and 2009, respectively. During these same three years, leases of approximately
22.0% of the net rentable area of our office properties in Dallas and approximately 31.5% of the
net rentable area of our office properties in Houston expire.
Our results of operations depends on the ability of El Paso Energy to meet its obligations pursuant
to its lease termination agreement with us.
In June 2005, we entered into an agreement with our largest office tenant, El Paso Energy
Services Company and certain of its subsidiaries, which terminated El Pasos leases totaling
888,000 square feet at Greenway Plaza in Houston, Texas, effective December 31, 2007. Original
expirations for the space ranged from 2007 through 2014. Under the agreement, El Paso is required
to pay in cash to us:
|
|
|
$65.0 million in termination fees in periodic installments through December 31, 2007 (of
which $35.0 million has been received as of December 31, 2006, and is included in
restricted cash in our Consolidated Balance Sheets as it is required to be escrowed with
the lender); and |
|
|
|
|
$62.0 million in rent according to original contractual lease terms from July 1, 2005,
through December 31, 2007 (of which $39.8 million has been received as of December 31,
2006). |
If El Paso does not comply with the terms of the agreement, our revenues will decline, which
will adversely affect our results of operations and reduce the cash available for distribution to
our shareholders or the payment of our debt.
We may have limited flexibility in dealing with our jointly owned investments.
Our organizational documents do not limit the amount of funds that we may invest in properties
and assets jointly with other persons or entities. As of December 31, 2006, approximately 43% of
the net rentable area of our office properties was held jointly with other persons or entities. In
addition, three of our five Resort/Hotel properties, all of our Resort Residential Development
properties and our Temperature-Controlled Logistics properties were owned jointly.
14
Joint ownership of properties may involve special risks, including the possibility that our
partners or co-investors might:
|
|
|
become bankrupt; |
|
|
|
|
have economic or other business interests or goals which are unlike or incompatible with
our business interests or goals; |
|
|
|
|
be in a position to take action contrary to our suggestions or instructions, or in
opposition to our policies or objectives (including actions that may be inconsistent with
our REIT status); and |
|
|
|
|
have different objectives from us regarding the appropriate timing and pricing of any
sale or refinancing of the properties. |
Joint ownership also gives a third party the opportunity to influence the return we can
achieve on some of our investments and may adversely affect our results of operations and our
ability to meet our obligations. In addition, in many cases we do not control the timing or amount
of distributions that we receive from the joint investment, and amounts otherwise available for
distribution to us instead may be reinvested in the property or used for other costs and expenses
of the joint operation.
We also have joint venture agreements that contain buy-sell clauses that could require us to
buy or sell our interest at a time we do not deem favorable for financial or other reasons,
including the availability of cash at such time and the impact of tax consequences resulting from
any sale.
The management and leasing agreements under which we operate our Office Properties owned through
joint ventures may be terminated after an initial period.
We generally manage the day-to-day operations of our 17 properties held through joint ventures
pursuant to separate management and leasing agreements. Under these agreements we receive fees for
management of the properties and leasing commissions. The management and leasing agreements may be
terminated, after an initial period of one to five years, by our partners in the joint ventures.
The termination of one or more of the management and leasing agreements would result in the loss of
the management fees and leasing commissions payable under such agreement or agreements.
The performance of our Resort Residential Development Properties is affected by national, regional
and local economic conditions.
Our Resort Residential Development Properties, which include Desert Mountain and CRDI
properties, are generally targeted toward purchasers of high-end primary residences or seasonal
secondary residences. As a result, the economic performance and value of these properties is
particularly sensitive to changes in national, regional and local economic and market conditions.
Economic downturns may discourage potential customers from purchasing new, larger primary
residences or vacation or seasonal homes. In addition, other factors may affect the performance and
value of a property adversely, including changes in laws and governmental regulations (including
those governing usage, zoning and taxes), changes in interest rates (including the risk that
increased interest rates may result in decreased sales of lots in any resort residential
development property) and the availability to potential customers of financing. Adverse changes in
any of these factors, each of which is beyond our control, could reduce the income that we receive
from the properties, and adversely affect our ability to meet our obligations.
In many cases, we do not develop our Resort Residential Development Properties and are dependent on
the developer of these properties.
Some of our Resort Residential Development Corporations co-own Resort Residential Development
properties in partnership with third parties, which are the developers of the properties. Our
partner for the majority of our Resort Residential Development properties is Harry Frampton and his
East West Partners development team. Our income from the development and sale of these properties
may be adversely affected if East West Partners fails to control costs and provide quality services and workmanship
or if it fails to maintain a quality brand name. In addition, although we have entered into
agreements with East West Partners that contain limited non-competition provisions, at certain
times and upon certain conditions, East West Partners may develop, and in some cases own or invest
in, Resort Residential Development properties that compete with our properties, which may result in
conflicts of interest. As a result, East West Partners may in the future make decisions regarding
competing properties that would not be in our best interests. While we believe that we could find
a replacement for East West Partners, the loss of its services could have an adverse effect on the
financial performance of our Resort Residential Development Segment.
15
The revenues from our eight Resort/Hotel Properties depend on third-party operators that we do not
control.
We own or have an interest in eight Resort/Hotel properties, seven of which are leased to our
own subsidiaries. We currently lease the remaining Resort/Hotel property, the Omni Austin Hotel, to
a third-party entity, HCD Austin Corporation. To maintain our status as a REIT, third-party
property managers manage each of the eight Resort/Hotel properties. As a result, we are unable to
directly implement strategic business decisions with respect to the operation and marketing of our
Resort/Hotel properties, such as decisions about quality of accommodations, room-rate structure and
the quality and scope of other amenities such as food and beverage facilities and similar matters.
The amount of revenue that we receive from the Resort/Hotel properties is dependent on the ability
of the property managers to maintain and increase the gross receipts from these properties. If the
gross receipts of our Resort/Hotel Properties decline, our revenues will decrease as well, which
could adversely affect our results of operations and reduce the amount of cash available to meet
our obligations.
The revenues from our eight Resort/Hotel Properties are subject to risks associated with the
hospitality industry.
The following factors, among others, are common to the Resort/Hotel industry, and may reduce
the receipts generated by our Resort/Hotel Properties.
|
|
|
Based on features such as access, location, quality of accommodations, room-rate
structure and, to a lesser extent, the quality and scope of other amenities such as food
and beverage facilities, our Resort/Hotel properties compete for guests with other resorts
and hotels, a number of which have greater marketing and financial resources than our
lessees or the Resort/Hotel property managers; |
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|
|
|
If there is an increase in operating costs resulting from inflation or other factors, we
or the property managers may not be able to offset the increase by increasing room rates; |
|
|
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Our Resort/Hotel Properties are subject to fluctuating and seasonal demands for business
travel and tourism; and |
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Our Resort/Hotel Properties are subject to general and local economic conditions that
may affect the demand for travel in general and other factors that are beyond our control,
such as acts of terrorism. |
Military actions against terrorists, new terrorist attacks (actual or threatened) and other
political events could cause a lengthy period of uncertainty that might increase customer
reluctance to travel and therefore adversely affect our results of operations and our ability to
meet our obligations.
Development and construction risks could adversely affect our profitability.
We currently are developing, expanding or renovating some of our office or Resort/Hotel
Properties. In addition, our Resort Residential Development Properties engage in the development of
raw land and construction of single-family homes, condominiums, town homes and time-share units.
These activities may be exposed to the following risks, each of which could adversely affect our
results of operations and our ability to meet our obligations:
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We may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use,
building, occupancy and other required governmental permits and authorizations, which could
result in increased costs or our abandonment of these activities; |
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We may incur costs for development, expansion or renovation of a property which exceed
our original estimates due to increased costs for materials or labor or other costs that
were unexpected; |
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We may not be able to obtain financing with favorable terms, which may make us unable to
proceed with our development and other related activities on the schedule we originally
planned or at all; |
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We may be unable to complete construction and sale or lease-up of a lot, office property
or resort residential development unit on schedule, which could result in increased debt
service expense or construction costs; |
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We may lease, rent or sell developed properties at below expected rental rates, room
rates or unit prices; and |
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Occupancy rates, rents or unit sales at newly completed properties may fluctuate
depending on a number of factors, including market and economic conditions, and may result
in our investment not being profitable. |
Additionally, the time frame required for development, construction and lease-up of these
properties means that we may have to wait a few years for a significant cash return. As a REIT, we
are required to make cash
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distributions to our shareholders. If our cash flows from operations are
not sufficient, we may be forced to borrow to fund these distributions, which could affect our
ability to meet our other obligations.
Many real estate costs are fixed, even if income from our properties decreases.
Our financial results depend primarily on leasing space in our office properties to tenants,
renting rooms at our resorts and hotels and successfully developing and selling lots, single-family
homes, condominiums, town homes and time-share units at our residential development properties, in
each case on terms favorable to us. Fixed costs associated with real estate investment, such as
real estate taxes and insurance costs, generally do not decrease even when a property is not fully
occupied, or the rate of sales at a project decreases, or other circumstances cause a reduction in
income from the investment.
Payment of distributions on any class of our shares may be adversely affected by the level of our
debt and the terms and number of our other shares that rank on an equal basis with or senior to
that class of shares.
Payment of distributions due on our common shares is subordinated to distributions on our
preferred shares, and distributions on both our common and our preferred shares will be
subordinated to all of our existing and future debt and will be structurally subordinated to the
payment of dividends and distributions on equity, if any, issued by our subsidiaries, including the
Operating Partnership. In addition, we may issue additional shares of the same or another class or
series of shares that rank on a parity with any class or series of our shares as to the payment of
distributions and the amounts payable upon liquidation, dissolution or winding up of our business.
The amount of debt that we have and the restrictions imposed by that debt could adversely affect
our business and our financial condition.
We have a substantial amount of debt. As of December 31, 2006, we had approximately $2.3
billion of consolidated debt outstanding, of which approximately $1.5 billion was secured by
approximately 57% of our gross total assets.
Our organizational documents do not limit the level or amount of debt that we may incur. We do
not have a policy limiting the ratio of our debt to our total capitalization or assets. The amount
of debt we have and may have outstanding could have important consequences to you. For example, it
could:
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make it difficult to satisfy our debt service requirements; |
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prevent us from making distributions on our outstanding common shares and preferred shares; |
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require us to dedicate a substantial portion of our cash flow from operations to
payments on our debt, thereby reducing funds available for operations, property
acquisitions and other appropriate business opportunities that may arise in the future; |
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require us to dedicate increased amounts of our cash flow from operations to payments on
our variable rate, unhedged debt if interest rates rise; |
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limit our flexibility in planning for, or reacting to, changes in our business and the
factors that affect the profitability of our business; |
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limit our ability to obtain additional financing, if we need it in the future for
working capital, debt refinancing, capital expenditures, acquisitions, development or other
general corporate purposes; and |
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limit our flexibility in conducting our business, which may place us at a disadvantage
compared to competitors with less debt. |
Our ability to make scheduled payments of the principal of, to pay interest on, or to
refinance, our indebtedness will depend on our future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond our control. There can be no
assurance that our business will continue to generate sufficient cash flow from operations in the
future to service our debt or meet our other cash needs. If we are unable to do so, we may be
required to refinance all or a portion of our existing debt, or to sell assets or obtain additional
financing. We cannot assure you that any such refinancing, sale of assets or additional financing
would be possible on terms that we would find acceptable.
If we were to breach certain of our debt covenants, our lenders could require us to repay the
debt immediately, and, if the debt is secured, could immediately take possession of the property
securing the loan. In addition, if any other lender declared its loan in an amount in excess of
$5.0 million due and payable as a result of a default, the holders of our public and private notes,
along with the lenders under our credit facility and certain other lenders would be able to require
that those debts be paid immediately. As a result, any default under our debt
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covenants could have
an adverse effect on our financial condition, results of operations and our ability to meet our
obligations.
We are obligated to comply with financial and other covenants in our debt that could restrict our
operating activities, and the failure to comply could result in defaults that accelerate the
payment under our debt.
Our secured debt generally contains customary covenants, including, among others, provisions:
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relating to the maintenance of the property securing the debt; |
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relating to minimum acceptable insurance coverage on our properties; |
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restricting our ability to pledge assets or create other liens; |
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restricting our ability to incur additional debt; |
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restricting our ability to amend or modify existing leases; and |
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restricting our ability to enter into transactions with affiliates. |
Our unsecured debt generally contains various restrictive covenants. The covenants in our
unsecured debt include, among others, provisions restricting our ability to:
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incur additional debt; |
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incur additional secured debt and subsidiary debt; |
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make certain distributions, investments and other restricted payments, including
distribution payments on our or our subsidiaries outstanding common and preferred equity; |
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limit the ability of restricted subsidiaries to make payments to us; |
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enter into transactions with affiliates; |
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create certain liens; |
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enter into certain sale-leaseback transactions; and |
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consolidate, merge or sell all or substantially all of our assets. |
In addition, certain covenants in our bank facilities require us and our subsidiaries to
maintain certain financial ratios, which include minimum debt service ratios, maximum leverage
ratios, maximum distributions on preferred and common shares and, in the case of the Operating Partnership, a minimum tangible net worth limitation and a
fixed charge coverage ratio. The indentures under which our senior unsecured debt have been issued
require us to meet thresholds for a number of customary financial and other covenants, including
maximum leverage ratios, minimum debt service coverage ratios, maximum secured debt as a percentage
of total undepreciated assets, and ongoing maintenance of unencumbered assets, in order to incur
additional debt.
Any of the covenants described in this risk factor may restrict our operations and our ability
to pursue potentially advantageous business opportunities. Our failure to comply with these
covenants could also result in an event of default that, if not cured or waived, could result in
the acceleration of all or a substantial portion of our debt.
Many factors affect the trading price of our shares.
As with other publicly traded securities, the trading price of our shares will depend on a
number of factors that change from time to time, including:
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our financial condition, performance and prospects; |
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the market for similar securities; |
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additional issuance of other classes or series of our shares, particularly preferred
shares, or the issuance of debt securities; |
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the amount of distributions paid on our common and preferred shares; |
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an announcement regarding future dividend pay-out ranges on our common shares; |
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general economic and financial market conditions; and |
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prevailing interest rates, increases in which may have a negative effect on the trading
value of our preferred shares. |
Rising interest rates could adversely affect our cash flow and the market price of our outstanding
debt securities and preferred shares.
Of our approximately $2.3 billion of debt outstanding as of December 31, 2006, approximately
$479.6 million bears interest at variable rates and is unhedged. We also may borrow additional
funds at variable interest rates in the future. To mitigate part of this risk, we have entered,
and in the future may enter into other transactions to limit our exposure to rising interest rates.
Increases in interest rates, or the loss of the benefits of any
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interest rate hedging arrangements,
would increase our interest expense on our variable rate debt, which could adversely affect cash
flow and our ability to service our debt and meet our obligations. In addition, an increase in
market interest rates may lead purchasers of our securities to demand a higher annual yield, which
could adversely affect the market price of our outstanding debt securities and preferred shares.
The
level of our distributions to our common shareholders is highly
dependent on the implementation of our Strategic Plan.
Lower occupancy levels, reduced rental rates, increased leasing costs and reduced revenues as
a result of asset sales have had the effect of reducing our cash flow from operations. For year
ended December 31, 2006, our cash flow from operations was insufficient to fully cover the
distributions on our common shares. We funded this shortfall primarily with a combination of
proceeds from asset sales and joint ventures and borrowings under our credit facility. While we
believe that cash flow from operations will be sufficient to cover our normal operating expenses,
interest payments on our debt, distributions on our preferred shares, non-revenue enhancing capital
expenditures and revenue enhancing capital expenditures (including property improvements, tenant
improvements and leasing commissions) in 2007, if our Board of Trustees continues to
declare distributions on our common shares at current levels, we expect that our cash flow from
operations will continue to be insufficient to fully cover distributions to our common shareholders
in 2007. We intend to use proceeds from asset sales and joint
ventures pursuant to our Strategic Plan to cover this shortfall. In
addition, as we implement our Strategic Plan, we intend to align our
dividend with industry-accepted pay-out ranges to allow for retention of capital
for growth.
The terms of some of our debt may prevent us from paying distributions on our shares.
Some of our debt limits the Operating Partnerships ability to make some types of payments on
equity and other distributions to us, which would limit our ability to make some types of payments,
including payment of distributions on our shares, unless we meet certain financial tests or are
required to make the distributions to maintain our qualification as a REIT. As a result, if we are
unable to meet the applicable financial tests, we may not be able to pay distributions on our
shares in one or more periods.
Mezzanine loans involve greater risks of loss than senior loans secured by income producing
properties.
We invest in mezzanine loans that typically take the form of limited recourse loans made to a
special purpose entity which is the direct or indirect parent of another special purpose entity
owning a commercial real estate property. These mezzanine loans are secured by a pledge of the
ownership interest in the property owner (or in an entity that directly or indirectly owns the
property owner) and are thus structurally subordinate to a conventional first mortgage loan made to
the property owner. We also offer mezzanine financing by taking a junior participating interest in
a first mortgage loan.
These types of investments involve more risk than conventional senior mortgage lending
directly secured by real property because these investments are structurally or contractually
subordinated to the senior loans (or senior participations) and may become unsecured as a result of
foreclosure by a senior lender on its collateral. While we will typically have cure rights with
respect to loans senior to ours and the right to purchase these senior loans if in default, an
exercise of this right may require our investing substantial additional capital on short notice to
avoid loss of our initial investment.
In addition, mezzanine loans usually have higher loan-to-value ratios than conventional
mortgage loans, resulting in less equity in the property and increasing the risk of loss of
principal. Reflecting the risk of these loans, mezzanine borrowers are generally required to pay
significantly higher rates of interest than conventional mortgage loan borrowers, increasing
borrowers cash-flow vulnerability. In the event of a bankruptcy of the borrower, we may not have
full recourse to the borrowers assets, or the assets of the borrower may not be sufficient to
satisfy our mezzanine loan. Additionally, we have no right to participate in the bankruptcy
proceedings of any senior borrower (including the property owner). While we normally obtain
recourse guaranties to protect against a voluntary bankruptcy or uncontested involuntary bankruptcy
of the mezzanine borrower and the senior borrowers, these guaranties may not fully cover our debt.
As a result of any or all of the foregoing, we may not recover some or all of our mezzanine
loan investment.
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The use
of repurchase agreements to fund our mezzanine notes exposes us to risks.
We finance certain of our mezzanine loans through the use of warehouse facilities governed by
repurchase agreements. We sell those mezzanine loans financed through a warehouse facility to a
counterparty and agree to repurchase the same loans at a price equal to the original sales price
plus periodic interest payments. Our repurchase agreement counterparties are commercial and
investment banks. During the term of the repurchase agreement, we receive the principal and
interest payments on the related mezzanine loan and pay interest to the counterparty. The use of
this type of leverage to finance our mezzanine investments involves a number of risks, including
the following:
If we are unable to renew our borrowings at favorable rates, it may force us to sell assets or
find other financing and our profitability may be adversely affected. If we are not able to renew
or replace maturing borrowings, we would be forced to sell some of our assets under possibly
adverse market conditions, which may adversely affect our profitability.
A decline in the market value of the pool of assets in the warehouse facility may result in
margin calls that may force us to sell assets under adverse market conditions. The market value of
a pool of assets in a warehouse facility is valued by the lender in order to determine the advance
rate, and to ensure adequate collateral secures the advances under the repurchase agreement.
Repurchase agreements involve the risk that the market value of the securities sold by us may
decline and that we will be required to post additional collateral, reduce the amount borrowed or
suffer forced sales of the collateral. If forced sales were made at prices lower than the carrying
value of the collateral, we would experience additional losses.
If
a mezzanine loan defaults, we may not be able to fund the repurchase of the loan from our
warehouse facility or the stabilization of the property by drawings under our credit facility which
could cause liquidity concerns. If a default occurs under one of our mezzanine loans and, if
financed under our warehouse facilities, it may need to be repurchased from the warehouse lender on
two business days notice. If we do not have sufficient liquidity under our credit facility for
funds to repurchase these loans, the counterparty may foreclose on all of the pledged assets in the
facility. Even if, following a default on a mezzanine loan, we are able to foreclose on the
collateral, which is a direct or indirect equity interest in an entity owning real property, we may
need to commit substantial additional capital to stabilize the property and prevent defaults on
other loans outstanding on the real property.
Our use of repurchase agreements to borrow money may give our lenders greater rights in the
event of bankruptcy. Borrowings made under repurchase agreements may qualify for special treatment
under the U.S. Bankruptcy Code, which may make it difficult for us to recover our pledged assets if
a lender files for bankruptcy. In addition, if we were to file for bankruptcy, lenders under our
repurchase agreements may be able to avoid the automatic stay provisions of the U.S. Bankruptcy
Code and take possession of, and liquidate, the assets we pledged under these agreements without
the delay associated with the automatic stay.
Environmental problems are possible and may be costly.
Under various federal, state and local laws, ordinances and regulations, we may be required to
investigate and clean up certain hazardous or toxic substances released on or in properties we own
or operate, and also may be required to pay other costs relating to hazardous or toxic substances.
This liability may be imposed without regard to whether we knew about the release of these types of
substances or were responsible for their release. The presence of contamination or the failure to
remediate properly contamination at any of our properties may adversely affect our ability to sell
or lease those properties or to borrow using those properties as collateral. The costs or
liabilities could exceed the value of the affected real estate. We have not been notified by any
governmental authority, however, of any material environmental non-compliance, liability or other
environmental claim in connection with any of our properties, and we are not aware of any other
environmental condition with respect to any of our properties that management believes would have a
material adverse effect on our business, assets or results of operations taken as a whole.
The uses of any of our properties prior to our acquisition of the property and the building
materials used at the property are among the property-specific factors that will affect how the
environmental laws are applied to our properties. In general, before we purchased each of our
properties, independent environmental consultants conducted Phase I environmental assessments,
which generally do not involve invasive techniques such as soil or ground water sampling, and where
indicated, based on the Phase I results, conducted Phase II environmental assessments which do
involve this type of sampling. None of these assessments revealed any materially adverse
environmental condition relating to any particular property not previously known to us. We believe
that all of those
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previously known conditions either have been remediated or are in the process of
being remediated at this time. There can be no assurance, however, that environmental liabilities
have not developed since these environmental assessments were prepared or that future uses or
conditions (including changes in applicable environmental laws and regulations) or new information
about previously unidentified historical conditions will not result in the imposition of
environmental liabilities. If we are subject to any material environmental liabilities, the
liabilities could adversely affect our results of operations and our ability to meet our
obligations.
Compliance with the Americans with Disabilities Act could be costly.
Under the Americans with Disabilities Act of 1990, all public accommodations and commercial
facilities must meet certain federal requirements related to access and use by disabled persons.
Compliance with the ADA requirements could involve removal of structural barriers from certain
disabled persons entrances. Other federal, state and local laws may require modifications to or
restrict further renovations of our properties with respect to such accesses. Although we believe
that our properties are substantially in compliance with present requirements, noncompliance with
the ADA or related laws or regulations could result in the United States governments imposition of
fines or in the award to private litigants of damages against us. Costs such as these, as well as
the general costs of compliance with these laws or regulations, may adversely affect our ability to
meet our obligations.
Our insurance coverage on our properties may be inadequate or unavailable, which may have a
material adverse effect on our business.
We currently carry insurance on all of our properties, including insurance for property damage
and third-party liability. We believe this coverage is of the type and amount customarily obtained
for or by an owner of real property assets. We intend to obtain similar insurance coverage on
subsequently acquired properties. Our existing primary insurance policies expire on November 1
annually.
In the future, we may be unable to renew or duplicate our current insurance coverage in
adequate amounts or at reasonable prices. In addition, due to events such as the September 11, 2001
terrorist attacks and the recent hurricanes in Louisiana, Mississippi and Florida, insurance
companies may no longer offer coverage against certain types of losses, such as losses due to
terrorist acts, environmental liabilities, or other catastrophic events including named storms and
floods, or, if offered, the expense of obtaining these types of insurance may increase dramatically
or may not be justifiable. We therefore may cease to have insurance coverage against certain types
of losses and/or there may be decreases in the limits of insurance available. In 2006, insurance
companies lowered the amount of named storm insurance offered substantially, or, where offered, the
expense increased dramatically. As a result, the amount of named storm coverage we obtained is
significantly lower than 2005. If an uninsured loss or a loss in excess of our insured limits
occurs, we could lose all or a portion of the capital we have invested in a property, as well as
the anticipated future revenue from the property, but still remain obligated for any mortgage debt
or other financial obligations related to the property. We cannot guarantee that material losses in
excess of insurance proceeds will not occur in the future. If any of our properties were to
experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result
in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and
ordinances, environmental considerations and other factors, it may not be feasible to use insurance
proceeds to replace a building after it has been damaged or destroyed. Events such as these could
adversely affect our results of operations and our ability to meet our obligations.
In addition, the debt we use to finance our properties includes covenants that require us to
maintain designated levels of insurance coverage with insurers having minimum credit ratings. For
example, certain of our loans secured by our coastal properties include requirements that we
maintain minimum levels of named storm insurance. If we are unable to maintain insurance that
meets the requirements of our lenders and if we are unable to amend or obtain waivers of those
requirements, we could be in default under these loan agreements, which could have a material
adverse effect on our business.
Competition for acquisitions and dispositions could adversely affect us.
We may compete for available investment opportunities with entities that have greater
liquidity or financial resources. Several real estate companies may compete with us in seeking
properties for acquisition or land for development and prospective tenants, guests or purchasers.
This competition may increase the costs of any acquisitions that we make and adversely affect our
results of operations and our ability to meet our obligations by:
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reducing the number of suitable investment opportunities offered to us; and |
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increasing the bargaining power of property owners.
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We face similar competition with other real estate companies in our efforts to dispose of
properties, which may result in lower sales prices. In addition, if a competitor succeeds in
making an acquisition in a market in which our properties compete, ownership of that investment by
a competitor may adversely affect our results of operations and our ability to meet our obligations
by:
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interfering with our ability to attract and retain tenants, guests or purchasers; and |
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adversely affecting our ability to minimize expenses of operation. |
Acquisitions may fail to perform as expected.
We focus our investment strategy on investment opportunities and markets that offer
attractive returns on our invested capital, primarily within our Office Property Segment, with a strategy of acquiring
properties at a cost significantly below that which would be required to develop a comparable
property. Acquisition of properties entails risks that include the following, any of which could
adversely affect our results of operations and our ability to meet our obligations:
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We may not be able to identify suitable properties to acquire or may be unable to
complete the acquisition of the properties we select for acquisition; |
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We may not be able to integrate new acquisitions into our existing operations
successfully; |
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Our estimate of the costs of improving, repositioning or redeveloping an acquired
property may prove to be too low, and, as a result, the property may fail to meet our
estimates of the profitability of the property, either temporarily or for a longer time; |
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Office properties, resorts or hotels we acquire may fail to achieve the occupancy and
rental or room rates we anticipate at the time we make the decision to invest in the
properties, resulting in lower profitability than we expected in analyzing the properties; |
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Our pre-acquisition evaluation of the physical condition of each new investment may not
detect certain defects or necessary repairs until after the property is acquired, which
could significantly increase our total acquisition costs; and |
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Our investigation of a property or building prior to its acquisition, and any
representations we may receive from the seller, may fail to reveal various liabilities,
which could effectively reduce the cash flow from the property or building, or increase our
acquisition cost. |
We are dependent on our key personnel whose continued service is not guaranteed.
Our officers, particularly John Goff and Dennis H. Alberts, are critical to the management and
direction of our business, and to our implementation of our Strategic Plan. Our future success
depends, in large part, on our ability to retain these officers, our Trust Managers and other
capable management personnel. We do not presently have employment agreements with any of our
executive officers. Although we believe that we will be able to attract and retain talented
personnel and replace key personnel should the need arise, including by making retention payments
in connection with the Strategic Plan, our inability to do so could disrupt our operations,
including implementation of our Strategic Plan. We do not have key-man life insurance for our
executive officers.
Provisions of our declaration of trust and bylaws could inhibit changes in control or discourage
takeover attempts beneficial to our shareholders.
There are certain provisions of our declaration of trust and bylaws that may have the effect
of discouraging, delaying or making more difficult a change in control and preventing the removal
of incumbent directors. The existence of these provisions may discourage third-party bids and
reduce any premiums paid to you for common shares that you own. These include a staggered Board of
Trust Managers, which makes it more difficult for a third party to gain control of our Board, and
the ownership limit described below. In addition, any future series of preferred shares may have
certain voting provisions that could delay or prevent a change of control or other transaction that
might involve a premium price or otherwise be beneficial to our security holders. The declaration
of trust also establishes special requirements with respect to business combinations, including
certain issuances of equity securities, between us and an interested shareholder, and mandates
procedures for obtaining voting rights with respect to control shares acquired in a control share
acquisition.
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Your ownership of our shares is subject to limitation for REIT tax purposes.
To remain qualified as a REIT for federal income tax purposes, not more than 50% in value of
our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as
defined in the federal income tax laws applicable to REITs) at any time during the last half of any
taxable year, and our outstanding shares must be beneficially owned by 100 or more persons at least
335 days of a taxable year. To facilitate maintenance of our REIT qualification, our declaration of
trust, subject to certain exceptions, prohibits ownership by any single shareholder of more than
8.0% of our issued and outstanding common shares or such greater percentage as established by our
Board of Trust Managers, but in no event greater than 9.9%, or more than 9.9% of any class of our
issued and outstanding preferred shares. We refer to these limits together as the ownership
limit. In addition, the declaration of trust prohibits ownership by Richard E. Rainwater, the
Chairman of our Board of Trust Managers, together with certain of his affiliates or relatives,
initially, of more than 8.0% and subsequently, of more than 9.5% of our issued and outstanding
common shares. We refer to this limit as the Rainwater ownership limit. Any transfer of shares
may be null and void if it causes a person to violate the ownership limit, or Mr. Rainwater,
together with his affiliates and relatives, to violate the Rainwater ownership limit, and the
intended transferee or holder will acquire no rights in the shares. Those shares will automatically
convert into excess shares, and the shareholders rights to distributions and to vote will
terminate. The shareholder would have the right to receive payment of the purchase price for such
excess shares and certain distributions upon our liquidation. Excess shares will be subject to
repurchase by us at our election. While the ownership limit and the Rainwater ownership limit help
preserve our status as a REIT, they could also delay or prevent any person or small group of
persons from acquiring, or attempting to acquire, control of us and, therefore, could adversely
affect our shareholders ability to realize a premium over the then-prevailing market price for
their shares.
The number of shares available for future sale could adversely affect the market price of our
publicly traded securities.
We have entered into various private placement transactions whereby units of limited
partnership interests in our Operating Partnership were issued in exchange for properties or
interests in properties. These units and interests are currently exchangeable for our common shares
on the basis of two shares for each one unit or, at our option, an equivalent amount of cash. Upon
exchange for our common shares, those common shares may be sold in the public market pursuant to
registration rights. As of December 31, 2006, approximately 11,320,798 units were outstanding,
8,551,173 of which were exchangeable for 17,102,346 of our common shares or, at our option, an
equivalent amount of cash. In addition, as of December 31, 2006, the Operating Partnership had
outstanding options to acquire approximately 3,159,560 units, of which 482,408 were exercisable and
exchangeable for 964,816 of our common shares or, at our option, an equivalent amount of cash.
These options were exercisable at a weighted average exercise price of $34 per unit, or $17 per
common share, with a weighted average remaining contractual life of five years. We have also
reserved a number of common shares for issuance pursuant to our employee benefit plans, and such
common shares will be available for sale from time to time. As of December 31, 2006, we had
outstanding options to acquire approximately 4,562,950 common shares, of which approximately
4,266,446 options were exercisable at a weighted average exercise price of $20, with a weighted
average remaining contractual life of three years. We cannot predict the effect that future sales
of common shares, or the perception that such sales could occur, will have on the market prices of
our equity securities.
Failure to qualify as a REIT would cause us to be taxed as a corporation, which would substantially
reduce funds available for payment of distributions.
We intend to continue to operate in a manner that allows us to meet the requirements for
qualification as a REIT under the Internal Revenue Code of 1986, as amended, which we refer to as
the Code. A REIT generally is not taxed at the corporate level on income it distributes to its
shareholders, as long as it distributes at least 90 percent of its income to its shareholders
annually and satisfies certain other highly technical and complex requirements. Unlike many REITs,
which tend to make only one or two types of real estate investments, we invest in a broad range of
real estate products. Several of our investments also are more complicated than those of other
REITs. As a result, we are likely to encounter a greater number of interpretative issues under the
REIT qualification rules, and more issues which lack clear guidance, than are other REITs. We, as a
matter of policy, consult with outside tax counsel in structuring our new investments in an effort
to satisfy the REIT qualification rules.
We must meet the requirements of the Code in order to qualify as a REIT now and in the future,
so it is possible that we will not continue to qualify as a REIT in the future. The laws and
regulations governing federal income taxation are the subject of frequent review and amendment, and
proposed or contemplated changes in the laws or regulations may affect our ability to qualify as a
REIT and the manner in which we conduct our business. If we fail to qualify as a REIT for federal
income tax purposes, we would not be allowed a deduction for distributions
23
to our shareholders in
computing taxable income and would be subject to federal income tax at regular corporate rates. In
addition to these taxes, we may be subject to the federal alternative minimum tax. Unless we are
entitled to relief under certain statutory provisions, we could not elect to be taxed as a REIT for
four taxable years following any year during which we were first disqualified. Therefore, if we
lose our REIT status, we could be required to pay significant income taxes, which would reduce our
funds available for investments or for distributions to our shareholders. This would likely
adversely affect the value of your investment in us. In addition, we would no longer be required by
law or our operating agreements to make any distributions to our shareholders.
The lower tax rate on dividends from regular corporations may cause investors to prefer to hold
stock in regular corporations instead of REITs.
On May 28, 2003, the President signed into law the Jobs and Growth Tax Relief Reconciliation
Act of 2003, which we refer to as the Act. Under the Act, the current maximum tax rate on the
long-term capital gains of non-corporate taxpayers is reduced to 15% for the tax years beginning on
or before December 31, 2008. The Act also reduced the tax rate on qualified dividend income to
the maximum capital gains rate. Because, as a REIT, we are not generally subject to tax on the
portion of our REIT taxable income or capital gains distributed to our shareholders, our
distributions are not generally eligible for this new tax rate on dividends. As a result, the
non-capital-gain portion of our REIT distributions generally continues to be taxed at the higher
tax rates applicable to ordinary income. Without further legislation, the maximum tax rate on
long-term capital gains will revert to 20% in 2009, and dividends will again be subject to tax at
ordinary rates.
Our results of operations and financial condition may be affected by a recently enacted law, which
subjects us to the revised Texas franchise tax.
On May 18, 2006, the Texas Governor signed into law HB 3, a franchise tax reform bill. The
revised franchise tax, which will first be due in May 2008 based on 2007 financial results, will be
a tax based on taxable margin (commonly referred to as the Margin Tax). Unlike the existing
franchise tax, the Margin Tax will be imposed on substantially all businesses that have statutory
liability protection, including Texas real estate investment trusts and limited partnerships, such
as the Company and the Operating Partnership. Payment of the Margin Tax may adversely affect our
results of operations and financial condition.
Item 1B. Unresolved Staff Comments.
We have received no written comments from the Commission staff regarding our periodic or
current reports in the 180 days preceding December 31, 2006, that remain unresolved.
Item 2. Properties
We consider all of our Properties to be in good condition, well-maintained, suitable and
adequate to carry on our business.
Office Properties
As of December 31, 2006, we owned or had an interest in 71 Office Properties, located in
26 metropolitan submarkets in eight states, with an aggregate of approximately 27.6 million net
rentable square feet. Our Office Properties are located primarily in the Houston and Dallas,
Texas, metropolitan areas. As of December 31, 2006, our Office Properties in Houston and Dallas
represented an aggregate of approximately 66% of our office portfolio based on total net rentable
square feet (39% for Houston and 27% for Dallas).
24
Office Property Table (1)
The following table shows, as of
December 31, 2006, certain information about our Office
Properties. In the table, CBD means central business
district.
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Weighted |
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Average Full- |
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Service |
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Rental Rate |
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Economic |
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Per |
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Our |
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No. of |
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Net Rentable |
|
|
Occupancy |
|
|
Occupied |
|
|
Ownership |
|
State, City, Property |
|
Properties |
|
|
Submarket |
|
Year Completed |
|
Area (Sq. Ft.) |
|
|
Percentage |
|
|
Sq. Ft. (2) |
|
|
Percentage (1) |
|
Texas |
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Dallas |
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|
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The Crescent |
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2 |
|
|
Uptown/Turtle Creek |
|
1985 |
|
|
1,299,522 |
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98.5 |
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34.49 |
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24 |
% |
Fountain Place |
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1 |
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CBD |
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1986 |
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1,200,266 |
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91.2 |
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21.38 |
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|
24 |
% |
Trammell Crow Center |
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1 |
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CBD |
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1984 |
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1,128,331 |
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90.1 |
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24.20 |
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24 |
% |
Stemmons Place |
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1 |
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Stemmons Freeway |
|
1983 |
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634,381 |
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66.4 |
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|
16.82 |
|
|
|
100 |
% |
Spectrum Center |
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|
1 |
|
|
Quorum/Bent Tree |
|
1983 |
|
|
598,250 |
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|
|
92.1 |
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|
|
20.60 |
|
|
|
100 |
% |
125 E. John Carpenter Freeway |
|
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1 |
|
|
Las Colinas |
|
1982 |
|
|
446,031 |
|
|
|
88.3 |
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|
|
20.78 |
|
|
|
100 |
% |
The Aberdeen |
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|
1 |
|
|
Quorum/Bent Tree |
|
1986 |
|
|
319,758 |
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|
|
95.5 |
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|
|
16.80 |
|
|
|
100 |
% |
MacArthur Center I & II |
|
|
1 |
|
|
Las Colinas |
|
1982/1986 |
|
|
298,161 |
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|
|
81.0 |
|
|
|
19.01 |
|
|
|
100 |
% |
Stanford Corporate Centre |
|
|
1 |
|
|
Quorum/Bent Tree |
|
1985 |
|
|
274,684 |
|
|
|
88.5 |
(3) |
|
|
21.29 |
|
|
|
100 |
% |
Palisades Central II |
|
|
1 |
|
|
Richardson |
|
1985 |
|
|
240,935 |
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|
|
95.3 |
|
|
|
20.83 |
|
|
|
100 |
% |
3333 Lee Parkway |
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1 |
|
|
Uptown/Turtle Creek |
|
1983 |
|
|
233,543 |
|
|
|
98.3 |
|
|
|
19.47 |
|
|
|
100 |
% |
The Addison |
|
|
1 |
|
|
Quorum/Bent Tree |
|
1981 |
|
|
215,016 |
|
|
|
100.0 |
|
|
|
23.09 |
|
|
|
100 |
% |
Palisades Central I |
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1 |
|
|
Richardson |
|
1980 |
|
|
180,503 |
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76.3 |
|
|
|
18.16 |
|
|
|
100 |
% |
Greenway II |
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1 |
|
|
Richardson |
|
1985 |
|
|
154,329 |
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|
|
99.9 |
|
|
|
18.03 |
|
|
|
100 |
% |
Greenway I & IA |
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2 |
|
|
Richardson |
|
1983 |
|
|
146,704 |
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|
|
74.7 |
|
|
|
16.64 |
|
|
|
100 |
% |
|
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|
|
|
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|
Subtotal/Weighted Average |
|
|
17 |
|
|
|
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|
|
|
7,370,414 |
|
|
|
89.9 |
% |
|
$ |
23.38 |
|
|
|
63 |
% |
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Fort Worth |
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Carter Burgess Plaza |
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1 |
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CBD |
|
1982 |
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|
954,895 |
|
|
|
96.4 |
% |
|
$ |
19.88 |
|
|
|
100 |
% |
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Houston |
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Greenway Plaza |
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10 |
|
|
Greenway Plaza |
|
1969-1982 |
|
|
4,348,052 |
|
|
|
86.5 |
% |
|
$ |
19.67 |
|
|
|
100 |
% |
Houston Center |
|
|
4 |
|
|
CBD |
|
1974-1983 |
|
|
2,960,544 |
|
|
|
91.5 |
|
|
|
19.96 |
|
|
|
24 |
% |
Post Oak Central |
|
|
3 |
|
|
West Loop/Galleria |
|
1974-1981 |
|
|
1,279,759 |
|
|
|
96.7 |
|
|
|
20.90 |
|
|
|
24 |
% |
Fulbright Tower |
|
|
1 |
|
|
CBD |
|
1982 |
|
|
1,247,061 |
|
|
|
73.4 |
(3) |
|
|
20.37 |
|
|
|
24 |
% |
Five Post Oak Park |
|
|
1 |
|
|
West Loop/Galleria |
|
1986 |
|
|
567,396 |
|
|
|
88.9 |
|
|
|
19.04 |
|
|
|
30 |
% |
BriarLake Plaza |
|
|
1 |
|
|
Westchase |
|
2000 |
|
|
502,410 |
|
|
|
87.3 |
(3) |
|
|
24.61 |
|
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
20 |
|
|
|
|
|
|
|
10,905,222 |
|
|
|
87.7 |
% |
|
$ |
20.17 |
|
|
|
55 |
% |
|
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Austin |
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|
|
|
|
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|
|
816 Congress |
|
|
1 |
|
|
CBD |
|
1984 |
|
|
433,024 |
|
|
|
77.3 |
% |
|
$ |
20.81 |
|
|
|
100 |
% |
301 Congress Avenue |
|
|
1 |
|
|
CBD |
|
1986 |
|
|
418,338 |
|
|
|
82.1 |
|
|
|
23.03 |
|
|
|
50 |
% |
Austin Centre |
|
|
1 |
|
|
CBD |
|
1986 |
|
|
343,664 |
|
|
|
97.2 |
|
|
|
18.95 |
|
|
|
100 |
% |
The Avallon |
|
|
3 |
|
|
Northwest |
|
1993/1997 |
|
|
318,217 |
|
|
|
93.1 |
|
|
|
20.50 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
6 |
|
|
|
|
|
|
|
1,513,243 |
|
|
|
86.5 |
% |
|
$ |
20.84 |
|
|
|
86 |
% |
|
|
|
|
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|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
Colorado |
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
Denver
Johns Manville Plaza |
|
|
1 |
|
|
CBD |
|
1978 |
|
|
675,400 |
|
|
|
91.5 |
% |
|
$ |
19.84 |
|
|
|
100 |
% |
707 17th Street |
|
|
1 |
|
|
CBD |
|
1982 |
|
|
550,805 |
|
|
|
91.9 |
|
|
|
20.42 |
|
|
|
100 |
% |
Regency Plaza |
|
|
1 |
|
|
Denver Technology Center |
|
1985 |
|
|
309,862 |
|
|
|
86.5 |
(3) |
|
|
18.76 |
|
|
|
100 |
% |
Peakview Tower |
|
|
1 |
|
|
Greenwood Village |
|
2001 |
|
|
264,149 |
|
|
|
91.4 |
|
|
|
24.05 |
|
|
|
100 |
% |
55 Madison |
|
|
1 |
|
|
Cherry Creek |
|
1982 |
|
|
137,176 |
|
|
|
93.8 |
|
|
|
19.03 |
|
|
|
100 |
% |
The Citadel |
|
|
1 |
|
|
Cherry Creek |
|
1987 |
|
|
130,652 |
|
|
|
92.4 |
|
|
|
24.94 |
|
|
|
100 |
% |
44 Cook |
|
|
1 |
|
|
Cherry Creek |
|
1984 |
|
|
124,174 |
|
|
|
81.2 |
|
|
|
18.87 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
7 |
|
|
|
|
|
|
|
2,192,218 |
|
|
|
90.5 |
% |
|
$ |
20.56 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
Colorado Springs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Briargate Office and
Research Center |
|
|
1 |
|
|
Northeast |
|
1988 |
|
|
260,046 |
|
|
|
87.3 |
% |
|
$ |
18.16 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
25
Office Property Table Continued (1)
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|
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Weighted |
|
|
|
|
|
|
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|
|
Average Full- |
|
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|
|
|
|
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|
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|
|
|
|
|
|
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|
Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic |
|
|
Per |
|
|
Our |
|
|
|
No. of |
|
|
|
|
|
|
Net Rentable |
|
|
Occupancy |
|
|
Occupied |
|
|
Ownership |
|
State, City, Property |
|
Properties |
|
|
Submarket |
|
Year Completed |
|
Area (Sq. Ft.) |
|
|
Percentage |
|
|
Sq. Ft. (2) |
|
|
Percentage (1) |
|
Florida |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami Center |
|
|
1 |
|
|
CBD |
|
1983 |
|
|
782,211 |
|
|
|
93.2 |
% (3) |
|
$ |
32.44 |
|
|
|
40 |
% |
Datran Center |
|
|
2 |
|
|
Kendall/Dadeland |
|
1986/1988 |
|
|
476,412 |
|
|
|
94.3 |
|
|
|
29.01 |
|
|
|
100 |
% |
The Alhambra |
|
|
2 |
|
|
Coral Gables |
|
1961/1987 |
|
|
325,005 |
|
|
|
92.0 |
|
|
|
30.47 |
|
|
|
100 |
% |
The BAC Colonnade Building |
|
|
1 |
|
|
Coral Gables |
|
1989 |
|
|
218,170 |
|
|
|
89.6 |
|
|
|
33.40 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
6 |
|
|
|
|
|
|
|
1,801,798 |
|
|
|
92.8 |
% |
|
$ |
31.28 |
|
|
|
74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orange County |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dupont Centre |
|
|
1 |
|
|
Airport Office Area |
|
1986 |
|
|
250,782 |
|
|
|
97.3 |
% |
|
$ |
27.41 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hughes Center |
|
|
8 |
|
|
Central East |
|
1986 - 1999 |
|
|
1,111,388 |
|
|
|
97.5 |
% |
|
$ |
33.60 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlanta |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Buckhead Plaza |
|
|
1 |
|
|
Buckhead |
|
1987 |
|
|
461,669 |
|
|
|
91.3 |
% |
|
$ |
30.48 |
|
|
|
35 |
% |
One Live Oak |
|
|
1 |
|
|
Buckhead |
|
1981 |
|
|
201,488 |
|
|
|
88.7 |
|
|
|
24.24 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
2 |
|
|
|
|
|
|
|
663,157 |
|
|
|
90.5 |
% |
|
$ |
28.62 |
|
|
|
55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seattle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Building |
|
|
1 |
|
|
CBD |
|
1930/2001 |
|
|
295,515 |
|
|
|
99.0 |
% |
|
$ |
24.57 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Office Portfolio
Excluding Properties Not
Stabilized |
|
|
70 |
|
|
|
|
|
|
|
27,318,678 |
|
|
|
89.8 |
% (3) |
|
$ |
22.78 |
(4) |
|
|
68 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTIES NOT STABILIZED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phoenix |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Plaza (5) |
|
|
1 |
|
|
Mesa |
|
1986 |
|
|
309,983 |
|
|
|
80.6 |
% |
|
$ |
25.06 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Office Portfolio |
|
|
71 |
|
|
|
|
|
|
|
27,628,661 |
|
|
|
|
|
|
|
|
|
|
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Office Property Table data is presented without adjustments
to reflect our actual ownership percentage in joint
ventured properties. Our actual ownership percentage in
each property has been included for informational purposes. |
|
(2) |
|
Calculated in accordance with GAAP based on base rent
payable as of December 31, 2006, giving effect to free rent
and scheduled rent increases and including adjustments for
expenses payable by or reimbursable from customers. The
weighted average full-service rental rate for the El Paso
lease (Greenway Plaza, Houston, Texas) reflects weighted
average full-service rental rate over the shortened term
(due to lease termination effective as of December 31,
2007) and excludes the impact of the net lease termination
fee being amortized into revenue through December 31, 2007. |
|
(3) |
|
Leases have been executed at certain Office Properties but
had not commenced as of December 31, 2006. If such leases
had commenced as of December 31, 2006, the percent leased
for Office Properties would have been 92.6%. Properties
whose percent leased exceeds economic occupancy by 5
percentage points or more are as follows: Stanford
Corporate Centre 94.1%, Fullbright Tower 91.7%,
BriarLake Plaza 97.3, Regency Plaza 93.8% and Miami
Center 98.8%. |
|
(4) |
|
The weighted average full-service cash rental rate per
square foot calculated based on base rent payable for
Office Properties as of December 31, 2006, without giving
effect to free rent and scheduled rent increases that are
taken into consideration under GAAP but including
adjustments for expenses paid by or reimbursed from
customers is $22.55. |
|
(5) |
|
Property statistics exclude Financial Plaza (acquired
January 2006). This office property will be included in
portfolio statistics once stabilized. Stabilization is
deemed to occur upon the earlier of (a) achieving 90%
occupancy, (b) one year following the acquisition date or
date placed in service (related to developments), or (c)
two years following the acquisition date for properties
which are being repositioned. |
26
The following table shows, as of December 31, 2006, the principal
businesses conducted by the tenants at our Office Properties, based
on tenants applicable 2-digit NAICS Code. Based on rental revenues
from office leases in effect as of December 31, 2006, no single
tenant accounted for more than 2.5% of our total Office Segment
revenues for 2006.
|
|
|
|
|
|
|
Percent of |
Industry Sector |
|
Leased Sq. Ft. |
Professional and Business Services |
|
|
32 |
% |
Financial Activities |
|
|
27 |
|
Natural Resources, Mining, Construction |
|
|
18 |
|
Information |
|
|
5 |
|
Trade, Transportation, Utilities |
|
|
4 |
|
Public Administration |
|
|
4 |
|
Manufacturing |
|
|
4 |
|
Leisure and Hospitality |
|
|
4 |
|
Education and Health Services |
|
|
1 |
|
Other Services |
|
|
1 |
|
|
|
|
|
|
Total Leased |
|
|
100 |
% |
|
|
|
|
|
Aggregate Lease Expirations of Office Properties
The following tables show schedules of lease expirations for leases
in place as of December 31, 2006, for our total Office Properties
and for Dallas, Houston and Austin, Texas; Denver, Colorado; Miami,
Florida and Las Vegas, Nevada, individually, for each of the 10
years beginning 2007.
27
Total Office Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Crescents |
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Share of |
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Expiring |
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Square Footage |
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
(After Renewals |
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
and Relets) |
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
1,529,501 |
|
|
|
(1,008,685 |
) |
|
|
|
520,816 |
|
|
|
2.2 |
|
|
|
|
356,887 |
|
|
$ |
9,271,512 |
|
|
|
1.7 |
|
|
$ |
17.80 |
|
|
|
192 |
|
Q2 2007 |
|
|
676,701 |
|
|
|
(250,959 |
) |
|
|
|
425,742 |
|
|
|
1.8 |
|
|
|
|
262,548 |
|
|
|
9,644,046 |
|
|
|
1.8 |
|
|
|
22.65 |
|
|
|
76 |
|
Q3 2007 |
|
|
401,377 |
|
|
|
(109,255 |
) |
|
|
|
292,122 |
|
|
|
1.2 |
|
|
|
|
238,632 |
|
|
|
6,654,607 |
|
|
|
1.2 |
|
|
|
22.78 |
|
|
|
65 |
|
Q4 2007 |
|
|
597,153 |
|
|
|
173,046 |
|
|
|
|
770,199 |
|
|
|
3.2 |
|
|
|
|
426,478 |
|
|
|
18,354,467 |
|
|
|
3.3 |
|
|
|
23.83 |
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2007 |
|
|
3,204,732 |
(4) |
|
|
(1,195,853 |
) |
|
|
|
2,008,879 |
(4) |
|
|
8.4 |
% |
|
|
|
1,284,545 |
|
|
$ |
43,924,632 |
|
|
|
8.0 |
% |
|
$ |
21.87 |
|
|
|
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
1,123,514 |
|
|
|
(43,782 |
) |
|
|
|
1,079,732 |
|
|
|
4.5 |
|
|
|
|
927,689 |
|
|
$ |
24,763,642 |
|
|
|
4.5 |
|
|
$ |
22.93 |
|
|
|
64 |
|
Q2 2008 |
|
|
458,494 |
|
|
|
(15,598 |
) |
|
|
|
442,896 |
|
|
|
1.8 |
|
|
|
|
366,677 |
|
|
|
10,610,394 |
|
|
|
1.9 |
|
|
|
23.96 |
|
|
|
73 |
|
Q3 2008 |
|
|
422,896 |
|
|
|
(48,346 |
) |
|
|
|
374,550 |
|
|
|
1.6 |
|
|
|
|
234,722 |
|
|
|
8,845,813 |
|
|
|
1.6 |
|
|
|
23.62 |
|
|
|
73 |
|
Q4 2008 |
|
|
479,305 |
|
|
|
(55,774 |
) |
|
|
|
423,531 |
|
|
|
1.8 |
|
|
|
|
337,022 |
|
|
|
10,120,853 |
|
|
|
1.8 |
|
|
|
23.90 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2008 |
|
|
2,484,209 |
|
|
|
(163,500 |
) |
|
|
|
2,320,709 |
|
|
|
9.7 |
% |
|
|
|
1,866,110 |
|
|
$ |
54,340,702 |
|
|
|
9.8 |
% |
|
$ |
23.42 |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2,581,216 |
|
|
|
(73,993 |
) |
|
|
|
2,507,223 |
|
|
|
10.4 |
|
|
|
|
1,714,536 |
|
|
$ |
58,488,832 |
|
|
|
10.6 |
|
|
$ |
23.33 |
|
|
|
301 |
|
2010 |
|
|
2,111,239 |
|
|
|
169,775 |
|
|
|
|
2,281,014 |
|
|
|
9.5 |
|
|
|
|
1,462,189 |
|
|
|
55,193,305 |
|
|
|
10.0 |
|
|
|
24.20 |
|
|
|
250 |
|
2011 |
|
|
2,232,042 |
|
|
|
44,709 |
|
|
|
|
2,276,751 |
|
|
|
9.4 |
|
|
|
|
1,633,071 |
|
|
|
56,202,831 |
|
|
|
10.2 |
|
|
|
24.69 |
|
|
|
235 |
|
2012 |
|
|
1,498,307 |
|
|
|
317,784 |
|
|
|
|
1,816,091 |
|
|
|
7.5 |
|
|
|
|
1,410,079 |
|
|
|
41,972,305 |
|
|
|
7.6 |
|
|
|
23.11 |
|
|
|
111 |
|
2013 |
|
|
1,942,939 |
|
|
|
129,854 |
|
|
|
|
2,072,793 |
|
|
|
8.6 |
|
|
|
|
1,563,202 |
|
|
|
47,746,034 |
|
|
|
8.7 |
|
|
|
23.03 |
|
|
|
93 |
|
2014 |
|
|
3,273,247 |
|
|
|
187,140 |
|
|
|
|
3,460,387 |
|
|
|
14.3 |
|
|
|
|
2,172,475 |
|
|
|
72,301,983 |
|
|
|
13.1 |
|
|
|
20.89 |
|
|
|
48 |
|
2015 |
|
|
1,720,570 |
|
|
|
29,531 |
|
|
|
|
1,750,101 |
|
|
|
7.3 |
|
|
|
|
1,281,374 |
|
|
|
40,189,224 |
|
|
|
7.3 |
|
|
|
22.96 |
|
|
|
60 |
|
2016 |
|
|
1,213,952 |
|
|
|
11,713 |
|
|
|
|
1,225,665 |
|
|
|
5.1 |
|
|
|
|
539,239 |
|
|
|
29,272,813 |
|
|
|
5.3 |
|
|
|
23.88 |
|
|
|
59 |
|
2017 and thereafter |
|
|
1,853,425 |
|
|
|
542,840 |
|
|
|
|
2,396,265 |
|
|
|
9.8 |
|
|
|
|
1,450,899 |
|
|
|
50,610,106 |
|
|
|
9.4 |
|
|
|
21.12 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
24,115,878 |
|
|
|
|
|
|
|
|
24,115,878 |
(5) |
|
|
100.0 |
% |
|
|
|
16,377,719 |
|
|
$ |
550,242,767 |
|
|
|
100.0 |
% |
|
$ |
22.82 |
|
|
|
1,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken into account under GAAP
and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 1,825,691 square feet (including relets and renewals of 1,195,853 square feet and new leases of 629,838 square feet) have been signed and will commence during 2007.
These signed leases represent approximately 57% of gross square footage expiring during 2007. Expiring square footage includes 247,361 square feet of month-to-month leases. |
|
(5) |
|
Reconciliation of Occupied SF to Net Rentable Area: |
|
|
|
|
|
|
|
|
|
Occupied SF Per Above: |
|
|
24,115,878 |
|
|
Non-revenue Generating Space: |
|
|
405,938 |
|
|
|
|
|
|
|
|
|
|
Total Occupied Office SF: |
|
|
24,521,816 |
|
|
Total Vacant SF: |
|
|
2,796,862 |
|
|
|
|
|
|
|
|
|
|
Total Stabilized Office NRA: |
|
|
27,318,678 |
|
|
|
|
|
|
|
|
|
Dallas Office Properties (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
458,157 |
|
|
|
(403,976 |
) |
|
|
|
54,181 |
|
|
|
0.8 |
|
|
|
$ |
1,265,432 |
|
|
|
0.8 |
|
|
$ |
23.36 |
|
|
|
33 |
|
Q2 2007 |
|
|
106,697 |
|
|
|
(15,259 |
) |
|
|
|
91,438 |
|
|
|
1.4 |
|
|
|
|
1,743,619 |
|
|
|
1.1 |
|
|
|
19.07 |
|
|
|
16 |
|
Q3 2007 |
|
|
87,395 |
|
|
|
(39,350 |
) |
|
|
|
48,045 |
|
|
|
0.7 |
|
|
|
|
844,161 |
|
|
|
0.5 |
|
|
|
17.57 |
|
|
|
11 |
|
Q4 2007 |
|
|
76,704 |
|
|
|
316,377 |
|
|
|
|
393,081 |
|
|
|
6.0 |
|
|
|
|
9,398,804 |
|
|
|
6.1 |
|
|
|
23.91 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Total 2007 |
|
|
728,953 |
(4) |
|
|
(142,208 |
) |
|
|
|
586,745 |
(4) |
|
|
8.9 |
% |
|
|
$ |
13,252,016 |
|
|
|
8.5 |
|
|
$ |
22.59 |
|
|
|
69 |
|
|
Q1 2008 |
|
|
144,242 |
|
|
|
1,388 |
|
|
|
|
145,630 |
|
|
|
2.2 |
|
|
|
$ |
3,596,739 |
|
|
|
2.3 |
|
|
$ |
24.70 |
|
|
|
13 |
|
Q2 2008 |
|
|
90,001 |
|
|
|
1,579 |
|
|
|
|
91,580 |
|
|
|
1.4 |
|
|
|
|
2,158,883 |
|
|
|
1.4 |
|
|
|
23.57 |
|
|
|
17 |
|
Q3 2008 |
|
|
79,743 |
|
|
|
(9,650 |
) |
|
|
|
70,093 |
|
|
|
1.1 |
|
|
|
|
1,493,525 |
|
|
|
1.0 |
|
|
|
21.31 |
|
|
|
20 |
|
Q4 2008 |
|
|
110,721 |
|
|
|
(17,109 |
) |
|
|
|
93,612 |
|
|
|
1.4 |
|
|
|
|
1,967,611 |
|
|
|
1.3 |
|
|
|
21.02 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
Total 2008 |
|
|
424,707 |
|
|
|
(23,792 |
) |
|
|
|
400,915 |
|
|
|
6.1 |
% |
|
|
$ |
9,216,758 |
|
|
|
6.0 |
|
|
$ |
22.99 |
|
|
|
72 |
|
|
2009 |
|
|
459,179 |
|
|
|
(1,411 |
) |
|
|
|
457,768 |
|
|
|
7.0 |
|
|
|
$ |
11,745,207 |
|
|
|
7.6 |
|
|
$ |
25.66 |
|
|
|
54 |
|
2010 |
|
|
640,621 |
|
|
|
12,222 |
|
|
|
|
652,843 |
|
|
|
10.0 |
|
|
|
|
16,302,254 |
|
|
|
10.6 |
|
|
|
24.97 |
|
|
|
59 |
|
2011 |
|
|
469,972 |
|
|
|
(65,847 |
) |
|
|
|
404,125 |
|
|
|
6.2 |
|
|
|
|
10,331,270 |
|
|
|
6.7 |
|
|
|
25.56 |
|
|
|
38 |
|
2012 |
|
|
340,047 |
|
|
|
46,526 |
|
|
|
|
386,573 |
|
|
|
5.9 |
|
|
|
|
8,461,619 |
|
|
|
5.5 |
|
|
|
21.89 |
|
|
|
32 |
|
2013 |
|
|
503,065 |
|
|
|
80,544 |
|
|
|
|
583,609 |
|
|
|
8.9 |
|
|
|
|
14,362,393 |
|
|
|
9.3 |
|
|
|
24.61 |
|
|
|
26 |
|
2014 |
|
|
630,572 |
|
|
|
7,922 |
|
|
|
|
638,494 |
|
|
|
9.7 |
|
|
|
|
14,440,942 |
|
|
|
9.4 |
|
|
|
22.62 |
|
|
|
13 |
|
2015 |
|
|
936,483 |
|
|
|
17,599 |
|
|
|
|
954,082 |
|
|
|
14.6 |
|
|
|
|
22,054,983 |
|
|
|
14.3 |
|
|
|
23.12 |
|
|
|
22 |
|
2016 |
|
|
204,867 |
|
|
|
|
|
|
|
|
204,867 |
|
|
|
3.1 |
|
|
|
|
5,809,013 |
|
|
|
3.8 |
|
|
|
28.36 |
|
|
|
14 |
|
2017 and
thereafter |
|
|
1,214,468 |
|
|
|
68,445 |
|
|
|
|
1,282,913 |
|
|
|
19.6 |
|
|
|
|
27,753,961 |
|
|
|
18.3 |
|
|
|
21.63 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,552,934 |
|
|
|
|
|
|
|
|
6,552,934 |
|
|
|
100.0 |
% |
|
|
$ |
153,730,416 |
|
|
|
100.0 |
|
|
$ |
23.46 |
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken
into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 201,481 square feet (including relets and renewals of 142,208 square feet and new leases of 59,273 square feet) have been signed and will
commence during 2007. These signed leases represent approximately 28% of gross square footage expiring during 2007. Expiring square footage includes
14,018 square feet of month-to-month leases. |
28
Houston Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renwals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
789,946 |
|
|
|
(502,076 |
) |
|
|
|
287,870 |
|
|
|
3.1 |
|
|
|
$ |
4,428,987 |
|
|
|
2.4 |
|
|
$ |
15.39 |
|
|
|
95 |
|
Q2 2007 |
|
|
343,944 |
|
|
|
(163,389 |
) |
|
|
|
180,555 |
|
|
|
1.9 |
|
|
|
|
3,577,680 |
|
|
|
1.9 |
|
|
|
19.81 |
|
|
|
21 |
|
Q3 2007 |
|
|
176,376 |
|
|
|
(65,187 |
) |
|
|
|
111,189 |
|
|
|
1.2 |
|
|
|
|
2,197,816 |
|
|
|
1.2 |
|
|
|
19.77 |
|
|
|
21 |
|
Q4 2007 |
|
|
173,733 |
|
|
|
(27,070 |
) |
|
|
|
146,663 |
|
|
|
1.6 |
|
|
|
|
2,969,467 |
|
|
|
1.6 |
|
|
|
20.25 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
Total 2007 |
|
|
1,483,999 |
(4) |
|
|
(757,722 |
) |
|
|
|
726,277 |
(4) |
|
|
7.8 |
% |
|
|
$ |
13,173,950 |
|
|
|
7.1 |
% |
|
$ |
18.14 |
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
816,224 |
|
|
|
(20,516 |
) |
|
|
|
795,708 |
|
|
|
8.4 |
|
|
|
$ |
17,387,899 |
|
|
|
9.2 |
|
|
$ |
21.85 |
|
|
|
24 |
|
Q2 2008 |
|
|
110,715 |
|
|
|
4,779 |
|
|
|
|
115,494 |
|
|
|
1.2 |
|
|
|
|
2,270,779 |
|
|
|
1.2 |
|
|
|
19.66 |
|
|
|
20 |
|
Q3 2008 |
|
|
217,357 |
|
|
|
(33,057 |
) |
|
|
|
184,300 |
|
|
|
2.0 |
|
|
|
|
3,995,546 |
|
|
|
2.1 |
|
|
|
21.68 |
|
|
|
25 |
|
Q4 2008 |
|
|
180,656 |
|
|
|
(7,927 |
) |
|
|
|
172,729 |
|
|
|
1.8 |
|
|
|
|
3,602,549 |
|
|
|
1.9 |
|
|
|
20.86 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Total 2008 |
|
|
1,324,952 |
|
|
|
(56,721 |
) |
|
|
|
1,268,231 |
|
|
|
13.4 |
% |
|
|
$ |
27,256,773 |
|
|
|
14.4 |
% |
|
$ |
21.49 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
965,859 |
|
|
|
103 |
|
|
|
|
965,962 |
|
|
|
10.3 |
|
|
|
$ |
18,567,268 |
|
|
|
9.9 |
|
|
$ |
19.22 |
|
|
|
100 |
|
2010 |
|
|
548,711 |
|
|
|
107,150 |
|
|
|
|
655,861 |
|
|
|
7.0 |
|
|
|
|
12,697,593 |
|
|
|
6.7 |
|
|
|
19.36 |
|
|
|
80 |
|
2011 |
|
|
750,787 |
|
|
|
21,350 |
|
|
|
|
772,137 |
|
|
|
8.2 |
|
|
|
|
15,434,732 |
|
|
|
8.2 |
|
|
|
19.99 |
|
|
|
78 |
|
2012 |
|
|
601,136 |
|
|
|
138,685 |
|
|
|
|
739,821 |
|
|
|
7.9 |
|
|
|
|
15,697,606 |
|
|
|
8.3 |
|
|
|
21.22 |
|
|
|
36 |
|
2013 |
|
|
449,801 |
|
|
|
24,078 |
|
|
|
|
473,879 |
|
|
|
5.0 |
|
|
|
|
9,845,448 |
|
|
|
5.2 |
|
|
|
20.78 |
|
|
|
15 |
|
2014 |
|
|
1,829,951 |
|
|
|
102,963 |
|
|
|
|
1,932,914 |
|
|
|
20.5 |
|
|
|
|
38,897,610 |
|
|
|
20.6 |
|
|
|
20.12 |
|
|
|
16 |
|
2015 |
|
|
372,354 |
|
|
|
|
|
|
|
|
372,354 |
|
|
|
4.0 |
|
|
|
|
6,963,821 |
|
|
|
3.7 |
|
|
|
18.70 |
|
|
|
14 |
|
2016 |
|
|
723,018 |
|
|
|
11,713 |
|
|
|
|
734,731 |
|
|
|
7.8 |
|
|
|
|
15,736,199 |
|
|
|
8.4 |
|
|
|
21.42 |
|
|
|
28 |
|
2017 and
thereafter |
|
|
372,754 |
|
|
|
408,401 |
|
|
|
|
781,155 |
|
|
|
8.1 |
|
|
|
|
14,175,940 |
|
|
|
7.5 |
|
|
|
18.15 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
9,423,322 |
|
|
|
|
|
|
|
|
9,423,322 |
|
|
|
100.0 |
% |
|
|
$ |
188,446,940 |
|
|
|
100.0 |
% |
|
$ |
20.00 |
|
|
|
632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and
relets), giving effect to free rent and scheduled rent increases taken into account under GAAP and including
adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 1,202,482 square feet (including relets and renewals of 757,722 square feet
and new leases of 444,760 square feet) have been signed and will commence during 2007. These signed leases represent
approximately 81% of gross square footage expiring during 2007. Expiring square footage includes 144,374 square feet
of month-to-month leases. |
Austin Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets)
(1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
72,878 |
|
|
|
(17,512 |
) |
|
|
|
55,366 |
|
|
|
4.3 |
|
|
|
$ |
706,809 |
|
|
|
2.6 |
|
|
$ |
12.77 |
|
|
|
13 |
|
Q2 2007 |
|
|
9,904 |
|
|
|
1,484 |
|
|
|
|
11,388 |
|
|
|
0.9 |
|
|
|
|
204,182 |
|
|
|
0.8 |
|
|
|
17.93 |
|
|
|
3 |
|
Q3 2007 |
|
|
12,386 |
|
|
|
(1,824 |
) |
|
|
|
10,562 |
|
|
|
0.8 |
|
|
|
|
196,659 |
|
|
|
0.7 |
|
|
|
18.62 |
|
|
|
5 |
|
Q4 2007 |
|
|
23,405 |
|
|
|
|
|
|
|
|
23,405 |
|
|
|
1.8 |
|
|
|
|
494,407 |
|
|
|
1.8 |
|
|
|
21.12 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
Total 2007 |
|
|
118,573 |
(4) |
|
|
(17,852 |
) |
|
|
|
100,721 |
(4) |
|
|
7.8 |
% |
|
|
$ |
1,602,057 |
|
|
|
5.9 |
% |
|
$ |
15.91 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
10,313 |
|
|
|
|
|
|
|
|
10,313 |
|
|
|
0.8 |
|
|
|
$ |
160,125 |
|
|
|
0.6 |
|
|
$ |
15.53 |
|
|
|
5 |
|
Q2 2008 |
|
|
4,788 |
|
|
|
|
|
|
|
|
4,788 |
|
|
|
0.4 |
|
|
|
|
104,876 |
|
|
|
0.4 |
|
|
|
21.90 |
|
|
|
3 |
|
Q3 2008 |
|
|
20,061 |
|
|
|
|
|
|
|
|
20,061 |
|
|
|
1.6 |
|
|
|
|
491,386 |
|
|
|
1.8 |
|
|
|
24.49 |
|
|
|
8 |
|
Q4 2008 |
|
|
32,708 |
|
|
|
|
|
|
|
|
32,708 |
|
|
|
2.5 |
|
|
|
|
877,009 |
|
|
|
3.2 |
|
|
|
26.81 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Total 2008 |
|
|
67,870 |
|
|
|
|
|
|
|
|
67,870 |
|
|
|
5.3 |
% |
|
|
$ |
1,633,396 |
|
|
|
6.0 |
% |
|
$ |
24.07 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
199,764 |
|
|
|
(48,767 |
) |
|
|
|
150,997 |
|
|
|
11.8 |
|
|
|
$ |
3,371,645 |
|
|
|
12.5 |
|
|
$ |
22.33 |
|
|
|
26 |
|
2010 |
|
|
163,394 |
|
|
|
16,028 |
|
|
|
|
179,422 |
|
|
|
14.0 |
|
|
|
|
3,422,001 |
|
|
|
12.7 |
|
|
|
19.07 |
|
|
|
26 |
|
2011 |
|
|
102,375 |
|
|
|
50,591 |
|
|
|
|
152,966 |
|
|
|
11.9 |
|
|
|
|
3,589,116 |
|
|
|
13.3 |
|
|
|
23.46 |
|
|
|
15 |
|
2012 |
|
|
67,188 |
|
|
|
|
|
|
|
|
67,188 |
|
|
|
5.2 |
|
|
|
|
1,501,417 |
|
|
|
5.6 |
|
|
|
22.35 |
|
|
|
8 |
|
2013 |
|
|
105,228 |
|
|
|
|
|
|
|
|
105,228 |
|
|
|
8.2 |
|
|
|
|
2,220,392 |
|
|
|
8.2 |
|
|
|
21.10 |
|
|
|
9 |
|
2014 |
|
|
253,980 |
|
|
|
|
|
|
|
|
253,980 |
|
|
|
19.8 |
|
|
|
|
5,517,181 |
|
|
|
20.4 |
|
|
|
21.72 |
|
|
|
4 |
|
2015 |
|
|
129,488 |
|
|
|
|
|
|
|
|
129,488 |
|
|
|
10.1 |
|
|
|
|
2,610,609 |
|
|
|
9.7 |
|
|
|
20.16 |
|
|
|
10 |
|
2016 |
|
|
67,509 |
|
|
|
|
|
|
|
|
67,509 |
|
|
|
5.3 |
|
|
|
|
1,288,715 |
|
|
|
4.8 |
|
|
|
19.09 |
|
|
|
3 |
|
2017 and
thereafter |
|
|
9,434 |
|
|
|
|
|
|
|
|
9,434 |
|
|
|
0.6 |
|
|
|
|
247,413 |
|
|
|
0.9 |
|
|
|
26.23 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,284,803 |
|
|
|
|
|
|
|
|
1,284,803 |
|
|
|
100.0 |
% |
|
|
$ |
27,003,942 |
|
|
|
100.0 |
% |
|
$ |
21.02 |
|
|
|
149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and
relets), giving effect to free rent and scheduled rent increases taken into account under GAAP and including
adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 38,127 square feet (including relets and renewals of 17,852 square feet and
new leases of 20,275 square feet) have been signed and will commence during 2007. These signed leases represent
approximately 32% of gross square footage expiring during 2007. Expiring square footage includes 35,417 square feet
of month-to-month leases. |
29
Denver Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
64,250 |
|
|
|
(34,159 |
) |
|
|
|
30,091 |
|
|
|
1.5 |
|
|
|
$ |
507,542 |
|
|
|
1.2 |
|
|
$ |
16.87 |
|
|
|
13 |
|
Q2 2007 |
|
|
18,646 |
|
|
|
(5,993 |
) |
|
|
|
12,653 |
|
|
|
0.6 |
|
|
|
|
300,929 |
|
|
|
0.7 |
|
|
|
23.78 |
|
|
|
4 |
|
Q3 2007 |
|
|
16,298 |
|
|
|
549 |
|
|
|
|
16,847 |
|
|
|
0.9 |
|
|
|
|
328,868 |
|
|
|
0.8 |
|
|
|
19.52 |
|
|
|
3 |
|
Q4 2007 |
|
|
14,214 |
|
|
|
(7,955 |
) |
|
|
|
6,259 |
|
|
|
0.3 |
|
|
|
|
134,015 |
|
|
|
0.3 |
|
|
|
21.41 |
|
|
|
2 |
|
|
|
|
Total 2007 |
|
|
113,408 |
(4) |
|
|
(47,558 |
) |
|
|
|
65,850 |
(4) |
|
|
3.3 |
% |
|
|
$ |
1,271,354 |
|
|
|
3.0 |
% |
|
$ |
19.31 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
46,161 |
|
|
|
(23,079 |
) |
|
|
|
23,082 |
|
|
|
1.2 |
|
|
|
$ |
528,713 |
|
|
|
1.3 |
|
|
$ |
22.91 |
|
|
|
6 |
|
Q2 2008 |
|
|
132,980 |
|
|
|
(3,877 |
) |
|
|
|
129,103 |
|
|
|
6.6 |
|
|
|
|
2,956,407 |
|
|
|
7.2 |
|
|
|
22.90 |
|
|
|
6 |
|
Q3 2008 |
|
|
18,610 |
|
|
|
|
|
|
|
|
18,610 |
|
|
|
0.9 |
|
|
|
|
396,545 |
|
|
|
1.0 |
|
|
|
21.31 |
|
|
|
3 |
|
Q4 2008 |
|
|
12,700 |
|
|
|
(2,978 |
) |
|
|
|
9,722 |
|
|
|
0.5 |
|
|
|
|
220,596 |
|
|
|
0.5 |
|
|
|
22.69 |
|
|
|
4 |
|
|
|
|
Total 2008 |
|
|
210,451 |
|
|
|
(29,934 |
) |
|
|
|
180,517 |
|
|
|
9.2 |
% |
|
|
$ |
4,102,261 |
|
|
|
10.0 |
% |
|
$ |
22.73 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
234,658 |
|
|
|
(52,720 |
) |
|
|
|
181,938 |
|
|
|
9.2 |
|
|
|
$ |
3,729,509 |
|
|
|
9.1 |
|
|
$ |
20.50 |
|
|
|
26 |
|
2010 |
|
|
198,027 |
|
|
|
20,537 |
|
|
|
|
218,564 |
|
|
|
11.1 |
|
|
|
|
4,810,970 |
|
|
|
11.8 |
|
|
|
22.01 |
|
|
|
18 |
|
2011 |
|
|
200,877 |
|
|
|
7,615 |
|
|
|
|
208,492 |
|
|
|
10.6 |
|
|
|
|
4,562,349 |
|
|
|
11.1 |
|
|
|
21.88 |
|
|
|
22 |
|
2012 |
|
|
180,482 |
|
|
|
83,980 |
|
|
|
|
264,462 |
|
|
|
13.4 |
|
|
|
|
5,995,876 |
|
|
|
14.7 |
|
|
|
22.67 |
|
|
|
12 |
|
2013 |
|
|
160,969 |
|
|
|
(57,190 |
) |
|
|
|
103,779 |
|
|
|
5.3 |
|
|
|
|
2,138,630 |
|
|
|
5.2 |
|
|
|
20.61 |
|
|
|
9 |
|
2014 |
|
|
444,840 |
|
|
|
73,210 |
|
|
|
|
518,050 |
|
|
|
26.3 |
|
|
|
|
10,368,492 |
|
|
|
25.3 |
|
|
|
20.01 |
|
|
|
5 |
|
2015 |
|
|
18,637 |
|
|
|
|
|
|
|
|
18,637 |
|
|
|
0.9 |
|
|
|
|
372,567 |
|
|
|
0.9 |
|
|
|
19.99 |
|
|
|
3 |
|
2016 |
|
|
64,075 |
|
|
|
|
|
|
|
|
64,075 |
|
|
|
3.3 |
|
|
|
|
1,073,124 |
|
|
|
2.6 |
|
|
|
16.75 |
|
|
|
3 |
|
2017 and thereafter |
|
|
144,050 |
|
|
|
2,060 |
|
|
|
|
146,110 |
|
|
|
7.4 |
|
|
|
|
2,498,672 |
|
|
|
6.3 |
|
|
|
17.10 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,970,474 |
|
|
|
|
|
|
|
|
1,970,474 |
|
|
|
100.0 |
% |
|
|
$ |
40,923,804 |
|
|
|
100.0 |
% |
|
$ |
20.77 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken
into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 new leases totaling 88,007 square feet (including relets and renewals of 47,558 square feet and new leases of 40,449 square feet) have been signed and will
commence during 2007. These signed leases represent approximately 78% of gross square footage expiring during 2007. Expiring square footage includes 6,751 square feet of
month-to-month leases. |
Miami Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
71,586 |
|
|
|
(18,295 |
) |
|
|
|
53,291 |
|
|
|
3.2 |
|
|
|
$ |
1,419,646 |
|
|
|
2.7 |
|
|
$ |
26.64 |
|
|
|
22 |
|
Q2 2007 |
|
|
86,478 |
|
|
|
(9,610 |
) |
|
|
|
76,868 |
|
|
|
4.6 |
|
|
|
|
2,415,668 |
|
|
|
4.6 |
|
|
|
31.43 |
|
|
|
20 |
|
Q3 2007 |
|
|
23,791 |
|
|
|
|
|
|
|
|
23,791 |
|
|
|
1.4 |
|
|
|
|
678,535 |
|
|
|
1.3 |
|
|
|
28.52 |
|
|
|
8 |
|
Q4 2007 |
|
|
47,727 |
|
|
|
(22,905 |
) |
|
|
|
24,822 |
|
|
|
1.5 |
|
|
|
|
643,332 |
|
|
|
1.2 |
|
|
|
25.92 |
|
|
|
3 |
|
|
|
|
Total 2007 |
|
|
229,582 |
(4) |
|
|
(50,810 |
) |
|
|
|
178,772 |
(4) |
|
|
10.7 |
% |
|
|
$ |
5,157,181 |
|
|
|
9.8 |
% |
|
$ |
28.85 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
18,764 |
|
|
|
(1,249 |
) |
|
|
|
17,515 |
|
|
|
1.1 |
|
|
|
$ |
555,165 |
|
|
|
1.1 |
|
|
$ |
31.70 |
|
|
|
5 |
|
Q2 2008 |
|
|
29,853 |
|
|
|
5,995 |
|
|
|
|
35,848 |
|
|
|
2.2 |
|
|
|
|
1,120,978 |
|
|
|
2.1 |
|
|
|
31.27 |
|
|
|
9 |
|
Q3 2008 |
|
|
21,544 |
|
|
|
|
|
|
|
|
21,544 |
|
|
|
1.3 |
|
|
|
|
664,396 |
|
|
|
1.3 |
|
|
|
30.84 |
|
|
|
6 |
|
Q4 2008 |
|
|
61,354 |
|
|
|
(11,114 |
) |
|
|
|
50,240 |
|
|
|
3.0 |
|
|
|
|
1,480,178 |
|
|
|
2.8 |
|
|
|
29.46 |
|
|
|
13 |
|
|
|
|
Total 2008 |
|
|
131,515 |
|
|
|
(6,368 |
) |
|
|
|
125,147 |
|
|
|
7.6 |
% |
|
|
$ |
3,820,717 |
|
|
|
7.3 |
% |
|
$ |
30.53 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
338,219 |
|
|
|
(6,043 |
) |
|
|
|
332,176 |
|
|
|
20.0 |
|
|
|
$ |
9,882,868 |
|
|
|
18.8 |
|
|
$ |
29.75 |
|
|
|
40 |
|
2010 |
|
|
279,776 |
|
|
|
2,072 |
|
|
|
|
281,848 |
|
|
|
17.0 |
|
|
|
|
9,137,800 |
|
|
|
17.4 |
|
|
|
32.42 |
|
|
|
25 |
|
2011 |
|
|
147,857 |
|
|
|
16,049 |
|
|
|
|
163,906 |
|
|
|
9.9 |
|
|
|
|
5,298,991 |
|
|
|
10.1 |
|
|
|
32.33 |
|
|
|
23 |
|
2012 |
|
|
98,434 |
|
|
|
5,524 |
|
|
|
|
103,958 |
|
|
|
6.3 |
|
|
|
|
3,629,533 |
|
|
|
6.9 |
|
|
|
34.91 |
|
|
|
7 |
|
2013 |
|
|
85,113 |
|
|
|
2,000 |
|
|
|
|
87,113 |
|
|
|
5.3 |
|
|
|
|
2,774,422 |
|
|
|
5.3 |
|
|
|
31.85 |
|
|
|
11 |
|
2014 |
|
|
36,952 |
|
|
|
|
|
|
|
|
36,952 |
|
|
|
2.2 |
|
|
|
|
1,054,130 |
|
|
|
2.0 |
|
|
|
28.53 |
|
|
|
2 |
|
2015 |
|
|
110,242 |
|
|
|
11,932 |
|
|
|
|
122,174 |
|
|
|
7.4 |
|
|
|
|
3,995,035 |
|
|
|
7.6 |
|
|
|
32.70 |
|
|
|
4 |
|
2016 |
|
|
108,226 |
|
|
|
|
|
|
|
|
108,226 |
|
|
|
6.5 |
|
|
|
|
3,805,138 |
|
|
|
7.3 |
|
|
|
35.16 |
|
|
|
7 |
|
2017 and thereafter |
|
|
92,440 |
|
|
|
25,644 |
|
|
|
|
118,084 |
|
|
|
7.1 |
|
|
|
|
3,909,838 |
|
|
|
7.5 |
|
|
|
33.11 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,658,356 |
|
|
|
|
|
|
|
|
1,658,356 |
|
|
|
100.0 |
% |
|
|
$ |
52,465,653 |
|
|
|
100.0 |
% |
|
$ |
31.64 |
|
|
|
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken
into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 99,189 square feet (including relets and renewals of 50,810 square feet and new leases of 48,379 square feet) have been signed and
will commence during 2007. These signed leases represent approximately 43% of gross square footage expiring during 2007. Expiring square footage includes
25,936 square feet of month-to-month leases. |
30
Las Vegas Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
%of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
%of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
33,578 |
|
|
|
(12,051 |
) |
|
|
|
21,527 |
|
|
|
2.0 |
|
|
|
$ |
608,101 |
|
|
|
1.7 |
|
|
$ |
28.25 |
|
|
|
4 |
|
Q2 2007 |
|
|
38,769 |
|
|
|
(29,392 |
) |
|
|
|
9,377 |
|
|
|
0.9 |
|
|
|
|
267,854 |
|
|
|
0.7 |
|
|
|
28.56 |
|
|
|
2 |
|
Q3 2007 |
|
|
55,483 |
|
|
|
|
|
|
|
|
55,483 |
|
|
|
5.2 |
|
|
|
|
1,695,604 |
|
|
|
4.7 |
|
|
|
30.56 |
|
|
|
9 |
|
Q4 2007 |
|
|
58,908 |
|
|
|
(10,426 |
) |
|
|
|
48,482 |
|
|
|
4.5 |
|
|
|
|
1,580,136 |
|
|
|
4.3 |
|
|
|
32.59 |
|
|
|
10 |
|
|
|
|
Total 2007 |
|
|
186,738 |
(4) |
|
|
(51,869 |
) |
|
|
|
134,869 |
(4) |
|
|
12.6 |
% |
|
|
$ |
4,151,695 |
|
|
|
11.4 |
% |
|
$ |
30.78 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
56,474 |
|
|
|
1,659 |
|
|
|
|
58,133 |
|
|
|
5.4 |
|
|
|
$ |
1,821,333 |
|
|
|
5.0 |
|
|
$ |
31.33 |
|
|
|
3 |
|
Q2 2008 |
|
|
35,795 |
|
|
|
|
|
|
|
|
35,795 |
|
|
|
3.3 |
|
|
|
|
1,203,659 |
|
|
|
3.3 |
|
|
|
33.63 |
|
|
|
7 |
|
Q3 2008 |
|
|
15,505 |
|
|
|
|
|
|
|
|
15,505 |
|
|
|
1.4 |
|
|
|
|
487,676 |
|
|
|
1.3 |
|
|
|
31.45 |
|
|
|
4 |
|
Q4 2008 |
|
|
56,048 |
|
|
|
|
|
|
|
|
56,048 |
|
|
|
5.2 |
|
|
|
|
1,756,564 |
|
|
|
4.8 |
|
|
|
31.34 |
|
|
|
6 |
|
|
|
|
Total 2008 |
|
|
163,822 |
|
|
|
1,659 |
|
|
|
|
165,481 |
|
|
|
15.3 |
% |
|
|
$ |
5,269,232 |
|
|
|
14.4 |
% |
|
$ |
31.84 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
165,447 |
|
|
|
977 |
|
|
|
|
166,424 |
|
|
|
15.5 |
|
|
|
$ |
5,469,670 |
|
|
|
15.0 |
|
|
$ |
32.87 |
|
|
|
21 |
|
2010 |
|
|
107,440 |
|
|
|
2,757 |
|
|
|
|
110,197 |
|
|
|
10.2 |
|
|
|
|
3,676,593 |
|
|
|
10.1 |
|
|
|
33.36 |
|
|
|
15 |
|
2011 |
|
|
259,486 |
|
|
|
|
|
|
|
|
259,486 |
|
|
|
24.1 |
|
|
|
|
9,350,976 |
|
|
|
25.7 |
|
|
|
36.04 |
|
|
|
27 |
|
2012 |
|
|
35,380 |
|
|
|
21,119 |
|
|
|
|
56,499 |
|
|
|
5.2 |
|
|
|
|
2,018,546 |
|
|
|
5.5 |
|
|
|
35.73 |
|
|
|
3 |
|
2013 |
|
|
62,581 |
|
|
|
|
|
|
|
|
62,581 |
|
|
|
5.8 |
|
|
|
|
2,207,007 |
|
|
|
6.1 |
|
|
|
35.27 |
|
|
|
7 |
|
2014 |
|
|
19,295 |
|
|
|
|
|
|
|
|
19,295 |
|
|
|
1.8 |
|
|
|
|
605,642 |
|
|
|
1.7 |
|
|
|
31.39 |
|
|
|
2 |
|
2015 |
|
|
43,116 |
|
|
|
|
|
|
|
|
43,116 |
|
|
|
4.0 |
|
|
|
|
1,373,599 |
|
|
|
3.8 |
|
|
|
31.86 |
|
|
|
1 |
|
2016 |
|
|
33,533 |
|
|
|
|
|
|
|
|
33,533 |
|
|
|
3.1 |
|
|
|
|
1,268,591 |
|
|
|
3.5 |
|
|
|
37.83 |
|
|
|
2 |
|
2017 and thereafter |
|
|
|
|
|
|
25,357 |
|
|
|
|
25,357 |
|
|
|
2.4 |
|
|
|
|
1,029,356 |
|
|
|
2.8 |
|
|
|
40.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,076,838 |
|
|
|
|
|
|
|
|
1,076,838 |
|
|
|
100.0 |
% |
|
|
$ |
36,420,907 |
|
|
|
100.0 |
% |
|
$ |
33.82 |
|
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken
into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 58,652 square feet (including relets and renewals of 51,869 square feet and new leases of 6,783 square feet) have been signed and
will commence during 2007. These signed leases represent approximately 31% of gross square footage expiring during 2007. Expiring square footage includes
8,399 square feet of month-to-month leases. |
Other Office Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
Square |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
Annual |
|
|
|
|
|
|
Footage of |
|
|
Signed |
|
|
|
Footage of |
|
|
|
|
|
|
|
Annual |
|
|
Annual |
|
|
Expiring |
|
|
Number of |
|
|
|
Expiring |
|
|
Renewals |
|
|
|
Expiring |
|
|
% of |
|
|
|
Full-Service |
|
|
Full- |
|
|
PSF |
|
|
Customers |
|
|
|
Leases |
|
|
and Relets |
|
|
|
Leases |
|
|
Square |
|
|
|
Rent Under |
|
|
Service |
|
|
Full- |
|
|
With |
|
Year of Lease |
|
(Before Renewals |
|
|
of Expiring |
|
|
|
(After Renewals |
|
|
Footage |
|
|
|
Expiring |
|
|
Rent |
|
|
Service |
|
|
Expiring |
|
Expiration |
|
and Relets) (1) |
|
|
Leases (2) |
|
|
|
and Relets) (1) |
|
|
Expiring |
|
|
|
Leases (3) |
|
|
Expiring |
|
|
Rent (3) |
|
|
Leases |
|
Q1 2007 |
|
|
39,106 |
|
|
|
(20,616 |
) |
|
|
|
18,490 |
|
|
|
0.9 |
|
|
|
$ |
334,995 |
|
|
|
0.7 |
|
|
$ |
18.12 |
|
|
|
12 |
|
Q2 2007 |
|
|
72,263 |
|
|
|
(28,800 |
) |
|
|
|
43,463 |
|
|
|
2.0 |
|
|
|
|
1,134,114 |
|
|
|
2.2 |
|
|
|
26.09 |
|
|
|
10 |
|
Q3 2007 |
|
|
29,648 |
|
|
|
(3,443 |
) |
|
|
|
26,205 |
|
|
|
1.2 |
|
|
|
|
712,964 |
|
|
|
1.4 |
|
|
|
27.21 |
|
|
|
8 |
|
Q4 2007 |
|
|
202,462 |
|
|
|
(74,975 |
) |
|
|
|
127,487 |
|
|
|
5.9 |
|
|
|
|
3,134,306 |
|
|
|
6.1 |
|
|
|
24.59 |
|
|
|
9 |
|
|
|
|
Total 2007 |
|
|
343,479 |
(4) |
|
|
(127,834 |
) |
|
|
|
215,645 |
(4) |
|
|
10.0 |
% |
|
|
$ |
5,316,379 |
|
|
|
10.4 |
% |
|
$ |
24.65 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2008 |
|
|
31,336 |
|
|
|
(1,985 |
) |
|
|
|
29,351 |
|
|
|
1.4 |
|
|
|
$ |
713,668 |
|
|
|
1.4 |
|
|
$ |
24.31 |
|
|
|
8 |
|
Q2 2008 |
|
|
54,362 |
|
|
|
(24,074 |
) |
|
|
|
30,288 |
|
|
|
1.4 |
|
|
|
|
794,812 |
|
|
|
1.6 |
|
|
|
26.24 |
|
|
|
11 |
|
Q3 2008 |
|
|
50,076 |
|
|
|
(5,639 |
) |
|
|
|
44,437 |
|
|
|
2.1 |
|
|
|
|
1,316,739 |
|
|
|
2.6 |
|
|
|
29.63 |
|
|
|
7 |
|
Q4 2008 |
|
|
25,118 |
|
|
|
(16,646 |
) |
|
|
|
8,472 |
|
|
|
0.4 |
|
|
|
|
216,346 |
|
|
|
0.4 |
|
|
|
25.54 |
|
|
|
5 |
|
|
|
|
Total 2008 |
|
|
160,892 |
|
|
|
(48,344 |
) |
|
|
|
112,548 |
|
|
|
5.3 |
% |
|
|
$ |
3,041,565 |
|
|
|
6.0 |
% |
|
$ |
27.02 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
218,090 |
|
|
|
33,868 |
|
|
|
|
251,958 |
|
|
|
11.7 |
|
|
|
$ |
5,722,665 |
|
|
|
11.2 |
|
|
$ |
22.71 |
|
|
|
34 |
|
2010 |
|
|
173,270 |
|
|
|
9,009 |
|
|
|
|
182,279 |
|
|
|
8.5 |
|
|
|
|
5,146,094 |
|
|
|
10.0 |
|
|
|
28.23 |
|
|
|
27 |
|
2011 |
|
|
300,688 |
|
|
|
14,951 |
|
|
|
|
315,639 |
|
|
|
14.7 |
|
|
|
|
7,635,397 |
|
|
|
14.9 |
|
|
|
24.19 |
|
|
|
32 |
|
2012 |
|
|
175,640 |
|
|
|
21,950 |
|
|
|
|
197,590 |
|
|
|
9.2 |
|
|
|
|
4,667,708 |
|
|
|
9.1 |
|
|
|
23.62 |
|
|
|
13 |
|
2013 |
|
|
576,182 |
|
|
|
80,422 |
|
|
|
|
656,604 |
|
|
|
30.6 |
|
|
|
|
14,197,742 |
|
|
|
27.7 |
|
|
|
21.62 |
|
|
|
16 |
|
2014 |
|
|
57,657 |
|
|
|
3,045 |
|
|
|
|
60,702 |
|
|
|
2.8 |
|
|
|
|
1,417,986 |
|
|
|
2.8 |
|
|
|
23.36 |
|
|
|
6 |
|
2015 |
|
|
110,250 |
|
|
|
|
|
|
|
|
110,250 |
|
|
|
5.1 |
|
|
|
|
2,818,610 |
|
|
|
5.5 |
|
|
|
25.57 |
|
|
|
6 |
|
2016 |
|
|
12,724 |
|
|
|
|
|
|
|
|
12,724 |
|
|
|
0.6 |
|
|
|
|
292,033 |
|
|
|
0.6 |
|
|
|
22.95 |
|
|
|
2 |
|
2017 and thereafter |
|
|
20,279 |
|
|
|
12,933 |
|
|
|
|
33,212 |
|
|
|
1.5 |
|
|
|
|
994,926 |
|
|
|
1.8 |
|
|
|
29.96 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,149,151 |
|
|
|
|
|
|
|
|
2,149,151 |
|
|
|
100.0 |
% |
|
|
$ |
51,251,105 |
|
|
|
100.0 |
% |
|
$ |
23.85 |
|
|
|
208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Square footage is presented without adjustment to reflect our actual ownership percentage in joint ventured properties. |
|
(2) |
|
Signed renewals and relets extend the expiration dates of in-place leases to the end of the renewed or relet term. |
|
(3) |
|
Calculated based on base rent payable under the lease for net rentable square feet expiring (after renewals and relets), giving effect to free rent and scheduled rent increases taken
into account under GAAP and including adjustments for expenses payable by or reimbursable from customers based on current expense levels. |
|
(4) |
|
As of December 31, 2006 leases totaling 137,753 square feet (including relets and renewals of 127,834 square feet and new leases of 9,919 square feet) have been signed and will
commence during 2007. These signed leases represent approximately 40% of gross square footage expiring during 2007. Expiring square feet includes
12,466 square feet of month-to-month leases. |
31
Resort Residential Development Properties
The following table shows certain information as of December 31, 2006, relating to the Resort Residential
Development Properties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Average |
|
|
|
|
|
|
Our |
|
|
|
|
|
Planned |
|
|
|
|
|
|
|
|
|
Under |
|
Physical |
|
Sales Price |
|
Sales Price |
|
|
|
|
|
|
Preferred |
|
|
|
|
|
Sales |
|
Closed |
|
Remaining |
|
Development |
|
Inventory |
|
on Closed |
|
on Remaining |
|
|
|
|
|
|
Return/Economic |
|
Product |
|
Lots/Units/ |
|
Lots/Units/ |
|
Lots/Units/ |
|
Lots/Units/ |
|
Lots/Units/ |
|
Lots/Units/ |
|
Lots/Units/ |
Corporation / Project |
|
Location |
|
Ownership (1) |
|
Type (2) |
|
Acres |
|
Acres |
|
Acres |
|
Acres |
|
Acres |
|
Acres (3) |
|
Acres |
|
Desert Mountain Development Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Desert Mountain (4) |
|
Scottsdale, AZ |
|
|
93 |
% |
|
SF, SH, TH B |
|
|
2,489 |
|
|
|
2,415 |
|
|
|
74 |
(5) |
|
|
|
|
|
|
42 |
|
|
|
749 |
|
|
|
2,781 |
|
Custom Lots
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent Resort Development Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tahoe Mountain Resorts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northstar Village |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Big Horn and Catamount |
|
Lake Tahoe, CA |
|
|
13%/57 |
% |
|
CO S |
|
|
113 |
|
|
|
21 |
|
|
|
92 |
|
|
|
92 |
|
|
|
|
|
|
|
1,862 |
|
|
|
1,331 |
|
Identified Future Projects |
|
Lake Tahoe, CA |
|
|
13%/23%-57 |
% |
|
TH S, TS S |
|
|
133 |
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,210 |
|
Northstar Highlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northstar
Trailside Townhomes |
|
Lake Tahoe, CA |
|
|
13%/57 |
% |
|
TH S |
|
|
16 |
|
|
|
|
|
|
|
16 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
3,718 |
|
Northstar
Ritz Condos |
|
Lake Tahoe, CA |
|
|
13%/23 |
% |
|
CO S |
|
|
84 |
|
|
|
|
|
|
|
84 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
4,189 |
|
Highlands Acreage |
|
Lake Tahoe, CA |
|
|
13%/23 |
% |
|
ACR |
|
|
4.8 |
|
|
|
|
|
|
|
4.8 |
|
|
|
|
|
|
|
4.8 |
|
|
|
|
|
|
|
4,688 |
|
Identified Future Projects |
|
Lake Tahoe, CA |
|
|
13%/57 |
% |
|
CO, TH, TS S |
|
|
1,272 |
|
|
|
|
|
|
|
1,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,680 |
|
Old Greenwood |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units |
|
Lake Tahoe, CA |
|
|
13%/71 |
% |
|
TH B |
|
|
19 |
|
|
|
15 |
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
1,428 |
|
|
|
938 |
|
Fractional
Units(6) |
|
Lake Tahoe, CA |
|
|
13%/71 |
% |
|
TS S |
|
|
146.00 |
|
|
|
42.12 |
|
|
|
103.88 |
|
|
|
11.00 |
|
|
|
30.00 |
|
|
|
1,922 |
|
|
|
2,185 |
|
Grays Crossing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lots |
|
Lake Tahoe, CA |
|
|
13%/71 |
% |
|
SF B |
|
|
377 |
|
|
|
254 |
|
|
|
123 |
|
|
|
84 |
|
|
|
39 |
|
|
|
314 |
|
|
|
421 |
|
Units(8) |
|
Lake Tahoe, CA |
|
|
13%/71 |
% |
|
CO B |
|
|
170 |
|
|
|
|
|
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creekside Townhomes at Riverfront Park |
|
Denver, CO |
|
|
12%/64 |
% |
|
TH P |
|
|
23 |
|
|
|
21 |
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
737 |
|
|
|
1,107 |
|
Brownstones (Phase I) |
|
Denver, CO |
|
|
12%/64 |
% |
|
TH P |
|
|
16 |
|
|
|
14 |
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
1,634 |
|
|
|
1,582 |
|
Delgany |
|
Denver, CO |
|
|
12%/64 |
% |
|
CO P |
|
|
42 |
|
|
|
38 |
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
673 |
|
|
|
835 |
|
One Riverfront |
|
Denver, CO |
|
|
12%/56 |
% |
|
CO P |
|
|
50 |
|
|
|
|
|
|
|
50 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
843 |
|
Identified Future Projects |
|
Denver, CO |
|
|
12%/56%-64 |
% |
|
TH, CO B |
|
|
328 |
|
|
|
|
|
|
|
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
754 |
|
Downtown Acreage |
|
Denver, CO |
|
|
12%/64 |
% |
|
ACR |
|
|
6.76 |
|
|
|
|
|
|
|
6.76 |
|
|
|
|
|
|
|
6.76 |
|
|
|
|
|
|
|
4,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mountain and Other Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eagle Ranch |
|
Eagle, CO |
|
|
12%/76 |
% |
|
SF P |
|
|
1,398 |
|
|
|
1,198 |
|
|
|
200 |
|
|
|
65 |
|
|
|
135 |
|
|
|
89 |
|
|
|
168 |
|
Main Street
Station Vacation Club (7) |
|
Breckenridge, CO |
|
|
12%/30 |
% |
|
TS S |
|
|
42.00 |
|
|
|
30.93 |
|
|
|
11.07 |
|
|
|
|
|
|
|
11.07 |
|
|
|
1,221 |
|
|
|
1,055 |
|
Riverbend |
|
Charlotte, NC |
|
|
12%/68 |
% |
|
SF P |
|
|
659 |
|
|
|
491 |
|
|
|
168 |
|
|
|
144 |
|
|
|
24 |
|
|
|
31 |
|
|
|
39 |
|
Three Peaks |
|
Silverthorne, CO |
|
|
12%/49 |
% |
|
SF S |
|
|
325 |
|
|
|
312 |
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
|
|
193 |
|
|
|
281 |
|
Village Walk |
|
Beaver Creek, CO |
|
|
12%/58 |
% |
|
TH S |
|
|
26 |
|
|
|
5 |
|
|
|
21 |
|
|
|
21 |
|
|
|
|
|
|
|
5,907 |
|
|
|
5,205 |
|
The
Residences at Park Hyatt Beaver Creek (7) |
|
Beaver Creek, CO |
|
|
N/A/91 |
% |
|
TS S |
|
|
15.00 |
|
|
|
3.10 |
|
|
|
11.90 |
|
|
|
|
|
|
|
11.90 |
|
|
|
4,554 |
|
|
|
3,573 |
|
Beaver Creek Landing |
|
Beaver Creek, CO |
|
|
12%/59 |
% |
|
CO B |
|
|
52 |
|
|
|
|
|
|
|
52 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
Riverfront Village |
|
Beaver Creek, CO |
|
|
12%/27 |
% |
|
CO, TH B |
|
|
311 |
|
|
|
|
|
|
|
311 |
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
1,112 |
|
Identified Future Projects |
|
Colorado |
|
|
12%/30%-64 |
% |
|
CO S |
|
|
81 |
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston Area Development Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spring Lakes |
|
Houston, TX |
|
|
98 |
% |
|
SF P |
|
|
497 |
|
|
|
477 |
|
|
|
20 |
|
|
|
|
|
|
|
20 |
|
|
$ |
35 |
|
|
$ |
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent Plaza Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Residences at the Ritz-Carlton (Phase I) |
|
Dallas, TX |
|
|
100 |
% |
|
CO |
|
|
70 |
|
|
|
|
|
|
|
70 |
|
|
|
70 |
|
|
|
|
|
|
$ |
|
|
|
$ |
1,902 |
|
The Tower Residences and Regency Row (Phase II) |
|
Dallas, TX |
|
|
100 |
% |
|
CO, TH P |
|
|
100 |
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,548 |
(8) |
|
|
|
(1) |
|
We receive our invested capital plus a preferred return on our invested capital
before profits are allocated to the partners based on ownership
percentage. Some projects listed assume an equity partner will
participate. |
|
(2) |
|
SF (Single-Family Lot); CO (Condominium); TH (Townhome); TS (Timeshare Equivalent Unit);
ACR (Acreage); and SH (Single-Family Home). Superscript items represent P (Primary residence); S
(Secondary residence); and B (Both Primary and Secondary residence) |
|
(3) |
|
Based on lots, units, and acres closed during our ownership period. |
|
(4) |
|
Average Sales Price includes golf membership, which as of December 31, 2006 is $0.3 million. |
|
(5) |
|
As of December 31, 2006 there were 57 units and 17 lots in inventory or planned for development. |
|
(6) |
|
Selling 17 shares per unit. |
|
(7) |
|
Selling 20 shares per unit. |
|
(8) |
|
Proposed Average Sales Price for The Tower Residences and Regency Row excludes the four
Regency Row townhomes, which are expected to have a range in price of
$7.0 million to $8.0 million. |
32
Resort/Hotel Properties(1)
The following table shows certain information for the years ended December 31, 2006 and 2005, with respect to our Resort/Hotel Properties. The information for the Resort/Hotel Properties is based on available rooms, except for the Canyon Ranch-Tucson
and Canyon Ranch-Lenox, which measure their performance based on available guest nights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
Per |
|
|
|
|
|
|
|
Year |
|
|
|
|
|
|
Occupancy |
|
|
Daily |
|
|
Available |
|
|
|
|
|
|
|
Completed/ |
|
|
|
|
|
|
Rate |
|
|
Rate |
|
|
Room/Guest Night |
|
PROPERTY |
|
Location |
|
|
Renovated |
|
|
Rooms |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Canyon Ranch® |
|
Tuscon, AZ / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canyon Ranch Tucson & Lenox(2) |
|
Lenox, MA |
|
|
1980/1989 |
|
|
|
471 |
(3) |
|
|
83 |
% |
|
|
82 |
% |
|
$ |
769 |
|
|
$ |
739 |
|
|
$ |
598 |
|
|
$ |
567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luxury Resorts and Spas: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park Hyatt Beaver Creek Resort and Spa |
|
|
Avon, CO |
|
|
1989/2001/2006 |
|
|
|
190 |
(4) |
|
|
54 |
% |
|
|
57 |
% |
|
$ |
365 |
|
|
$ |
303 |
|
|
$ |
197 |
|
|
$ |
172 |
|
Fairmont Sonoma Mission Inn & Spa |
|
Sonoma, CA |
|
|
1927/1987/1997/2004 |
|
|
|
228 |
|
|
|
77 |
|
|
|
71 |
|
|
|
306 |
|
|
|
292 |
|
|
|
235 |
|
|
|
207 |
|
Ventana Inn & Spa |
|
Big Sur, CA |
|
|
1975/1982/1988 |
|
|
|
60 |
|
|
|
72 |
|
|
|
73 |
|
|
|
520 |
|
|
|
480 |
|
|
|
375 |
|
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average |
|
|
|
|
|
|
|
|
|
|
478 |
|
|
|
66 |
% |
|
|
64 |
% |
|
$ |
354 |
|
|
$ |
319 |
|
|
$ |
235 |
|
|
$ |
206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upscale Business Class Hotels: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver Marriott City Center |
|
Denver, CO |
|
|
1982/1994 |
|
|
|
613 |
|
|
|
72 |
% |
|
|
73 |
% |
|
$ |
138 |
|
|
$ |
130 |
|
|
$ |
100 |
|
|
$ |
95 |
|
Renaissance Houston Hotel |
|
Houston, TX |
|
|
1975/2000 |
|
|
|
388 |
|
|
|
68 |
|
|
|
70 |
|
|
|
128 |
|
|
|
105 |
|
|
|
87 |
|
|
|
74 |
|
Omni Austin Hotel (5) |
|
Austin, TX |
|
|
1986 |
|
|
|
375 |
|
|
|
79 |
|
|
|
77 |
|
|
|
150 |
|
|
|
128 |
|
|
|
119 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average |
|
|
|
|
|
|
|
|
|
|
1,376 |
|
|
|
73 |
% |
|
|
73 |
% |
|
$ |
139 |
|
|
$ |
123 |
|
|
$ |
101 |
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average Luxury Resorts and Spas
and Upscale Business Class Hotels |
|
|
|
|
|
|
|
|
|
|
1,854 |
|
|
|
71 |
% |
|
|
71 |
% |
|
$ |
192 |
|
|
$ |
175 |
|
|
$ |
137 |
|
|
$ |
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Property Table is presented at 100% without any adjustment to give effect to our actual ownership percentage in the properties. |
|
(2) |
|
We own 48% of the Canyon Ranch companies which own or manage: Canyon Ranch Tucson and Canyon Ranch Lenox Destination Resorts, Canyon Ranch SpaClub at the Venetian Resort in Las Vegas, the Canyon Ranch SpaClub on the Queen Mary 2
ocean liner, the Canyon Ranch Living Community in Miami, Fl., the Canyon Ranch SpaClub at The Gaylord Palms Resort in Kissimmee, Fl., Canyon Ranch Living Community in Chicago, IL., and all Canyon Ranch trade names and trademarks. |
|
(3) |
|
Represents available guest nights, which is the maximum number of guests the resort can accommodate per
night. |
|
(4) |
|
In April 2006, 85 rooms were taken out of service at the Park Hyatt Beaver Creek Resort and Spa. The floor space occupied by 55 of these rooms is to be converted into time-share units for sale by CRDI. The remaining space was
used to expand the Allegria Spa within the hotel. |
|
(5) |
|
The Omni Austin Hotel is leased pursuant to a lease to HCD Austin Corporation. |
33
Temperature-Controlled Logistics Properties
The following table shows the number and aggregate size of Temperature-Controlled
Logistic Properties by state as of December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cubic |
|
Total |
|
|
Number of |
|
Footage |
|
Square feet |
State |
|
Properties(1) |
|
(in millions) |
|
(in millions) |
Alabama |
|
|
5 |
|
|
|
13.8 |
|
|
|
0.5 |
|
Arizona |
|
|
1 |
|
|
|
2.9 |
|
|
|
0.1 |
|
Arkansas |
|
|
6 |
|
|
|
33.1 |
|
|
|
1.0 |
|
California |
|
|
7 |
|
|
|
29.5 |
|
|
|
1.0 |
|
Colorado |
|
|
1 |
|
|
|
2.8 |
|
|
|
0.1 |
|
Florida |
|
|
5 |
|
|
|
6.5 |
|
|
|
0.3 |
|
Georgia |
|
|
9 |
|
|
|
61.8 |
|
|
|
2.1 |
|
Idaho |
|
|
2 |
|
|
|
18.7 |
|
|
|
0.8 |
|
Illinois |
|
|
3 |
|
|
|
21.7 |
|
|
|
0.6 |
|
Indiana |
|
|
1 |
|
|
|
9.1 |
|
|
|
0.3 |
|
Iowa |
|
|
2 |
|
|
|
12.5 |
|
|
|
0.5 |
|
Kansas |
|
|
2 |
|
|
|
5.0 |
|
|
|
0.2 |
|
Kentucky |
|
|
1 |
|
|
|
2.7 |
|
|
|
0.1 |
|
Maine |
|
|
1 |
|
|
|
1.8 |
|
|
|
0.2 |
|
Massachusetts |
|
|
4 |
|
|
|
10.2 |
|
|
|
0.5 |
|
Minnesota |
|
|
1 |
|
|
|
3.0 |
|
|
|
0.1 |
|
Mississippi |
|
|
1 |
|
|
|
4.7 |
|
|
|
0.2 |
|
Missouri |
|
|
2 |
|
|
|
46.8 |
|
|
|
2.7 |
|
Nebraska |
|
|
2 |
|
|
|
4.4 |
|
|
|
0.2 |
|
New York |
|
|
1 |
|
|
|
11.8 |
|
|
|
0.4 |
|
North Carolina |
|
|
4 |
|
|
|
15.1 |
|
|
|
0.5 |
|
Ohio |
|
|
2 |
|
|
|
8.9 |
|
|
|
0.4 |
|
Oklahoma |
|
|
1 |
|
|
|
1.4 |
|
|
|
0.1 |
|
Oregon |
|
|
5 |
|
|
|
35.6 |
|
|
|
1.5 |
|
Pennsylvania |
|
|
3 |
|
|
|
39.0 |
|
|
|
1.1 |
|
South Carolina |
|
|
1 |
|
|
|
1.6 |
|
|
|
0.1 |
|
South Dakota |
|
|
1 |
|
|
|
2.9 |
|
|
|
0.1 |
|
Tennessee |
|
|
3 |
|
|
|
10.6 |
|
|
|
0.4 |
|
Texas |
|
|
3 |
|
|
|
16.5 |
|
|
|
0.5 |
|
Utah |
|
|
1 |
|
|
|
8.6 |
|
|
|
0.4 |
|
Virginia |
|
|
2 |
|
|
|
8.7 |
|
|
|
0.3 |
|
Washington |
|
|
6 |
|
|
|
28.7 |
|
|
|
1.1 |
|
Wisconsin |
|
|
3 |
|
|
|
17.4 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
92 |
|
|
|
497.8 |
|
|
|
19.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of December 31, 2006 we held a 31.72% interest in AmeriCold Realty Trust which operates
104 facilities, of which 91 are wholly-owned or leased, one is partially owned and 12 are
managed for outside owners. |
Item 3. Legal Proceedings
We are not currently subject to any material legal proceeding nor, to our knowledge,
is any material legal proceeding contemplated against us.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth quarter of
our fiscal year ended December 31, 2006.
34
PART II
Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
Common Equity
Our common shares have been traded on the New York Stock Exchange under the symbol CEI
since the completion of our initial public offering in May 1994. For each calendar quarter
indicated, the following table reflects the high and low sales prices during the quarter for the
common shares and the distributions declared with respect to each quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
|
|
|
|
|
High |
|
|
Low |
|
|
Distributions |
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
18.14 |
|
|
$ |
16.12 |
|
|
$ |
0.375 |
|
Second Quarter |
|
|
18.99 |
|
|
|
16.02 |
|
|
|
0.375 |
|
Third Quarter |
|
|
20.65 |
|
|
|
17.95 |
|
|
|
0.375 |
|
Fourth Quarter |
|
|
21.06 |
|
|
|
19.23 |
|
|
|
0.375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
21.60 |
|
|
$ |
20.14 |
|
|
$ |
0.375 |
|
Second Quarter |
|
|
20.64 |
|
|
|
17.61 |
|
|
|
0.375 |
|
Third Quarter |
|
|
22.80 |
|
|
|
18.72 |
|
|
|
0.375 |
|
Fourth Quarter |
|
|
22.42 |
|
|
|
19.28 |
|
|
|
0.375 |
|
As of March 5, 2007, there were approximately 652 holders of record of our common shares.
Our actual results of operations and the amounts actually available for distribution will be
affected by a number of factors, including:
|
|
|
the general condition of the United States economy; |
|
|
|
|
general leasing activity and rental rates in the markets in which the Office Properties are located; |
|
|
|
|
the ability of tenants to meet their rent obligations; |
|
|
|
|
our operating and interest expenses; |
|
|
|
|
consumer preferences relating to the Resort/Hotel Properties and the Resort Residential Development Properties; |
|
|
|
|
cash flows from unconsolidated and consolidated entities; |
|
|
|
|
the level of our property acquisitions and dispositions; |
|
|
|
|
capital expenditure requirements; |
|
|
|
|
federal, state and local taxes payable by us; and |
|
|
|
|
the adequacy of cash reserves. |
Our future distributions will be at the discretion of our Board of Trust Managers. The Board
of Trust Managers has indicated that it will review our distribution rate on a
quarterly basis and, as part of the implementation of the Strategic
Plan, we intend to align our dividend with industry-accepted pay-out
ranges to allow for retention of capital for growth.
35
Performance Graph
The following graph sets forth a comparison of the percentage change in the cumulative
total shareholder return on the Common Shares compared to the cumulative total return of the NAREIT
All Equity REIT Index and the S&P 500 Index for the period December 31, 2001 through December 31,
2006. The graph depicts the actual increase in the market value of the Common Shares relative to
an initial investment of $100 on December 31, 2001, assuming a reinvestment of cash distributions.
Crescent Real Estate Equities Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending |
|
|
Company / Index |
|
12/31/01 |
|
12/31/02 |
|
12/31/03 |
|
12/31/04 |
|
12/31/05 |
|
12/31/06 |
Crescent Real Estate Equities Company |
|
|
100.00 |
|
|
|
100.25 |
|
|
|
113.72 |
|
|
|
132.81 |
|
|
|
156.49 |
|
|
|
167.61 |
|
S&P 500 |
|
|
100.00 |
|
|
|
77.90 |
|
|
|
100.25 |
|
|
|
111.15 |
|
|
|
116.61 |
|
|
|
135.03 |
|
NAREIT All Equity REIT Index |
|
|
100.00 |
|
|
|
103.82 |
|
|
|
142.37 |
|
|
|
187.33 |
|
|
|
210.12 |
|
|
|
283.78 |
|
We no longer use SNL as a provider of this performance graph, and therefore, the SNL Office REITs Index is
excluded because it is not readily available. We believe the S&P 500 and the NAREIT All Equity REIT Index are
sufficient indices for comparison of five year total return.
36
Distributions
Under the Code, REITs are subject to numerous organizational and operational
requirements, including the requirement to distribute at least 90% of REIT taxable income each
year. Pursuant to this requirement, we were required to distribute $108.3 million and $128.0
million for 2006 and 2005, respectively. Our actual distributions to common and preferred
shareholders were $185.1 million and $182.2 million for 2006 and 2005, respectively.
Distributions to the extent of our current and accumulated earnings and profits for federal
income tax purposes generally will be taxable to a shareholder as ordinary dividend income. For
tax years beginning after December 31, 2002, qualified dividends paid to shareholders are taxed at
capital gains rates, as added by the Jobs and Growth Tax Relief Reconciliation Act of 2003.
Distributions in excess of current and accumulated earnings and profits will be treated as a
nontaxable reduction of the shareholders basis in such shareholders shares, to the extent
thereof, and thereafter as taxable gain. Distributions that are treated as a reduction of the
shareholders basis in its shares will have the effect of deferring taxation until the sale of the
shareholders shares. No assurances can be given regarding what portion, if any, of distributions
in 2007 or subsequent years will constitute a return of capital for federal income tax purposes.
Following is the income tax status of distributions paid during the years ended December 31,
2006 and 2005, to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
Ordinary dividend |
|
|
27.1 |
% |
|
|
6.3 |
% |
Qualified dividend eligible for 15% tax rate |
|
|
8.0 |
|
|
|
2.7 |
|
Capital gain |
|
|
15.5 |
|
|
|
47.2 |
|
Return of capital |
|
|
45.5 |
|
|
|
29.5 |
|
Unrecaptured Section 1250 gain |
|
|
3.9 |
|
|
|
14.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
Distributions on the 14,200,000 Series A Convertible Cumulative Preferred Shares issued by us
in February 1998, April 2002 and January 2004 are payable at a rate of $1.6875 per annum per Series
A Convertible Cumulative Preferred Share, prior to distributions on the common shares.
Distributions on the 3,400,000 Series B Cumulative Redeemable Preferred Shares issued by us in
May and June 2002 are payable at a rate of $2.3750 per annum per Series B Cumulative Redeemable
Preferred Share, prior to distributions on the common shares.
Following is the income tax status of distributions paid during the years ended December 31,
2006 and 2005, to preferred shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Preferred (1) |
|
Class B Preferred (2) |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
Ordinary dividend |
|
|
49.8 |
% |
|
|
8.9 |
% |
|
|
49.8 |
% |
|
|
8.9 |
% |
Qualified dividend eligible
for 15% tax rate |
|
|
14.8 |
|
|
|
3.8 |
|
|
|
14.8 |
|
|
|
3.8 |
|
Capital gain |
|
|
28.3 |
|
|
|
67.1 |
|
|
|
28.3 |
|
|
|
67.1 |
|
Unrecaptured Section 1250 Gain |
|
|
7.1 |
|
|
|
20.2 |
|
|
|
7.1 |
|
|
|
20.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Series A Preferred Shares are convertible at any time, in whole or in
part, at the option of the holders into common shares at a conversion price of $40.86 per
common share (equivalent to a conversion rate of 0.6119 common shares per Series A
Preferred Share). We pay distributions on the Series A Preferred
Shares in an amount totaling $1.6875 per share each year (equivalent to 6.75%
of the $25.00 liquidation preference per share), payable on a
quarterly basis. The Series A Preferred Shares are redeemable, on or
after February 28, 2003, in whole or in part, at our option. |
|
(2) |
|
The Series B Preferred Shares are redeemable on or after May 17, 2007, in whole
or in part, at our option. We pay distributions on the Series B Preferred Shares in an
amount totaling $2.375 per share each year (equivalent to 9.50% of the $25.00 liquidation
preference per share), payable on a quarterly basis. |
37
Item 6. Selected Financial Data
The following table includes certain of our financial information on a consolidated
historical basis. You should read this section in conjunction with Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements
and Supplementary Data.
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED HISTORICAL FINANCIAL DATA
(Dollars in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Years Ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
|
2006 |
|
(Restated) |
|
(Restated) |
|
(Restated) |
|
(Restated) |
Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property revenue |
|
$ |
928,696 |
|
|
$ |
1,018,100 |
|
|
$ |
1,000,273 |
|
|
$ |
892,005 |
|
|
$ |
946,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
270,672 |
|
|
$ |
278,839 |
|
|
$ |
314,977 |
|
|
$ |
304,333 |
|
|
$ |
339,319 |
|
Income from continuing operations before minority interests
and income taxes |
|
$ |
18,864 |
|
|
$ |
28,827 |
|
|
$ |
191,216 |
|
|
$ |
58,147 |
|
|
$ |
72,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
1,395 |
|
|
$ |
69,547 |
|
|
$ |
147,061 |
|
|
$ |
4,732 |
|
|
$ |
67,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.40 |
|
|
$ |
0.02 |
|
|
$ |
0.12 |
|
Net income available to common shareholders-basic |
|
$ |
0.01 |
|
|
$ |
0.69 |
|
|
$ |
1.49 |
|
|
$ |
0.05 |
|
|
$ |
0.65 |
|
|
Diluted earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders before
discontinued operations and cumulative effect of a change in
accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.40 |
|
|
$ |
0.02 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders diluted |
|
$ |
0.01 |
|
|
$ |
0.69 |
|
|
$ |
1.48 |
|
|
$ |
0.05 |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,046,971 |
|
|
$ |
4,163,256 |
|
|
$ |
4,060,325 |
|
|
$ |
4,335,875 |
|
|
$ |
4,309,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
2,296,358 |
|
|
$ |
2,259,473 |
|
|
$ |
2,152,255 |
|
|
$ |
2,558,699 |
|
|
$ |
2,382,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
1,122,286 |
|
|
$ |
1,251,626 |
|
|
$ |
1,303,603 |
|
|
$ |
1,223,889 |
|
|
$ |
1,347,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash distribution declared per common share |
|
$ |
1.50 |
|
|
$ |
1.50 |
|
|
$ |
1.50 |
|
|
$ |
1.50 |
|
|
$ |
1.50 |
|
Weighted average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and units outstanding basic |
|
|
121,515,791 |
|
|
|
118,012,402 |
|
|
|
116,747,408 |
|
|
|
116,634,546 |
|
|
|
117,523,248 |
|
Weighted average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and units outstanding diluted |
|
|
122,979,783 |
|
|
|
118,836,421 |
|
|
|
116,965,897 |
|
|
|
116,676,242 |
|
|
|
117,725,984 |
|
|
Funds from operations available to common shareholders
diluted (1) |
|
$ |
99,448 |
|
|
$ |
118,987 |
|
|
$ |
97,001 |
|
|
$ |
175,901 |
|
|
$ |
212,572 |
|
|
|
|
(1) |
|
Funds from operations, or FFO, is a supplemental non-GAAP financial measurement
used in the real estate industry to measure and compare the operating performance of real
estate companies, although those companies may calculate funds from operations in different
ways. The National Association of Real Estate Investment Trusts (NAREIT) defines funds from
operations as Net Income (Loss) determined in accordance with generally accepted accounting
principles (GAAP), excluding gains (or losses) from sales of depreciable operating property,
excluding extraordinary items (determined by GAAP), plus depreciation and amortization of real
estate assets, and after adjustments for unconsolidated partnerships and joint ventures. We
calculate FFO available to common shareholders diluted in the same manner, except that Net
Income (Loss) is replaced by Net Income (Loss) Available to Common Shareholders and we include
the effect of Operating Partnership unitholder minority interests. For a more detailed
definition and description of FFO and a reconciliation to net income determined in accordance
with GAAP, see Funds from Operations included in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations. |
38
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and Results
of Operations |
|
|
|
|
|
Index to Managements Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
|
|
Page |
|
|
|
|
40 |
|
|
|
|
41 |
|
|
|
|
|
|
|
|
|
47 |
|
Years ended December 31, 2005 and 2004 |
|
|
51 |
|
|
|
|
|
|
|
|
|
55 |
|
|
|
|
58 |
|
|
|
|
61 |
|
|
|
|
64 |
|
|
|
|
65 |
|
|
|
|
69 |
|
39
Overview
We are a REIT with assets and operations divided into four investment segments: Office,
Resort Residential Development, Resort/Hotel and
Temperature-Controlled Logistics. Our strategy, prior to full
implementation of the Strategic Plan discussed below, had two key elements as outlined below.
First, we selectively invest in premier office properties in markets that offer
attractive returns on invested capital. We may align ourselves with institutional partners to
enhance our return on equity when compared to the returns we receive as a 100% owner. Where
possible, we negotiate performance-based incentives on our joint ventures that allow for additional equity to be earned
if return targets are exceeded. For example, we earned promoted interests on the sales of the Three Westlake
and Four Westlake Office Properties in 2006. We also evaluate our existing portfolio for
joint-venture opportunities that enable us to increase our return on equity and provide access to
equity for reinvestment. We currently hold 43% of our office portfolio in joint ventures.
We selectively develop new office properties where the opportunity exists for attractive
returns. In August 2006, we completed, with JMI Realty, a 232,330 square-foot, three-building
complex in San Diego, California and sold our interest in the property in December 2006 for a $10.4
million gain. We are also developing a 239,000 square-foot office building as an addition to the
Hughes Center complex in Las Vegas, Nevada. We are co-developing with Hines a 267,000 square-foot
office building in Irvine, California, and with Champion Partners, a 144,380 square-foot,
two-building office complex in Austin, Texas.
Second, we invest in real estate businesses that offer returns equal to or superior to what we
are able to achieve in our office investments. We develop and sell residential properties in
resort locations primarily through Harry Frampton and his East West Partners development team with
the most significant project in terms of future cash flow being our investment in Tahoe Mountain
Resorts in California. This development encompasses more than 2,500 total lots and units, of which
532 have been sold, 73 are currently in inventory and over 1,950 are scheduled for development over
the next 14 years, and is expected to generate in excess of $5.0 billion in sales. We expect our
investment in Tahoe to be a long-term source of earnings and cash flow growth as new projects are
designed and developed. We view our resort residential developments as a business and believe
that, beyond the net present value of existing projects, there is value in our strategic
relationships with the development teams and our collective ability to identify and develop new
projects. In addition, we sometimes serve as the primary developer, such as The Ritz-Carlton
Phases I and II. Also, we provide mezzanine financing to other office, hotel and residential
investors where we see attractive returns relative to owning the equity. We currently have
approximately $124.3 million of mezzanine notes.
In
2005, we also completed the recapitalization of our Canyon Ranch
investment. In addition to its
wellness facilities in Tucson, Arizona and Lenox, Massachusetts and
its Spa Club operation at the Venetian Resort in Las Vegas, Nevada,
Canyon Ranch partners with developers to establish Canyon Ranch
Living communities at which the focal point is a large, comprehensive
wellness facility and earns fees for the licensing of
the brand name to these communities, providing design and technical services, and the ongoing management of the facilities. One
such development is under construction in Miami Beach and an agreement that will pave the way for
the development of a Canyon Ranch Living community in Chicago, Illinois, and others, are under
consideration or in negotiation.
During 2006, we conducted an extensive review of our strategic alternatives, and in late
August received an offer to purchase certain assets. Our Board of Trust Managers established a
special committee of independent trust managers to assist in its consideration of the strategic
alternatives and to respond to the offer that was received. The Special Committee hired an
independent investment banker and counsel to assist with its review. The Special Committee
rejected the offer received, and on November 1, 2006, instituted a formal review of our strategic alternatives.
On March 1, 2007, we announced that we had concluded the review of strategic alternatives
first announced on November 1, 2006. Based on that review, we
adopted a plan, which we refer to as the Strategic Plan, designed to simplify our business model by concentrating on our core office properties business.
Key elements of the Strategic Plan include:
|
|
|
Sale of all resort and hotel assets. Properties to be sold include the Fairmont Sonoma
Mission Inn & Spa®, Ventana Inn & Spa in Big Sur, California, the Park Hyatt Beaver
Creek Resort & Spa, and three business-class hotels. |
|
|
|
|
Sale of resort residential developments. Properties and assets to be sold include
Crescent Resort Development and Desert Mountain Development Corporation. |
|
|
|
|
Opportunistic sale of office properties. Properties to be sold include virtually all
suburban Dallas properties and all Austin properties, as well as our single assets in
Phoenix, Arizona, and in Seattle, Washington. |
|
|
|
|
Reduction of general and administrative expenses by more
than $17.0 million, or $0.14 per
share. Implementation of savings began immediately on March 1, 2007 and is expected to be
fully phased in by the end of 2007. We expect to take a charge of
approximately $5.0 million for
severance costs. |
|
|
|
|
Use of sales proceeds to retire debt. We plan to first use the proceeds from asset sales
to retire debt. We expect that our balance sheet will be significantly strengthened and our
cost of capital lowered, giving us capacity for growth. |
|
|
|
|
Alignment of dividend. We intend to align
our dividend with industry-accepted pay-out ranges to allow for retention of capital for
growth. |
In addition to the above elements, we are considering alternatives for our interest in Canyon
Ranch®
in conjunction with the founders of Canyon Ranch®. We will communicate our dividend plans as we execute asset sales. After completing these
dispositions, our remaining office portfolio is expected to consist of 22.6 million square feet, of
which 11.7 million square feet, or 52%, will be owned in joint venture. Our effective ownership
will be 14.0 million square feet.
40
Recent Developments
Office Segment
Joint Ventures
Paseo Del Mar
On September 21, 2005, we entered into a joint venture arrangement, Crescent-JMIR Paseo Del
Mar LLC, with JMI Realty. The joint venture committed to co-develop a 232,330 square-foot,
three-building office complex in the Del Mar Heights submarket of San Diego, California. The
development was completed in August 2006. The joint venture was structured such that we owned an
80% interest and JMI Realty owned the remaining 20% interest. On December 14, 2006, we completed
the sale of our 80% interest in Crescent JMIR Paseo Del Mar LLC. The sale generated proceeds,
net of selling costs, of approximately $42.1 million and a gain of approximately $10.4 million, net
of promoted interest due JMI Realty and income taxes. Proceeds from the sale were used to pay down
our credit facility.
Bank One Center
On December 14, 2006, we completed the sale of Bank One Center on behalf of Main Street
Partners, L.P., the joint venture which was owned 50% by an affiliate of The Blackstone Group and
50% by us. The sale generated proceeds to the joint venture, net of selling costs and after a
$104.7 million loan repayment, of approximately $110.0 million and a net gain of approximately $4.4
million. Our share of the net gain was approximately $1.6 million inclusive of the write-off of
unamortized deal costs from the original joint venture of the property. Our share of the proceeds
was approximately $55.0 million, which was used to pay down our credit facility.
Three Westlake Park
On December 11, 2006, we completed the sale of Three Westlake Park on behalf of Houston PT
Three Westlake Office Limited Partnership, the joint venture which was owned 80% by an affiliate of
GE Asset Management, or GE and 20% by us. The sale generated proceeds to the joint venture, net of
selling costs and after a $33.0 million loan repayment, of approximately $46.7 million and a net
gain of approximately $33.4 million. Our share of the net gain, including a promoted interest of
approximately $7.7 million, recognition of the unamortized deferred gain, and write-off of
unamortized deal costs from the original joint venture of the property, was approximately $17.3
million. Our share of the proceeds was approximately $15.8 million, which was used to pay down our
credit facility.
Four Westlake Park
On September 26, 2006, we completed the sale of Four Westlake Park on behalf of Houston PT
Four Westlake Office Limited Partnership, the joint venture which was owned 80% by an affiliate of
GE and 20% by us. The sale generated proceeds to the joint venture, net of selling costs and after
a $46.1 million loan repayment, of approximately $73.0 million and a net gain of approximately
$55.0 million. Our share of the net gain, including a promoted interest of approximately $14.7
million, was approximately $24.2 million. Our share of the proceeds was approximately $28.7
million, which was used to pay down our credit facility.
Chase Tower
On June 20, 2006, we completed the sale of Chase Tower on behalf of Austin PT BK One Tower
Office Limited Partnership, the joint venture which was owned 80% by an affiliate of GE and 20% by
us. The sale generated proceeds to the joint venture, net of selling costs and after a $36.0
million loan repayment, of approximately $28.0 million and a net gain of approximately $10.1
million. Our share of the net gain, including recognition of the unamortized deferred
gain was approximately $4.3 million. Our share of the proceeds was approximately
$5.6 million, which was used to pay down the credit facility.
Parkway at Oakhill
On March 31, 2006, we entered into a joint venture arrangement, C-C Parkway Austin, L.P., or
Parkway, with Champion Partners. The joint venture has committed to co-develop a 144,380
square-foot, two-building office complex in Austin, Texas. The venture is structured such that we
own a 90% interest and Champion Partners owns the remaining 10% interest. In connection with the
joint venture, Parkway entered into a maximum $18.3 million construction loan. Our equity
commitment to the joint venture was $8.2 million, of which $7.0 million has been funded as of
December 31, 2006. The development, which is currently
41
underway, is scheduled for delivery in the third quarter of 2007.
Asset Purchase
|
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|
(in millions) |
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|
Purchase |
Date |
|
Property |
|
Location |
|
Price |
January 23, 2006
|
|
Financial Plaza Class A Office Property
|
|
Phoenix, Arizona
|
|
$55.0(1) |
|
|
|
(1) |
|
The acquisition was funded by the assumption of a $23.6 million loan from
Allstate, a new $15.9 million loan from Allstate and a draw on our credit facility. This
property is wholly-owned. |
Asset Sale
|
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|
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|
|
(in millions) |
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|
|
Date |
|
Property |
|
Location |
|
Proceeds |
February 17, 2006
|
|
Waterside Commons Class A Office Property
|
|
Dallas, Texas
|
|
$24.8(2) |
|
|
|
(2) |
|
We previously recorded an impairment charge of approximately $1.0 million during
the year ended December 31, 2005. The proceeds from the sale were used primarily to pay down
the credit facility. |
Significant Tenant Lease Termination
In June 2005, we entered into an agreement with our largest office tenant, El Paso Energy
Services Company and certain of its subsidiaries, which terminated El Pasos leases totaling
888,000 square feet at Greenway Plaza in Houston, Texas, effective December 31, 2007. Under the
agreement, El Paso is required to pay us $65.0 million in termination fees in periodic installments
through December 31, 2007, and $62.0 million in rent according to the original lease terms from
July 1, 2005 through December 31, 2007. As of December 31, 2006, we have collected $35.0 million
of the lease termination fee. For the years ended December 31,
2006 and 2005, we recognized $38.8 million and $8.5 million,
respectively, in
net termination fees, which includes accelerated termination fees and contractual full-service
rents resulting from the re-lease of approximately 463,000 square feet. As of December 31, 2006,
El Paso was current on all rent obligations.
Resort Residential Development Segment
Joint Venture
Riverfront Village
On March 21, 2006, CRDI entered into a joint venture arrangement, East West Resort Development
XIV, L.P., L.L.L.P. (Riverfront Village), with affiliates of Crow Holdings and our development
partner. The joint venture was formed to co-develop a hotel and condominiums in Avon, Colorado.
The development, which is currently underway, is scheduled for delivery in 2008. We provided 41.9%
of the initial capitalization and the venture is structured such that we own a 26.8% interest after
we receive a preferred return on our invested capital and return of our capital. Our initial
equity commitment to the joint venture is $22.6 million, of which $17.2 million was funded as of
December 31, 2006. In connection with construction financing obtained in November 2006 for the
Riverfront Village project, the partners committed to contribute up to an additional $17.1 million
in capital should certain financial covenants not be maintained. Our share of this capital
commitment is $7.2 million, of which none was funded as of December 31, 2006.
Asset Sale
Jefferson Station Apartments
On October 21, 2004, we entered into a partnership agreement with affiliates of JPI
Multi-Family Investments, L.P. to develop a multi-family luxury apartment project in Dedham,
Massachusetts. The development was completed in November 2006. On December 8, 2006, the
partnership, Jefferson Station, L.P., completed the sale of the apartment project. We consolidated
the partnership which was owned 50% by JPI Multi-Family Investments, L.P. and 50% by us. The sale
generated proceeds, net of selling costs and after the repayment of the $38.8 million loan with
Bank of America, of approximately $35.9 million and a gain of approximately $20.3 million. Our
share of the gain, net of minority interests and taxes, was approximately $5.4 million. Our share
of the proceeds was approximately $24.1 million, which was used to pay down our credit facility.
42
Resort/Hotel Segment
Park Hyatt Beaver Creek
In the second quarter of 2006, 85 rooms were taken out of service at the Park Hyatt Beaver
Creek in Avon, Colorado. The area occupied by 55 of these rooms is being converted into 15
fractional units for sale in our Resort Residential Development
Segment. Sales of fractional units commenced in 2006. The remaining space was
used to expand the Allegria Spa within the hotel. In addition, the Resort is adding air conditioning and upgrading
the common areas. The spa expansion and common area upgrade were completed in December 2006.
Temperature-Controlled Logistics Segment
In August 2006, AmeriCold entered into a definitive agreement to acquire from ConAgra
Foods, Inc. or ConAgra, four refrigerated warehouse facilities and the lease on a fifth facility,
with an option to purchase. These five warehouses contain a total of 1.7 million square feet and
48.9 million cubic feet. The aggregate purchase price is approximately $190.0 million, consisting
of $152.0 million in cash to ConAgra and $38.0 million representing the recording of a capital
lease obligation for the fifth facility. During the fourth quarter of 2006, AmeriCold completed
the acquisition of two of these facilities and assumed the leasehold on the fifth facility and the
related capital lease obligation. In January 2007, AmeriCold completed the acquisition of the
third facility. The acquisition of the remaining facility is expected to be completed during the
first half of 2007.
In December 2006, AmeriCold completed a 5.45% fixed-rate, interest-only financing in an
aggregate principal amount of $1.05 billion which matures in approximately equal tranches in seven,
nine and ten years. The proceeds were used to repay $449.0 million of fixed-rate mortgages with a
rate of 6.89% and a $430.0 million variable rate mortgage. The mortgages that were repaid were
collateralized by 84 temperature-controlled warehouses which were released upon repayment. Fifty
of the warehouses are used to collateralize the new loan. A portion of the remaining proceeds were
distributed to the owners, of which our portion was approximately $58.7 million.
Other Segment
Mezzanine
Notes
We offer mezzanine financing in the form of limited recourse loans that are made to a special
purpose entity which is the direct or indirect parent of another special purpose entity owning a
commercial real estate property. These mezzanine loans are secured by a pledge of the ownership
interest in the property owner (or in an entity that directly or indirectly owns the property
owner) and are thus structurally subordinate to a conventional first mortgage loan made to the
property owner. We also offer mezzanine financing by taking a junior participating interest in a
first mortgage loan.
43
The underlying real estate assets may be a single office, hotel or residential property, or a
portfolio of cross-collateralized real estate assets. We typically require recourse guaranties from
the ultimate owners of the property for such matters as voluntary bankruptcy filings, failure to
contest involuntary bankruptcy filings, violation of special purpose entity covenants,
environmental liability and other events such as misappropriation of rents or insurance. Although
these types of loans generally have greater repayment risks than first mortgages due to the
subordinated nature of the loans and the higher loan-to-value ratio, we have a disciplined approach
in underwriting the value of the asset. The yield on these investments may be enhanced by front-end
fees, prepayment fees, yield look-backs, participating interests and additional fees to allow
prepayment during a prepayment black-out period.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Rate at |
|
(in millions) |
|
|
|
|
|
Date of |
|
|
Maturity |
|
|
December |
|
|
December |
|
Note |
|
|
|
|
|
Transaction |
|
|
Date |
|
|
31, 2006 |
|
|
31, 2006 |
|
Fixed Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Dallas Office Properties |
|
|
(1) |
|
|
|
8/31/05 |
|
|
|
2010 |
|
|
$ |
7.6 |
|
|
|
11.04 |
% |
21 California Condominiums |
|
|
(2) |
|
|
|
12/28/06 |
|
|
|
2008 |
|
|
|
9.8 |
(3) |
|
|
17.00 |
% |
Variable Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas Office Property |
|
|
(4) |
|
|
|
6/9/05 |
|
|
|
2007 |
|
|
|
12.0 |
|
|
|
13.85 |
% |
Two Luxury Hotel Properties in California |
|
|
(5) |
|
|
|
11/16/05 |
|
|
|
2007 |
|
|
|
15.0 |
|
|
|
16.35 |
% |
Office Portfolio in Southeastern U.S. |
|
|
(6) |
|
|
|
12/30/05 |
|
|
|
2007 |
|
|
|
20.7 |
|
|
|
12.23 |
% |
Florida Hotel Portfolio Investment |
|
|
(7) |
|
|
|
1/20/06 |
|
|
|
2009 |
|
|
|
15.0 |
|
|
|
13.35 |
% |
California Ski Resort |
|
|
(8) |
|
|
|
4/12/06 |
|
|
|
2009 |
|
|
|
20.0 |
|
|
|
9.85 |
% |
New York City Residential |
|
|
(9) |
|
|
|
5/8/06 |
|
|
|
2007 |
|
|
|
24.2 |
|
|
|
18.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mezzanine Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
124.3 |
|
|
|
|
|
|
|
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|
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|
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|
Total Weighted Average Interest Rate |
|
|
|
|
|
|
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|
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|
|
|
|
|
14.09 |
% |
|
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|
|
(1) |
|
The loan has an interest-only term through September 2007. Beginning
October 2007, the borrower must make principal payments based on a 30-year amortization
schedule until maturity. We determined that the entity to which the loan was funded is a
VIE under FIN 46R of which we are not the primary beneficiary; therefore, we do not
consolidate the entity. Our maximum exposure to loss is limited to the amount of the loan. |
|
(2) |
|
The loan has an interest-only term until maturity, subject to the right of
the borrower to extend the loan pursuant to one six-month extension. |
|
(3) |
|
The condominiums securing this note were sold by CRDI to a
third party. Due to restrictions under SFAS No. 66, Accounting for
Sales of Real Estate regarding seller financed transactions, the
profit from the sale of $4.7 million was deferred and recorded under the cost
recovery method and reflected as a reduction of the note such that the face value of the note is included in the table above. |
|
(4) |
|
The loan bears interest at LIBOR plus 850 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options. |
|
(5) |
|
The loan bears interest at LIBOR plus 1,100 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to five one-year extension options. |
|
(6) |
|
The loan bears interest at LIBOR plus 685 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options. |
|
(7) |
|
The loan bears interest at LIBOR plus 800 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. |
|
(8) |
|
The loan bears interest at LIBOR plus 450 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. |
|
(9) |
|
The loan bears interest at LIBOR plus 1,283 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. We determined that the entity to which the loan
was funded is a VIE under FIN 46R of which we are not the primary beneficiary; therefore, we
do not consolidate the entity. Our maximum exposure to loss is limited to the amount of the
loan. |
In 2006, we received approximately $110.2 million of net proceeds, after the repayment of
debt, for the repayment of five of our mezzanine notes, which included $6.2 million of prepayment
fees.
44
2006 Operating Performance
Office Segment
The following table shows the performance factors on stabilized properties, excluding
properties held for sale, used by management to assess the operating performance of the Office
Segment:
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
Economic Occupancy (1) |
|
|
89.8 |
% |
|
|
88.5 |
% |
Leased Occupancy (2) |
|
|
92.6 |
% |
|
|
90.8 |
% |
In-Place Weighted Average Full-Service Rental Rate (3) |
|
$ |
22.78 |
|
|
$ |
22.48 |
|
Tenant Improvement and Leasing Costs per Sq. Ft. per year |
|
$ |
3.56 |
|
|
$ |
3.55 |
|
Average Lease Term (4) |
|
5.7 |
yrs |
|
6.2 |
yrs |
Same-Store NOI (5) Decline |
|
|
(1.0 |
)% |
|
|
(1.5 |
)% |
Same-Store Average Occupancy |
|
|
89.3 |
% |
|
|
87.3 |
% |
|
|
|
(1) |
|
Economic occupancy reflects the occupancy of all tenants paying rent. |
|
(2) |
|
Leased occupancy reflects the amount of contractually obligated space, whether
or not commencement has occurred. |
|
(3) |
|
Calculated based on base rent payable at December 31 giving effect to free
rent and scheduled rent increases and including adjustments for expenses payable by or
reimbursable from tenants. The weighted average full-service rental rate for the El
Paso lease reflects weighted average full-service rental rate over the shortened term
and excludes the impact of the net lease termination fee being recognized ratably to
income through December 31, 2007. |
|
(4) |
|
Reflects leases executed during the period. |
|
(5) |
|
Same-store NOI (net operating income) represents office property net income
excluding depreciation, amortization, interest expense and non-recurring items such as
lease termination fees for Office Properties owned for the entirety of the comparable
periods. |
Resort Residential Development Segment
The following tables show the performance factors used by management to assess the operating
performance of the Resort Residential Development Segment. Information is provided for the CRDI
Resort Residential Development Properties and the Desert Mountain Resort Residential Development
Properties, which represent our significant investments in this segment as of December 31, 2006.
CRDI
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
(dollars in thousands) |
|
2006 |
|
2005 |
Resort Residential Lot Sales |
|
|
212 |
|
|
|
545 |
|
Resort Residential Unit Sales: |
|
|
|
|
|
|
|
|
Townhome Sales |
|
|
30 |
|
|
|
25 |
|
Condominium Sales |
|
|
59 |
|
|
|
187 |
|
Equivalent Timeshare Sales |
|
|
19.3 |
|
|
|
15.7 |
|
Average Sales Price per Resort Residential Lot |
|
$ |
125 |
|
|
$ |
164 |
|
Average Sales Price per Resort Residential Unit |
|
$ |
2,003 |
|
|
$ |
1,265 |
|
CRDI, which invests primarily in mountain residential real estate in Colorado and California
and residential real estate in downtown Denver, Colorado, is highly dependent upon the national
economy and customer demand.
45
Desert Mountain
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
(dollars in thousands) |
|
2006 |
|
2005 |
Resort Residential Lot Sales |
|
|
5 |
|
|
|
40 |
|
Average Sales Price per Lot (1) |
|
$ |
1,837 |
|
|
$ |
1,082 |
|
Resort Residential Unit Sales |
|
|
12 |
|
|
|
|
|
Average Sales Price per Unit (1) |
|
$ |
1,485 |
|
|
$ |
|
|
|
|
|
(1) |
|
Includes equity golf membership |
Desert Mountain is in the latter stages of development and management anticipates minor
additions to its decreasing available inventory.
Resort/Hotel Segment
The following table shows the performance factors used by management to assess the operating
performance of our Resort/Hotel Properties.
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
|
|
|
|
|
|
|
|
Average |
|
Average |
|
Revenue Per |
|
|
Same-Store NOI(1) |
|
Occupancy |
|
Daily |
|
Available |
|
|
% Change |
|
Rate |
|
Rate |
|
Room/Guest Night |
|
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
Luxury Resorts and Spas (2) |
|
|
15 |
% |
|
|
127 |
%(3) |
|
|
76 |
% |
|
|
72 |
% |
|
$ |
349 |
|
|
$ |
332 |
|
|
$ |
264 |
|
|
$ |
237 |
|
Upscale Business Class Hotels |
|
|
23 |
% |
|
|
26 |
% |
|
|
73 |
% |
|
|
73 |
% |
|
$ |
139 |
|
|
$ |
123 |
|
|
$ |
101 |
|
|
$ |
90 |
|
|
|
|
(1) |
|
Same-Store NOI (net operating income) represents net income excluding
depreciation and amortization, interest expense and rent expense for Resort/Hotel
Properties owned for the entirety of the comparable periods. |
|
(2) |
|
Excludes the Park Hyatt Beaver Creek Resort and Spa which had 85 rooms taken out
of service in April 2006. The onsite construction and closure of the spa has impacted
performance at the property. The floor space occupied by 55 of these rooms was converted
into 15 fractional units for sale in our Resort Residential Development Segment. The
remaining space was used to expand the Allegria Spa within the hotel. |
|
(3) |
|
In November 2003, the Fairmont Sonoma Mission Inn placed 97 historic inn rooms out of service
for renovation. The renovation was completed in July 2004, resulting in an increase
in 2005 Same-Store NOI as compared to 2004. |
Our luxury
and destination fitness resorts and spas are unique properties due to location, concept and high
replacement cost, but 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. Our upscale Resort/Hotel Properties in Denver,
Austin and Houston are business and convention center hotels
that compete against other business and convention hotels.
46
Results of Operations
The following table shows the variance in dollars for certain of our operating data
between the years ended December 31, 2006 and 2005 and the years ended December 31, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
Total variance in |
|
|
Total variance in |
|
|
|
dollars between |
|
|
dollars between |
|
|
|
the years ended |
|
|
the years ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2006 and 2005 |
|
|
2005 and 2004 |
|
(in millions) |
|
(Restated) |
|
|
(Restated) |
|
REVENUE: |
|
|
|
|
|
|
|
|
Office Property |
|
$ |
41.5 |
|
|
$ |
(103.0 |
) |
Resort Residential Development Property |
|
|
(130.6 |
) |
|
|
192.8 |
|
Resort/Hotel Property |
|
|
(0.4 |
) |
|
|
(71.9 |
) |
|
|
|
|
|
|
|
Total Property Revenue |
|
$ |
(89.5 |
) |
|
$ |
17.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE: |
|
|
|
|
|
|
|
|
Office Property real estate taxes |
|
$ |
3.6 |
|
|
$ |
(19.3 |
) |
Office Property operating expenses |
|
|
7.3 |
|
|
|
(19.1 |
) |
Resort Residential Development Property expense |
|
|
(89.2 |
) |
|
|
160.9 |
|
Resort/Hotel Property expense |
|
|
(2.9 |
) |
|
|
(68.5 |
) |
|
|
|
|
|
|
|
Total Property Expense |
|
$ |
(81.2 |
) |
|
$ |
54.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
(8.3 |
) |
|
$ |
(36.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
Income from sale of investment unconsolidated company |
|
$ |
17.8 |
|
|
$ |
29.9 |
|
Income from investment land sales |
|
|
(8.6 |
) |
|
|
(10.3 |
) |
(Loss) gain on joint venture of properties |
|
|
2.7 |
|
|
|
(268.5 |
) |
Interest and other income |
|
|
18.2 |
|
|
|
11.3 |
|
Corporate general and administrative |
|
|
5.4 |
|
|
|
(11.3 |
) |
Interest expense |
|
|
2.4 |
|
|
|
40.1 |
|
Amortization of deferred financing costs |
|
|
0.5 |
|
|
|
5.0 |
|
Extinguishment of debt |
|
|
2.2 |
|
|
|
40.4 |
|
Depreciation and amortization |
|
|
(6.0 |
) |
|
|
18.5 |
|
Impairment charges related to real estate assets |
|
|
|
|
|
|
4.1 |
|
Other expenses |
|
|
(9.0 |
) |
|
|
(3.3 |
) |
Equity in net income (loss) of unconsolidated companies: |
|
|
|
|
|
|
|
|
Office Properties |
|
|
(2.3 |
) |
|
|
5.2 |
|
Resort Residential Development Properties |
|
|
0.1 |
|
|
|
1.8 |
|
Resort/Hotel Properties |
|
|
(3.6 |
) |
|
|
(1.3 |
) |
Temperature-Controlled Logistics Properties |
|
|
(15.9 |
) |
|
|
(6.0 |
) |
Other |
|
|
(5.7 |
) |
|
|
18.2 |
|
|
|
|
|
|
|
|
Total other income (expense) |
|
$ |
(1.8 |
) |
|
$ |
(126.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY
INTERESTS AND INCOME TAXES |
|
$ |
(10.1 |
) |
|
$ |
(162.3 |
) |
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
8.4 |
|
|
|
21.6 |
|
Income tax benefit (expense) |
|
|
12.0 |
|
|
|
(20.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
|
$ |
10.3 |
|
|
$ |
(161.4 |
) |
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of
minority interests and taxes |
|
|
(4.5 |
) |
|
|
(6.4 |
) |
Impairment charges related to real estate assets from
discontinued operations, net of minority interests |
|
|
0.9 |
|
|
|
2.0 |
|
Gain on sale of real estate from discontinued
operations, net of minority interests and taxes |
|
|
(74.8 |
) |
|
|
88.1 |
|
Cumulative effect of a change in accounting principle,
net of minority interests |
|
|
|
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
(68.1 |
) |
|
$ |
(77.3 |
) |
|
|
|
|
|
|
|
|
|
Series A Preferred Share distributions |
|
|
|
|
|
|
(0.3 |
) |
Series B Preferred Share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
(68.1 |
) |
|
$ |
(77.6 |
) |
|
|
|
|
|
|
|
47
Comparison of the year ended December 31, 2006, to the year ended December 31, 2005 (Restated)
Property Revenues
Total
property revenues decreased $89.5 million, or 8.8%, to $928.7 million for the year ended
December 31, 2006, as compared to $1,018.2 million for the year ended December 31, 2005. The
primary components of the decrease in total property revenues are discussed below.
|
|
|
Office Property revenues increased $41.5 million, or 11.1%, to $414.3 million, primarily
due to: |
|
|
|
an increase of $28.1 million in net lease termination fees (from $11.2 million to
$39.3 million) primarily due to the El Paso lease termination and related
re-leasing; |
|
|
|
|
an increase of $9.4 million from the 51 consolidated Office Properties (excluding
properties acquired, disposed or stabilized during 2005 and 2006) that we owned or
had an interest in, primarily due to a 1.6 percentage point increase in average
occupancy (from 86.6% to 88.2%), increased expense recovery revenue related to the
increase in occupancy and increased recoverable expenses, and increased parking
revenue; partially offset by a decline in full service weighted average rental
rates; |
|
|
|
|
an increase of $8.8 million due to the acquisition of Financial Plaza in January
2006 and increased occupancy at One Live Oak, the Exchange Building and Peakview
Tower; and |
|
|
|
|
an increase of $1.0 million related to third party management and leasing
services primarily due to increased reimbursement revenue as a result of increased
reimbursable expenses; partially offset by |
|
|
|
|
a decrease of $5.8 million due to the joint ventures of Fulbright Tower in
February 2005 and One Buckhead Plaza in June 2005. |
|
|
|
Resort Residential Development Property revenues decreased
$130.6 million, or 26.0%, to
$372.1 million, primarily due to: |
|
|
|
a decrease of $121.6 million in CRDI revenues primarily related to: |
|
o |
|
a net decrease of $195.7 million primarily related to product mix in lots and
units available for sale in 2005 versus 2006 at Hummingbird Lodge in Bachelor Gulch,
Colorado, Northstar Ironhorse and Grays Crossing in Lake Tahoe, California, Creekside
Townhomes, Brownstones Phase I, and Delgany, all in Denver, Colorado, and Eagle
Ranch in Eagle, Colorado, which had sales in the twelve months ended December 31,
2005, but reduced sales in the same period 2006, partially offset by Old Greenwood
Timeshares in Lake Tahoe, California, and Main Street Station in Breckenridge,
Colorado, which had sales in the twelve months ended December 31, 2005, but increased
sales in the same period 2006; and |
|
|
o |
|
a decrease of $38.5 million primarily related to product mix in lots and
units available for sale in 2005 versus 2006 at Horizon Pass Lodge in Bachelor Gulch,
Colorado, Creekside Phase II in Denver, Colorado, and Old Greenwood Lots in Lake
Tahoe, California, which had sales in the twelve months ended December 31, 2005, but
no sales in the same period 2006; partially offset by |
|
|
o |
|
an increase of $112.0 million primarily related to product mix in lots and
units available for sale in 2006 versus 2005 at Village Walk and EW Hotel Residences
in Beaver Creek, Colorado, Northstar Big Horn, Northstar Village Commercial and Old Greenwood Townhomes in Lake
Tahoe, California and Union Center land in Denver, Colorado, which had sales in the twelve months ended December 31, 2006, but
no sales in the same period 2005. |
|
|
|
|
a decrease of $10.5 million at Desert Mountain primarily related to reduced net
revenue from lot sales due to a decrease in the number of lots sold partially offset
by an increase in the average sales price per lot and lower membership transfer fee
income, partially offset by increased unit sales revenue due to an increase in the number of
units sold. |
|
|
|
Resort/Hotel Property revenues decreased $0.4 million, or 0.3%, to $142.2 million,
primarily due to: |
|
|
|
a decrease of $4.7 million in revenue at the Park Hyatt Beaver Creek related to a
decrease in occupancy due to construction activity on the property and the closure
of the Allegria Spa for expansion; and |
|
|
|
|
a decrease of $4.6 million due to the contribution in January 2005, of the Canyon
Ranch® Properties to a newly formed entity, CR Operating, LLC, in which we have a
48% member interest that is accounted for as an unconsolidated investment; partially
offset by |
|
|
|
|
an increase of $4.9 million in revenue at the remaining Luxury Resort and Spa
Properties primarily at the Fairmont Sonoma Mission Inn, which experienced an 14%
increase in revenue per available room (from $207 to $235) resulting from an
increase of 5% in average daily rate (from $292 to $306) and a six percentage point
increase in occupancy (from 71% to 77%); and |
|
|
|
|
an increase of $4.0 million in room revenue at the Upscale Business Class Hotel
Properties primarily related to a 12% increase in revenue per available room (from
$90 to $101) resulting from a 13% increase in average daily rate (from $123 to $139)
with occupancy remaining flat. |
48
Property Expenses
Total
property expenses decreased $81.2 million, or 11.0%, to $658.0 million for the year
ended December 31, 2006, as compared to $739.2 million for the year ended December 31, 2005. The
primary components of the decrease in total property expenses are discussed below.
|
|
|
Office Property expenses increased $10.9 million, or 5.6%, to $206.6 million, primarily
due to: |
|
|
|
an increase of $9.4 million in operating expenses of the 51 consolidated Office
Properties (excluding properties acquired, disposed, or stabilized in 2005 and 2006)
that we owned or had an interest in primarily due to increased property taxes,
utilities, general building expenses, cleaning expenses, insurance expense and
non-recoverable administrative expenses (primarily bad debt); |
|
|
|
|
an increase of $3.4 million from the acquisition of Financial Plaza in January 2006; |
|
|
|
|
an increase of $1.4 million related to lease termination expenses; and |
|
|
|
|
an increase of $1.1 million related to the cost of providing third-party
management services primarily due to increased staffing and salary expenses and the
joint venture of One Buckhead Plaza in June 2005, which are recouped by increased
third party fee income and direct expense reimbursements; partially offset by |
|
|
|
|
a decrease of $3.1 million primarily due to the joint
venturing of Fulbright Tower
in February 2005 and One Buckhead Plaza in June 2005; and |
|
|
|
|
a decrease of $1.3 million related to decreased consulting and legal fees. |
|
|
|
Resort Residential Development Property expenses decreased
$89.2 million, or 20.6%, to
$343.0 million, primarily due to: |
|
|
|
a decrease of $86.2 million in CRDI expenses primarily related to: |
|
o |
|
a net decrease of $151.4 million primarily related to product mix in lots and
units available for sale in 2005 versus 2006 at Hummingbird Lodge in Bachelor Gulch,
Colorado, Northstar Ironhorse and Grays Crossing in Lake Tahoe, California, Creekside
Townhomes, Brownstones Phase I, and Delgany, all in Denver, Colorado, and Eagle
Ranch in Eagle, Colorado, which had sales in the twelve months ended December 31,
2005, but reduced sales in the same period 2006, partially offset by Old Greenwood
Timeshares in Lake Tahoe, California, and Main Street Station in Breckenridge,
Colorado, which had sales in the twelve months ended December 31, 2005, but increased
sales in the same period 2006; and |
|
|
o |
|
a decrease of $30.4 million primarily related to product mix in lots and
units available for sale in 2005 versus 2006 at Horizon Pass Lodge in Bachelor Gulch,
Colorado, Creekside Phase II in Denver, Colorado, and Old Greenwood Lots in Lake
Tahoe, California, which had sales in the twelve months ended December 31, 2005, but
no sales in the same period 2006; partially offset by |
|
|
o |
|
an increase of $93.2 million primarily related to product mix in lots and
units available for sale in 2006 versus 2005 at Village Walk and EW Hotel Residences
in Beaver Creek, Colorado, Northstar Big Horn, Northstar Village Commercial and Old Greenwood Townhomes in Lake
Tahoe, California and Union Center land in Denver, Colorado, which had sales in the twelve months ended December 31, 2006, but
no sales in the same period 2005. |
|
|
|
|
an increase of $1.1 million in at CRDI marketing expense at CRDI; and |
|
|
|
|
a decrease of $7.1 million at Desert Mountain, primarily related to a decrease of
$9.8 million in cost of sales primarily due to decreased lot sales and product mix
and a decrease of $4.1 million in general and administrative expenses; partially
offset by an increase of $5.5 million in the development costs recognized using
the percentage complete method, and an increase of $1.4 million
in club operating
expense; partially offset by |
|
|
|
|
an increase of $2.4 million primarily due to marketing expenses related to the
Ritz-Carlton Tower Residences and Regency Row in Dallas, Texas. |
|
|
|
Resort/Hotel Property expenses decreased $2.9 million, or 2.6%, to $108.4 million,
primarily due to: |
|
|
|
a decrease of $4.1 million due to the contribution, in January 2005, of the
Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in which we
have a 48% member interest that is accounted for as an unconsolidated investment;
and |
|
|
|
|
a decrease of $2.3 million at the Park Hyatt Beaver Creek related to a decrease
in occupancy due to construction activity on the property and the closure of the
Allegria Spa for expansion; partially offset by |
|
|
|
|
an increase of $2.8 million at the remaining Luxury Resort and Spa Properties,
primarily at Sonoma Mission Inn, related to a 6 percentage point increase in
occupancy (from 71% to 77%); and |
|
|
|
|
an increase of $0.6 million primarily due to pre-opening expenses at The Ritz-Carlton Dallas. |
49
Other Income/Expense
Total
other expenses increased $1.8 million, or 0.7%, to
$251.8 million for the
year ended December 31, 2006, compared to $250.0 million for year ended December 31, 2005. The
primary components of the increase in total other income and expenses are discussed below.
Other Income
Other income increased $2.7 million, or 2.8%, to $95.3 million for the year ended December 31,
2006, as compared to $92.6 million for the year ended December 31, 2005. The primary components of
the increase in other income are discussed below.
|
|
|
Income from sale of investment in unconsolidated company increased $17.8 million due
primarily to the sale of the Four Westlake Park, Three Westlake Park and Chase Tower
Office Properties in 2006, partially offset by the sale of our interests in the entity that
owned the 5 Houston Center Office Property in 2005. |
|
|
|
|
Income from investment land sales decreased $8.6 million due primarily to the gain on
the sale of two parcels of undeveloped investment land in Houston, Texas in 2005. |
|
|
|
|
Loss on joint venture of properties decreased $2.7 million, primarily due to the 2005 write-off of capitalized internal leasing costs related to prior year
joint venture of properties. |
|
|
|
|
Interest and other income increased $18.2 million, or
62.1% to $47.4 million primarily
due to: |
|
§ |
|
an increase of $13.0 million from mezzanine loans and other loans attributable to
an increase of $86.6 million in the weighted average mezzanine loan balance (from
$88.7 million to $175.3 million) and a 1.10 percentage point increase in the
weighted average interest rate (from 11.92% to 13.02%); |
|
|
§ |
|
an increase of $6.2 million due to prepayment fees on two mezzanine loans that
were paid off in first quarter 2006; and |
|
|
§ |
|
an increase of $2.6 million related to the amortization of imputed interest
related to the El Paso lease termination and contractual full service rents to
interest income; partially offset by |
|
|
§ |
|
a decrease of $2.3 million interest earned on U.S. Treasury and government
sponsored agency securities purchased for debt defeasance in order to release the
lien on properties securing the LaSalle Note I and Note II and Nomura Funding VI
Note; and |
|
|
§ |
|
a decrease of $1.7 million in other income from legal settlement proceeds
received in 2005 in connection with certain deed transfer taxes. |
|
|
|
Equity in net income of unconsolidated companies decreased $27.4 million to $0.3 million
primarily due to: |
|
§ |
|
a decrease of $15.9 million in Temperature-Controlled Logistics equity in net
income primarily attributable to: |
|
° |
|
an increase of $6.8 million in debt related expense due to |
|
Ø |
|
a prepayment fee related to Goldman Sachs debt defeasance of $4.6 million; |
|
|
Ø |
|
a write-off of $2.2 million of unamortized deferred financing costs
associated with the Goldman Sachs and Morgan Stanley debt paid off in 2006;
and |
|
° |
|
an increase of $2.7 million related to adjustments for vacation
accrual, workers compensation and legal expenses; and |
|
|
° |
|
a decrease of $5.7 million in operating margins, primarily in the
transportation segment due to services with FEMA in 2005 in the wake of Hurricane
Katrina. |
|
§ |
|
a decrease of $5.7 million in Other equity in net income primarily attributable
to a decrease of income from the G2 and SunTx investments; |
|
|
§ |
|
a decrease of $3.6 million in Resort/Hotel equity in net income primarily
attributable to a $3.0 million license fee from Canyon Ranch Living in Miami,
Florida, of which our portion was $1.4 million, in the first quarter of 2005 and
$2.2 million due to increased expenses in 2006 compared to 2005 associated with
Canyon Ranch Operating, LLC; and |
|
|
§ |
|
a decrease of $2.3 million in Office equity in net income primarily due to a $0.8
million decline in operations at Bank One Center, a $0.7 million decrease in
operations at Houston Center and a $0.5 million decrease related to the disposition
of 5 Houston Center in December 2005. |
50
Other Expenses
Other
expenses increased $4.5 million, or 1.3%, to $347.2 million for the year ended December
31, 2006, compared to $342.7 million for the year ended December 31, 2005. The primary components
of the increase in other expenses are discussed below.
|
|
|
Corporate general and administrative costs decreased
$5.4 million, or 10.7%, to $44.9
million primarily due to changes in the short-term incentive compensation plans and lower
compensation expense associated with restricted units granted under our long-term incentive
compensation plans in December 2004 and May 2005. |
|
|
|
|
Interest expense decreased $2.4 million, or 1.8%, to $134.3 million due to an increase
of $11.8 million in capitalized interest (from $21.9 million to $33.7 million); partially
offset by an increase of $123.0 million in the weighted average debt balance (from $2.271
billion to $2.394 billion) and a 0.12 percentage point increase in the hedged weighted
average interest rate (from 6.98% to 7.10%). |
|
|
|
|
Extinguishment of debt expense decreased $2.2 million due to the write off of deferred
financing costs, of which $0.7 million related to the joint venture or sale of real estate
assets in 2005. |
|
|
|
|
Depreciation and amortization expense increased
$6.0 million, or 4.2%, primarily due to; |
|
§
|
|
an increase of $5.3 million related to additions to
leasehold and building improvements and lease conversions; and |
|
|
§
|
|
an increase of $5.1 million due to the acquisition of
Financial Plaza in January 2006; partially offset by |
|
|
§ |
|
a decrease of $2.3 million related to lease terminations in 2005; and |
|
|
§ |
|
a decrease of $2.0 million due to the joint venture of Fulbright Tower in
February 2005 and One Buckhead Plaza in June 2005. |
|
|
|
Other expense increased $9.0 million to $13.0 million due primarily to legal and
advisory fees for certain contemplated strategic alternatives. |
Income Tax Benefit/Expense
The
$12.0 million increase in the income tax benefit for the year ended December 31, 2006,
compared to the income tax expense of $8.5 million for the year ended December 31, 2005, is
primarily due to a $10.8 million increased tax benefit due to decreases from 2005 to 2006 in taxable
income of the Resort Residential Development Properties and a $2.1 million decrease in tax expense
related to 2005 income from the G2 and SunTx
investments.
Discontinued Operations
Income from discontinued operations on assets sold and held for sale, net of minority
interests and taxes, decreased $78.4 million to $13.8 million primarily due to:
|
|
|
a decrease of $74.8 million, net of minority interest and taxes due to an $89.2 million
aggregate gain on the sale of four properties in 2005 compared to $14.4 million aggregate
gain on sale of three properties in 2006; and |
|
|
|
|
a decrease of $4.5 million income, net of minority interest and taxes, due to the
reduction of net income associated with properties held for sale in 2006 compared to 2005. |
Comparison
of the year ended December 31, 2005 (Restated), to the year ended December 31, 2004 (Restated)
Property Revenues
Total
property revenues increased $17.9 million, or 1.8%, to $1,018.1 million for the year
ended December 31, 2005, as compared to $1,000.2 million for the year ended December 31, 2004. The
primary components of the increase in total property revenues are discussed below.
|
|
|
Office Property revenues decreased $103.0 million, or 21.6%, to $372.8 million,
primarily due to: |
|
§ |
|
a decrease of $154.9 million due to the joint ventures of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004;
partially offset by Fulbright Tower, which was acquired in December 2004 and joint
ventured in February 2005, and One Buckhead Plaza which was acquired in April 2005
and joint ventured in June 2005; partially offset by |
51
|
§
|
|
an increase of $26.9 million from the acquisition of Hughes Center in January
through May 2004, Dupont Centre in March 2004, The Alhambra in August 2004, One Live
Oak and Peakview Tower in December 2004 and the Exchange Building in February 2005; |
|
|
§
|
|
an increase of $17.3 million resulting from third party management and leasing
services and related direct expense reimbursements due to the joint ventures of The
Crescent, Trammell Crow Center, Fountain Place, Houston Center and Post Oak Central
in November 2004, and Fulbright Tower in February 2005 and One Buckhead Plaza in
June 2005; |
|
|
§
|
|
an increase of $6.2 million from the 42 consolidated Office Properties (excluding
2004 and 2005 acquisitions, dispositions and properties held for sale) that we owned
or had an interest in, primarily due to a 2.6 percentage point increase in average
occupancy (from 83.3% to 85.9%), increased expense recovery revenue related to the
increase in occupancy and increased recoverable expenses, and increased parking
revenue; partially offset by a decline in full service weighted average rental
rates; and |
|
|
§
|
|
an increase of $2.2 million in net lease termination fees (from $9.0 million to
$11.2 million) primarily due to the El Paso lease termination. |
|
|
|
Resort Residential Development Property revenues increased
$192.8 million, or 62.2%, to
$502.7 million, primarily due to: |
|
§ |
|
an increase of $189.7 million in CRDI revenues primarily related to: |
|
o |
|
an increase of $239.5 million primarily related to product mix in lots and
units available for sale in 2005 versus 2004 at Hummingbird Lodge in Bachelor Gulch,
Colorado, Northstar Village in Lake Tahoe, California, and Creekside Phase II,
Creekside Townhomes, Brownstones Phase I and Delgany, all in Denver, Colorado,
which had sales in the twelve months ended December 31, 2005, but no sales in the same
period 2004; partially offset by |
|
|
o |
|
a decrease of $47.3 million primarily related to product mix in lots and
units available for sale in 2004 versus 2005 at Horizon Pass Townhomes in Bachelor
Gulch, Colorado, Park Place, Park Tower and Central Platte Valley, all in Denver,
Colorado, and Cresta Run in Edwards, Colorado, which had sales in the twelve months
ended December 31, 2004, but no sales in the same period 2005; and |
|
|
o |
|
a net decrease of $4.0 million primarily related to product mix in lots and
units available for sale in 2004 versus 2005 at Horizon Pass Lodge in Bachelor Gulch,
Colorado, Old Greenwood Lots in Lake Tahoe, California, Creekside Phase I in
Denver, Colorado, and Main Street Station in Breckenridge, Colorado, which had sales
in the twelve months ended December 31, 2004, but reduced sales in the same period
2005, partially offset by Grays Crossing and Old Greenwood Timeshares in Lake Tahoe,
California, and Eagle Ranch in Eagle, Colorado, which had sales in the twelve months
ended December 31, 2004, but increased sales in the same period
2005. |
|
|
|
Resort/Hotel Property revenues decreased $71.9 million, or 33.5%, to $142.6 million,
primarily due to: |
|
§
|
|
a decrease of $88.8 million due to the contribution, in January 2005, of the
Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in which we
have a 48% member interest that is accounted for as an unconsolidated investment;
partially offset by |
|
|
§
|
|
an increase of $6.9 million in room revenue at the Luxury Resort and Spa
Properties related to a 20% increase in revenue per available room (from $171 to
$206) resulting from a 12% increase in average daily rate (from $285 to $319) and a
4 percentage point increase in occupancy (from 60% to 64%); |
|
|
§
|
|
an increase of $4.5 million in food and beverage, spa and other revenue at the
Luxury Resort and Spa Properties primarily due to a 12 percentage point increase in
occupancy (from 59% to 71%) at the Sonoma Mission Inn primarily related to the
renovation of the 97 historic inn rooms which were out of service during the first
two quarters of 2004; |
|
|
§
|
|
an increase of $2.8 million in room revenue at the Upscale Business-Class Hotel
Properties primarily due to a 13% increase in revenue per available room (from $80
to $90) resulting from an increase of 6% in average daily rate (from $116 to $123)
and a 4 percentage point increase in occupancy (from 69% to 73%); and |
|
|
§
|
|
an increase of $2.6 million in food and beverage and other revenue at the Upscale
Business-Class Hotel Properties primarily related to the 4 percentage point increase
in occupancy (from 69% to 73%) in conjunction with increased group volume. |
Property Expenses
Total
property expenses increased $54.0 million, or 7.9%, to $739.3 million for the year ended
December 31, 2005, as compared to $685.3 million for the year ended December 31, 2004. The
primary components of the variances in property expenses are discussed below.
|
|
|
Office Property expenses decreased $38.4 million, or 16.4%, to $195.8 million, primarily
due to: |
|
§
|
|
a decrease of $73.7 million due to the joint ventures of The Crescent, Trammell
Crow Center, Fountain Place, Houston Center and Post Oak Central in November 2004,
partially offset by Fulbright Tower, which was acquired in December 2004 and joint
ventured in February 2005 and One Buckhead Plaza, which was acquired in April 2005
and joint ventured in June 2005; partially offset by |
|
|
§
|
|
an increase of $14.7 million related to the cost of providing third-party
management services due to the joint venture of The Crescent, Trammell Crow Center,
Fountain Place, Houston Center and Post Oak Central in November 2004, and Fulbright
Tower in February 2005 and One Buckhead Plaza in June 2005, which are recouped by
increased third party fee income and direct expense reimbursements; |
52
|
§
|
|
an increase of $10.7 million from the acquisition of Hughes Center in January
through May 2004, Dupont Centre in March 2004, The Alhambra in August 2004, One Live
Oak and Peakview Tower in December 2004 and the Exchange Building in February 2005; |
|
|
§
|
|
an increase of $4.8 million in operating expenses of the 42 consolidated Office
Properties (excluding 2004 and 2005 acquisitions, dispositions and properties held
for sale) that we owned or had an interest in primarily due to increased
administrative costs, utilities, general building and property taxes; and |
|
|
§
|
|
an increase of $4.5 million due to increased payroll and benefit costs and
Sarbanes-Oxley compliance costs. |
|
|
|
Resort Residential Development Property expenses increased
$160.9 million, or 59.3%, to
$432.2 million, primarily due to: |
|
§ |
|
an increase of $160.5 million in CRDI expenses primarily related to: |
|
o |
|
an increase of $207.3 million primarily related to product mix in lots and
units available for sale in 2005 versus 2004 at Hummingbird Lodge in Bachelor Gulch,
Colorado, Northstar Village in Lake Tahoe, California, and Creekside Phase II,
Creekside Townhomes, Brownstones Phase I, and Delgany, all in Denver, Colorado,
which had sales in the twelve months ended December 31, 2005, but no sales in the same
period 2004; partially offset by |
|
|
o |
|
a decrease of $41.8 million primarily related to product mix in lots and
units available for sale in 2004 versus 2005 at Horizon Pass Townhomes in Bachelor
Gulch, Colorado, Park Place, Park Tower, and Central Platte Valley, all in Denver,
Colorado, and Cresta Run in Edwards, Colorado, which had sales in the twelve months
ended December 31, 2004, but no sales in the same period 2005; and |
|
|
o |
|
a net decrease of $5.5 million primarily related to product mix in lots and
units available for sale in 2004 versus 2005 at Horizon Pass Lodge in Bachelor Gulch,
Colorado, Old Greenwood Lots in Lake Tahoe, California, Creekside Phase I in
Denver, Colorado, and Main Street Station in Breckenridge, Colorado, which had sales
in the twelve months ended December 31, 2004, but reduced sales in the same period
2005, partially offset by Grays Crossing and Old Greenwood Timeshares in Lake Tahoe,
California, and Eagle Ranch in Eagle, Colorado, which had sales in the twelve months
ended December 31, 2004, but increased sales in the same period 2005. |
|
|
|
Resort/Hotel Property expenses decreased $68.5 million, or 38.1%, to $111.3 million,
primarily due to: |
|
§
|
|
a decrease of $76.5 million due to the contribution, in January 2005, of the
Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in which we
have a 48% member interest that is accounted for as an unconsolidated investment;
partially offset by |
|
|
§
|
|
an increase of $5.2 million in operating expenses at the Luxury Resort and Spa
Properties primarily due to a 12 percentage point increase in occupancy at Sonoma
Mission Inn (from 59% to 71%) primarily related to the renovation of the 97 historic
inn rooms which were out of service during the first two quarters of 2004; and |
|
|
§
|
|
an increase of $2.7 million in operating expenses at the Upscale Business-Class
Hotel Properties primarily related to a 9 percentage point increase in occupancy at
Houston Renaissance (from 61% to 70%). |
Other Income/Expense
Total
expenses increased $126.2 million, or 101.9%,
to $250.0 million for the
year ended December 31, 2005, compared to $123.8 million for year ended December 31, 2004. The
primary components of the increase in total other income and expenses are discussed below.
Other Income
Other income decreased $219.7 million, or 70.3%, to $92.6 million for the year ended December
31, 2005, as compared to $312.3 million for the year ended December 31, 2004. The primary
components of the decrease in other income are discussed below.
|
|
|
Gain on joint venture of properties decreased $268.5 million, due primarily to: |
|
§
|
|
$265.8 million decrease due to the gain on the joint venture of The Crescent,
Fountain Place, Trammell Crow Center, Houston Center and Post Oak Central Office
Properties in 2004; and |
|
|
§
|
|
$4.9 million decrease due to the write-off of capitalized internal leasing costs
related to prior year joint venture of properties; partially offset by |
|
|
§
|
|
$1.9 million increase due to the gain on the joint venture of Fullbright Tower
and One Buckhead in 2005. |
|
|
|
Income from investment land sales decreased $10.3 million due to the gain of $8.6
million on sales of two parcels of undeveloped investment land in 2005 compared to $18.8
million gain on sales of five parcels of undeveloped investment land in 2004. |
|
|
|
|
Income from sale of investment in unconsolidated company increased $29.9 million due to
the sale of our interests in the entity that owned the 5 Houston Center Office Property in
2005. |
|
|
|
|
Interest and other income increased $11.3 million to $29.3 million primarily due to: |
|
§
|
|
$10.5 million interest from mezzanine loans; |
|
|
§
|
|
$3.7 million interest from U.S. Treasury and government sponsored agency
securities purchased in December 2004 and January 2005 related to debt defeasance in
order to release the lien on properties securing the LaSalle Note I and Nomura
Funding VI Note; and |
|
|
§
|
|
$1.7 million increase in other income from legal settlement proceeds received in
connection with certain deed transfer taxes; partially offset by |
53
|
§
|
|
$3.7 million received in 2004 from COPI pursuant to the COPI bankruptcy plan for
notes receivable previously written off in 2001. |
|
|
|
Equity in net income of unconsolidated companies increased $17.9 million to $27.6
million primarily due to: |
|
§
|
|
an increase of $18.2 million in Other equity in net income primarily attributable
to an increase of $6.1 million of income from the G2 investment and an increase of
$11.5 million of income from the SunTx investment; and |
|
|
§
|
|
an increase of $5.2 million in Office equity in net income primarily attributable
to the joint ventures of The Crescent, Fountain Place, Trammell Crow Center, Houston
Center and Post Oak Central Office Properties; partially offset by |
|
|
§
|
|
a decrease of $6.0 million in Temperature-Controlled Logistics equity in net
income primarily attributable to the gain on the sale of a portion of our interests
in AmeriCold to The Yucaipa Companies in 2004. |
Other Expenses
Other
expenses decreased $93.5 million, or 21.4%, to $342.6 million for the year ended
December 31, 2005, compared to $436.0 million for the year ended December 31, 2004. The primary
components of the decrease in other expenses are discussed below.
|
|
|
Extinguishment of debt expense decreased $40.4 million, or 94.8%, to $2.2 million due
to: |
|
§
|
|
$17.5 million related to the securities purchased in excess of the debt balance
to defease LaSalle Note I in connection with the joint venture of Office Properties
in 2004; |
|
|
§
|
|
$17.5 million prepayment penalty associated with the payoff of the JP Morgan Chase
Mortgage Loan in connection with the joint venture of Office Properties in 2004; |
|
|
§
|
|
$1.0 million mortgage prepayment fee associated with the payoff of the Lehman
Brothers Holdings, Inc. Loan in connection with the joint venture of Office
Properties in 2004; and |
|
|
§
|
|
$6.6 million write-off of deferred financing costs, of which $3.1 million related
to the joint venture or sale of real estate assets in 2004; partially offset by |
|
|
§
|
|
$2.1 million write-off of deferred financing costs, of which $0.7 million related
to the joint venture or sale of real estate assets in 2005. |
|
|
|
Interest expense decreased $40.1 million, or 22.7%, to $136.7 million due to a decrease
of $392.0 million in the weighted average debt balance (from $2,664 billion to $2,272
billion), partially offset by a .03 percentage point increase in the hedged weighted
average interest rate (from 6.95% to 6.98%) and $3.0 million cash flow payments recorded as
interest expense related to the Fountain Place transaction in June 2004. |
|
|
|
|
Depreciation and amortization costs decreased
$18.5 million, or 11.6%, to $141.4 million due to: |
|
§
|
|
$19.0 million decrease in Office Property depreciation expense, primarily due to: |
|
° |
|
$36.7 million decrease attributable to the joint ventures of The
Crescent, Fountain Place, Trammell Crow Center, Houston Center and Post Oak
Central in November 2004, partially offset by Fulbright Tower which was acquired
in December 2004 and subsequently joint ventured in February 2005 and One
Buckhead Plaza which was acquired in April 2005 and subsequently joint ventured
in June 2005; partially offset by |
|
|
° |
|
$13.2 million increase from the acquisitions of Hughes Center in
January through May 2004, Dupont Centre in March 2004, The Alhambra in August
2004, One Live Oak, Fulbright Tower and Peakview Tower in December 2004 and the
Exchange Building in February 2005; and |
|
|
° |
|
$3.1 million increase primarily due to increased building and
leasehold improvements; and |
|
§
|
|
$5.2 million decrease in Resort/Hotel Property depreciation expense primarily
related to the joint venture of the Canyon Ranch Properties, partially offset by the
reclassification of the Denver City Marriott Hotel Property from held for sale to
held and used; partially offset by |
|
|
§
|
|
$6.6 million increase in Resort Residential Development Property depreciation
expense primarily related to club amenities and golf course improvements at CRDI and
Desert Mountain. |
|
|
|
Amortization of deferred financing costs decreased $5.0 million, or 38.2%, to $8.1
million primarily due to the refinancing and modification of the Credit Facility in
February 2005 and December 2005, partially offset by the reduction of the Fleet Fund I and
II Term Loan in January 2004 and the payoff of the Lehman Capital Note in November 2004. |
|
|
|
|
Impairment charges related to real estate assets decreased $4.1 million due to the
impairment of $4.1 million related to the demolition of the old clubhouse at the Sonoma
Club in the third quarter 2004 in order to construct a new clubhouse. |
|
|
|
|
Corporate general and administrative costs increased
$11.3 million, or 29.0%, to $50.4
million due primarily to an increase in compensation expense associated with restricted
units granted under our long-term incentive compensation plans in December 2004 and May
2005. |
54
Income Tax Expense/Benefit
The
$20.7 million decrease in the income tax benefit to an $8.5 million income tax expense for
the year ended December 31, 2005, as compared to the income tax benefit of $12.2 million for the
year ended December 31, 2004, is primarily due to:
|
|
|
$8.5 million decreased tax benefit on the Resort Residential Development Properties
primarily attributable to the results of operations at CRDI; |
|
|
|
|
$5.8 million decreased tax benefit on the Resort/Hotel Properties due to the
contribution of the Canyon Ranch Properties to a newly formed entity, CR Operating, LLC, in
which we have a 48% member interest that is accounted for as an unconsolidated investment
and reduced taxable losses at the other properties; |
|
|
|
|
$4.0 million tax expense related to income from our investment in SunTx; and |
|
|
|
|
$2.8 million tax expense related to income from our investment in G2. |
Discontinued Operations
Income from discontinued operations on assets sold and held for sale, net of minority
interests and taxes, increased $83.7 million to $92.3 million for the year ended December 31, 2005,
due to:
|
|
|
an increase of $88.1 million, net of minority interest, primarily due to the $89.2
million gain on the sale of four properties in 2005; and |
|
|
|
|
an increase of $2.0 million, net of minority interest, due to an aggregate $3.0 million
impairment on three office properties in 2004 compared to $1.0 million impairment of
Waterside Commons office property in 2005; partially offset by |
|
|
|
|
a decrease of $6.4 million, net of minority interest, due to the reduction of net income
associated with properties held for sale in 2005 compared to 2004. |
Liquidity and Capital Resources
Overview
Our primary sources of liquidity
are cash flow from operations, our credit facility, construction loans and proceeds from asset sales and joint ventures.
Our short-term liquidity requirements through December 31, 2007 consists primarily of our normal operating expenses,
maturity of our 7.5% senior unsecured notes dues September 2007, the
2007 Notes, recurring principal and
interest payments on our debt, Resort Residential Development capital
expenditures, capital expenditures for operating properties, potential
redemption of restricted units from our Operating Partnership and distributions to our shareholders. Our long-term liquidity
requirements are substantially similar to our short-term liquidity requirements other than the level of debt obligations
maturing after December 31, 2007.
We intend on using
the proceeds from the substantial asset sales
that we expect to make in accordance with our Strategic Plan which is
discussed in the Overview to this Item 7,
Managements Discussion and Analysis of Financial Condition and
Results of Operations to address many of our long-term
liquidity requirements early, including: retiring our 9.25% senior
notes due April 2009, the 2009 Notes, selected
mortgage debt, our Series B Preferred Shares and outstanding borrowings under our revolving credit facility.
Additionally,
if and when we sell our Resort Residential Development Properties, we expect to eliminate all related construction
debt as
well as future Resort Residential capital expenditures.
Short-Term Liquidity
We believe that cash flow from operations will be sufficient to cover our normal operating
expenses, interest payments on our debt, distributions on our preferred shares, non-revenue
enhancing capital expenditures and revenue enhancing capital expenditures (including property
improvements, tenant improvements and leasing commissions) in 2007. The cash flow from our Resort
Residential Development Segment is cyclical in nature and primarily realized in the last quarter of
each year. While we expect to sell virtually all of the investments comprising this segment in 2007, we may
meet temporary shortfalls in operating cash flow caused by this cyclicality through working capital
draws under our credit facility, additional borrowings or asset sales in accordance with our
Strategic Plan. As of December 31, 2006, we had up to $239.3 million of borrowing capacity
available under our credit facility. If our Board of Trustees continues to declare distributions on
our common shares at current levels, our cash flow from operations, after payments discussed above,
is not expected to fully cover such distributions on our common shares in 2007. However, as part of
our Strategic Plan, we intend to align our distributions with
industry-accepted pay-out ranges to
allow for retention of capital for growth. We will communicate our distribution plans as
we execute asset sales. In the meantime, we intend to use proceeds from any asset sales and joint
ventures and borrowings under our credit facility to cover any distribution shortfall.
In addition, through December 31, 2007, we may make capital expenditures that are not in the
ordinary course of operations of our business of approximately $140.3 million, primarily relating
to new developments of investment property. We anticipate funding these short-term liquidity
requirements primarily through construction loans and borrowings under our credit facility and any
asset sales. As of December 31, 2006, we also had maturing debt obligations of $750.0 million
through December 31, 2007, made up primarily of the maturity of the 2007 Notes, the GACC Note
(which has three one-year extension options), Funding I Defeasance (to be repaid from proceeds of
defeasance investments), the Mass Mutual Note and the KeyBank II loan. The 2007 Notes are expected
to be repaid using proceeds from asset sales in accordance with our
Strategic Plan. We intend to refinance or pay off with asset sales the
Mass Mutual and KeyBank II loans. In addition,
$108.3 million of these maturing debt obligations relate to the Resort Residential Development
Segment and are expected to be repaid with the sales of the
corresponding land or units or are expected to be refinanced with
additional debt facilities. The
remaining maturities consist primarily of normal principal amortization and are expected to be met
with cash flow from operations.
55
Long-Term Liquidity
Our long-term liquidity requirements as of December 31, 2006, consist primarily of $1.5
billion of debt maturing after December 31, 2007, some of which we expect to repay in 2007 from
asset sales as discussed above. We anticipate meeting these obligations, to the extent that these obligations remain
outstanding after we have fully implemented our Strategic Plan, primarily through refinancing
maturing debt with long-term secured and unsecured debt, construction loans and through other
debt and equity financing alternatives, as well as cash proceeds from joint
ventures.
We anticipate that long-term liquidity requirements will also include amounts required for
future unidentified property acquisitions, mezzanine notes and capital expenditures. Property
acquisitions and capital expenditures are expected to be funded with any cash reserves remaining
from asset sales made in accordance with our Strategic Plan, available cash flow from operations,
borrowings under our credit facility, construction and permanent secured financing, other debt and
equity financing alternatives, as well as cash proceeds from future asset sales and joint ventures.
Mezzanine notes are expected to be funded with borrowings under our credit facility and
through the use of our warehouse facilities governed by repurchase agreements.
Cash Flows
Our cash flow from operations is primarily attributable to the operations of our Office,
Resort Residential Development and Resort/Hotel Properties. The level of our cash flow depends on
multiple factors, including rental rates and occupancy rates at our Office Properties, sales of
lots and units at our Resort Residential Development Properties and room rates and occupancy rates
at our Resort/Hotel Properties. Our net cash provided by operating activities is also affected by
the level of our operating and other expenses, as well as Resort Residential capital expenditures
for existing and committed projects.
During the year ended December 31, 2006, our cash flow from operations was insufficient to
fully cover the distributions on our common shares. We funded this shortfall primarily with a
combination of proceeds from asset sales and borrowings under our credit facility.
|
|
|
|
|
|
|
For the year ended |
|
(in millions) |
|
December 31, 2006 |
|
Cash used in Operating Activities |
|
$ |
(102.8 |
) |
Cash provided by Investing Activities |
|
|
216.8 |
|
Cash used in Financing Activities |
|
|
(122.7 |
) |
|
|
|
|
Decrease in Cash and Cash Equivalents |
|
$ |
(8.7 |
) |
Cash and Cash Equivalents, Beginning of Period |
|
|
86.2 |
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
|
$ |
77.5 |
|
|
|
|
|
Operating Activities
Our
cash used in operating activities of $102.8 million is attributable to Property
operations.
Investing Activities
Our
cash provided by investing activities of $216.8 million is primarily attributable to:
|
|
|
$186.4 million proceeds from defeasance investment maturities and other
securities, primarily due to the maturity of the securities securing the LaSalle
Note II which was repaid in March 2006 and the sale of our available for sale
marketable securities; |
|
|
|
|
$102.9 million proceeds from sale of investment in unconsolidated company due to
our sale of the Four Westlake Park, Three Westlake Park, Bank One Center and Chase
Tower Office Properties, on behalf of the joint ventures in which we had an
interest; |
|
|
|
|
$103.9 million proceeds from property sales due to the sale of our interest in
the Paseo Del Mar Office Property, the sale of the Waterside Commons Office
Property, and the sale of the JPI Multi-Family Investments luxury apartment project; |
|
|
|
|
$81.3 million return of investment in unconsolidated companies, primarily due to
the distributions received from AmeriCold Realty Trust, Main Street Partners, L.P.,
Blue River Land Company, LLC and Redtail Capital Partners, L.P.; |
|
|
|
|
$69.0 million decrease in notes receivable, primarily due to the repayment of
five of our mezzanine loans, offset by four new mezzanine loans; and |
|
|
|
|
$9.6 million decrease in restricted cash. |
56
The cash provided by investing activities is partially offset by:
|
|
|
$138.2 million for the development of investment properties, due to the
development of the JPI Multi-Family Investments luxury apartment project, Paseo del
Mar and Parkway at Oakhill office developments, Ritz-Carlton Hotel development and
3883 Hughes Parkway office development; |
|
|
|
|
$68.7 million for non-revenue enhancing tenant improvement and leasing costs for Office Properties; |
|
|
|
|
$47.6 million of property improvements for Office and Resort/Hotel Properties; |
|
|
|
|
$30.7 million for the acquisition of investment properties, primarily due to the
acquisition of the Financial Plaza Office Property in January 2006; |
|
|
|
|
$27.6 million for development of amenities at the Resort Residential Development
Properties; and |
|
|
|
|
$23.5 million additional investment in unconsolidated companies, primarily
related to our investment in Riverfront Village and Redtail Capital Partners, L.P. |
Financing Activities
Our
cash used in financing activities of $122.7 million is primarily attributable to:
|
|
|
$193.2 million payments under other borrowings, primarily due to the pay off of
the LaSalle Note II funded by proceeds from the maturity of defeasance investments,
the pay off of the FHI Finance loan, pay down of the Morgan Stanley note and
principal payments related to other debt agreements; |
|
|
|
|
$184.1 million distributions to common shareholders and unitholders; |
|
|
|
|
$116.0 million net paydowns under our credit facility; |
|
|
|
|
$32.0 million distributions to preferred shareholders; |
|
|
|
|
$18.6 million capital distributions to joint venture partners, primarily due to
distributions to JPI Multi-Family Investments, L.P., Desert Mountain and Fairmont
Sonoma Mission Inn; and |
|
|
|
|
$4.1 million debt financing costs, primarily due to the Bank of America loan
secured by the Fairmont Sonoma Mission Inn and the Goldman Sachs and Morgan Stanley
repurchase agreements secured by mezzanine loans. |
The cash used in financing activities is partially offset by:
|
|
|
$282.4 million proceeds from other borrowings, primarily due to the Key Bank loan
secured by distributions from Funding III, IV & V, the Bank of America loan secured
by the Fairmont Sonoma Mission Inn, the Morgan Stanley and Goldman Sachs repurchase
agreements secured by mezzanine loans and construction draws on our Office
developments and The Ritz-Carlton hotel development; |
|
|
|
|
$111.2 million net proceeds from borrowings for construction costs at the Resort
Residential Development Properties; |
|
|
|
|
$23.1 million proceeds from the exercise of share and unit options; and |
|
|
|
|
$8.6 million proceeds from capital contributions from our joint venture partners. |
57
Liquidity Requirements
Contractual Obligations
The table below presents, as of December 31, 2006, our future scheduled payments due under
these contractual obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
(in millions) |
|
Total |
|
|
Less than 1 yr |
|
|
1-3 years |
|
|
3-5 years |
|
|
More than 5 yrs |
|
|
|
|
Long-term
debt(1)(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments |
|
$ |
2,296.4 |
|
|
$ |
750.0 |
|
|
$ |
1,008.4 |
|
|
$ |
321.5 |
|
|
$ |
216.5 |
|
Interest payments |
|
|
511.3 |
|
|
|
152.0 |
|
|
|
155.9 |
|
|
|
47.6 |
|
|
|
155.8 |
|
Share of unconsolidated debt |
|
|
705.6 |
|
|
|
38.6 |
|
|
|
61.8 |
|
|
|
185.1 |
|
|
|
420.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ground lease obligations |
|
|
147.0 |
|
|
|
1.9 |
|
|
|
3.8 |
|
|
|
4.0 |
|
|
|
137.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations (2) |
|
|
46.0 |
|
|
|
39.1 |
|
|
|
6.9 |
|
|
|
|
|
|
|
|
|
Share of unconsolidated operating lease
obligations |
|
|
13.4 |
|
|
|
11.4 |
|
|
|
2.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant capital expenditure
obligations (3) |
|
|
145.3 |
|
|
|
140.3 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
3,865.0 |
|
|
$ |
1,133.3 |
|
|
$ |
1,243.8 |
|
|
$ |
558.2 |
|
|
$ |
929.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts include scheduled principal and interest payments for consolidated
debt. We estimate variable rate debt interest payments using the interest rate as of
December 31, 2006. Additionally, we have letters of credit issued under our credit facility of $9.5 million which
reduces our borrowing capacity. These letters of credit are excluded from the table above as
management believes that this obligation is not reasonably likely to occur. |
|
(2) |
|
As part of our ongoing operations, we execute operating lease agreements which
generally provide tenants with leasehold improvement allowances and other lease
concessions. In addition, we generally pay lease commissions to cooperating third-party
brokers. Total committed but unfunded operating lease obligations as of December 31, 2006
are reflected in the above table. |
|
(3) |
|
For further detail of significant capital expenditure obligations, see table
under Significant Capital Expenditures in this Item 7. |
|
(4) |
|
We intend on using the proceeds from the substantial asset
sales that we expect to make in accordance with our Strategic Plan
which is discussed in the Overview section to this Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations to address many of our
long-term liquidity requirements early, including: retiring our
9.25% senior notes due April 2009, the 2009 Notes,
selected mortgage debt, our Series B Preferred Shares and
outstanding borrowings under our revolving credit facility.
Additionally, if and when we sell our Resort Residential Development
Properties, we expect to eliminate all related construction debt as
well as future Resort Residential capital expenditures. |
We also pay preferred distributions to our Series A and Series B Preferred shareholders.
The distributions per Series A Preferred share was $1.6875 per preferred share annualized, or $23.9
million for the year ended December 31, 2006. The distributions per Series B Preferred share was
$2.3750 per preferred share annualized, or $8.1 million for the year ended December 31, 2006.
Debt Financing Summary
The following table shows summary information about our debt, including our pro rata share of
unconsolidated debt, as of December 31, 2006. Listed below are the aggregate required principal
payments by year as of December 31, 2006, excluding any extension options. Scheduled principal
installments and amounts due at maturity are included.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of |
|
|
|
|
|
|
Secured |
|
|
Defeased |
|
|
Unsecured |
|
|
Consolidated |
|
|
Unconsolidated |
|
|
|
|
(in thousands) |
|
Debt |
|
|
Debt |
|
|
Debt |
|
|
Debt |
|
|
Debt |
|
|
Total |
|
2007 |
|
$ |
399,719 |
|
|
$ |
100,279 |
|
|
$ |
250,000 |
|
|
$ |
749,998 |
|
|
$ |
38,613 |
|
|
$ |
788,611 |
|
2008 |
|
|
234,290 |
|
|
|
289 |
|
|
|
118,000 |
(1) |
|
|
352,579 |
|
|
|
43,465 |
|
|
|
396,044 |
|
2009 |
|
|
280,489 |
|
|
|
320 |
|
|
|
375,000 |
|
|
|
655,809 |
|
|
|
18,279 |
|
|
|
674,088 |
|
2010 |
|
|
134,043 |
|
|
|
6,337 |
|
|
|
|
|
|
|
140,380 |
|
|
|
17,761 |
|
|
|
158,141 |
|
2011 |
|
|
181,120 |
|
|
|
|
|
|
|
|
|
|
|
181,120 |
|
|
|
167,303 |
|
|
|
348,423 |
|
Thereafter |
|
|
139,151 |
|
|
|
|
|
|
|
77,321 |
|
|
|
216,472 |
|
|
|
420,177 |
|
|
|
636,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,368,812 |
|
|
$ |
107,225 |
|
|
$ |
820,321 |
|
|
$ |
2,296,358 |
|
|
$ |
705,598 |
|
|
$ |
3,001,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Borrowings under the credit facility. |
58
Significant Capital Expenditures
As
of December 31, 2006, we had unfunded capital expenditures of
approximately $145.3
million relating to capital investments that are not in the ordinary course of
operations of our business segments. The table below specifies:
|
|
|
our requirements for capital expenditures (not factoring in
project level financing); |
|
|
|
|
the amounts funded as of December 31, 2006, on a cash
basis; and |
|
|
|
|
amounts remaining to be funded (future funding classified between
short-term and long-term capital requirements). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Spent |
|
|
|
|
|
Capital Expenditures |
|
|
|
Total |
|
|
as of |
|
|
Amount |
|
|
Short-Term |
|
|
Long-Term |
|
|
|
Project |
|
|
December 31, |
|
|
Remaining To |
|
|
(Next 12 |
|
|
(12+ |
|
(in millions) Project |
|
Cost (1) |
|
|
2006 |
|
|
Spend |
|
|
Months) (2) |
|
|
Months) (2) |
|
Consolidated: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3883 Hughes Center (3) |
|
$ |
73.0 |
|
|
$ |
56.6 |
|
|
$ |
16.4 |
|
|
$ |
16.4 |
|
|
$ |
|
|
Parkway at Oakhill(4) |
|
|
24.6 |
|
|
|
13.1 |
|
|
|
11.5 |
|
|
|
6.5 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort Residential Development Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ritz-Carlton Highlands (5) |
|
|
402.2 |
|
|
|
22.3 |
|
|
|
8.0 |
(6) |
|
|
8.0 |
|
|
|
|
|
Tahoe Mountain Club (7) |
|
|
107.2 |
|
|
|
92.2 |
|
|
|
15.0 |
|
|
|
15.0 |
|
|
|
|
|
The Ritz-Carlton Phase I(8) |
|
|
211.6 |
|
|
|
120.9 |
|
|
|
90.7 |
|
|
|
90.7 |
|
|
|
|
|
The Ritz-Carlton Phase II(9) |
|
|
136.8 |
|
|
|
14.2 |
|
|
|
|
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort/Hotel Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Park Hyatt Beaver Creek(11) |
|
|
26.6 |
|
|
|
22.9 |
|
|
|
3.7 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
982.0 |
|
|
$ |
342.2 |
|
|
$ |
145.3 |
|
|
$ |
140.3 |
|
|
$ |
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All amounts are approximate. |
|
(2) |
|
Reflects our estimate of the breakdown between short-term and long-term capital
expenditures. |
|
(3) |
|
We have committed to a first phase office development of 239,000 square feet on
land that we own within the Hughes Center complex. We expect to complete the building in the
first quarter of 2007. We closed a $52.3 million construction loan in the third quarter of
2005. |
|
(4) |
|
In March 2006, we entered into a joint venture agreement with Champion Partners.
The joint venture has committed to develop a 144,380 square-foot, two-building office complex
in Austin, Texas. The joint venture has a $18.3 million construction loan to fund
construction of this project. Amounts in the table represent our portion (90%) of total
project costs. The development is scheduled to be completed in first quarter 2007. |
|
(5) |
|
We entered into agreements with Ritz-Carlton Hotel Company, L.L.C. for us to
develop a 172 room luxury hotel in Lake Tahoe, California. The new luxury property will also
include the Ritz-Carlton Residences. |
|
(6) |
|
The funding of future potential capital expenditures is dependent upon obtaining a
certain level of unit pre-sales, construction financing and assumes
we will obtain a joint venture partner
for 60% of the equity. In the interim, we have committed up to an additional $8.0 million in development
costs on the project. |
|
(7) |
|
As of December 31, 2006, we had invested $92.2 million in Tahoe Mountain Club,
which includes the acquisition of land and development of golf courses and club amenities.
This table includes the development planned for 2007 only. We anticipate collecting
membership deposits which will be utilized to fund a portion of the development costs. |
|
(8) |
|
We entered into agreements with Ritz-Carlton Hotel Company, L.L.C. for us to
develop the first Ritz-Carlton hotel and condominium project in Dallas, Texas. The
development plans include a Ritz-Carlton with approximately 218 hotel rooms and 70
residences. Construction on the development is anticipated to be completed in the third
quarter of 2007. We have a $169.0 million construction line of credit from KeyBank for the
construction of this project. |
|
(9) |
|
We entered into agreements with Ritz-Carlton Hotel Company, L.L.C. for us to
develop an additional 96 Ritz-Carlton residences and 4 townhomes adjacent to the Phase I
development. |
|
(10) |
|
The funding of future potential capital expenditures is dependent upon obtaining a
certain level of unit pre-sales and construction financing. |
|
(11) |
|
In April 2006, we began renovations at the Park Hyatt Beaver Creek in Avon,
Colorado, which consist of the addition of air conditioning, upgrades to the common areas and
taking 30 rooms out of service to expand the Allegria Spa within the
hotel. The spa expansion and common area
upgrade were completed in December 2006. |
59
Units Subject to Redemption
Restricted units granted under the 2004 and 2005 Unit Plans vest in 20% increments when the
average closing price of Crescent common shares for the preceding 40 trading days achieves certain
targets. Each vested restricted unit will be exchangeable, beginning on the second anniversary of
the date of grant, for cash equal to the value of two Crescent common shares based on the closing
price of the common shares on the date of exchange, and subject to a six-month hold period
following vesting, unless, prior to the date of the exchange, Crescent requests and obtains
shareholder approval authorizing it, at its discretion, to deliver instead two common shares in
exchange for each such restricted unit. Regular quarterly distributions accrue on unvested
restricted units and are payable upon vesting of the restricted units.
The following table presents the amount of restricted unit grants, vested restricted units and
the redemption amount by year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested Unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redemption Value |
|
|
Redeemable at |
|
|
|
|
(dollars in |
|
|
|
|
|
|
|
|
|
|
|
|
|
at December 31, |
|
|
December 31, |
|
|
Redeemable in |
|
thousands) |
|
Granted(1) |
|
|
Vested(1) |
|
|
Redeemed |
|
|
2006 (2) |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Plan |
|
|
3,568,500 |
|
|
|
2,147,500 |
|
|
|
206,750 |
|
|
$ |
38,329 |
|
|
$ |
35,278 |
|
|
$ |
3,051 |
|
|
$ |
|
|
2005 Plan |
|
|
2,187,500 |
|
|
|
437,500 |
|
|
|
|
|
|
|
8,641 |
(3) |
|
|
|
|
|
|
8,542 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,756,000 |
|
|
|
2,585,000 |
|
|
|
206,750 |
|
|
$ |
46,970 |
|
|
$ |
35,278 |
|
|
$ |
11,593 |
|
|
$ |
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts listed in common share equivalents and are net of forfeitures. |
|
(2) |
|
Vested units may be exchanged for cash unless, prior to the date of exchange,
Crescent obtains shareholder approval authorizing it, at its discretion, to deliver instead
two common shares for each such restricted unit. Redemption value based on Crescents
closing stock price at December 31, 2006. |
|
(3) |
|
Amount is redeemable beginning May 16, 2007. |
Off-Balance Sheet Arrangements Guarantee Commitments
Our guarantees in place as of December 31, 2006, are listed in the table below. For the
guarantees on indebtedness, no triggering events or conditions are anticipated to occur that would
require payment under the guarantees and management believes the assets associated with the loans
that are guaranteed are sufficient to cover the maximum potential amount of future payments and
therefore, would not require us to provide additional collateral to support the guarantees.
|
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
Maximum |
|
|
|
Amount |
|
|
Guaranteed |
|
(in thousands) |
|
Outstanding at |
|
|
Amount at |
|
Debtor |
|
December 31, 2006 |
|
|
December 31, 2006 |
|
CRDI U.S. Bank National Association(1) |
|
$ |
14,346 |
|
|
$ |
20,393 |
|
CRDI Eagle Ranch Metropolitan District Letter of Credit (2) |
|
|
7,840 |
|
|
|
7,840 |
|
Fresh Choice, LLC(3) |
|
|
1,000 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
Total Guarantees |
|
$ |
23,186 |
|
|
$ |
29,233 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We entered into a Payment and Completion Guaranty with U.S. Bank National
Association for the repayment of bonds that were issued by the Northstar Community Housing
Corporation to fund construction of an employee housing project. The initial guaranty of
$20.4 million decreases to $5.1 million once construction is complete and certain
conditions are met and decreases further and is eventually released as certain debt service
coverage ratios are achieved. |
|
(2) |
|
We provide a $7.8 million letter of credit to support the payment of interest and
principal of the Eagle Ranch Metropolitan District Revenue Development Bonds. |
|
(3) |
|
We provide a guarantee of up to $1.0 million to GE Capital Franchise Financing
Corporation as part of Fresh Choices bankruptcy reorganization. |
Other Commitments
In July 2005, we purchased comprehensive insurance that covers us, contractors and other
parties involved in the construction of the Ritz-Carlton hotel and condominium project in Dallas,
Texas. Our insurance carrier, which will pay the associated claims as they occur under this program
and will be reimbursed by us within our deductibles, requires us to provide a $1.7 million letter
of credit supporting payment of claims. We believe there is a remote likelihood that payment will
be required under the letter of credit.
In connection with the Canyon Ranch transaction, we have agreed to indemnify the founders
regarding the tax treatment of the transaction, not to exceed $2.5 million, and certain other
matters. We believe there is a remote likelihood that payment will ever be required related to
these indemnities.
60
Debt and Equity Financing
The
significant terms of our primary debt financing arrangements existing as of December 31, 2006, are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at |
|
|
Interest Rate at |
|
|
|
|
|
Secured |
|
Maximum |
|
|
December 31, |
|
|
December 31, |
|
|
|
Description(1) |
|
Asset |
|
Borrowings |
|
|
2006 |
|
|
2006 |
|
|
Maturity Date |
Secured Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEGON Partnership Note |
|
Greenway Plaza |
|
$ |
242,290 |
|
|
$ |
242,290 |
|
|
|
7.53 |
% |
|
July 2009 |
Prudential Note |
|
707 17th Street/Denver Marriott |
|
|
70,000 |
|
|
|
70,000 |
|
|
|
5.22 |
|
|
June 2010 |
JP Morgan Chase III |
|
Datran Center |
|
|
65,000 |
|
|
|
65,000 |
|
|
|
4.88 |
|
|
October 2015 |
Bank of America Note I |
|
Fairmont Sonoma Mission Inn |
|
|
55,000 |
|
|
|
55,000 |
|
|
|
5.40 |
|
|
February 2011 |
Morgan Stanley I |
|
The Alhambra |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
5.06 |
|
|
October 2011 |
Allstate Life Note |
|
Financial Plaza |
|
|
38,949 |
|
|
|
38,949 |
|
|
|
5.47 |
|
|
October 2010 |
Bank of America Note II |
|
The BAC Colonnade Building |
|
|
37,439 |
|
|
|
37,439 |
|
|
|
5.53 |
|
|
May 2013 |
Metropolitan Life Note VII |
|
Dupont Centre |
|
|
35,500 |
|
|
|
35,500 |
|
|
|
4.31 |
|
|
May 2011 |
Column Financial |
|
Peakview Tower |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
5.59 |
|
|
April 2015 |
Mass Mutual Note |
|
3800 Hughes |
|
|
32,203 |
|
|
|
32,203 |
|
|
|
7.75 |
|
|
July 2007 |
Northwestern Life Note |
|
301 Congress |
|
|
26,000 |
|
|
|
26,000 |
|
|
|
4.94 |
|
|
November 2008 |
JP Morgan Chase II |
|
3773 Hughes |
|
|
24,755 |
|
|
|
24,755 |
|
|
|
4.98 |
|
|
September 2011 |
Allstate Note (2) |
|
3993 Hughes |
|
|
24,025 |
|
|
|
24,025 |
|
|
|
6.65 |
|
|
September 2010 |
Metropolitan Life Note VI (2) |
|
3960 Hughes |
|
|
22,074 |
|
|
|
22,074 |
|
|
|
7.71 |
|
|
October 2009 |
Construction, Acquisition and other obligations |
|
Various Office and Resort
Residential Assets |
|
|
40,690 |
|
|
|
40,690 |
|
|
|
2.90 to 13.75 |
|
|
July 2007 to Dec. 2016 |
Secured Fixed Rate Defeased Debt (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LaSalle Note I |
|
Funding I Defeasance |
|
|
100,017 |
|
|
|
100,017 |
|
|
|
7.83 |
|
|
August 2007 |
Nomura Funding VI Note |
|
Funding VI Defeasance |
|
|
7,208 |
|
|
|
7,208 |
|
|
|
10.07 |
|
|
July 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
904,150 |
|
|
$ |
904,150 |
|
|
|
6.38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2009 Notes |
|
|
|
$ |
375,000 |
|
|
$ |
375,000 |
|
|
|
9.25 |
% |
|
April 2009 |
The 2007 Notes |
|
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
7.50 |
|
|
September 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
625,000 |
|
|
$ |
625,000 |
|
|
|
8.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Variable Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GACC Note (4) |
|
Funding One Assets |
|
$ |
165,000 |
|
|
$ |
165,000 |
|
|
|
6.82 |
% |
|
June 2007 |
Morgan Stanley II (5)(6) |
|
Mezzanine Investments |
|
|
100,000 |
|
|
|
22,311 |
|
|
|
7.37 |
|
|
March 2009 |
Goldman Sachs(6)(7) |
|
Mezzanine Investments |
|
|
100,000 |
|
|
|
10,000 |
|
|
|
6.72 |
|
|
May 2009 |
KeyBank II |
|
Distributions from Funding III, IV and V |
|
|
75,000 |
|
|
|
75,000 |
|
|
|
7.35 |
|
|
June 2007 |
National Bank of Arizona |
|
DMDC Assets |
|
|
30,000 |
|
|
|
15,654 |
|
|
|
8.75 |
|
|
October 2007 |
Acquisition
and other obligations |
|
Various Office and Other Assets |
|
|
13,416 |
|
|
|
13,416 |
|
|
|
6.60 to 6.63 |
|
|
February 2008 to
December 2012 |
Secured Variable Rate Construction Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KeyBank I (4) |
|
Ritz-Carlton Dallas Construction |
|
|
169,000 |
|
|
|
80,296 |
|
|
|
7.60 |
|
|
July 2008 |
JP Morgan Chase |
|
Northstar Big Horn Construction |
|
|
84,918 |
|
|
|
56,342 |
|
|
|
7.75 |
|
|
October 2007 |
Societe Generale I (8) |
|
3883 Hughes Construction |
|
|
52,250 |
|
|
|
30,587 |
|
|
|
7.22 |
|
|
September 2008 |
FirstBank of Vail |
|
Village Walk Construction |
|
|
41,782 |
|
|
|
14,041 |
|
|
|
7.75 |
|
|
February 2008 |
US Bank II |
|
Northstar Trailside Construction |
|
|
36,000 |
|
|
|
1,991 |
|
|
|
8.10 |
|
|
March 2009 |
US Bank I (9) |
|
Beaver Creek Landing Construction |
|
|
33,400 |
|
|
|
16,446 |
|
|
|
7.10 |
|
|
February 2008 |
California Bank & Trust(10) |
|
One Riverfront Construction |
|
|
27,500 |
|
|
|
13,861 |
|
|
|
8.38 |
|
|
March 2008 |
JP Morgan Chase Bank |
|
Old Greenwood Construction |
|
|
20,999 |
|
|
|
16,150 |
|
|
|
8.25 |
|
|
March 2007 |
Construction, Acquisition and other obligations |
|
Various Office and Resort
Residential Assets |
|
|
73,077 |
|
|
|
40,792 |
|
|
|
7.45 to 9.25 |
|
|
June 2007 to December 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
1,022,342 |
|
|
$ |
571,887 |
|
|
|
7.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Variable Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility (11) |
|
|
|
$ |
366,759 |
|
|
$ |
118,000 |
|
|
|
6.95 |
% |
|
February 2008 |
Junior Subordinated Notes |
|
|
|
|
51,547 |
|
|
|
51,547 |
|
|
|
7.38 |
|
|
June 2035 |
Junior Subordinated Notes |
|
|
|
|
25,774 |
|
|
|
25,774 |
|
|
|
7.38 |
|
|
July 2035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
444,080 |
|
|
$ |
195,321 |
|
|
|
7.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average |
|
|
|
$ |
2,995,572 |
|
|
$ |
2,296,358 |
|
|
|
7.29 |
%(12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average remaining term |
|
|
|
|
|
|
|
|
|
|
|
3.1 years |
|
|
|
|
|
(1) |
|
For more information regarding the terms of our debt financing arrangements and
the method of calculation of the interest rate for our variable rate debt, see Note 12, Notes
Payable and Borrowings under Credit Facility, included in Item 8, Financial Statements and
Supplementary Data. |
|
(2) |
|
Includes a portion of total premiums of $2.2 million reflecting market value of debt
acquired with the purchase of Hughes Center portfolio. |
|
(3) |
|
We purchased U.S. Treasuries and government sponsored agency securities, or
defeasance investments, to substitute as collateral for these loans. The cash flow from
defeasance investments (principal and interest) matches the total debt service payment of the
loans. |
|
(4) |
|
This loan has three one-year extension options. |
|
(5) |
|
The investments can be financed through March 2008, after which four equal payments
are due quarterly. The loan has a provision for a one-year extension which is subject to
Morgan Stanleys approval. |
|
(6) |
|
The loans supporting these facilities are subject to daily valuations by Morgan
Stanley and Goldman Sachs, respectively. We are subject to a margin call if the overall
leverage of the facility exceeds certain thresholds. |
|
(7) |
|
The investments can be financed through May 2009. The financing and maturity can be
extended one year subject to Goldman Sachs approval. |
|
(8) |
|
This loan has two one-year extension options. |
|
(9) |
|
This loan has one six-month extension option. |
|
(10) |
|
This loan has one one-year extension option. |
|
(11) |
|
The Credit Facility has a maximum borrowing capacity of $366.8 million. The $118.0
million outstanding at December 31, 2006, excludes letters of credit issued under the facility
of $9.5 million. We are also subject to financial covenants, which include minimum debt
service ratios, maximum leverage ratios and, in the case of the Operating Partnership, a
minimum tangible net worth limitation and a fixed charge coverage ratio. |
|
(12) |
|
The overall weighted average interest rate does not include the effect of our cash
flow hedge agreements. Including the effect of these agreements, the overall weighted average
interest rate would have been 7.27%. |
61
We are generally obligated by our debt agreements to comply with financial covenants,
affirmative covenants and negative covenants, or some combination of these types of covenants. The
financial covenants to which we are subject include, among others, leverage ratios, debt service
coverage ratios and limitations on total indebtedness. The affirmative covenants to which we are
subject under our debt agreements include, among others, provisions requiring us to comply with all
laws relating to operation of any Properties securing the debt, maintenance of those Properties in
good repair and working order, maintaining adequate insurance and providing timely financial
information. The negative covenants under our debt agreements generally restrict our ability to
transfer or pledge assets or incur additional debt at a subsidiary level, limit our ability to
engage in transactions with affiliates and place conditions on our or our subsidiaries ability to
make distributions.
Failure to comply with covenants generally will result in an event of default under that debt
instrument. Any uncured or unwaived events of default under our loans can trigger an increase in
interest rates, an acceleration of payment on the loan in default, and for our secured debt,
foreclosure on the property securing the debt, and could cause the credit facility to become
unavailable to us. In addition, an event of default by us or any of our subsidiaries with respect
to any indebtedness in excess of $5.0 million generally will result in an event of default the
Credit Facility, the 2007 Notes, 2009 Notes, KeyBank I Loan, Morgan Stanley II Loan, Goldman Sachs
Loan, Societe Generale I Construction Loan and KeyBank II Loan, after the notice and cure periods
for the other indebtedness have passed. As a result, any uncured or unwaived event of default
could have an adverse effect on our business, financial condition, or liquidity.
As of December 31, 2006, no event of default had occurred. Our secured debt facilities
generally prohibit loan prepayment for an initial period, allow prepayment with a penalty during a
following specified period and allow prepayment without penalty after the expiration of that
period. During the year ended December 31, 2006, there were no circumstances that required
prepayment penalties or increased collateral related to our existing debt.
Warehouse Facilities
We finance certain of our mezzanine loans through the use of warehouse facilities governed by
repurchase agreements. A repurchase agreement is a financing under which we pledge one or more of
our mezzanine investments as collateral to secure a loan with the repurchase agreement counterparty
(i.e. lender). The amount borrowed under a repurchase agreement is limited to a specified
percentage, generally not more than 80%, of the estimated market value of the pledged collateral.
Repurchase agreements take the form of a sale of the pledged collateral to a lender at an agreed
upon price in return for such lenders simultaneous agreement to resell the same securities back to
the borrower at a future date (i.e. the maturity of the borrowing), with periodic interest payments
during the term of the sale. The cost of borrowings under repurchase agreements generally
corresponds to LIBOR plus a margin. Under our repurchase agreements, we retain beneficial ownership
of the pledged collateral, while the lender maintains custody of such collateral. At the maturity
of a repurchase agreement, we are required to repay the loan, which may be due in installments over
a one-year period, and receive back our pledged collateral from the lender or, at the sole
discretion of the lender, we may renew such agreement. Under repurchase agreements, a lender may
require us to pledge additional assets to such lender (i.e. a margin call) in the event that the
lender determines the estimated fair value of our existing pledged collateral has declined below a
specified percentage. Our pledged collateral fluctuates in value due to, among other things,
market changes in interest rates and matters affecting the real estate underlying certain pledged
collateral.
In order to reduce our exposure to counterparty-related risk, our goal is to enter into
repurchase agreements with multiple financial institutions, all of whom have investment-grade
long-term debt ratings. As of December 31, 2006, we had outstanding repurchase obligations under
two repurchase agreements totaling $32.3 million with a weighted average borrowing rate of 7.17%.
62
Derivative Instruments and Hedging Activities
We use derivative financial instruments to convert a portion of our variable rate debt to
fixed rate debt and to manage the fixed to variable rate debt ratio. As of December 31, 2006, we
had interest rate swaps and interest rate caps designated as cash flow hedges, which are accounted
for in conformity with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities an Amendment of FASB Statement No. 133 and SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.
The following table shows information regarding the fair value of our interest rate swaps and
caps designated as cash flow hedge agreements, which are included in the Other assets, net and
Accounts payable, accrued expenses and other liabilities line items in the Consolidated Balance
Sheets, and additional interest expense and unrealized gains (losses) recorded in Accumulated other
comprehensive income, or OCI, for the year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Reduction) |
|
|
Unrealized Gains |
|
Effective Date |
|
Notional Amount |
|
|
Maturity Date |
|
|
Reference Rate |
|
|
Fair Market Value |
|
|
Interest Expense |
|
|
(Losses) in OCI |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/15/03 |
|
$ |
100,000 |
|
|
|
2/15/06 |
|
|
|
3.26 |
% |
|
$ |
|
|
|
$ |
(147 |
) |
|
$ |
(138 |
) |
2/15/03 |
|
|
100,000 |
|
|
|
2/15/06 |
|
|
|
3.25 |
% |
|
|
|
|
|
|
(148 |
) |
|
|
(139 |
) |
9/02/03 |
|
|
200,000 |
|
|
|
9/01/06 |
|
|
|
3.72 |
% |
|
|
|
|
|
|
(1,603 |
) |
|
|
(1,264 |
) |
1/17/05 |
|
|
|
|
|
|
10/16/06 |
|
|
|
3.74 |
% |
|
|
|
|
|
|
|
(1) |
|
|
(205 |
) |
4/25/06 |
|
|
79,761 |
|
|
|
12/26/07 |
|
|
|
5.20 |
% |
|
|
3 |
|
|
|
|
(1) |
|
|
3 |
|
9/29/06 |
|
|
200,000 |
|
|
|
9/4/07 |
|
|
|
5.20 |
% |
|
|
56 |
|
|
|
(66 |
) |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
59 |
|
|
$ |
(1,964 |
) |
|
$ |
(1,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/07/05 |
|
$ |
7,800 |
|
|
|
2/01/08 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
4 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
59 |
|
|
$ |
(1,960 |
) |
|
$ |
(1,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
A portion of the interest on the debt that this swap is hedging is capitalized. |
In addition, three of our unconsolidated companies have interest rate caps and swaps
designated as cash flow hedges of which our portion of change in unrealized losses reflected in OCI
was $0.1 million for the year ended December 31, 2006.
Unconsolidated Debt Arrangements
As of December 31, 2006, the total debt of the unconsolidated joint ventures and
investments in which we have ownership interests was $2.3 billion, of which our share was
$705.6 million. We guaranteed $1.0 million of this debt as of December 31, 2006.
Additional information relating to our unconsolidated debt financing arrangements is contained in
Note 10, Investments in Unconsolidated Companies, of Item 1, Financial Statements and
Supplementary Data.
Share Repurchase Program
We commenced our share repurchase program in March 2000. On October 15, 2001, our Board of
Trust Managers increased from $500.0 million to $800.0 million the amount of outstanding common
shares that can be repurchased from time to time in the open market or through privately negotiated
transactions. There were no share repurchases under the program for the year ended December 31,
2006. As of December 31, 2006, we had repurchased 20,256,423 common shares under the share
repurchase program, at an aggregate cost of approximately $386.9 million, resulting in an average
repurchase price of $19.10 per common share. All repurchased shares were recorded as treasury
shares.
Shelf Registration Statement
On October 29, 1997, we filed a shelf registration statement with the SEC relating to the
future offering of up to an aggregate of $1.5 billion of common shares, preferred shares and
warrants exercisable for common shares. Management believes the shelf registration statement will
provide us with more efficient and immediate access to capital
markets when considered appropriate. As of March 5, 2007,
approximately $510.0 million was available under the shelf registration statement for the issuance
of securities.
63
Unconsolidated Investments
The following is a summary of our ownership in significant unconsolidated joint ventures and
investments as of December 31, 2006.
|
|
|
|
|
|
|
|
|
Our Ownership |
|
|
|
|
as of |
Entity |
|
Classification |
|
December 31, 2006 |
Crescent Irvine, LLC
|
|
Office (2211 Michelson Office Development Irvine)
|
|
40.0% (1) |
Crescent Miami Center, LLC
|
|
Office (Miami Center Miami)
|
|
40.0%
(2) (3) |
Crescent One Buckhead Plaza, L.P.
|
|
Office (One Buckhead Plaza Atlanta)
|
|
35.0% (4) (3) |
Crescent POC Investors, L.P.
|
|
Office (Post Oak Central Houston)
|
|
23.9% (5) (3) |
Crescent HC Investors, L.P.
|
|
Office (Houston Center Houston)
|
|
23.9% (5) (3) |
Crescent TC Investors, L.P.
|
|
Office (The Crescent Dallas)
|
|
23.9% (5) (3) |
Crescent Ross Avenue Mortgage Investors, L.P.
|
|
Office (Trammell Crow Center, Mortgage Dallas)
|
|
23.9% (6) (3) |
Crescent Ross Avenue Realty Investors, L.P.
|
|
Office (Trammell Crow Center, Ground Lessor Dallas)
|
|
23.9% (6) (3) |
Crescent Fountain Place, L.P.
|
|
Office (Fountain Place Dallas)
|
|
23.9% (6) (3) |
Crescent Five Post Oak Park L.P.
|
|
Office (Five Post Oak Park Houston)
|
|
30.0% (7) (3) |
Crescent One BriarLake Plaza, L.P.
|
|
Office (One BriarLake Plaza Houston)
|
|
30.0% (8) (3) |
Crescent 1301 McKinney, L.P.
|
|
Office (Fulbright Tower Houston)
|
|
23.9% (9) (3) |
AmeriCold Realty Trust
|
|
Temperature-Controlled Logistics
|
|
31.7% (10) |
CR Operating, LLC
|
|
Resort/Hotel
|
|
48.0% (11) |
CR Spa, LLC
|
|
Resort/Hotel
|
|
48.0% (11) |
East West Resort Development XIV, L.P., L.L.L.P.
|
|
Resort Residential Development
|
|
26.8% (12) |
Blue River Land Company, LLC
|
|
Resort Residential Development
|
|
33.2% (13) |
EW Deer Valley, LLC
|
|
Resort Residential Development
|
|
35.7% (14) |
SunTx Fulcrum Fund, L.P. (SunTx)
|
|
Other
|
|
26.5% (15) |
Redtail Capital Partners, L.P. (Redtail)
|
|
Other
|
|
25.0% (16) (3) |
Fresh Choice, LLC
|
|
Other
|
|
40.0% (17) |
G2 Opportunity Fund, L.P. (G2)
|
|
Other
|
|
12.5% (18) |
|
|
|
(1) |
|
The remaining 60% interest is owned by an affiliate of Hines. |
|
(2) |
|
The remaining 60% interest is owned by an affiliate of a fund managed by JP Morgan
Investment Management, Inc., or JPM. |
|
(3) |
|
We have negotiated performance based incentives, which we refer to as promoted
interest, which allow for additional equity to be earned if return targets are exceeded. |
|
(4) |
|
The remaining 65% interest is owned by Metzler US Real Estate Fund, L.P. |
|
(5) |
|
Each limited partnership is owned by Crescent Big Tex I, L.P., which is owned 60% by
a fund advised by JPM and 16.1% by affiliates of General Electric, or GE. |
|
(6) |
|
Each limited partnership is owned by Crescent Big Tex II, L.P., which is owned 76.1%
by a fund advised by JPM. |
|
(7) |
|
The remaining 70% interest is owned by an affiliate of GE.
|
|
(8) |
|
The remaining 70% interest is owned by affiliates of JPM. |
|
(9) |
|
The partnership is owned by Crescent Big Tex III, L.P., which is owned 60% by a fund
advised by JPM and 16.1% by affiliates of GE. |
|
(10) |
|
Of the remaining 68.3% interest, 47.6% is owned by Vornado Realty, L.P. and 20.7%
is owned by The Yucaipa Companies. |
|
(11) |
|
The remaining 52% interest is owned by the founders of Canyon Ranch and their
affiliates. CR Spa, LLC operates three resort spas which offer guest programs and services
and sells Canyon Ranch branded skin care products exclusively at the destination health
resorts and the resort spas. CR Operating, LLC operates and manages the two Canyon Ranch
destination health resorts, Tucson and Lenox, and collaborates with select real estate
developers in developing residential lifestyle communities. |
|
(12) |
|
We provided 41.9% of the initial capitalization and the venture is structured such
that we own a 26.8% interest after we receive a preferred return on our invested capital and
return of our capital. The remaining 73.2% economic interest is owned by parties unrelated to
us. East West Resort Development XIV, L.P., L.L.L.P. was formed to co-develop a hotel and
condominiums in Avon, Colorado. |
|
(13) |
|
The remaining 66.8% interest is owned by parties unrelated to us. Blue River Land
Company, LLC was formed to acquire, develop and sell certain real estate property in Summit
County, Colorado. |
|
(14) |
|
The remaining 64.3% interest is owned by parties unrelated to us. EW Deer Valley,
LLC was formed to acquire, hold and dispose of its 3.3% ownership interest in Empire Mountain
Village, L.L.C. Empire Mountain Village, LLC was formed to acquire, develop and sell certain
real estate property at Deer Valley Ski Resort next to Park City, Utah. |
|
(15) |
|
Of the remaining 73.5%, approximately 42.5% is owned by SunTx Capital Partners,
L.P. and the remaining 31.0% is owned by a group of individuals unrelated to us. Of our
limited partnership interest in SunTx, 6.3% is through an unconsolidated investment in SunTx
Capital Partners, L.P., the general partner of SunTx. SunTx Fulcrum Fund, L.P.s objective is
to invest in a portfolio of entities that offer the potential for substantial capital
appreciation. |
|
(16) |
|
The remaining 75% interest is owned by Capstead Mortgage Corporation. Redtail was
formed to invest up to $100.0 million in equity in select mezzanine loans on commercial real
estate over a two-year period. |
|
(17) |
|
The remaining 60% interest is owned by Cedarlane Natural Foods, Inc. Fresh Choice
is a restaurant owner, operator and developer. |
|
(18) |
|
G2 was formed for the purpose of investing in commercial mortgage backed securities
and other commercial real estate investments. The remaining 87.5% interest is owned by
Goff-Moore Strategic Partners, L.P., or GMSPLP, and by parties unrelated to us. G2 is managed
and controlled by an entity that is owned equally by GMSPLP and GMAC Commercial Mortgage
Corporation, or GMACCM. The ownership structure of GMSPLP consists of an approximately 92%
limited partnership interest owned directly and indirectly by Richard E. Rainwater, Chairman
of our Board of Trust Managers, of which approximately 6% is owned by Darla Moore, who is
married to Mr. Rainwater. Approximately 6% general partner interest is owned by John C. Goff,
Vice-Chairman of our Board of Trust Managers and our Chief Executive Officer. The remaining
approximately 2% general partnership interest is owned by unrelated parties. |
64
Significant Accounting Policies
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on our
consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, and contingencies as of the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates
on an ongoing basis. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. These estimates form the
basis for making judgments about the carrying values of assets and liabilities where that
information is available from other sources. Certain estimates are particularly sensitive due to
their significance to the financial statements. Actual results may differ significantly from
managements estimates.
We believe that the most significant accounting policies that involve the use of estimates and
assumptions as to future uncertainties and, therefore, may result in actual amounts that differ
from estimates are the following:
|
|
|
Impairments, |
|
|
|
|
Acquisition of operating properties, |
|
|
|
|
Relative sales method and percentage of completion (Resort Residential Development entities), |
|
|
|
|
Gain recognition on sale of real estate assets, |
|
|
|
|
Consolidation of variable interest entities, and |
|
|
|
|
Allowance for doubtful accounts. |
Impairments.
Real estate, leasehold improvements and intangible assets are classified as long-lived assets
held for sale or long-lived assets to be held and used. Assets
classified as held and used are evaluated for impairment when events
or circumstances indicate that the carrying amount may not be
recoverable. When expected undiscounted cash flows are
less than the carrying value of a Property and we do not expect to recover our carrying costs, an
impairment loss is recognized. For Properties classified as held for use, we reduce carrying costs
to fair value. For Properties held for disposition, we reduce carrying costs to the fair value
less estimated selling costs in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Our estimates of cash flows of the Properties requires us to make
assumptions related to future rental rates, occupancies, operating expenses, the ability of our
tenants to perform pursuant to their lease obligations and proceeds to be generated from the
eventual sale of our Properties. Any changes in estimated future cash flows due to changes in our
plans or views of market and economic conditions could result in recognition of additional
impairment losses.
Goodwill is reviewed for impairment at least annually, using the fair value based test
prescribed by SFAS No. 142, Goodwill and Other Intangible Assets. Our impairment review is
judgmental and involves the use of significant estimates and assumptions. Estimates of fair value
are primarily determined using discounted cash flow methods and are dependent upon assumptions of
future sales trends, market conditions, future cash flow and applicable discount rates. A change
in these underlying assumptions could cause a change in the results of our analysis and, as such,
could cause the fair value to be less than the respective carrying amount. Such an event would
result in recognition of impairment losses.
If events or circumstances indicate that the fair value of an investment accounted for using
the equity method has declined below its carrying value and we consider the decline to be other
than temporary, the investment is written down to fair value and an impairment loss is recognized.
The evaluation of impairment for an investment would be based on a number of factors, including
financial condition and operating results for the investment, inability to remain in compliance
with provisions of any related debt agreements, and recognition of impairments by other investors.
Impairment recognition would negatively impact the recorded value of our investment and reduce net
income.
Acquisition of operating properties. We allocate the purchase price of acquired properties to
tangible and identified intangible assets acquired based on their fair values in accordance with
SFAS No. 141, Business Combinations. We initially record the allocation based on a preliminary
purchase price allocation with adjustments recorded during the allocation period, not to exceed one
year from the acquisition.
In making estimates of fair value for purposes of allocating purchase price, management
utilizes sources, including, but not limited to, independent value consulting services, independent
appraisals that may be obtained in connection with financing the respective property, and other
market data. Management also considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the
tangible and intangible assets acquired.
The aggregate value of the tangible assets acquired is measured based on the sum of (i) the
value of the property and (ii) the present value of the unamortized in-place tenant improvement
allowances. Managements estimates of the value of the
property are made using models similar to those used by independent appraisers. Factors considered
by management in its analysis include an estimate of carrying costs such as real estate taxes,
insurance, and other operating expenses and estimates of lost rentals during the expected lease-up
period assuming current market conditions. The value of the property is then allocated among
building, land, site improvements, and equipment. The value of tenant improvements is separately
estimated due to the different depreciable lives.
65
The aggregate value of intangible assets acquired is measured based on the difference between
(i) the purchase price and (ii) the value of the tangible assets acquired as defined above. This
value is then allocated among above-market and below-market in-place lease values, costs to execute
similar leases (including leasing commissions, legal expenses and other related expenses), in-place
lease values and customer relationship values.
Above-market and below-market in-place lease values for acquired properties are calculated
based on the present value (using a market interest rate which reflects the risks associated with
the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to
the in-place leases and (ii) managements estimate of fair market lease rates for the corresponding
in-place leases, measured over a period equal to the remaining non-cancelable term of the lease for
above-market leases and the initial term plus the term of the below-market fixed rate renewal
option, if any, for below-market leases. We perform this analysis on a lease by lease basis. The
capitalized above-market lease values are amortized as a reduction to rental income over the
remaining non-cancelable terms of the respective leases. The capitalized below-market lease values
are amortized as an increase to rental income over the initial term plus the term of the
below-market fixed rate renewal option, if any, of the respective leases.
Management estimates costs to execute leases similar to those acquired at the property at
acquisition based on current market conditions. These costs are recorded based on the present value
of the amortized in-place leasing costs on a lease by lease basis over the remaining term of each
lease.
The in-place lease values and customer relationship values are based on managements
evaluation of the specific characteristics of each customers lease and our overall relationship
with that respective customer. Characteristics considered by management in allocating these values
include the nature and extent of our existing business relationships with the customer, growth
prospects for developing new business with the customer, the customers credit quality, and the
expectation of lease renewals, among other factors. The in-place lease value and customer
relationship value are both amortized to expense over the initial term of the respective leases and
projected renewal periods, but in no event does the amortization period for the intangible assets
exceed the remaining depreciable life of the building.
Should a tenant terminate its lease, the unamortized portion of the costs to execute similar
leases, in-place lease value and the customer relationship value and above-market and below-market
lease values would be charged to expense.
Relative sales method and percentage of completion. We use the accrual method to recognize
earnings from the sale of Resort Residential Development Properties after closing has taken place,
title has been transferred, sufficient cash has been received to demonstrate the buyers commitment
to pay for the property and collection of the balance of the sales price, if any, is reasonably
assured. If a sale does not qualify for the accrual method of recognition, deferral methods are
used as appropriate including the percentage-of-completion method. In certain cases, when we
receive an inadequate cash down payment and take a promissory note for the balance of the sales
price, revenue recognition is deferred until such time as sufficient cash is received to meet
minimum down payment requirements. The cost of resort residential property sold is defined based
on the type of product being purchased. The cost of sales for resort residential lots is generally
determined as a specific percentage of the sales revenues recognized for each Resort Residential
Development project. The percentages are based on total estimated development costs and sales
revenue for each Resort Residential Development project. These estimates are revised annually and
are based on the then-current development strategy and operating assumptions utilizing internally
developed projections for product type, revenue and related development costs. The cost of sales
for resort residential units (such as townhomes and condominiums) is determined using the relative
sales value method. If the resort residential unit has been sold prior to the completion of
infrastructure cost, and those uncompleted costs are not significant in relation to total costs,
the full accrual method is utilized. Under this method, 100% of the revenue is recognized, and a
commitment liability is established to reflect the allocated estimated future costs to complete the
resort residential unit. If our estimates of costs or the percentage of completion is incorrect,
it could result in either an increase or decrease in cost of sales expense or revenue recognized
and therefore, an increase or decrease in net income.
Gain recognition on sale of real estate assets. In accordance with SFAS No. 66,
Accounting for Sales of Real Estate, we perform evaluations of each real estate sale to determine
if full gain recognition is appropriate and of each sale or contribution of a property to a joint
venture to determine if partial gain recognition is appropriate. The application of SFAS No. 66
can be complex and requires us to make assumptions including an assessment of whether the risks and
rewards of ownership have been transferred, the extent of the purchasers investment in the
property being sold, whether our receivables, if any, related to the sale are collectible and are
subject to subordination, and the degree of our continuing involvement with the real estate asset
after the sale. If full gain recognition is not appropriate, we account for the sale under an
appropriate deferral method.
66
Consolidation of Variable Interest Entities. We perform evaluations of each of our
investments, investment partnerships, real estate partnerships, mezzanine investments and joint
ventures to determine if the associated entities constitute a Variable Interest Entity, or VIE, as
defined under Interpretations 46 and 46R, Consolidation of Variable Interest Entities, or FIN 46
and 46R, respectively. In general, a VIE is an entity that has (i) an insufficient amount of
equity for the entity to carry on its principal operations, without additional subordinated
financial support from other parties, (ii) a group of equity owners that are unable to make
decisions about the entitys activities, or (iii) equity that does not absorb the entitys losses
or receive the benefits of the entity. If any one of these characteristics is present, the entity
is subject to FIN 46Rs variable interests consolidation model.
Quantifying the variability of VIEs is complex and subjective, requiring consideration and
estimates of a significant number of possible future outcomes as well as the probability of each
outcome occurring. The results of each possible outcome are allocated to the parties holding
interests in the VIE and based on the allocation, a calculation is performed to determine which
party, if any, has a majority of the potential negative outcomes (expected losses) or a majority of
the potential positive outcomes (expected residual returns). That party, if any, is the VIEs
primary beneficiary and is required to consolidate the VIE. Calculating expected losses and
expected residual returns requires modeling potential future results of the entity, assigning
probabilities to each potential outcome, and allocating those potential outcomes to the VIEs
interest holders. If our estimates of possible outcomes and probabilities are incorrect, it could
result in the inappropriate consolidation or deconsolidation of the VIE.
For entities that do not constitute VIEs, we consider other GAAP, as required, determining
(i) consolidation of the entity if our ownership interests comprise a majority of its outstanding
voting stock or otherwise control the entity, or (ii) application of the equity method of
accounting if we do not have direct or indirect control of the entity, with the initial investment
carried at cost and subsequently adjusted for our share of net income or loss and cash
contributions and distributions to and from these entities. Further, we evaluate, under EITF 04-5,
Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain Rights, entities for which we
have a general partner interest to determine the nature of limited partners rights in assessing
whether those rights overcome the presumption that we control the limited partnership entity.
Allowance for doubtful accounts/credit losses. Our accounts receivable balance is
reduced by an allowance for amounts that may become uncollectible in the future. Our receivable
balance is composed primarily of rents and operating cost recoveries due from tenants, receivables
associated with club memberships at our Resort Residential Development properties and guest
receivables at our Resort/Hotel properties. We also maintain an allowance for deferred rent
receivables which arise from the straight-lining of rents. The allowance for doubtful accounts is
reviewed at least quarterly for adequacy by reviewing such factors as the credit quality of our
tenants or members, any delinquency in payment, historical trends and current economic conditions.
If the assumptions regarding the collectibility of accounts receivable prove incorrect, we could
experience write-offs in excess of allowance for doubtful accounts, which would result in a
decrease in net income.
Mezzanine notes are reviewed for potential impairment at each balance sheet date.
A mezzanine note is considered impaired when it becomes probable, based on current
information, that we will be unable to collect all amounts due according to the mezzanine note
contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount
of the mezzanine note to the present value of the expected cash flows or the fair value of the
collateral. If a mezzanine note was deemed to be impaired, we would record a reserve for loan
losses through a charge to income for any shortfall. To date, no such impairment charges have been
recognized.
Impact of New Accounting Standards
SFAS No. 123R. In December 2004, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 123R (Revised 2004), Share-Based Payment.
The new FASB rule requires that the compensation cost relating to share-based payment transactions
be recognized in financial statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. We were required to apply SFAS No. 123R beginning January
1, 2006. The scope of SFAS No. 123R includes a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards, share appreciation rights, and employee
share purchase plans. SFAS No. 123R replaces SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board, or APB, Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123, as originally issued in 1995, established as preferable a
fair-value-based method of accounting for share-based payment transactions with employees.
However, that statement permitted entities the option of continuing to apply the guidance in
Opinion No. 25, as long as the footnotes to the financial statements disclosed what net income
would have been had the preferable fair-value-based method been used. Effective January 1, 2003,
we adopted the fair value expense recognition provisions of SFAS No. 123 on a prospective basis.
We adopted SFAS No. 123R using the modified prospective application method which requires, among
other things, that we recognize compensation cost for all awards outstanding at January 1, 2006,
for which the requisite service has not yet been rendered. Additionally, our prior interim periods
and fiscal years do not reflect any restated amounts due to the adoption of SFAS No. 123R. We
estimate an additional
67
$0.2 million of expense will be recorded for the year ended December 31,
2007, for stock and unit options due to the adoption of SFAS No. 123R.
EITF 04-5. In June 2005, the EITF ratified the consensus in Issue No. 04-5, Determining
Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5), which states that the
general partner in a limited partnership is presumed to control that limited partnership. This
presumption may be overcome if the limited partners have either (1) the substantive ability to
dissolve the limited partnership or otherwise remove the general partner without cause or (2)
substantive participating rights, which provide the limited partners with the ability to
effectively participate in significant decisions that would be expected to be made in the ordinary
course of business and thereby preclude the general partner from exercising unilateral control over
the partnership. EITF 04-5 is effective June 30, 2005 for new or modified limited partnership
arrangements and effective January 1, 2006 for existing limited partnership arrangements.
There was no impact to our financial condition or results of operations from the adoption of
EITF 04-5.
EITF 06-3. At its June 2006 meeting, the EITF ratified the consensus regarding Issue No. 06-3
(EITF 06-3), How Taxes Collected from Customers and Remitted to Governmental Authorities Should be
Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 is effective
for interim and annual periods beginning after December 15, 2006, with earlier application
permitted. The scope of EITF 06-3 includes any tax assessed by a governmental authority that is
both imposed on and concurrent with a specific revenue-producing transaction between a seller and a
customer, and may include, but is not limited to, sales, use, value added, and certain excise
taxes. The consensus indicates that gross vs. net income statement classification of those taxes
within its scope is an accounting policy decision. In addition, for taxes within its scope, the
consensus requires the following disclosures: the accounting policy elected for these taxes and
the amounts of the taxes reflected gross (as revenue) in the income statement on an interim and
annual basis. We do not believe there will be an impact to our financial condition or results of
operations from the adoption of EITF 06-3.
FASB Interpretation 48. In July 2006, the FASB issued Interpretation 48, Accounting for
Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109, (FIN 48), which
clarifies the accounting for uncertainty in income taxes recognized in a companys financial
statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 also prescribes a
recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The standard also
provides guidance on derecognizing, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006, and are to be applied to all tax positions upon initial adoption
of this standard. Only tax positions that meet a more-likely-than-not recognition threshold at the
effective date may be recognized or continue to be recognized upon adoption of FIN 48. We expect
to record less than $1.0 million as a cumulative effect adjustment to beginning Accumulated Deficit
as of January 1, 2007 from the adoption of FIN 48.
SFAS No. 157. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
The new FASB rule defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, or GAAP, and expands disclosures about fair value measurements.
The statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the
impact, if any, to our financial condition or results of operations from the adoption of SFAS No.
157.
SAB No. 108. In September 2006, the Securities and Exchange Commission, or SEC, issued Staff
Accounting Bulletin No. 108, Financial Statements Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements, (SAB 108), which
is effective for fiscal years ending after November 15, 2006. SAB No. 108 provides guidance on the
consideration of the effects of prior year misstatements in quantifying current year misstatements.
The adoption of SAB No. 108 did not have an impact to our financial condition or results of
operations.
EITF 06-8. At its November 2006 meeting, the EITF ratified the consensus regarding Issue
No. 06-8 (EITF 06-8), Applicability of the Assessment of a Buyers Continuing Investment under FASB
Statement No. 66 for Sales Of Condominiums. EITF 06-8 is effective for annual periods beginning
after March 15, 2007. The scope of EITF 06-8 is limited to the sale of individual units in a
condominium project and requires an entity to evaluate the adequacy of the buyers initial and
continuing investment for purposes of determining whether the sales price is collectible as
required to recognize profit using the percentage-of-completion method under paragraph 37 of
Statement 66. If the buyer does not meet the initial and continuing investment criteria, the
guidance requires use of the deposit method to recognize profit. We do not believe there will be
an impact to our financial condition or results of operations from the adoption of EITF 06-8.
68
Funds from Operations
FFO, as used in this document, means:
|
|
|
Net Income (Loss) determined in accordance with GAAP; |
|
|
|
|
excluding gains (or losses) from sales of depreciable operating property; |
|
|
|
|
excluding extraordinary items (as defined by GAAP); |
|
|
|
|
plus depreciation and amortization of real estate assets; and |
|
|
|
|
after adjustments for unconsolidated partnerships and joint ventures. |
We calculate FFO available to common shareholders diluted in this manner, except that Net
Income (Loss) is replaced by Net Income (Loss) Available to Common Shareholders and we include the
effect of operating partnership unitholder minority interests.
The National Association of Real Estate Investment Trusts, or NAREIT, developed FFO as a
relative measure of performance and liquidity of an equity REIT to recognize that income-producing
real estate historically has not depreciated on the basis determined under GAAP. We consider FFO
available to common shareholders diluted and FFO appropriate measures of performance for an
equity REIT and for its investment segments. However, FFO available to common shareholders
diluted and FFO should not be considered an alternative to net income determined in accordance with
GAAP as an indication of our operating performance.
Accordingly, we believe that to facilitate a clear understanding of our consolidated
historical operating results, FFO available to common shareholders diluted should be considered
in conjunction with our net income and cash flows reported in the consolidated financial statements
and notes to the financial statements. However, our measure of FFO available to common
shareholders diluted may not be comparable to similarly titled measures of other REITs because
these REITs may apply the definition of FFO in a different manner than we apply it.
69
Consolidated Statements of Funds from Operations
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
(dollars in thousands) |
|
|
|
|
(Restated) |
|
Net income |
|
$ |
33,433 |
|
|
$ |
101,585 |
|
Adjustments to reconcile net income to funds from operations
available to common shareholders diluted: |
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
|
132,139 |
|
|
|
131,392 |
|
Gain on property sales |
|
|
(28,847 |
) |
|
|
(102,803 |
) |
Gain from sale of development operating property |
|
|
(16,221 |
) |
|
|
(13,369 |
) |
Gain from promoted interest |
|
|
(22,575 |
) |
|
|
(13,579 |
) |
Adjustment for investments in unconsolidated companies: |
|
|
|
|
|
|
|
|
Office Properties |
|
|
21,217 |
|
|
|
18,872 |
|
Resort Residential Development Properties |
|
|
(10,616 |
) |
|
|
(5,543 |
) |
Resort/Hotel Properties |
|
|
4,773 |
|
|
|
3,881 |
|
Temperature-Controlled Logistics Properties |
|
|
17,917 |
|
|
|
18,210 |
|
Unitholder minority interest |
|
|
266 |
|
|
|
12,379 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders diluted(1) (2) |
|
$ |
99,448 |
|
|
$ |
118,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Segments: |
|
|
|
|
|
|
|
|
Office Properties |
|
$ |
231,248 |
|
|
$ |
209,715 |
|
Resort Residential Development Properties |
|
|
12,422 |
|
|
|
45,486 |
|
Resort/Hotel Properties |
|
|
36,150 |
|
|
|
34,440 |
|
Temperature-Controlled Logistics Properties |
|
|
2,249 |
|
|
|
18,444 |
|
Other: |
|
|
|
|
|
|
|
|
Corporate general and administrative |
|
|
(44,918 |
) |
|
|
(50,363 |
) |
Interest expense |
|
|
(135,457 |
) |
|
|
(136,664 |
) |
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
Income from mezzanine loans and other loans |
|
|
29,674 |
|
|
|
10,618 |
|
Other(3) |
|
|
118 |
|
|
|
19,349 |
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders diluted(1) (2) |
|
$ |
99,448 |
|
|
$ |
118,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
102,055 |
|
|
|
100,179 |
|
Diluted weighted average shares and units outstanding(4) |
|
|
122,980 |
|
|
|
118,836 |
|
|
|
|
(1) |
|
To calculate basic funds from operations available to common shareholders,
deduct unitholder minority interest. |
|
(2) |
|
In addition to presenting FFO in accordance with the NAREIT definition, we also
disclose FFO available to common shareholders as adjusted, which includes adjustments to
exclude extinguishment of debt and impairment charges related to real estate assets and
include the impact of gain on sale of developed properties and promoted interest. We
provide this additional information because management utilizes it, in addition to FFO
available to common shareholders diluted, in making operating decisions and assessing
performance, and because we believe that it also is useful to investors in assessing our
operating performance. |
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
(dollars in thousands) |
|
2006 |
|
|
2005 |
|
FFO available to common shareholders diluted NAREIT |
|
$ |
99,448 |
|
|
$ |
118,987 |
|
Debt extinguishment charges related to the sale of real
estate assets |
|
|
|
|
|
|
729 |
|
Impairment charges related to real estate assets |
|
|
125 |
|
|
|
1,047 |
|
Promoted interests related to the sale of investment in
unconsolidated companies |
|
|
22,575 |
|
|
|
13,579 |
|
Gain from sale of development operating property |
|
|
16,221 |
|
|
|
13,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common shareholders diluted as adjusted |
|
$ |
138,369 |
|
|
$ |
147,711 |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Includes income from investment land sales, interest and other income,
extinguishment of debt, income/loss from other unconsolidated companies, other expenses,
depreciation and amortization of non-real estate assets, and amortization of deferred
financing costs. |
|
(4) |
|
See calculations for the amounts presented in the reconciliation following this
table. |
70
The following schedule reconciles our basic weighted average shares to the diluted
weighted average shares/units in share equivalents presented above:
|
|
|
|
|
|
|
|
|
|
|
For the years |
|
|
ended December 31, |
(shares/units in share equivalents in thousands) |
|
2006 |
|
2005 |
Basic weighted average shares: |
|
|
102,055 |
|
|
|
100,179 |
|
Add: Weighted average units in share equivalents |
|
|
19,461 |
|
|
|
17,833 |
|
Restricted shares and share and unit options
in share equivalents |
|
|
1,464 |
|
|
|
824 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares and units |
|
|
122,980 |
|
|
|
118,836 |
|
|
|
|
|
|
|
|
|
|
The following table reconciles the As Previously Reported to the As Restated Consolidated
Statement of Funds from Operations for the year ended December 31, 2005. This table reflects the
impact of the restated financial data discussed in Item 8., Financial Statements and
Supplementary Data, Note 1, Organization and Basis of Presentation, associated with the
Calculation of Minority Interest, the Redeemable Fees for Club Member
Services and the Classification of Club Membership Intangible Asset
matters.
Consolidated Statement of Funds from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
As Reported with |
|
|
|
|
|
|
As Previously |
|
Discontinued |
|
Discontinued |
|
Restatement |
|
|
(in thousands) |
|
Reported |
|
Operations |
|
Operations |
|
Adjustments |
|
As Restated |
|
|
|
Net income |
|
$ |
95,307 |
|
|
$ |
|
|
|
$ |
95,307 |
|
|
$ |
6,278 |
|
|
$ |
101,585 |
|
Adjustments to reconcile net income to funds from operations
available to common shareholders diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
|
131,392 |
|
|
|
|
|
|
|
131,392 |
|
|
|
|
|
|
|
131,392 |
|
Gain on property sales |
|
|
(102,803 |
) |
|
|
|
|
|
|
(102,803 |
) |
|
|
|
|
|
|
(102,803 |
) |
Gain from sale of development operating property |
|
|
(13,369 |
) |
|
|
|
|
|
|
(13,369 |
) |
|
|
|
|
|
|
(13,369 |
) |
Gain from promoted interest |
|
|
(13,579 |
) |
|
|
|
|
|
|
(13,579 |
) |
|
|
|
|
|
|
(13,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties |
|
|
18,872 |
|
|
|
|
|
|
|
18,872 |
|
|
|
|
|
|
|
18,872 |
|
Resort Residential Development Properties |
|
|
(5,468 |
) |
|
|
|
|
|
|
(5,468 |
) |
|
|
(75 |
) |
|
|
(5,543 |
) |
Resort/Hotel Properties |
|
|
3,881 |
|
|
|
|
|
|
|
3,881 |
|
|
|
|
|
|
|
3,881 |
|
Temperature-Controlled Logistics Properties |
|
|
18,210 |
|
|
|
|
|
|
|
18,210 |
|
|
|
|
|
|
|
18,210 |
|
Unitholder minority interest |
|
|
16,964 |
|
|
|
|
|
|
|
16,964 |
|
|
|
(4,585 |
) |
|
|
12,379 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
Funds from
operations available to common shareholders diluted |
|
$ |
117,369 |
(1) |
|
$ |
|
|
|
$ |
117,369 |
|
|
$ |
1,618 |
|
|
$ |
118,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties |
|
$ |
209,715 |
|
|
$ |
|
|
|
$ |
209,715 |
|
|
$ |
|
|
|
$ |
209,715 |
|
Resort Residential Development Properties |
|
|
43,868 |
|
|
|
|
|
|
|
43,868 |
|
|
|
1,618 |
|
|
|
45,486 |
|
Resort/Hotel Properties |
|
|
34,440 |
|
|
|
|
|
|
|
34,440 |
|
|
|
|
|
|
|
34,440 |
|
Temperature-Controlled Logistics Properties |
|
|
18,444 |
|
|
|
|
|
|
|
18,444 |
|
|
|
|
|
|
|
18,444 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate general and administrative |
|
|
(50,363 |
) |
|
|
|
|
|
|
(50,363 |
) |
|
|
|
|
|
|
(50,363 |
) |
Interest expense |
|
|
(136,664 |
) |
|
|
|
|
|
|
(136,664 |
) |
|
|
|
|
|
|
(136,664 |
) |
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
Income from mezzanine loans and other loans |
|
|
10,618 |
|
|
|
|
|
|
|
10,618 |
|
|
|
|
|
|
|
10,618 |
|
Other(3) |
|
|
19,349 |
|
|
|
|
|
|
|
19,349 |
|
|
|
|
|
|
|
19,349 |
|
|
|
|
Funds from operations available to common
shareholders diluted |
|
$ |
117,369 |
(1) |
|
$ |
|
|
|
$ |
117,369 |
|
|
$ |
1,618 |
|
|
$ |
118,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
100,179 |
|
|
|
|
|
|
|
100,179 |
|
|
|
|
|
|
|
100,179 |
|
Diluted weighted average shares and units outstanding |
|
|
118,836 |
|
|
|
|
|
|
|
118,836 |
|
|
|
|
|
|
|
118,836 |
|
|
|
|
(1) |
|
Amount represents FFO available to common shareholders
presented in accordance with the NAREIT definition. The 2005 Form
10-K amount reported of $144,317 represented FFO, as adjusted, and
included $26,948 gain on sale of developed property (inclusive of
$13,579 promoted interest). |
71
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our use of financial instruments, such as debt instruments and mezzanine notes receivable,
subjects us to market risk which may affect our future earnings and cash flows as well as the fair
value of its assets. Market risk generally refers to the risk of loss from changes in interest
rates and market prices. We manage our market risk by attempting to match anticipated inflow of
cash from our operating, investing and financing activities with anticipated outflow of cash to
fund debt payments, distributions to shareholders, investments, capital expenditures and other cash
requirements. We also enter into derivative financial instruments such as interest rate swaps to
mitigate our interest rate risk on a related financial instrument or to effectively lock the
interest rate on a portion of our variable rate debt.
The following discussion of market risk is based solely on hypothetical changes in interest
rates related to our variable rate debt and variable rate mezzanine notes receivable. This
discussion does not purport to take into account all of the factors that may affect the financial
instruments discussed in this section.
Interest Rate Risk
Debt
Our interest rate risk is most sensitive to fluctuations in interest rates on our short-term
variable rate debt. We had total outstanding debt of approximately $2.3 billion at December 31,
2006, of which approximately $479.6 million, or approximately 21%, was unhedged variable rate debt.
The variable rate debt is based on an index (LIBOR or Prime) plus a credit spread. The weighted
average interest rate on such unhedged variable rate debt was 7.3% as of December 31, 2006. A
10% increase in the underlying index would cause an increase of 62.1 basis points to the weighted
average interest rate on such variable rate debt, which would result in an annual decrease in net
income and cash flows of approximately $3.0 million. Conversely, a 10% decrease in the underlying
index would cause a decrease of 62.1 basis points to the weighted average interest rate on such
unhedged variable rate debt, which would result in an annual increase in net income and cash flows
of approximately $3.0 million based on the unhedged variable rate debt outstanding as of December
31, 2006.
Mezzanine Notes
Our mezzanine notes receivable are sensitive to fluctuations in interest rates on our variable
loans. We had total outstanding mezzanine loans of approximately $124.3 million at December 31,
2006, of which approximately $106.8 million, or approximately 86%, were variable rate loans. The
variable rate is based on an index (LIBOR) plus a credit spread. The weighted average interest
rate on such variable rate loans was 14.0% as of December 31, 2006. A 10% increase in the
underlying index would cause an increase of 53.6 basis points to the weighted average interest rate
on such variable rate loans, which would result in an annual increase in net income and cash flows
of approximately $0.6 million. Conversely, a 10% decrease in the underlying index would cause a
decrease of 53.6 basis points to the weighted average interest rate on such variable rate loans,
which would result in an annual decrease in net income and cash flows of approximately $0.6 million
based on the variable rate loans outstanding as of December 31, 2006.
Cash Flow Hedges
We use derivative financial instruments to convert a portion of our variable rate debt to
fixed rate debt and to manage the fixed to variable rate debt ratio. As of December 31, 2006,
total variable rate debt was $767.2 million, of which $287.6 million was hedged. A description of
these derivative financial instruments is contained in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations Equity and Debt Financing Derivative
Instruments and Hedging Activities.
72
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
75 |
|
|
|
|
|
|
|
|
|
76 |
|
|
|
|
|
|
|
|
|
77 |
|
|
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
79 |
|
|
|
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
|
146 |
|
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trust Managers and Shareholders of
Crescent Real Estate Equities Company
We have audited the accompanying consolidated balance sheets of Crescent Real Estate Equities
Company (the Company) as of December 31, 2006 and 2005, and the related consolidated statements
of operations, shareholders equity, and cash flows for each of the three years in the period ended
December 31, 2006. Our audits also included the financial statement schedules listed in the Index
at Item 15(a). These financial statements and schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements and
schedules based on our audits. The financial statements of AmeriCold Realty Trust (AmeriCold), a
corporation in which the Company has a 31.7% interest for 2006, have been audited by other auditors
whose report has been furnished to us, and our opinion on the consolidated financial statements,
insofar as it relates to the amounts included for AmeriCold, is based solely on the report of the
other auditors. In the consolidated financial statements, the Companys investment in AmeriCold is
stated at $87,069,000 at December 31, 2006, and the Companys equity in the net loss of AmeriCold is
stated at $15,669,000 for the year then ended.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 2006, the report of other auditors, the financial
statements referred to above present fairly, in all material respects, the consolidated financial
position of Crescent Real Estate Equities Company at December 31, 2006 and 2005, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects, the information
set forth therein.
As discussed in Note 1 to the consolidated financial statements, the 2005 and 2004 consolidated
financial statements have been restated to correct errors in
recording minority interests,
membership deposits and intangible assets, including the related tax impact. Additionally,
as discussed in Note 2 to the consolidated financial statements, in 2006 the Company changed its method of
accounting for stock-based compensation.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Crescent Real Estate Equities Companys internal
control over financial reporting as of December 31, 2006, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated
March 13, 2007, expressed an
unqualified opinion on managements assessment and an adverse opinion
on the effectiveness of internal control over financial reporting.
ERNST & YOUNG LLP
Dallas, Texas
March 13, 2007
74
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
(As Restated See Note 1) |
|
ASSETS: |
|
|
|
|
|
|
|
|
Investments in real estate: |
|
|
|
|
|
|
|
|
Land |
|
$ |
186,779 |
|
|
$ |
183,228 |
|
Land improvements, net of accumulated depreciation of $36,421 and $29,784
at December 31, 2006 and 2005, respectively |
|
|
70,630 |
|
|
|
70,494 |
|
Buildings
and improvements, net of accumulated depreciation of $533,311 and
$456,628 at December 31, 2006 and 2005, respectively |
|
|
1,851,770 |
|
|
|
1,734,131 |
|
Furniture, fixtures and equipment, net of accumulated depreciation of $39,118 and
$34,129 at December 31, 2006 and 2005, respectively |
|
|
43,270 |
|
|
|
37,018 |
|
Land held for investment or development |
|
|
750,970 |
|
|
|
513,040 |
|
Properties held for disposition, net |
|
|
2,400 |
|
|
|
118,205 |
|
|
|
|
|
|
|
|
Net investment in real estate |
|
$ |
2,905,819 |
|
|
$ |
2,656,116 |
|
Cash and cash equivalents |
|
|
77,550 |
|
|
|
86,228 |
|
Restricted cash and cash equivalents |
|
|
93,471 |
|
|
|
84,699 |
|
Defeasance investments |
|
|
111,014 |
|
|
|
274,134 |
|
Accounts receivable, net |
|
|
63,996 |
|
|
|
56,356 |
|
Deferred rent receivable |
|
|
61,096 |
|
|
|
70,074 |
|
Investments in unconsolidated companies |
|
|
280,870 |
|
|
|
393,535 |
|
Notes receivable, net |
|
|
174,867 |
|
|
|
219,016 |
|
Income tax asset current and deferred, net |
|
|
3,274 |
|
|
|
10,732 |
|
Other assets, net |
|
|
275,014 |
|
|
|
312,366 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,046,971 |
|
|
$ |
4,163,256 |
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Borrowings under Credit Facility |
|
$ |
118,000 |
|
|
$ |
234,000 |
|
Notes
payable |
|
|
2,101,037 |
|
|
|
1,933,546 |
|
Notes
payable, accounts payable, accrued expenses and other liabilities, properties held for disposition |
|
|
|
|
|
|
19,306 |
|
Junior subordinated notes |
|
|
77,321 |
|
|
|
77,321 |
|
Accounts payable, accrued expenses and other liabilities |
|
|
502,014 |
|
|
|
495,918 |
|
Current tax liability |
|
|
610 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
2,798,982 |
|
|
$ |
2,760,091 |
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
MINORITY INTERESTS: |
|
|
|
|
|
|
|
|
Operating partnership, 11,320,798 and 11,416,173 units, at December 31, 2006
and 2005, respectively |
|
$ |
75,865 |
|
|
$ |
98,659 |
|
Consolidated real estate partnerships |
|
|
49,838 |
|
|
|
52,880 |
|
|
|
|
|
|
|
|
Total minority interests |
|
$ |
125,703 |
|
|
$ |
151,539 |
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Preferred shares, $0.01 par value, authorized 100,000,000 shares: |
|
|
|
|
|
|
|
|
Series A
Convertible Redeemable Cumulative Preferred Shares,
liquidation preference of $25.00 per share, 14,200,000 shares issued and
outstanding at December 31, 2006 and 2005 respectively |
|
$ |
319,166 |
|
|
$ |
319,166 |
|
Series B Cumulative Redeemable Preferred Shares,
liquidation preference of $25.00 per share, 3,400,000 shares issued and
outstanding at December 31, 2006 and 2005 |
|
|
81,923 |
|
|
|
81,923 |
|
Common shares, $0.01 par value, authorized 250,000,000 shares, 127,875,571 and
126,562,980 shares issued and 102,754,654 and 101,442,063 shares outstanding at
December 31, 2006 and 2005, respectively |
|
|
1,279 |
|
|
|
1,266 |
|
Additional paid-in capital |
|
|
2,294,827 |
|
|
|
2,271,888 |
|
Deferred compensation on restricted shares |
|
|
|
|
|
|
(1,182 |
) |
Accumulated deficit |
|
|
(1,114,553 |
) |
|
|
(962,688 |
) |
Accumulated other comprehensive (loss) income |
|
|
(224 |
) |
|
|
1,385 |
|
|
|
|
|
|
|
|
|
|
$ |
1,582,418 |
|
|
$ |
1,711,758 |
|
Less shares held in treasury, at cost, 25,120,917 common shares at December 31, 2006
and 2005 |
|
|
(460,132 |
) |
|
|
(460,132 |
) |
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
1,122,286 |
|
|
$ |
1,251,626 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
4,046,971 |
|
|
$ |
4,163,256 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
75
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
(As Restated see Note 1) |
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
Office Property |
|
$ |
414,343 |
|
|
$ |
372,759 |
|
|
$ |
475,797 |
|
Resort Residential Development Property |
|
|
372,148 |
|
|
|
502,723 |
|
|
|
309,945 |
|
Resort/Hotel Property |
|
|
142,205 |
|
|
|
142,618 |
|
|
|
214,531 |
|
|
|
|
|
|
|
|
|
|
|
Total Property Revenue |
|
$ |
928,696 |
|
|
$ |
1,018,100 |
|
|
$ |
1,000,273 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
Office Property real estate taxes |
|
$ |
41,674 |
|
|
$ |
38,062 |
|
|
$ |
57,393 |
|
Office Property operating expenses |
|
|
164,965 |
|
|
|
157,719 |
|
|
|
176,768 |
|
Resort Residential Development Property expense |
|
|
342,994 |
|
|
|
432,203 |
|
|
|
271,310 |
|
Resort/Hotel Property expense |
|
|
108,391 |
|
|
|
111,277 |
|
|
|
179,825 |
|
|
|
|
|
|
|
|
|
|
|
Total Property Expense |
|
$ |
658,024 |
|
|
$ |
739,261 |
|
|
$ |
685,296 |
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
270,672 |
|
|
$ |
278,839 |
|
|
$ |
314,977 |
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
Income from sale of investment in unconsolidated company |
|
$ |
47,709 |
|
|
$ |
29,934 |
|
|
$ |
|
|
Income from investment land sales |
|
|
|
|
|
|
8,622 |
|
|
|
18,879 |
|
(Loss) gain on joint venture of properties |
|
|
|
|
|
|
(2,743 |
) |
|
|
265,772 |
|
Interest and other income |
|
|
47,428 |
|
|
|
29,250 |
|
|
|
18,005 |
|
Corporate general and administrative |
|
|
(44,918 |
) |
|
|
(50,363 |
) |
|
|
(38,889 |
) |
Interest expense |
|
|
(134,273 |
) |
|
|
(136,664 |
) |
|
|
(176,771 |
) |
Amortization of deferred financing costs |
|
|
(7,605 |
) |
|
|
(8,108 |
) |
|
|
(13,056 |
) |
Extinguishment of debt |
|
|
|
|
|
|
(2,161 |
) |
|
|
(42,608 |
) |
Depreciation and amortization |
|
|
(147,407 |
) |
|
|
(141,366 |
) |
|
|
(159,898 |
) |
Impairment charges related to real estate assets |
|
|
|
|
|
|
|
|
|
|
(4,094 |
) |
Other expenses |
|
|
(12,997 |
) |
|
|
(3,964 |
) |
|
|
(725 |
) |
Equity in net income (loss) of unconsolidated companies: |
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties |
|
|
9,231 |
|
|
|
11,464 |
|
|
|
6,262 |
|
Resort Residential Development Properties |
|
|
(355 |
) |
|
|
(491 |
) |
|
|
(2,266 |
) |
Resort/Hotel Properties |
|
|
(5,109 |
) |
|
|
(1,541 |
) |
|
|
(245 |
) |
Temperature-Controlled Logistics Properties |
|
|
(15,669 |
) |
|
|
234 |
|
|
|
6,153 |
|
Other |
|
|
12,157 |
|
|
|
17,885 |
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
$ |
(251,808 |
) |
|
$ |
(250,012 |
) |
|
$ |
(123,761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES |
|
$ |
18,864 |
|
|
$ |
28,827 |
|
|
$ |
191,216 |
|
Minority interests |
|
|
(2,661 |
) |
|
|
(11,067 |
) |
|
|
(32,706 |
) |
Income tax benefit (expense) |
|
|
3,475 |
|
|
|
(8,462 |
) |
|
|
12,231 |
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
|
$ |
19,678 |
|
|
$ |
9,298 |
|
|
$ |
170,741 |
|
(Loss) income from discontinued operations, net of minority interests and taxes |
|
|
(502 |
) |
|
|
4,006 |
|
|
|
10,407 |
|
Impairment charges related to real estate assets from discontinued operations, net of
minority interests |
|
|
(105 |
) |
|
|
(953 |
) |
|
|
(2,978 |
) |
Gain on sale of real estate from discontinued operations, net of minority interest and taxes |
|
|
14,362 |
|
|
|
89,234 |
|
|
|
1,052 |
|
Cumulative effect of a change in accounting principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
(363 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
33,433 |
|
|
$ |
101,585 |
|
|
$ |
178,859 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
(23,963 |
) |
|
|
(23,723 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
1,395 |
|
|
$ |
69,547 |
|
|
$ |
147,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders before discontinued operations and
cumulative effect of a change in accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.40 |
|
(Loss) Income from discontinued operations, net of minority interests and taxes |
|
|
(0.01 |
) |
|
|
0.04 |
|
|
|
0.11 |
|
Impairment charges related to real estate assets from discontinued operations, net of
minority interests |
|
|
|
|
|
|
(0.01 |
) |
|
|
(0.03 |
) |
Gain on sale of real estate from discontinued operations, net of minority interests and
taxes |
|
|
0.14 |
|
|
|
0.89 |
|
|
|
0.01 |
|
Cumulative effect of a change in accounting principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders basic |
|
$ |
0.01 |
|
|
$ |
0.69 |
|
|
$ |
1.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders before discontinued operations and
cumulative effect of a change in accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.40 |
|
(Loss) Income from discontinued operations, net of minority interests and taxes |
|
|
(0.01 |
) |
|
|
0.04 |
|
|
|
0.10 |
|
Impairment charges related to real estate assets from discontinued operations, net of
minority interests |
|
|
|
|
|
|
(0.01 |
) |
|
|
(0.03 |
) |
Gain on sale of real estate from discontinued operations, net of minority interests and
taxes |
|
|
0.14 |
|
|
|
0.89 |
|
|
|
0.01 |
|
Cumulative effect of a change in accounting principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders diluted |
|
$ |
0.01 |
|
|
$ |
0.69 |
|
|
$ |
1.48 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
76
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(dollars in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Compensation |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Preferred Shares |
|
|
Preferred Shares |
|
|
Treasury Shares |
|
|
Common Shares |
|
|
Paid-in |
|
|
on Restricted |
|
|
Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
Net Value |
|
|
Shares |
|
|
Net Value |
|
|
Shares |
|
|
Net Value |
|
|
Shares |
|
|
Par Value |
|
|
Capital |
|
|
Shares |
|
|
(Deficit) |
|
|
(Loss) Income |
|
|
Total |
|
SHAREHOLDERS EQUITY, December 31, 2003 |
|
|
10,800,000 |
|
|
$ |
248,160 |
|
|
|
3,400,000 |
|
|
$ |
81,923 |
|
|
|
25,121,861 |
|
|
$ |
(460,148 |
) |
|
|
124,396,168 |
|
|
$ |
1,237 |
|
|
$ |
2,245,683 |
|
|
$ |
(4,102 |
) |
|
$ |
(877,120 |
) |
|
$ |
(13,829 |
) |
|
$ |
1,221,804 |
|
Cumulative effect of restatement on prior years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,570 |
) |
|
|
|
|
|
|
(2,570 |
) |
|
|
|
SHAREHOLDERS EQUITY, December 31, 2003 (As Restated see Note 1) |
|
|
10,800,000 |
|
|
$ |
248,160 |
|
|
|
3,400,000 |
|
|
$ |
81,923 |
|
|
|
25,121,861 |
|
|
$ |
(460,148 |
) |
|
|
124,396,168 |
|
|
$ |
1,237 |
|
|
$ |
2,245,683 |
|
|
$ |
(4,102 |
) |
|
$ |
(879,690 |
) |
|
$ |
(13,829 |
) |
|
$ |
1,219,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (As Restated see Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,859 |
|
|
|
|
|
|
|
178,859 |
|
Change in
Unrealized Net Gain on Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,036 |
|
|
|
1,036 |
|
Change in Unrealized Net Gain on Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,771 |
|
|
|
11,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191,666 |
|
Issuance of Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,954 |
|
|
|
|
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130 |
|
Exercise of Common Share Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,980 |
|
|
|
1 |
|
|
|
821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
822 |
|
Accretion of Discount on Employee Stock Option Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(252 |
) |
Issuance of Shares in Exchange for Operating
Partnership Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,916 |
|
|
|
7 |
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30 |
) |
Preferred Equity Issuance |
|
|
3,400,000 |
|
|
|
71,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,006 |
|
Stock Option Grants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
Amortization of Deferred Compensation on Restricted Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,869 |
|
|
|
|
|
|
|
|
|
|
|
1,869 |
|
Dividends on Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(149,034 |
) |
|
|
|
|
|
|
(149,034 |
) |
Dividends on Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,798 |
) |
|
|
|
|
|
|
(31,798 |
) |
|
|
|
SHAREHOLDERS EQUITY, December 31, 2004 (As Restated see Note 1) |
|
|
14,200,000 |
|
|
$ |
319,166 |
|
|
|
3,400,000 |
|
|
$ |
81,923 |
|
|
|
25,121,861 |
|
|
$ |
(460,148 |
) |
|
|
124,542,018 |
|
|
$ |
1,245 |
|
|
$ |
2,246,335 |
|
|
$ |
(2,233 |
) |
|
$ |
(881,663 |
) |
|
$ |
(1,022 |
) |
|
$ |
1,303,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (As Restated see Note 1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,585 |
|
|
|
|
|
|
|
101,585 |
|
Change in Unrealized Net Gain on Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(468 |
) |
|
|
(468 |
) |
Change in Unrealized Net Gain on Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,730 |
|
|
|
3,730 |
|
Change in Pension Liability at Unconsolidated Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(855 |
) |
|
|
(855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,992 |
|
Issuance of Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188,358 |
|
|
|
2 |
|
|
|
3,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,077 |
|
Exercise of Common Share Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
267,972 |
|
|
|
3 |
|
|
|
4,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,286 |
|
Accretion of Discount on Employee Stock Option Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253 |
) |
Issuance of Shares in Exchange for Operating
Partnership Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,564,632 |
|
|
|
16 |
|
|
|
18,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,400 |
|
Reissuance of Treasury Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(944 |
) |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
Stock Option Grants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64 |
|
Amortization of Deferred compensation on Restricted Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,051 |
|
|
|
|
|
|
|
|
|
|
|
1,051 |
|
Dividends on Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,572 |
) |
|
|
|
|
|
|
(150,572 |
) |
Dividends on Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,038 |
) |
|
|
|
|
|
|
(32,038 |
) |
|
|
|
SHAREHOLDERS EQUITY, December 31, 2005 (As Restated see Note 1) |
|
|
14,200,000 |
|
|
$ |
319,166 |
|
|
|
3,400,000 |
|
|
$ |
81,923 |
|
|
|
25,120,917 |
|
|
$ |
(460,132 |
) |
|
|
126,562,980 |
|
|
$ |
1,266 |
|
|
$ |
2,271,888 |
|
|
$ |
(1,182 |
) |
|
$ |
(962,688 |
) |
|
$ |
1,385 |
|
|
$ |
1,251,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,433 |
|
|
|
|
|
|
|
33,433 |
|
Change in Unrealized Net Gain on Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(568 |
) |
|
|
(568 |
) |
Change in Unrealized Net Gain on Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,760 |
) |
|
|
(1,760 |
) |
Change in Pension Liability at Unconsolidated Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
719 |
|
|
|
719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,824 |
|
Exercise of Common Share Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393,005 |
|
|
|
4 |
|
|
|
6,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,935 |
|
Accretion of Discount on Employee Stock Option Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(253 |
) |
Issuance of Shares in Exchange for Operating
Partnership Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
919,586 |
|
|
|
9 |
|
|
|
16,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,141 |
|
Amortization of Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260 |
|
Reclassification of Deferred Compensation on Restricted Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,182 |
) |
|
|
1,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of Restricted Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,051 |
|
Dividends on Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153,260 |
) |
|
|
|
|
|
|
(153,260 |
) |
Dividends on Preferred Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,038 |
) |
|
|
|
|
|
|
(32,038 |
) |
|
|
|
SHAREHOLDERS EQUITY, December 31, 2006 |
|
|
14,200,000 |
|
|
$ |
319,166 |
|
|
|
3,400,000 |
|
|
$ |
81,923 |
|
|
|
25,120,917 |
|
|
$ |
(460,132 |
) |
|
|
127,875,571 |
|
|
$ |
1,279 |
|
|
$ |
2,294,827 |
|
|
$ |
|
|
|
$ |
(1,114,553 |
) |
|
$ |
(224 |
) |
|
$ |
1,122,286 |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
77
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
|
|
|
|
(As Restated |
|
|
(As Restated |
|
|
|
|
|
|
see Note 1) |
|
|
see Note 1) |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
33,433 |
|
|
$ |
101,585 |
|
|
$ |
178,859 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
156,014 |
|
|
|
153,452 |
|
|
|
180,799 |
|
Extinguishment of debt |
|
|
|
|
|
|
2,271 |
|
|
|
6,459 |
|
Resort Residential Development cost of sales |
|
|
220,910 |
|
|
|
311,050 |
|
|
|
161,853 |
|
Resort Residential Development capital expenditures |
|
|
(425,860 |
) |
|
|
(356,603 |
) |
|
|
(202,767 |
) |
Impairment charges related to real estate assets |
|
|
125 |
|
|
|
1,122 |
|
|
|
7,605 |
|
Income from investment land sales |
|
|
|
|
|
|
(8,622 |
) |
|
|
(18,879 |
) |
Loss
(gain) on joint venture of properties, net |
|
|
|
|
|
|
2,743 |
|
|
|
(265,772 |
) |
Gain on property sales, net |
|
|
(36,256 |
) |
|
|
(105,258 |
) |
|
|
(1,241 |
) |
Income from sale of investment in unconsolidated company |
|
|
(47,709 |
) |
|
|
(29,934 |
) |
|
|
|
|
Minority interests |
|
|
13,178 |
|
|
|
27,494 |
|
|
|
34,217 |
|
Cumulative effect of a change in accounting principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
363 |
|
Non-cash compensation |
|
|
13,059 |
|
|
|
13,236 |
|
|
|
1,737 |
|
Amortization of debt premiums |
|
|
(1,792 |
) |
|
|
(2,452 |
) |
|
|
(2,386 |
) |
Equity in earnings from unconsolidated companies |
|
|
(255 |
) |
|
|
(27,551 |
) |
|
|
(9,624 |
) |
Ownership portion of management fees from unconsolidated companies |
|
|
7,462 |
|
|
|
6,609 |
|
|
|
1,833 |
|
Distributions received from unconsolidated companies |
|
|
9,083 |
|
|
|
30,992 |
|
|
|
7,982 |
|
Redemption of units under long-term incentive plans |
|
|
(4,349 |
) |
|
|
|
|
|
|
|
|
Change in assets and liabilities, net of effect of consolidations, acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and cash equivalents |
|
|
(15,354 |
) |
|
|
(1,626 |
) |
|
|
54,889 |
|
Accounts receivable and notes receivable |
|
|
(32,282 |
) |
|
|
886 |
|
|
|
(17,924 |
) |
Deferred rent receivable |
|
|
8,538 |
|
|
|
(14,562 |
) |
|
|
(16,246 |
) |
Income tax
asset -current and deferred, net |
|
|
7,458 |
|
|
|
7,723 |
|
|
|
(20,830 |
) |
Other assets |
|
|
(17,720 |
) |
|
|
(23,169 |
) |
|
|
(22,885 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
9,534 |
|
|
|
50,243 |
|
|
|
34,525 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(102,783 |
) |
|
$ |
139,629 |
|
|
$ |
92,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash impact of consolidation of previously unconsolidated entities |
|
$ |
|
|
|
$ |
|
|
|
$ |
334 |
|
Proceeds from property sales |
|
|
103,911 |
|
|
|
236,725 |
|
|
|
174,881 |
|
Proceeds from sale of investment in unconsolidated company and related property sales |
|
|
102,871 |
|
|
|
32,237 |
|
|
|
3,229 |
|
Proceeds from joint venture partners |
|
|
|
|
|
|
144,193 |
|
|
|
1,028,913 |
|
Acquisition of investment properties |
|
|
(30,675 |
) |
|
|
(192,154 |
) |
|
|
(381,672 |
) |
Development of investment properties |
|
|
(138,161 |
) |
|
|
(83,961 |
) |
|
|
(7,089 |
) |
Property improvements Office Properties |
|
|
(17,790 |
) |
|
|
(20,131 |
) |
|
|
(14,297 |
) |
Property improvements Resort/Hotel Properties |
|
|
(29,842 |
) |
|
|
(4,707 |
) |
|
|
(27,739 |
) |
Tenant improvement and leasing costs Office Properties |
|
|
(68,664 |
) |
|
|
(65,540 |
) |
|
|
(92,876 |
) |
Resort Residential Development Properties investments |
|
|
(27,610 |
) |
|
|
(32,876 |
) |
|
|
(35,428 |
) |
Decrease (increase) in restricted cash and cash equivalents |
|
|
9,584 |
|
|
|
(4,531 |
) |
|
|
75,395 |
|
Purchases of defeasance investments and other securities |
|
|
|
|
|
|
(115,710 |
) |
|
|
(203,643 |
) |
Proceeds from defeasance investment maturities and other securities |
|
|
186,428 |
|
|
|
23,273 |
|
|
|
14,560 |
|
Return of investment in unconsolidated companies |
|
|
81,288 |
|
|
|
18,785 |
|
|
|
129,693 |
|
Investment in unconsolidated companies |
|
|
(23,506 |
) |
|
|
(17,118 |
) |
|
|
(19,047 |
) |
Decrease (increase) in notes receivable |
|
|
69,018 |
|
|
|
(116,843 |
) |
|
|
(15,230 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
$ |
216,852 |
|
|
$ |
(198,358 |
) |
|
$ |
629,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing costs |
|
$ |
(4,060 |
) |
|
$ |
(15,659 |
) |
|
$ |
(12,918 |
) |
Borrowings under Credit Facility |
|
|
390,000 |
|
|
|
758,300 |
|
|
|
530,000 |
|
Payments under Credit Facility |
|
|
(506,000 |
) |
|
|
(666,800 |
) |
|
|
(626,500 |
) |
Notes payable proceeds |
|
|
282,370 |
|
|
|
387,200 |
|
|
|
577,146 |
|
Notes payable payments |
|
|
(193,178 |
) |
|
|
(346,968 |
) |
|
|
(1,027,661 |
) |
Junior subordinated notes |
|
|
|
|
|
|
77,321 |
|
|
|
|
|
Resort Residential Development Properties note payable borrowings |
|
|
276,064 |
|
|
|
257,411 |
|
|
|
111,672 |
|
Resort Residential Development Properties note payable payments |
|
|
(164,863 |
) |
|
|
(198,540 |
) |
|
|
(118,495 |
) |
Capital distributions to joint venture partner |
|
|
(18,555 |
) |
|
|
(18,516 |
) |
|
|
(8,565 |
) |
Capital contributions from joint venture partner |
|
|
8,566 |
|
|
|
7,834 |
|
|
|
2,833 |
|
Proceeds from exercise of share and unit options |
|
|
23,093 |
|
|
|
21,995 |
|
|
|
829 |
|
Reissuance of Treasury Shares |
|
|
|
|
|
|
16 |
|
|
|
|
|
Issuance of preferred shares-Series A |
|
|
|
|
|
|
|
|
|
|
71,006 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
(23,963 |
) |
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
(8,075 |
) |
Dividends and unitholder distributions |
|
|
(184,146 |
) |
|
|
(178,890 |
) |
|
|
(175,621 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
$ |
(122,747 |
) |
|
$ |
52,666 |
|
|
$ |
(708,312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(DECREASE ) INCREASE IN CASH AND CASH EQUIVALENTS |
|
$ |
(8,678 |
) |
|
$ |
(6,063 |
) |
|
$ |
14,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
86,228 |
|
|
|
92,291 |
|
|
|
78,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
77,550 |
|
|
$ |
86,228 |
|
|
$ |
92,291 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
78
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
References to we, us or our refer to Crescent Real Estate Equities Company and,
unless the context otherwise requires, Crescent Real Estate Equities Limited Partnership, which we
refer to as our Operating Partnership, and our other direct and indirect subsidiaries. We conduct
our business and operations through the Operating Partnership, our other subsidiaries and our joint
ventures. References to Crescent refer to Crescent Real Estate Equities Company. The sole
general partner of the Operating Partnership is Crescent Real Estate Equities, Ltd., a wholly-owned
subsidiary of Crescent Real Estate Equities Company, which we refer to as the General Partner.
We operate as a real estate investment trust, or REIT, for federal income tax purposes and
provide management, leasing and development services for some of our properties.
The following table shows our consolidated subsidiaries that owned or had an interest in real
estate assets and the real estate assets that each subsidiary owned or had an interest in as of
December 31, 2006.
|
|
|
Operating Partnership
|
|
Wholly-owned assets The Avallon IV, Dupont Centre and Financial Plaza, included in our Office Segment. |
|
|
|
|
|
Non wholly-owned assets, consolidated 301 Congress Avenue (50% interest), included in our
Office Segment. Fairmont Sonoma Mission Inn (80.1% interest), included in our Resort/Hotel
Segment. |
|
|
|
|
|
Non wholly-owned assets, unconsolidated 2211 Michelson Office Development Irvine (40% interest),
Miami Center (40% interest), One BriarLake Plaza (30% interest), Five Post Oak Park (30% interest),
Houston Center (23.85% interest in three office properties and the Houston Center Shops), The Crescent
Atrium (23.85% interest), The Crescent Office Towers (23.85% interest), Trammell Crow Center(1)
(23.85% interest), Post Oak Central (23.85% interest in three Office Properties), Fountain Place
(23.85% interest), Fulbright Tower (23.85% interest) and One Buckhead Plaza (35% interest), included in
our Office Segment. AmeriCold Realty Trust (31.7% interest in 92 properties), included in our
Temperature-Controlled Logistics Segment. Canyon Ranch Tucson and Canyon Ranch Lenox (48% interest),
included in our Resort/Hotel Segment. |
|
|
|
Crescent Real Estate Funding One,
L.P. (Funding One)
|
|
Wholly-owned assets Carter Burgess Plaza, 125 E. John Carpenter Freeway, The Aberdeen, Regency Plaza
One and The Citadel, included in our Office Segment. |
|
|
|
Hughes Center Entities(2)
|
|
Wholly-owned assets Hughes Center Properties (eight office properties each in a separate limited
liability company), 3883 Hughes Parkway (Office Development), included in our Office Segment. |
|
|
|
Crescent Real Estate Funding III,
IV and V, L.P. (Funding III, IV and
V)(3)
|
|
Non wholly-owned assets, consolidated Greenway Plaza Office Properties (ten Office Properties, 99.9%
interest), included in our Office Segment. Renaissance Houston Hotel (99.9% interest), included in our
Resort/Hotel Segment. |
|
|
|
Crescent Real Estate Funding VIII, L.P.
(Funding VIII)
|
|
Wholly-owned assets The Addison, Austin Centre, The Avallon I, II, III and V, Exchange Building, 816
Congress, Greenway I & IA (two office properties), Greenway II, Johns Manville Plaza, One Live Oak,
Palisades Central I, Palisades Central II, Stemmons Place, 3333 Lee Parkway, 44 Cook and 55 Madison,
included in our Office Segment. Omni Austin Hotel and Ventana Inn & Spa, included in our Resort/Hotel
Segment. |
|
|
|
Crescent Real Estate Funding XII, L.P.
(Funding XII)
|
|
Wholly-owned assets Briargate Office and Research Center, MacArthur Center I & II and Stanford
Corporate Center, included in our Office Segment. Park Hyatt Beaver Creek Resort & Spa, included in
our Resort/Hotel Segment. |
|
|
|
Crescent 707 17th Street, LLC
|
|
Wholly-owned assets 707 17th Street, included in our Office Segment and the Denver |
|
|
Marriott City Center, included in our Resort/Hotel Segment. |
|
|
|
Crescent Peakview Tower, LLC
|
|
Wholly-owned asset Peakview Tower, included in our Office Segment. |
|
|
|
Crescent Alhambra, LLC
|
|
Wholly-owned asset The Alhambra (two Office Properties), included in our Office Segment. |
|
|
|
Crescent Datran Center, LLC
|
|
Wholly-owned asset Datran Center (two Office Properties), included in our Office Segment. |
|
|
|
Crescent Spectrum Center, L.P.
|
|
Non wholly-owned asset, consolidated Spectrum Center (99.9% interest), included in our Office Segment. |
|
|
|
C-C Parkway Austin, L.P.
|
|
Non wholly-owned asset, consolidated Parkway at Oakhill Office Development (90% interest), included
in our Office Segment. |
|
|
|
Crescent Colonnade, LLC
|
|
Wholly-owned asset The BAC-Colonnade Building, included in our Office Segment. |
79
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Mira Vista Development Corp. (MVDC)
|
|
Non wholly-owned asset, consolidated
Mira Vista (98% interest),
included in our Resort Residential
Development Segment. |
|
|
|
Crescent Plaza Residential, L.P.
|
|
Wholly-owned asset the Residences at the Ritz-Carlton Development, included in our Resort
Residential Development Segment. |
|
|
|
Crescent Tower Residential, L.P.
|
|
Wholly-owned asset the Tower Residences and Regency Row at the Ritz-Carlton Development,
included in our Resort Residential Development Segment. |
|
|
|
Crescent Plaza Hotel Owner, L.P.
|
|
Wholly-owned asset the Ritz-Carlton Hotel Development, included in our Resort/Hotel Segment. |
|
|
|
Houston Area Development Corp.
(HADC)
|
|
Non wholly-owned assets, consolidated Spring Lakes (98% interest), included in our Resort
Residential Development Segment. |
|
|
|
Desert Mountain Development
Corporation (DMDC)
|
|
Non wholly-owned asset, consolidated Desert Mountain (93% interest), included in our Resort
Residential Development Segment. |
|
|
|
Crescent Resort Development
Inc. (CRDI)(4)
|
|
Wholly-owned asset The Residences at Park Hyatt Beaver Creek, included in our Resort
Residential Development Segment. |
|
|
|
|
|
Non wholly-owned assets, consolidated Brownstones (64% interest), Creekside Townhomes at
Riverfront Park (64% interest), Delgany (64% interest), One Riverfront (64% interest), Beaver
Creek Landing (59% interest), Eagle Ranch (76% interest), Grays Crossing (71% interest),
Main Street Vacation Club (30% interest), Northstar Highlands (57% interest), Northstar
Village (57% interest), Old Greenwood (71% interest), Riverbend (68% interest), Village Walk
(58% interest), Tahoe Mountain Club (71% interest) and Ritz-Carlton Highlands (71% interest),
included in our Resort Residential Development Segment. |
|
|
|
|
|
Non wholly-owned assets, unconsolidated Blue River Land Company, LLC Three Peaks (33.2%
interest), EW Deer Valley, LLC (35.7% interest) and East West Resort Development XIV, L.P.,
L.L.L.P. (26.8% interest), included in our Resort Residential Development Segment. |
|
|
|
(1) |
|
We own 23.85% of the economic interest in Trammell Crow Center through our
ownership of a 23.85% interest in the joint venture that holds fee simple title to the
Office 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 the building. |
|
(2) |
|
In addition, we own nine retail parcels located in Hughes Center. |
|
(3) |
|
Funding III owns nine of the ten office properties in the Greenway Plaza office
portfolio and the Renaissance Houston Hotel; Funding IV owns the central heated and chilled
water plant building located at Greenway Plaza; and Funding V owns 9 Greenway, the
remaining office property in the Greenway Plaza office portfolio. |
|
(4) |
|
For non wholly-owned assets, we receive a preferred return on our invested
capital and return of our capital before cash flows are allocated to the partners. |
See Note 10, Investments in Unconsolidated Companies, for a table that lists our
ownership in significant unconsolidated joint ventures and investments as of December 31, 2006.
See Note 12, Notes Payable and Borrowings Under Credit Facility, for a list of certain other
subsidiaries, all of which are consolidated in our financial statements and were formed primarily
for the purpose of obtaining secured debt or joint venture financing.
Segments
Our assets and operations consisted of four investment segments at December 31, 2006, as
follows:
|
|
|
Office Segment; |
|
|
|
|
Resort Residential Development Segment; |
|
|
|
|
Resort/Hotel Segment; and |
|
|
|
|
Temperature-Controlled Logistics Segment. |
80
Within these segments, we owned in whole or in part the following operating real estate
assets, which we refer to as the Properties, as of December 31, 2006:
|
|
|
Office Segment consisted of 71 office properties, which we refer to as the Office
Properties, located in 26 metropolitan submarkets in eight states, with an aggregate of
approximately 27.6 million net rentable square feet. Fifty-four of the Office
Properties are wholly-owned and 17 are owned through joint ventures, one of which is
consolidated and 16 of which are unconsolidated. |
|
|
|
|
Resort Residential Development Segment consisted of our ownership of common stock
representing interests of 98% to 100% in four Resort Residential Development
Corporations and two limited partnerships, which are consolidated. These Resort
Residential Development Corporations, through partnership arrangements, owned in whole
or in part, 30 active and planned upscale resort residential development properties,
which we refer to as the Resort Residential Development Properties. |
|
|
|
|
Resort/Hotel Segment consisted of five luxury and destination fitness resorts and
spas with a total of 949 rooms/guest nights and three upscale business-class hotel
properties with a total of 1,376 rooms, which we refer to as the Resort/Hotel
Properties. Five of the Resort/Hotel Properties are wholly-owned, one is owned through
a joint venture that is consolidated and two are owned through joint ventures that are
unconsolidated. |
|
|
|
|
Temperature-Controlled Logistics Segment consisted of our 31.7% interest in
AmeriCold Realty Trust, or AmeriCold, a REIT. As of December 31, 2006, AmeriCold
operated 104 facilities, of which 91 were wholly-owned or leased, one was partially-owned and 12
were managed for outside owners. The 92 owned or leased and partially-owned facilities, which we
refer to as the Temperature-Controlled Logistics Properties, had an aggregate of
approximately 497.8 million cubic feet (19.0 million square feet) of warehouse space.
AmeriCold also owned one quarry and the related land. |
Basis of Presentation
The accompanying consolidated financial statements include all of our direct and indirect
subsidiary entities. The equity interests that we do not own in those direct and indirect
subsidiaries are reflected as minority interests. All significant intercompany balances and
transactions have been eliminated.
Restatement of Financial Data
In connection with the closing of our financial records
for the year ended December 31, 2006, our management identified three accounting-related items
discussed below that affected our financial statements. In light of these accounting items, on February 28, 2007, our
Audit Committee of the Board of Trust Managers determined that readers should no longer rely on our previously
filed financial statements and other financial information for the fiscal years 2005, 2004, 2003, 2002 and 2001, and component fiscal quarters,
as well as for the first, second and third quarters of fiscal year 2006, and we filed a Form 8-K, Item 4.02, Non-Reliance
on Previously Issued Financial Statements on a Related Audit Report or Completed Interim Review. We have reflected all required
restatements in this Form 10-K as described below.
Calculation of Minority Interest
In February 1998, we completed our first offering of Series A Preferred Shares. In connection
with this offering, the Operating Partnership issued Series A Preferred Units to us in exchange for
the contribution of the proceeds from the offering. Subsequent Series A Preferred Share Offerings
in April 2002 and January 2004 and the Series B Preferred Share Offering in May 2002 were recorded
in the same manner as the February 1998 offering. In association with these offerings, the Limited
Partnership Agreement of the Operating Partnership outlines terms of the allocation of
distributions between us and the other limited partners of the Operating Partnership, whom we refer
to as Unitholders. After reviewing the Limited Partnership Agreement of the Operating Partnership,
we determined the distributions on the Preferred Units which we hold occurs prior to a distribution
to the Unitholders. Therefore, net income would first be allocated to cover the dividend on the
Preferred Shares and then an allocation should be made to the Unitholders.
Our calculation of minority interest has incorrectly allocated net income between us and
Unitholders based on respective ownership percentages and then deducting the preferred dividend
against the allocation to us. Additionally, income associated with a
Share Repurchase Agreement in the years 2000 through 2002
was not allocated to the Unitholders, resulting in an incorrect allocation of minority interest. The cumulative impact of the restatement, whereby the calculation
deducts the preferred dividend from net income and then allocates the
remaining net income, including the income associated with the Share
Repurchase Agreement, between
us and Unitholders, resulted in a $14.6 million increase in Net Income for the years ending December 31, 1998 through 2005. We have reflected this impact
as a cumulative adjustment to decrease Accumulated
Deficit as of December 31, 2003 by $5.0 million
and restated our Net Income, increasing the amounts by $4.8
million for each of the years ended December 31, 2005 and 2004, respectively.
81
Refundable Fees for Club Member Services
One of our golf clubs has a limited number of non-equity club members who are entitled to
repayment of a portion of their dues up to a fixed amount per member upon surrender of their
memberships. We are required to deposit a fixed percentage of all dues collected from these
members into a separate cash fund and then use this fund to make payments to members that choose to
surrender their membership. Our obligation for payment to the members for surrendered memberships
is funded by the amounts deposited into the separate cash fund.
In prior years, the liability
associated with these memberships was recognized through a charge to
expense equal to the amount funded at the balance sheet date in the separate cash
fund. We have determined that the appropriate methodology
associated with refundable fees for club member services is outlined in Staff Accounting Bulletin
No. 104, Revenue Recognition, under which revenue related to refundable fees for services should
not be recognized until the fee is fixed and determinable. For these memberships, member dues
should not have been recognized as revenue until the dues paid
exceeded the maximum refund amount available
to the member. The impact of this adjustment before taxes and
minority interests was to reduce revenue ($0.8 million and $1.3
million for the years ended December 31, 2005 and 2004, respectively)
by the amount of refundable dues received during each period and
reduce expense by the amounts recognized as a liability ($0.4 million
and $0.5 million for the years ended December 31, 2005 and 2004,
respectively). This results in a liability to members at each balance
sheet date equal to the refundable amount (an
increase in the liability of $11.0 million at December 31, 2005).
Application of the guidance resulted in a $4.7
million decrease in Net Income for the years ended December 31,
1997 through 2005 ($9.3 million before taxes and minority interests). We have
recognized this impact as a cumulative adjustment to increase
Accumulated Deficit as of December 31,
2003 by $4.1 million ($8.1 million before taxes
and minority interests) and restated our Net Income, decreasing the
amounts by $0.2 million and $0.4 million for the years ended December 31, 2005 and 2004,
respectively ($0.4 million and $0.8 million before taxes and minority
interests, respectively).
Classification of Club Membership Intangible Asset
At the time of acquisition of one of our golf clubs, a portion of the purchase price was
recorded as a membership intangible asset related to the acquired right to sell a predetermined
number of equity memberships in the club. As memberships were sold, a
pro rata amount of the membership intangible was charged to deferred
revenue and amortized. We have determined
that the right to sell a predetermined number of equity club memberships does not meet the criteria
for the recording of an identifiable intangible asset. Instead the
membership intangible asset should have been recorded as goodwill at
the time of acquisition and amortized until our adoption of SFAS
No. 142, Goodwill and Other Intangible Assets, then
evaluated annually for impairment. This resulted in an understatement
of goodwill ($19.0 million at December 31, 2005), an understatement
of deferred revenue ($17.7 million at December 31, 2005) and an
overstatement of amortization expense ($3.4 million and $3.1 million
for the years ended December 31, 2005 and 2004, respectively). The cumulative impact of the
restatement results in a $0.3 million decrease in Net Income for
the years ended December 31, 1997 through 2005 ($0.4 million before taxes and
minority interests). We have recognized this impact as a cumulative
adjustment to increase Accumulated Deficit as of December 31,
2003 by $3.5 million ($6.9 million before taxes and minority
interests) and restated our Net Income, increasing the amounts by
$1.7 million and $1.5 million for the years ended December 31, 2005 and 2004,
respectively ($3.4 million and $3.1 million before taxes and minority
interests, respectively).
The following table reconciles the As Previously Reported to the As Restated Accumulated
Deficit resulting from the cumulative impact of the restatement items on previously reporting
financial statements.
|
|
|
|
|
(dollars in thousands) |
|
Accumulated (Deficit) |
|
|
|
|
|
Balance at December 31, 2003 (as previously reported) |
|
$ |
(877,120 |
) |
Effect of Calculation of Minority Interest |
|
|
4,969 |
|
Effect of Refundable fees for Club Member Services |
|
|
(4,063 |
) |
Effect of Classification of Club Membership Intangible Asset |
|
|
(3,476 |
) |
|
|
|
|
Balance at December 31, 2003 (Restated) |
|
$ |
(879,690 |
) |
|
|
|
|
The following tables summarize the effect of the restatement items on the previously reported
Consolidated Financial Statements line items presented in our Consolidated Financial Statements
included in this Annual Report on Form 10-K as of December 31, 2006 and for the years ended
December 31, 2005 and 2004, respectively (in thousands, except per share amounts).
82
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
|
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
As Restated |
|
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
186,878 |
|
|
$ |
(3,650 |
) |
|
$ |
183,228 |
|
|
$ |
|
|
|
$ |
183,228 |
|
Land improvements |
|
|
100,278 |
|
|
|
|
|
|
|
100,278 |
|
|
|
|
|
|
|
100,278 |
|
Accumulated Depreciation |
|
|
(29,784 |
) |
|
|
|
|
|
|
(29,784 |
) |
|
|
|
|
|
|
(29,784 |
) |
Buildings and improvements |
|
|
2,245,064 |
|
|
|
(54,305 |
) |
|
|
2,190,759 |
|
|
|
|
|
|
|
2,190,759 |
|
Accumulated Depreciation |
|
|
(464,049 |
) |
|
|
7,421 |
|
|
|
(456,628 |
) |
|
|
|
|
|
|
(456,628 |
) |
Furniture, fixtures and equipment |
|
|
71,365 |
|
|
|
(218 |
) |
|
|
71,147 |
|
|
|
|
|
|
|
71,147 |
|
Accumulated Depreciation |
|
|
(34,129 |
) |
|
|
|
|
|
|
(34,129 |
) |
|
|
|
|
|
|
(34,129 |
) |
Land held for investment or development |
|
|
574,527 |
|
|
|
(61,487 |
) |
|
|
513,040 |
|
|
|
|
|
|
|
513,040 |
|
Properties held for disposition, net |
|
|
4,137 |
|
|
|
114,068 |
|
|
|
118,205 |
|
|
|
|
|
|
|
118,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in real estate |
|
$ |
2,654,287 |
|
|
$ |
1,829 |
|
|
$ |
2,656,116 |
|
|
$ |
|
|
|
|
2,656,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
86,228 |
|
|
|
|
|
|
|
86,228 |
|
|
|
|
|
|
|
86,228 |
|
Restricted cash and cash equivalents |
|
|
84,699 |
|
|
|
|
|
|
|
84,699 |
|
|
|
|
|
|
|
84,699 |
|
Defeasance investments |
|
|
274,134 |
|
|
|
|
|
|
|
274,134 |
|
|
|
|
|
|
|
274,134 |
|
Accounts receivable, net |
|
|
56,356 |
|
|
|
|
|
|
|
56,356 |
|
|
|
|
|
|
|
56,356 |
|
Deferred rent receivable |
|
|
70,201 |
|
|
|
(127 |
) |
|
|
70,074 |
|
|
|
|
|
|
|
70,074 |
|
Investments in unconsolidated companies |
|
|
393,535 |
|
|
|
|
|
|
|
393,535 |
|
|
|
|
|
|
|
393,535 |
|
Notes receivable, net |
|
|
219,016 |
|
|
|
|
|
|
|
219,016 |
|
|
|
|
|
|
|
219,016 |
|
Income tax asset current and deferred |
|
|
8,291 |
|
|
|
|
|
|
|
8,291 |
|
|
|
2,441 |
|
|
|
10,732 |
|
Other assets, net |
|
|
295,115 |
|
|
|
(1,702 |
) |
|
|
293,413 |
|
|
|
18,953 |
|
|
|
312,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,141,862 |
|
|
$ |
|
|
|
$ |
4,141,862 |
|
|
$ |
21,394 |
|
|
|
4,163,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under Credit Facility |
|
$ |
234,000 |
|
|
$ |
|
|
|
$ |
234,000 |
|
|
$ |
|
|
|
$ |
234,000 |
|
Notes
payable |
|
|
1,948,152 |
|
|
|
(14,606 |
) |
|
|
1,933,546 |
|
|
|
|
|
|
|
1,933,546 |
|
Notes
payable, accounts payable, accrued expenses and other liabilities, properties held for disposition |
|
|
|
|
|
|
19,306 |
|
|
|
19,306 |
|
|
|
|
|
|
|
19,306 |
|
Junior subordinated notes |
|
|
77,321 |
|
|
|
|
|
|
|
77,321 |
|
|
|
|
|
|
|
77,321 |
|
Accounts payable, accrued expenses and other
liabilities |
|
|
471,920 |
|
|
|
(4,700 |
) |
|
|
467,220 |
|
|
|
28,698 |
|
|
|
495,918 |
|
Income tax liability current and deferred |
|
|
1,093 |
|
|
|
|
|
|
|
1,093 |
|
|
|
(1,093 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
2,732,486 |
|
|
$ |
|
|
|
$ |
2,732,486 |
|
|
$ |
27,605 |
|
|
|
2,760,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY INTERESTS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating partnership units |
|
$ |
113,819 |
|
|
$ |
|
|
|
$ |
113,819 |
|
|
$ |
(15,160 |
) |
|
$ |
98,659 |
|
Consolidated real estate partnerships |
|
|
53,562 |
|
|
|
|
|
|
|
53,562 |
|
|
|
(682 |
) |
|
|
52,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minority interests |
|
$ |
167,381 |
|
|
$ |
|
|
|
$ |
167,381 |
|
|
$ |
(15,842 |
) |
|
|
151,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible Cumulative Preferred
Shares |
|
$ |
319,166 |
|
|
$ |
|
|
|
$ |
319,166 |
|
|
$ |
|
|
|
$ |
319,166 |
|
Series B Cumulative Redeemable Preferred
Shares |
|
|
81,923 |
|
|
|
|
|
|
|
81,923 |
|
|
|
|
|
|
|
81,923 |
|
Common shares |
|
|
1,266 |
|
|
|
|
|
|
|
1,266 |
|
|
|
|
|
|
|
1,266 |
|
Additional paid-in capital |
|
|
2,271,888 |
|
|
|
|
|
|
|
2,271,888 |
|
|
|
|
|
|
|
2,271,888 |
|
Deferred compensation on restricted shares |
|
|
(1,182 |
) |
|
|
|
|
|
|
(1,182 |
) |
|
|
|
|
|
|
(1,182 |
) |
Accumulated deficit |
|
|
(972,319 |
) |
|
|
|
|
|
|
(972,319 |
) |
|
|
9,631 |
|
|
|
(962,688 |
) |
Accumulated other comprehensive (loss) income |
|
|
1,385 |
|
|
|
|
|
|
|
1,385 |
|
|
|
|
|
|
|
1,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,702,127 |
|
|
$ |
|
|
|
$ |
1,702,127 |
|
|
$ |
9,631 |
|
|
|
1,711,758 |
|
Less shares held in treasury |
|
|
(460,132 |
) |
|
|
|
|
|
|
(460,132 |
) |
|
|
|
|
|
|
(460,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
1,241,995 |
|
|
$ |
|
|
|
$ |
1,241,995 |
|
|
$ |
9,631 |
|
|
|
1,251,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
4,141,862 |
|
|
$ |
|
|
|
$ |
4,141,862 |
|
|
$ |
21,394 |
|
|
|
4,163,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Property |
|
$ |
377,337 |
|
|
$ |
(4,578 |
) |
|
$ |
372,759 |
|
|
$ |
|
|
|
$ |
372,759 |
|
Resort Residential Development Property |
|
|
503,568 |
|
|
|
|
|
|
|
503,568 |
|
|
|
(845 |
) |
|
|
502,723 |
|
Resort/Hotel Property |
|
|
142,618 |
|
|
|
|
|
|
|
142,618 |
|
|
|
|
|
|
|
142,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Revenue |
|
$ |
1,023,523 |
|
|
$ |
(4,578 |
) |
|
$ |
1,018,945 |
|
|
$ |
(845 |
) |
|
$ |
1,018,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Property real estate taxes |
|
$ |
39,195 |
|
|
$ |
(1,133 |
) |
|
$ |
38,062 |
|
|
$ |
|
|
|
$ |
38,062 |
|
Office Property operating expenses |
|
|
160,077 |
|
|
|
(2,358 |
) |
|
|
157,719 |
|
|
|
|
|
|
|
157,719 |
|
Resort Residential Development Property expense |
|
|
432,620 |
|
|
|
(6 |
) |
|
|
432,614 |
|
|
|
(411 |
) |
|
|
432,203 |
|
Resort/Hotel Property expense |
|
|
111,277 |
|
|
|
|
|
|
|
111,277 |
|
|
|
|
|
|
|
111,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expense |
|
$ |
743,169 |
|
|
$ |
(3,497 |
) |
|
$ |
739,672 |
|
|
$ |
(411 |
) |
|
$ |
739,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
280,354 |
|
|
$ |
(1,081 |
) |
|
$ |
279,273 |
|
|
$ |
(434 |
) |
|
$ |
278,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from sale of investment in unconsolidated company |
|
$ |
29,934 |
|
|
$ |
|
|
|
$ |
29,934 |
|
|
$ |
|
|
|
$ |
29,934 |
|
Income from investment land sales |
|
|
8,622 |
|
|
|
|
|
|
|
8,622 |
|
|
|
|
|
|
|
8,622 |
|
Loss on joint venture of properties |
|
|
(2,743 |
) |
|
|
|
|
|
|
(2,743 |
) |
|
|
|
|
|
|
(2,743 |
) |
Interest and other income |
|
|
29,250 |
|
|
|
|
|
|
|
29,250 |
|
|
|
|
|
|
|
29,250 |
|
Corporate general and administrative |
|
|
(50,363 |
) |
|
|
|
|
|
|
(50,363 |
) |
|
|
|
|
|
|
(50,363 |
) |
Interest expense |
|
|
(136,664 |
) |
|
|
|
|
|
|
(136,664 |
) |
|
|
|
|
|
|
(136,664 |
) |
Amortization of deferred financing costs |
|
|
(8,108 |
) |
|
|
|
|
|
|
(8,108 |
) |
|
|
|
|
|
|
(8,108 |
) |
Extinguishment of debt |
|
|
(2,161 |
) |
|
|
|
|
|
|
(2,161 |
) |
|
|
|
|
|
|
(2,161 |
) |
Depreciation and amortization |
|
|
(146,173 |
) |
|
|
1,389 |
|
|
|
(144,784 |
) |
|
|
3,418 |
|
|
|
(141,366 |
) |
Impairment charges related to real estate assets |
|
|
(1,047 |
) |
|
|
1,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
(3,964 |
) |
|
|
|
|
|
|
(3,964 |
) |
|
|
|
|
|
|
(3,964 |
) |
Equity in net income (loss) of unconsolidated companies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties |
|
|
11,464 |
|
|
|
|
|
|
|
11,464 |
|
|
|
|
|
|
|
11,464 |
|
Resort Residential Development Properties |
|
|
(491 |
) |
|
|
|
|
|
|
(491 |
) |
|
|
|
|
|
|
(491 |
) |
Resort/Hotel Properties |
|
|
(1,541 |
) |
|
|
|
|
|
|
(1,541 |
) |
|
|
|
|
|
|
(1,541 |
) |
Temperature-Controlled Logistics Properties |
|
|
234 |
|
|
|
|
|
|
|
234 |
|
|
|
|
|
|
|
234 |
|
Other |
|
|
17,885 |
|
|
|
|
|
|
|
17,885 |
|
|
|
|
|
|
|
17,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
$ |
(255,866 |
) |
|
$ |
2,436 |
|
|
$ |
(253,430 |
) |
|
$ |
3,418 |
|
|
$ |
(250,012 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS
AND INCOME TAXES |
|
$ |
24,488 |
|
|
$ |
1,355 |
|
|
$ |
25,843 |
|
|
$ |
2,984 |
|
|
$ |
28,827 |
|
Minority interests |
|
|
(15,239 |
) |
|
|
(204 |
) |
|
|
(15,443 |
) |
|
|
4,376 |
|
|
|
(11,067 |
) |
Income tax expense |
|
|
(7,378 |
) |
|
|
(2 |
) |
|
|
(7,380 |
) |
|
|
(1,082 |
) |
|
|
(8,462 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING PRINCIPLE |
|
$ |
1,871 |
|
|
$ |
1,149 |
|
|
$ |
3,020 |
|
|
$ |
6,278 |
|
|
$ |
9,298 |
|
Income from discontinued operations, net of minority
interests and taxes |
|
|
4,266 |
|
|
|
(260 |
) |
|
|
4,006 |
|
|
|
|
|
|
|
4,006 |
|
Impairment charges related to real estate assets from
discontinued operations, net of minority interests |
|
|
(64 |
) |
|
|
(889 |
) |
|
|
(953 |
) |
|
|
|
|
|
|
(953 |
) |
Gain on sale of real estate from discontinued
operations, net of minority interest |
|
|
89,234 |
|
|
|
|
|
|
|
89,234 |
|
|
|
|
|
|
|
89,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
95,307 |
|
|
$ |
|
|
|
$ |
95,307 |
|
|
$ |
6,278 |
|
|
$ |
101,585 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
63,269 |
|
|
$ |
|
|
|
$ |
63,269 |
|
|
$ |
6,278 |
|
|
$ |
69,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
BASIC EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to
common shareholders before
discontinued operations and
cumulative effect of a change
in accounting principle |
|
$ |
(0.30 |
) |
|
$ |
0.01 |
|
|
$ |
(0.29 |
) |
|
$ |
0.06 |
|
|
$ |
(0.23 |
) |
Income from discontinued
operations, net of minority
interests |
|
|
0.04 |
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
0.04 |
|
Impairment charges related to
real estate assets from
discontinued operations, net
of minority interests |
|
|
|
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.01 |
) |
Gain on sale of real estate
from discontinued operations,
net of minority interests |
|
|
0.89 |
|
|
|
|
|
|
|
0.89 |
|
|
|
|
|
|
|
0.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to common shareholders
basic |
|
$ |
0.63 |
|
|
$ |
|
|
|
$ |
0.63 |
|
|
$ |
0.06 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to
common shareholders before
discontinued operations and
cumulative effect of a change
in accounting principle |
|
$ |
(0.30 |
) |
|
$ |
0.01 |
|
|
$ |
(0.29 |
) |
|
$ |
0.06 |
|
|
$ |
(0.23 |
) |
Income from discontinued
operations, net of minority
interests |
|
|
0.04 |
|
|
|
|
|
|
|
0.04 |
|
|
|
|
|
|
|
0.04 |
|
Impairment charges related to
real estate assets from
discontinued operations, net
of minority interests |
|
|
|
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.01 |
) |
Gain on sale of real estate
from discontinued operations,
net of minority interests |
|
|
0.89 |
|
|
|
|
|
|
|
0.89 |
|
|
|
|
|
|
|
0.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to common shareholders
diluted |
|
$ |
0.63 |
|
|
$ |
|
|
|
$ |
0.63 |
|
|
$ |
0.06 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For year ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Property |
|
$ |
481,710 |
|
|
$ |
(5,913 |
) |
|
$ |
475,797 |
|
|
$ |
|
|
|
$ |
475,797 |
|
Resort Residential Development Property |
|
|
311,197 |
|
|
|
|
|
|
|
311,197 |
|
|
|
(1,252 |
) |
|
|
309,945 |
|
Resort/Hotel Property |
|
|
214,531 |
|
|
|
|
|
|
|
214,531 |
|
|
|
|
|
|
|
214,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Revenue |
|
$ |
1,007,438 |
|
|
$ |
(5,913 |
) |
|
$ |
1,001,525 |
|
|
$ |
(1,252 |
) |
|
$ |
1,000,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Property real estate taxes |
|
$ |
58,776 |
|
|
$ |
(1,383 |
) |
|
$ |
57,393 |
|
|
$ |
|
|
|
$ |
57,393 |
|
Office Property operating expenses |
|
|
179,413 |
|
|
|
(2,645 |
) |
|
|
176,768 |
|
|
|
|
|
|
|
176,768 |
|
Resort Residential Development Property expense |
|
|
271,819 |
|
|
|
(52 |
) |
|
|
271,767 |
|
|
|
(457 |
) |
|
|
271,310 |
|
Resort/Hotel Property expense |
|
|
179,825 |
|
|
|
|
|
|
|
179,825 |
|
|
|
|
|
|
|
179,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expense |
|
$ |
689,833 |
|
|
$ |
(4,080 |
) |
|
$ |
685,753 |
|
|
$ |
(457) |
|
|
$ |
685,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
317,605 |
|
|
$ |
(1,833 |
) |
|
$ |
315,772 |
|
|
$ |
(795) |
|
|
$ |
314,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from investment land sales |
|
$ |
18,879 |
|
|
$ |
|
|
|
$ |
18,879 |
|
|
$ |
|
|
|
$ |
18,879 |
|
Gain on joint venture of properties |
|
|
265,772 |
|
|
|
|
|
|
|
265,772 |
|
|
|
|
|
|
|
265,772 |
|
Interest and other income |
|
|
18,005 |
|
|
|
|
|
|
|
18,005 |
|
|
|
|
|
|
|
18,005 |
|
Corporate general and administrative |
|
|
(38,889 |
) |
|
|
|
|
|
|
(38,889 |
) |
|
|
|
|
|
|
(38,889 |
) |
Interest expense |
|
|
(176,771 |
) |
|
|
|
|
|
|
(176,771 |
) |
|
|
|
|
|
|
(176,771 |
) |
Amortization of deferred financing costs |
|
|
(13,056 |
) |
|
|
|
|
|
|
(13,056 |
) |
|
|
|
|
|
|
(13,056 |
) |
Extinguishment of debt |
|
|
(42,608 |
) |
|
|
|
|
|
|
(42,608 |
) |
|
|
|
|
|
|
(42,608 |
) |
Depreciation and amortization |
|
|
(164,056 |
) |
|
|
1,084 |
|
|
|
(162,972 |
) |
|
|
3,074 |
|
|
|
(159,898 |
) |
Impairment charges related to real estate assets |
|
|
(4,094 |
) |
|
|
|
|
|
|
(4,094 |
) |
|
|
|
|
|
|
(4,094 |
) |
Other expenses |
|
|
(725 |
) |
|
|
|
|
|
|
(725 |
) |
|
|
|
|
|
|
(725 |
) |
Equity in net income (loss) of unconsolidated
companies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties |
|
|
6,262 |
|
|
|
|
|
|
|
6,262 |
|
|
|
|
|
|
|
6,262 |
|
Resort Residential Development Properties |
|
|
(2,266 |
) |
|
|
|
|
|
|
(2,266 |
) |
|
|
|
|
|
|
(2,266 |
) |
Resort/Hotel Properties |
|
|
(245 |
) |
|
|
|
|
|
|
(245 |
) |
|
|
|
|
|
|
(245 |
) |
Temperature-Controlled Logistics Properties |
|
|
6,153 |
|
|
|
|
|
|
|
6,153 |
|
|
|
|
|
|
|
6,153 |
|
Other |
|
|
(280 |
) |
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
$ |
(127,919 |
) |
|
$ |
1,084 |
|
|
$ |
(126,835 |
) |
|
$ |
3,074 |
|
|
$ |
(123,761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY
INTERESTS AND INCOME TAXES |
|
$ |
189,686 |
|
|
$ |
(749 |
) |
|
$ |
188,937 |
|
|
$ |
2,279 |
|
|
$ |
191,216 |
|
Minority interests |
|
|
(37,294 |
) |
|
|
117 |
|
|
|
(37,177 |
) |
|
|
4,471 |
|
|
|
(32,706 |
) |
Income tax benefit (expense) |
|
|
13,078 |
|
|
|
(20 |
) |
|
|
13,058 |
|
|
|
(827 |
) |
|
|
12,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
|
$ |
165,470 |
|
|
$ |
(652 |
) |
|
$ |
164,818 |
|
|
$ |
5,923 |
|
|
$ |
170,741 |
|
Income from discontinued operations, net of
minority interests and taxes |
|
|
9,755 |
|
|
|
652 |
|
|
|
10,407 |
|
|
|
|
|
|
|
10,407 |
|
Impairment charges related to real estate assets
from discontinued operations, net of minority
interests |
|
|
(2,978 |
) |
|
|
|
|
|
|
(2,978 |
) |
|
|
|
|
|
|
(2,978 |
) |
Gain on sale of real estate from discontinued
operations, net of minority interest and taxes |
|
|
1,052 |
|
|
|
|
|
|
|
1,052 |
|
|
|
|
|
|
|
1,052 |
|
Cumulative effect of a change in accounting
principle, net of minority interests |
|
|
(363 |
) |
|
|
|
|
|
|
(363 |
) |
|
|
|
|
|
|
(363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
172,936 |
|
|
$ |
|
|
|
$ |
172,936 |
|
|
$ |
5,923 |
|
|
$ |
178,859 |
|
Series A Preferred Share distributions |
|
|
(23,723 |
) |
|
|
|
|
|
|
(23,723 |
) |
|
|
|
|
|
|
(23,723 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
141,138 |
|
|
$ |
|
|
|
$ |
141,138 |
|
|
$ |
5,923 |
|
|
$ |
147,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
BASIC EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common
shareholders before
discontinued operations and
cumulative effect of a change
in accounting principle |
|
$ |
1.35 |
|
|
$ |
(0.01 |
) |
|
$ |
1.34 |
|
|
$ |
0.06 |
|
|
$ |
1.40 |
|
Income from discontinued
operations, net of minority
interests and taxes |
|
|
0.10 |
|
|
|
0.01 |
|
|
|
0.11 |
|
|
|
|
|
|
|
0.11 |
|
Impairment charges related to
real estate assets from
discontinued operations, net
of minority interests |
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.03 |
) |
Gain on sale of real estate
from discontinued operations,
net of minority interests and
taxes |
|
|
0.01 |
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to common shareholders -
basic |
|
$ |
1.43 |
|
|
$ |
|
|
|
$ |
1.43 |
|
|
$ |
0.06 |
|
|
$ |
1.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS PER SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common
shareholders before
discontinued operations and
cumulative effect of a change
in accounting principle |
|
$ |
1.34 |
|
|
$ |
|
|
|
$ |
1.34 |
|
|
$ |
0.06 |
|
|
$ |
1.40 |
|
Income from discontinued
operations, net of minority
interests and taxes |
|
|
0.10 |
|
|
|
|
|
|
|
0.10 |
|
|
|
|
|
|
|
0.10 |
|
Impairment charges related to
real estate assets from
discontinued operations, net
of minority interests |
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.03 |
) |
Gain on sale of real estate
from discontinued operations,
net of minority interests and
taxes |
|
|
0.01 |
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to common shareholders -
diluted |
|
$ |
1.42 |
|
|
$ |
|
|
|
$ |
1.42 |
|
|
$ |
0.06 |
|
|
$ |
1.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
Consolidated Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
year ended December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
As Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
95,307 |
|
|
$ |
|
|
|
$ |
95,307 |
|
|
$ |
6,278 |
|
|
$ |
101,585 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
156,870 |
|
|
|
|
|
|
|
156,870 |
|
|
|
(3,418 |
) |
|
|
153,452 |
|
Extinguishment of debt |
|
|
2,271 |
|
|
|
|
|
|
|
2,271 |
|
|
|
|
|
|
|
2,271 |
|
Resort Residential Development cost of sales |
|
|
311,050 |
|
|
|
|
|
|
|
311,050 |
|
|
|
|
|
|
|
311,050 |
|
Resort Residential Development capital expenditures |
|
|
(356,603 |
) |
|
|
|
|
|
|
(356,603 |
) |
|
|
|
|
|
|
(356,603 |
) |
Impairment charges related to real estate assets |
|
|
1,122 |
|
|
|
|
|
|
|
1,122 |
|
|
|
|
|
|
|
1,122 |
|
Income from investment land sales |
|
|
(8,622 |
) |
|
|
|
|
|
|
(8,622 |
) |
|
|
|
|
|
|
(8,622 |
) |
Loss on joint venture of properties, net |
|
|
2,743 |
|
|
|
|
|
|
|
2,743 |
|
|
|
|
|
|
|
2,743 |
|
Gain on property sales, net |
|
|
(105,258 |
) |
|
|
|
|
|
|
(105,258 |
) |
|
|
|
|
|
|
(105,258 |
) |
Income from sale of investment in unconsolidated company |
|
|
(29,934 |
) |
|
|
|
|
|
|
(29,934 |
) |
|
|
|
|
|
|
(29,934 |
) |
Minority interests |
|
|
31,870 |
|
|
|
|
|
|
|
31,870 |
|
|
|
(4,376 |
) |
|
|
27,494 |
|
Non-cash compensation |
|
|
13,236 |
|
|
|
|
|
|
|
13,236 |
|
|
|
|
|
|
|
13,236 |
|
Amortization of debt premiums |
|
|
(2,452 |
) |
|
|
|
|
|
|
(2,452 |
) |
|
|
|
|
|
|
(2,452 |
) |
Equity in earnings from unconsolidated companies |
|
|
(27,551 |
) |
|
|
|
|
|
|
(27,551 |
) |
|
|
|
|
|
|
(27,551 |
) |
Ownership portion of management fees from unconsolidated companies |
|
|
6,609 |
|
|
|
|
|
|
|
6,609 |
|
|
|
|
|
|
|
6,609 |
|
Distributions received from unconsolidated companies |
|
|
30,992 |
|
|
|
|
|
|
|
30,992 |
|
|
|
|
|
|
|
30,992 |
|
Change in assets and liabilities, net of effect of consolidations, acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and cash equivalents |
|
|
(1,626 |
) |
|
|
|
|
|
|
(1,626 |
) |
|
|
|
|
|
|
(1,626 |
) |
Accounts receivable and notes receivable |
|
|
886 |
|
|
|
|
|
|
|
886 |
|
|
|
|
|
|
|
886 |
|
Deferred rent receivable |
|
|
(14,562 |
) |
|
|
|
|
|
|
(14,562 |
) |
|
|
|
|
|
|
(14,562 |
) |
Income tax
asset -current and deferred, net |
|
|
5,548 |
|
|
|
|
|
|
|
5,548 |
|
|
|
2,175 |
|
|
|
7,723 |
|
Other assets |
|
|
(25,580 |
) |
|
|
|
|
|
|
(25,580 |
) |
|
|
2,411 |
|
|
|
(23,169 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
53,313 |
|
|
|
|
|
|
|
53,313 |
|
|
|
(3,070 |
) |
|
|
50,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
139,629 |
|
|
$ |
|
|
|
$ |
139,629 |
|
|
$ |
|
|
|
$ |
139,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from property sales |
|
$ |
236,725 |
|
|
$ |
|
|
|
$ |
236,725 |
|
|
$ |
|
|
|
$ |
236,725 |
|
Proceeds from sale of investment in unconsolidated company and related property sales |
|
|
32,237 |
|
|
|
|
|
|
|
32,237 |
|
|
|
|
|
|
|
32,237 |
|
Proceeds from joint venture partners |
|
|
144,193 |
|
|
|
|
|
|
|
144,193 |
|
|
|
|
|
|
|
144,193 |
|
Acquisition of investment properties |
|
|
(192,154 |
) |
|
|
|
|
|
|
(192,154 |
) |
|
|
|
|
|
|
(192,154 |
) |
Development of investment properties |
|
|
(83,961 |
) |
|
|
|
|
|
|
(83,961 |
) |
|
|
|
|
|
|
(83,961 |
) |
Property improvements Office Properties |
|
|
(20,131 |
) |
|
|
|
|
|
|
(20,131 |
) |
|
|
|
|
|
|
(20,131 |
) |
Property improvements Resort/Hotel Properties |
|
|
(4,707 |
) |
|
|
|
|
|
|
(4,707 |
) |
|
|
|
|
|
|
(4,707 |
) |
Tenant improvement and leasing costs Office Properties |
|
|
(65,540 |
) |
|
|
|
|
|
|
(65,540 |
) |
|
|
|
|
|
|
(65,540 |
) |
Resort Residential Development Properties investments |
|
|
(32,876 |
) |
|
|
|
|
|
|
(32,876 |
) |
|
|
|
|
|
|
(32,876 |
) |
Increase in restricted cash and cash equivalents |
|
|
(4,531 |
) |
|
|
|
|
|
|
(4,531 |
) |
|
|
|
|
|
|
(4,531 |
) |
Purchases of defeasance investments and other securities |
|
|
(115,710 |
) |
|
|
|
|
|
|
(115,710 |
) |
|
|
|
|
|
|
(115,710 |
) |
Proceeds from defeasance investment maturities and other securities |
|
|
23,273 |
|
|
|
|
|
|
|
23,273 |
|
|
|
|
|
|
|
23,273 |
|
Return of investment in unconsolidated companies |
|
|
18,785 |
|
|
|
|
|
|
|
18,785 |
|
|
|
|
|
|
|
18,785 |
|
Investment in unconsolidated companies |
|
|
(17,118 |
) |
|
|
|
|
|
|
(17,118 |
) |
|
|
|
|
|
|
(17,118 |
) |
Increase in notes receivable |
|
|
(116,843 |
) |
|
|
|
|
|
|
(116,843 |
) |
|
|
|
|
|
|
(116,843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
$ |
(198,358 |
) |
|
$ |
|
|
|
$ |
(198,358 |
) |
|
$ |
|
|
|
$ |
(198,358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing costs |
|
$ |
(15,659 |
) |
|
$ |
|
|
|
$ |
(15,659 |
) |
|
$ |
|
|
|
$ |
(15,659 |
) |
Borrowings under Credit Facility |
|
|
758,300 |
|
|
|
|
|
|
|
758,300 |
|
|
|
|
|
|
|
758,300 |
|
Payments under Credit Facility |
|
|
(666,800 |
) |
|
|
|
|
|
|
(666,800 |
) |
|
|
|
|
|
|
(666,800 |
) |
Notes payable proceeds |
|
|
387,200 |
|
|
|
|
|
|
|
387,200 |
|
|
|
|
|
|
|
387,200 |
|
Notes payable payments |
|
|
(346,968 |
) |
|
|
|
|
|
|
(346,968 |
) |
|
|
|
|
|
|
(346,968 |
) |
Junior subordinated notes |
|
|
77,321 |
|
|
|
|
|
|
|
77,321 |
|
|
|
|
|
|
|
77,321 |
|
Resort Residential Development Properties note payable borrowings |
|
|
257,411 |
|
|
|
|
|
|
|
257,411 |
|
|
|
|
|
|
|
257,411 |
|
Resort Residential Development Properties note payable payments |
|
|
(198,540 |
) |
|
|
|
|
|
|
(198,540 |
) |
|
|
|
|
|
|
(198,540 |
) |
Capital distributions to joint venture partner |
|
|
(18,516 |
) |
|
|
|
|
|
|
(18,516 |
) |
|
|
|
|
|
|
(18,516 |
) |
Capital contributions from joint venture partner |
|
|
7,834 |
|
|
|
|
|
|
|
7,834 |
|
|
|
|
|
|
|
7,834 |
|
Proceeds from exercise of share and unit options |
|
|
21,995 |
|
|
|
|
|
|
|
21,995 |
|
|
|
|
|
|
|
21,995 |
|
Reissuance of Treasury Shares |
|
|
16 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
16 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
Dividends and unitholder distributions |
|
|
(178,890 |
) |
|
|
|
|
|
|
(178,890 |
) |
|
|
|
|
|
|
(178,890 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
$ |
52,666 |
|
|
$ |
|
|
|
$ |
52,666 |
|
|
$ |
|
|
|
$ |
52,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS |
|
$ |
(6,063 |
) |
|
$ |
|
|
|
$ |
(6,063 |
) |
|
$ |
|
|
|
$ |
(6,063 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
92,291 |
|
|
|
|
|
|
|
92,291 |
|
|
|
|
|
|
|
92,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
86,228 |
|
|
$ |
|
|
|
$ |
86,228 |
|
|
$ |
|
|
|
$ |
86,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For year ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
|
|
|
|
|
|
|
|
As |
|
|
|
|
|
|
with |
|
|
|
|
|
|
|
|
|
Previously |
|
|
Discontinued |
|
|
Discontinued |
|
|
Restatement |
|
|
As |
|
|
|
Reported |
|
|
Operations |
|
|
Operations |
|
|
Adjustments |
|
|
Restated |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
172,936 |
|
|
$ |
|
|
|
$ |
172,936 |
|
|
$ |
5,923 |
|
|
$ |
178,859 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
183,873 |
|
|
|
|
|
|
|
183,873 |
|
|
|
(3,074 |
) |
|
|
180,799 |
|
Extinguishment of debt |
|
|
6,459 |
|
|
|
|
|
|
|
6,459 |
|
|
|
|
|
|
|
6,459 |
|
Resort Residential Development cost of sales |
|
|
161,853 |
|
|
|
|
|
|
|
161,853 |
|
|
|
|
|
|
|
161,853 |
|
Resort Residential Development capital expenditures |
|
|
(202,767 |
) |
|
|
|
|
|
|
(202,767 |
) |
|
|
|
|
|
|
(202,767 |
) |
Impairment charges related to real estate assets |
|
|
7,605 |
|
|
|
|
|
|
|
7,605 |
|
|
|
|
|
|
|
7,605 |
|
Income from investment land sales |
|
|
(18,879 |
) |
|
|
|
|
|
|
(18,879 |
) |
|
|
|
|
|
|
(18,879 |
) |
Gain on joint venture of properties |
|
|
(265,772 |
) |
|
|
|
|
|
|
(265,772 |
) |
|
|
|
|
|
|
(265,772 |
) |
Gain on
property sales, net |
|
|
(1,241 |
) |
|
|
|
|
|
|
(1,241 |
) |
|
|
|
|
|
|
(1,241 |
) |
Minority interests |
|
|
38,688 |
|
|
|
|
|
|
|
38,688 |
|
|
|
(4,471 |
) |
|
|
34,217 |
|
Cumulative effect of a change in accounting principle, net of minority interests |
|
|
363 |
|
|
|
|
|
|
|
363 |
|
|
|
|
|
|
|
363 |
|
Non-cash compensation |
|
|
1,737 |
|
|
|
|
|
|
|
1,737 |
|
|
|
|
|
|
|
1,737 |
|
Amortization of debt premiums |
|
|
(2,386 |
) |
|
|
|
|
|
|
(2,386 |
) |
|
|
|
|
|
|
(2,386 |
) |
Equity in earnings from unconsolidated companies |
|
|
(9,624 |
) |
|
|
|
|
|
|
(9,624 |
) |
|
|
|
|
|
|
(9,624 |
) |
Ownership portion of management fees from unconsolidated companies |
|
|
1,833 |
|
|
|
|
|
|
|
1,833 |
|
|
|
|
|
|
|
1,833 |
|
Distributions received from unconsolidated companies |
|
|
7,982 |
|
|
|
|
|
|
|
7,982 |
|
|
|
|
|
|
|
7,982 |
|
Change in assets and liabilities, net of effect of consolidations, acquisitions and dispositions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and cash equivalents |
|
|
54,889 |
|
|
|
|
|
|
|
54,889 |
|
|
|
|
|
|
|
54,889 |
|
Accounts receivable and notes receivable |
|
|
(17,924 |
) |
|
|
|
|
|
|
(17,924 |
) |
|
|
|
|
|
|
(17,924 |
) |
Deferred rent receivable |
|
|
(16,246 |
) |
|
|
|
|
|
|
(16,246 |
) |
|
|
|
|
|
|
(16,246 |
) |
Income tax
asset -current and deferred, net |
|
|
(21,657 |
) |
|
|
|
|
|
|
(21,657 |
) |
|
|
827 |
|
|
|
(20,830 |
) |
Other assets |
|
|
(23,983 |
) |
|
|
|
|
|
|
(23,983 |
) |
|
|
1,098 |
|
|
|
(22,885 |
) |
Accounts payable, accrued expenses and other liabilities |
|
|
34,828 |
|
|
|
|
|
|
|
34,828 |
|
|
|
(303 |
) |
|
|
34,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
92,567 |
|
|
$ |
|
|
|
$ |
92,567 |
|
|
$ |
|
|
|
$ |
92,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash impact of consolidation of previously unconsolidated entities |
|
$ |
334 |
|
|
$ |
|
|
|
$ |
334 |
|
|
$ |
|
|
|
$ |
334 |
|
Proceeds from property sales |
|
|
174,881 |
|
|
|
|
|
|
|
174,881 |
|
|
|
|
|
|
|
174,881 |
|
Proceeds from sale of investment in unconsolidated company and related property sales |
|
|
3,229 |
|
|
|
|
|
|
|
3,229 |
|
|
|
|
|
|
|
3,229 |
|
Proceeds from joint venture partners |
|
|
1,028,913 |
|
|
|
|
|
|
|
1,028,913 |
|
|
|
|
|
|
|
1,028,913 |
|
Acquisition of investment properties |
|
|
(381,672 |
) |
|
|
|
|
|
|
(381,672 |
) |
|
|
|
|
|
|
(381,672 |
) |
Development of investment properties |
|
|
(7,089 |
) |
|
|
|
|
|
|
(7,089 |
) |
|
|
|
|
|
|
(7,089 |
) |
Property improvements Office Properties |
|
|
(14,297 |
) |
|
|
|
|
|
|
(14,297 |
) |
|
|
|
|
|
|
(14,297 |
) |
Property improvements Resort/Hotel Properties |
|
|
(27,739 |
) |
|
|
|
|
|
|
(27,739 |
) |
|
|
|
|
|
|
(27,739 |
) |
Tenant improvement and leasing costs Office Properties |
|
|
(92,876 |
) |
|
|
|
|
|
|
(92,876 |
) |
|
|
|
|
|
|
(92,876 |
) |
Resort Residential Development Properties investments |
|
|
(35,428 |
) |
|
|
|
|
|
|
(35,428 |
) |
|
|
|
|
|
|
(35,428 |
) |
Decrease in restricted cash and cash equivalents |
|
|
75,395 |
|
|
|
|
|
|
|
75,395 |
|
|
|
|
|
|
|
75,395 |
|
Purchases of defeasance investments and other securities |
|
|
(203,643 |
) |
|
|
|
|
|
|
(203,643 |
) |
|
|
|
|
|
|
(203,643 |
) |
Proceeds from defeasance investment maturities and other securities |
|
|
14,560 |
|
|
|
|
|
|
|
14,560 |
|
|
|
|
|
|
|
14,560 |
|
Return of investment in unconsolidated companies |
|
|
129,693 |
|
|
|
|
|
|
|
129,693 |
|
|
|
|
|
|
|
129,693 |
|
Investment in unconsolidated companies |
|
|
(19,047 |
) |
|
|
|
|
|
|
(19,047 |
) |
|
|
|
|
|
|
(19,047 |
) |
Increase in notes receivable |
|
|
(15,230 |
) |
|
|
|
|
|
|
(15,230 |
) |
|
|
|
|
|
|
(15,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
$ |
629,984 |
|
|
$ |
|
|
|
$ |
629,984 |
|
|
$ |
|
|
|
$ |
629,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt financing costs |
|
$ |
(12,918 |
) |
|
$ |
|
|
|
$ |
(12,918 |
) |
|
$ |
|
|
|
$ |
(12,918 |
) |
Borrowings under Credit Facility |
|
|
530,000 |
|
|
|
|
|
|
|
530,000 |
|
|
|
|
|
|
|
530,000 |
|
Payments under Credit Facility |
|
|
(626,500 |
) |
|
|
|
|
|
|
(626,500 |
) |
|
|
|
|
|
|
(626,500 |
) |
Notes payable proceeds |
|
|
577,146 |
|
|
|
|
|
|
|
577,146 |
|
|
|
|
|
|
|
577,146 |
|
Notes payable payments |
|
|
(1,027,661 |
) |
|
|
|
|
|
|
(1,027,661 |
) |
|
|
|
|
|
|
(1,027,661 |
) |
Resort Residential Development Properties note payable borrowings |
|
|
111,672 |
|
|
|
|
|
|
|
111,672 |
|
|
|
|
|
|
|
111,672 |
|
Resort Residential Development Properties note payable payments |
|
|
(118,495 |
) |
|
|
|
|
|
|
(118,495 |
) |
|
|
|
|
|
|
(118,495 |
) |
Capital distributions to joint venture partner |
|
|
(8,565 |
) |
|
|
|
|
|
|
(8,565 |
) |
|
|
|
|
|
|
(8,565 |
) |
Capital contributions from joint venture partner |
|
|
2,833 |
|
|
|
|
|
|
|
2,833 |
|
|
|
|
|
|
|
2,833 |
|
Proceeds from exercise of share and unit options |
|
|
829 |
|
|
|
|
|
|
|
829 |
|
|
|
|
|
|
|
829 |
|
Issuance of preferred shares-Series A |
|
|
71,006 |
|
|
|
|
|
|
|
71,006 |
|
|
|
|
|
|
|
71,006 |
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
(23,963 |
) |
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
(8,075 |
) |
Dividends and unitholder distributions |
|
|
(175,621 |
) |
|
|
|
|
|
|
(175,621 |
) |
|
|
|
|
|
|
(175,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
$ |
(708,312 |
) |
|
$ |
|
|
|
$ |
(708,312 |
) |
|
$ |
|
|
|
$ |
(708,312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS |
|
$ |
14,239 |
|
|
$ |
|
|
|
$ |
14,239 |
|
|
$ |
|
|
|
$ |
14,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
78,052 |
|
|
|
|
|
|
|
78,052 |
|
|
|
|
|
|
|
78,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
92,291 |
|
|
$ |
|
|
|
$ |
92,291 |
|
|
$ |
|
|
|
$ |
92,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Impact of New Accounting Standards
SFAS No. 123R. In December 2004, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 123R (Revised 2004), Share-Based Payment.
The new FASB rule requires that the compensation cost relating to share-based payment transactions
be recognized in financial statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. We were required to apply SFAS No. 123R beginning January
1, 2006. The scope of SFAS No. 123R includes a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards, share appreciation
rights, and employee share purchase plans. SFAS No. 123R replaces SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board, or APB, Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No. 123, as originally issued in 1995, established
as preferable a fair-value-based method of accounting for share-based payment transactions with
employees. However, that statement permitted entities the option of continuing to apply the
guidance in Opinion No. 25, as long as the footnotes to the financial statements disclosed what net
income would have been had the preferable fair-value-based method been used. Effective January 1,
2003, we adopted the fair value expense recognition provisions of SFAS No. 123 on a prospective
basis. We adopted SFAS No. 123R using the modified prospective application method which requires,
among other things, that we recognize compensation cost for all awards outstanding at January 1,
2006, for which the requisite service has not yet been rendered. Additionally, our prior interim
periods and fiscal years do not reflect any restated amounts due to the adoption of SFAS No. 123R.
EITF 04-5. In June 2005, the EITF ratified the consensus in Issue No. 04-5, Determining
Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5), which states that the
general partner in a limited partnership is presumed to control that limited partnership. This
presumption may be overcome if the limited partners have either (1) the substantive ability to
dissolve the limited partnership or otherwise remove the general partner without cause or (2)
substantive participating rights, which provide the limited partners with the ability to
effectively participate in significant decisions that would be expected to be made in the ordinary
course of business and thereby preclude the general partner from exercising unilateral control over
the partnership. EITF 04-5 is effective June 30, 2005 for new or modified limited partnership
arrangements and effective January 1, 2006 for existing limited partnership arrangements.
There was no impact to our financial condition or results of operations from the adoption of
EITF 04-5.
EITF 06-3. At its June 2006 meeting, the EITF ratified the consensus regarding Issue No. 06-3
(EITF 06-3), How Taxes Collected from Customers and Remitted to Governmental Authorities Should be
Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 is effective
for interim and annual periods beginning after December 15, 2006, with earlier application
permitted. The scope of EITF 06-3 includes any tax assessed by a governmental authority that is
both imposed on and concurrent with a specific revenue-producing transaction between a seller and a
customer, and may include, but is not limited to, sales, use, value added, and certain excise
taxes. The consensus indicates that gross vs. net income statement classification of those taxes
within its scope is an accounting policy decision. In addition, for taxes within its scope, the
consensus requires the following disclosures: the accounting policy elected for these taxes and
the amounts of the taxes reflected gross (as revenue) in the income statement on an interim and
annual basis. There was no impact to our financial condition or results of operations from the
adoption of EITF 06-3.
FASB Interpretation 48. In July 2006, the FASB issued Interpretation 48, Accounting for
Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109, or FIN 48, which
clarifies the accounting for uncertainty in income taxes recognized in a companys financial
statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 also prescribes a
recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The standard also
provides guidance on derecognizing, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006, and are to be applied to all tax positions upon initial adoption
of this standard. Only tax positions that meet a more-likely-than-not recognition threshold at the
effective date may be recognized or continue to be recognized upon adoption of FIN 48. We expect
to record less than $1.0 million as a cumulative effect adjustment to beginning Accumulated Deficit
as of January 1, 2007 from the adoption of FIN 48. The impact of the adoption of FIN 48 has not been
determined by AmeriCold, an equity investment in which we hold a
31.7% interest, as of December 31, 2006.
90
SFAS No. 157. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The
new FASB rule defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, or GAAP, and expands disclosures about fair value measurements.
The statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the
impact, if any, to our financial condition or results of operations from the adoption of SFAS No.
157.
SAB No. 108. In September 2006, the Securities and Exchange Commission, or SEC, issued Staff
Accounting Bulletin No. 108, Financial Statements Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements, (SAB 108), which
is effective for fiscal years ending after November 15, 2006. SAB No. 108 provides guidance on the
consideration of the effects of prior year misstatements in quantifying current year misstatements.
The adoption of SAB No. 108 did not have an impact to our financial condition or results of
operations.
EITF 06-8. At its November 2006 meeting, the EITF ratified the consensus regarding Issue No.
06-8 (EITF 06-8), Applicability of the Assessment of a Buyers Continuing Investment under FASB
Statement No. 66 for Sales of Condominiums. EITF 06-8 is effective for annual periods beginning
after March 15, 2007. The scope of EITF 06-8 is limited to the sale of individual units in a
condominium project and requires an entity to evaluate the adequacy of the buyers initial and
continuing investment for purposes of determining whether the sales price is collectible as
required to recognize profit using the percentage-of-completion method under paragraph 37 of
Statement 66. If the buyer does not meet the initial and continuing investment criteria, the
guidance requires use of the deposit method to recognize profit. We do not believe there will be
an impact to our financial condition or results of operations from the adoption of EITF 06-8.
Significant Accounting Policies
Consolidation of Variable Interest Entities. We perform evaluations of each of our
investments, investment partnerships, real estate partnerships, mezzanine investments and joint
ventures to determine if the associated entities constitute a Variable Interest Entity, or VIE, as
defined under Interpretations 46 and 46R, Consolidation of Variable Interest Entities, or FIN 46
and 46R, respectively. Due to the adoption of FIN 46, we consolidated Elijah Fulcrum Fund
Partners, L.P., which we refer to as Elijah, as of January 1, 2004. Elijah is a limited
partnership whose purpose is to invest in the SunTx Fulcrum Fund, L.P. The consolidation of Elijah
resulted in an approximately $0.4 million charge to earnings which is reflected as a cumulative
effect of a change in accounting principle, net of minority interests in our Consolidated
Statements of Operations. In general, a VIE is an entity that has (i) an insufficient amount of
equity for the entity to carry on its principal operations without additional subordinated
financial support from other parties, (ii) a group of equity owners that are unable to make
decisions about the entitys activities, or (iii) equity that does not absorb the entitys losses
or receive the benefits of the entity. If any one of these characteristics is present, the entity
is subject to FIN 46Rs variable interests consolidation model.
Quantifying the variability of VIEs is complex and subjective, requiring consideration and
estimates of a significant number of possible future outcomes as well as the probability of each
outcome occurring. The results of each possible outcome are allocated to the parties holding
interests in the VIE and based on the allocation, a calculation is performed to determine which
party, if any, has a majority of the potential negative outcomes (expected losses) or a majority of
the potential positive outcomes (expected residual returns). That party, if any, is the VIEs
primary beneficiary and is required to consolidate the VIE. Calculating expected losses and
expected residual returns requires modeling potential future results of the entity, assigning
probabilities to each potential outcome, and allocating those potential outcomes to the VIEs
interest holders. If our estimates of possible outcomes and probabilities are incorrect, it could
result in the inappropriate consolidation or deconsolidation of the VIE.
For entities that do not constitute VIEs, we consider other GAAP, as required, determining
(i) consolidation of the entity if our ownership interests comprise a majority of its outstanding
voting stock or otherwise control the entity, or (ii) application of the equity method of
accounting if we do not have direct or indirect control of the entity, with the initial investment
carried at cost and subsequently adjusted for our share of net income or loss and cash
contributions and distributions to and from these entities. Further, we evaluate, under EITF 04-5,
Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain Rights, entities for which we
have a general partner interest to determine the nature of limited partners rights in assessing
whether those rights overcome the presumption that we control the limited partnership entity.
91
Acquisition of operating properties. We allocate the purchase price of acquired properties to
tangible and identified intangible assets acquired based on their fair values in accordance with
SFAS No. 141, Business Combinations. We initially record the allocation based on a preliminary
purchase price allocation with adjustments recorded during the allocation period, not to exceed
within one year from the acquisition.
In making estimates of fair value for purposes of allocating purchase price, management
utilizes sources, including, but not limited to, independent value consulting services, independent
appraisals that may be obtained in connection with financing the respective property, and other
market data. Management also considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the
tangible and intangible assets acquired.
The aggregate value of the tangible assets acquired is measured based on the sum of (i) the
value of the property and (ii) the present value of the unamortized in-place tenant improvement
allowances. Managements estimates of the value of the
property are made using models similar to those used by independent appraisers. Factors considered
by management in its analysis include an estimate of carrying costs such as real estate taxes,
insurance and other operating expenses and estimates of lost rentals during the expected lease-up
period assuming current market conditions. The value of the property is then allocated among
building, land, site improvements and equipment. The value of tenant improvements is separately
estimated due to the different depreciable lives.
The aggregate value of intangible assets acquired is measured based on the difference between
(i) the purchase price and (ii) the value of the tangible assets acquired as defined above. This
value is then allocated among above-market and below-market lease values, costs to execute similar
leases (including leasing commissions, legal expenses and other related expenses), in-place lease
values and customer relationship values.
Above-market and below-market in-place lease values for acquired properties are calculated
based on the present value (using a market interest rate which reflects the risks associated with
the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to
the in-place leases and (ii) managements estimate of fair market lease rates for the corresponding
in-place leases, measured over a period equal to the remaining non-cancelable term of the lease for
above-market leases and the initial term plus the term of the below-market fixed rate renewal
option, if any, for below-market leases. We perform this analysis on a lease by lease basis. The
capitalized above-market lease values are amortized as a reduction to rental income over the
remaining non-cancelable terms of the respective leases. The capitalized below-market lease values
are amortized as an increase to rental income over the initial term plus the term of the
below-market fixed rate renewal option, if any, of the respective leases.
Management estimates costs to execute leases similar to those acquired at the property at
acquisition based on current market conditions. These costs are recorded based on the present
value of the amortized in-place leasing costs on a lease by lease basis over the remaining term of
each lease.
The in-place lease values and customer relationship values are based on managements
evaluation of the specific characteristics of each customers lease and our overall relationship
with that respective customer. Characteristics considered by management in allocating these values
include the nature and extent of our existing business relationships with the customer, growth
prospects for developing new business with the customer, the customers credit quality and the
expectation of lease renewals, among other factors. The in-place lease value and customer
relationship value are both amortized to expense over the initial term of the respective leases and
projected renewal periods, but in no event does the amortization period for the intangible assets
exceed the remaining depreciable life of the building.
Should a tenant terminate its lease, the unamortized portion of the costs to execute similar
leases, in-place lease value and the customer relationship value and above-market and below-market
in-place lease values would be charged to expense.
Net Investments in Real Estate. Real estate, for operating properties, is carried at
cost, net of accumulated depreciation. Betterments, major renovations, and certain costs directly
related to the acquisition, improvements and leasing of real estate are capitalized. Operating
leases for space in our Office Properties generally provide an allowance for the construction of
tenant improvements. We capitalize the cost of tenant
improvements up to the amount of the allowance granted in the lease. The cost of any
improvements paid by the tenant in excess of the tenant improvement allowance is not reflected in
our Consolidated Financial Statements. Expenditures for maintenance and repairs are charged to
operations as incurred. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, as follows:
92
|
|
|
Buildings and Improvements
|
|
2 to 46 years |
Tenant Improvements
|
|
Terms of leases, which approximates the
useful life of the asset |
Furniture, Fixtures and Equipment
|
|
2 to 5 years |
Real estate also includes land and capitalized project costs associated with the acquisition
and the development of land, construction of resort residential units, amenities and facilities,
interest and loan origination costs on land under development, and certain general and
administrative expenses to the extent they benefit the development of land. We adhere to the
accounting and reporting standards under SFAS No. 67, Accounting for Costs and Initial Rental
Operations of Real Estate Projects for costs associated with the acquisition, development,
construction and sale of real estate projects. In addition, we capitalize interest costs as a part
of the historical cost of acquiring certain assets that qualify for capitalization under SFAS No.
34, Capitalization of Interest Cost. Our assets that qualify for accounting treatment under this
pronouncement must require a period of time to prepare for their intended use, such as our land
development project assets that are intended for sale or lease and constructed as discrete
projects. In accordance with the authoritative guidance, the interest cost capitalized by us is
the interest cost recognized on borrowings and other obligations. The amount capitalized is an
allocation of the interest cost incurred during the period required to complete the asset. The
interest rate for capitalization purposes is based on the rates of our outstanding borrowings.
Assets
classified as held and used are evaluated for impairment when events
or circumstances indicate that the carrying amount may not be
recoverable. When expected undiscounted cash flows are less than the carrying value of a Property and we do
not expect to recover our carrying costs, an impairment loss is recognized. For Properties
classified as held for use, we reduce carrying costs to fair value. For Properties held for
disposition, we reduce carrying costs to the fair value less estimated selling costs in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Depreciation
expense is not recognized on Properties classified as held for disposition.
Concentration of Real Estate Investments. Our Office Properties are located primarily in the
Dallas and Houston, Texas, metropolitan areas. As a result of this geographic concentration, our
operations could be adversely affected by a recession or general economic downturn in the areas
where these Properties are located.
Cash and Cash Equivalents. We consider all highly liquid investments with an original
maturity of 90 days or less to be cash and cash equivalents.
Restricted Cash and Cash Equivalents. Restricted cash includes escrows established pursuant
to certain mortgage financing arrangements for real estate taxes, insurance, security deposits,
ground lease expenditures, capital expenditures and capital requirements related to cash flow
hedges. At December 31, 2005, restricted cash also included funds related to residential property
closings at year end when the receipts are held in escrow and required to be used to pay down the
project construction loan.
Allowance
for Doubtful Accounts/Credit Losses. Our accounts receivable balance is
reduced by an allowance for amounts that may become uncollectible in the future. Our receivable
balance is composed primarily of rents and operating cost recoveries due from tenants, receivables
associated with club memberships at our Resort Residential Development properties and guest
receivables at our Resort/Hotel properties. We also maintain an allowance for deferred rent
receivables which arise from the straight-lining of rents. The allowance for doubtful accounts is
reviewed at least quarterly for adequacy by reviewing such factors as the credit quality of our
tenants or members, any delinquency in payment, historical trends and current economic conditions.
If the assumptions regarding the collectibility of accounts receivable prove incorrect, we could
experience write-offs in excess of its allowance for doubtful accounts, which would result in a
decrease in net income.
Mezzanine notes receivable are reviewed for potential impairment at each balance sheet date.
A mezzanine note receivable is considered impaired when it becomes probable, based on current
information, that we will be unable to collect all amounts due according to the mezzanine notes
contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount
of the mezzanine note to the present value of the expected cash flows or the fair value of the
collateral. If a mezzanine note was deemed to be impaired, we would record a reserve for loan
losses through a charge to income for any shortfall. To date, no such impairment charges have been
recognized.
Investments in Unconsolidated Companies. Investments in unconsolidated joint ventures and
companies are recorded initially at cost and subsequently adjusted for equity in earnings and cash
contributions and distributions. If events or circumstances indicate that the fair value of an
investment accounted for using the equity method has declined below its carrying value and we
consider the decline to be other than temporary, the investment is written down to fair value and
an impairment loss is recognized. The evaluation of impairment for an investment would be based on
a number of factors, including financial condition and operating results for the investment,
inability to remain in compliance with provisions of any related debt agreements, and recognition
of impairments by other investors. Impairment recognition would negatively impact the recorded
value of our investment and reduce net income.
93
Certain of our unconsolidated entities, Sun TX Fulcrum Fund, L.P., or SunTx, and G2 Opportunity
Fund, L.P., or G2, are subject to specialized industry accounting principles under the AICPA Audit
and Accounting Guide: Investment Companies. Under those guidelines, SunTx and G2 record underlying
investments, including investments in portfolio companies which are not publicly traded securities,
at estimated fair value. Accordingly, various factors are considered in valuing such securities,
including: their costs, current and projected operating performance, prices of recent significant
placements of securities of the same issuer to unaffiliated third parties, if any, recent market
transactions for similar companies, and other such factors. Because of the inherent uncertainty of
such valuations, the fair value adjustments to non-public investments are estimates, and
accordingly, such estimated values may differ from the values that
would have been used had a ready
market for the investments existed, and the differences could be material. SunTx and G2 update such
estimates of fair value on an annual basis; as such, we record any unrealized gains or losses
during the year in the fourth quarter as equity in earnings
results associated with these investments.
See Note 10, Investments in Unconsolidated Companies for a table that lists our ownership in
significant unconsolidated joint ventures and investments as of December 31, 2006.
Other Assets. Other assets consist principally of leasing costs, deferred financing costs,
intangible assets, goodwill and marketable securities. Leasing costs are amortized on a straight-line basis
during the terms of the respective leases, and unamortized leasing costs are written off upon early
termination of lease agreements. Deferred financing costs are amortized on a straight-line basis
(when it approximates the effective interest method) over the shorter of the expected lives or the
terms of the respective loans. The effective interest method is used to amortize deferred
financing costs on loans where the straight-line basis does not approximate the effective interest
method, over the terms of the respective loans.
Goodwill
and intangible assets are reviewed
annually for impairment. Upon the
conveyance of a water pipeline to the local government, we
reclassified the fair
value of the water pipeline from land improvements into an intangible asset, or water rights. The
water rights in use are being amortized on a straight-line basis over 20 years.
Marketable securities are considered either available-for-sale, trading or held-to-maturity,
in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities.
Realized gains or losses on sale of securities are recorded based on specific identification.
Available-for-sale securities are marked to market value on a monthly basis with the corresponding
unrealized gains and losses included in accumulated other comprehensive income. Trading securities
are marked to market on a monthly basis with the unrealized gains and losses included in earnings.
Held-to-maturity securities are carried at amortized cost. Held-to-maturity securities consists of
U.S. Treasury and government sponsored agency securities purchased to in-substance defease debt,
and are included in the Defeasance investments line. 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.
Investments in equity securities with no readily determinable market value are reported at cost, as
they are not considered marketable under SFAS No. 115.
Fair Value of Financial Instruments. The carrying values of cash and cash equivalents,
restricted cash and cash equivalents, short-term investments, accounts receivable, deferred rent
receivable, notes receivable, other assets, accounts payable and other liabilities are reasonable
estimates of their fair values. Fair values of our notes receivable, primarily mezzanine notes, are influenced by changes in,
and market expectations for changes in, interest rates and levels of repayments as well as other
factors beyond the control of management. Because most of our investments that have variable
interest rates adjust to more current rates monthly, declines in fair value caused by increases in
interest rates can be largely recovered in a relatively short period
of time. The fair value of mezzanine
notes with fixed interest rates are based on current interest rates for similar investments
with similar payment terms and maturities at the time of investment. The fair value of our defeasance investments was approximately
$110.3 million as of December 31, 2006. The fair value of our notes payable and junior
subordinated notes is most sensitive to fluctuations in interest rates. Since our $767.2 million
in variable rate debt changes with these changes in interest rates, it also approximates the fair
market value of the underlying debt. We reduce the variability in future cash flows by maintaining
a sizable portion of debt with fixed payment characteristics. Although the cash flow to or from us
does not change, the fair value of the $1.5 billion in fixed rate debt, based upon current interest
rates for similar debt instruments with similar payment terms and expected payoff dates, would be
approximately $1.5 billion as of December 31, 2006. The defeasance investments and defeased debt
cannot legally be separated and, therefore, have a net fair value of $0.4 million. For defeasance
investments, fair values are based on quoted market prices. For defeased debt, fair values are
based on rates currently available from banks and other lenders for debt with similar terms and
remaining maturities. Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2006.
Derivative Financial Instruments. SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended and interpreted, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in other contracts, and
for hedging activities. Our objective in using derivatives is to add stability to interest expense
and to manage our exposure to interest rate movements or other identified risks. Derivative
financial instruments are used to convert a portion of our variable rate debt to fixed rate debt
and to manage our fixed to variable rate debt ratio.
94
To accomplish this objective, we primarily use interest rate swaps as part of our cash flow
hedging strategy. Interest rate swaps designated as cash flow hedges are entered into to achieve a
fixed interest rate on variable rate debt.
We measure our derivative instruments and hedging activities at fair value and record them as
an asset or liability, depending on our rights or obligations under the applicable derivative
contract. For derivatives designated as fair value hedges, the changes in the fair value of both
the derivative instrument and the hedged items are recorded in earnings. Derivatives used to hedge
the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the
effective portions of changes in fair value of the derivative are reported in other comprehensive
income and are subsequently reclassified into earnings when the hedged item affects earnings.
Changes in fair value of derivative instruments not designated as hedges and ineffective portions
of hedges are recognized in earnings in the affected period. We assess the effectiveness of each
hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging
instrument with the changes in fair value or cash flows of the designated hedged item or
transaction.
As of December 31, 2006, there are no derivatives designated as fair value hedges or hedges of
net investments in foreign operations nor are derivatives being used for trading or speculative
purposes.
At December 31, 2006, derivatives with a fair value of $0.1 million were included in Other
assets, net. The change in net unrealized gains decreased $1.8 million in 2006 for derivatives
designated as cash flow hedges is separately disclosed in the Consolidated Statements of
Shareholders Equity.
Amounts reported in accumulated other comprehensive income related to derivatives will be
reclassified to interest expense as interest payments are made on our variable rate debt. The
change in net unrealized gains/losses on cash flow hedges reflects the recognition of $1.9 million
of net unrealized losses from other comprehensive income to interest expense during 2006. We
estimate that during 2007 an additional $0.1 million of unrealized gains will be recognized as a
reduction to interest expense.
Gain recognition on sale of real estate assets. In accordance with SFAS No. 66, Accounting
for Sales of Real Estate, we perform evaluations of each real estate sale to determine if full gain
recognition is appropriate and of each sale or contribution of a property to a joint venture to
determine if partial gain recognition is appropriate. The application of SFAS No. 66 can be
complex and requires us to make assumptions including an assessment of whether the risks and
rewards of ownership have been transferred, the extent of the purchasers investment in the
property being sold, whether our receivables, if any, related to the sale are collectible and are
subject to subordination, and the degree of our continuing involvement with the real estate asset
after the sale. If full gain recognition is not appropriate, we account for the sale under an
appropriate deferral method.
Revenue Recognition Office Properties. As a lessor, we have retained substantially all of
the risks and benefits of ownership of the Office Properties and account for our leases as
operating leases. Income on leases, which includes scheduled increases in rental rates during the
lease term and/or abated rent payments for various periods following the tenants lease
commencement date, is recognized on a straight-line basis. Deferred rent receivable represents the
excess of rental revenue recognized on a straight-line basis over cash received pursuant to the
applicable lease provisions. Office Property leases generally provide for the reimbursement of
annual increases
in operating expenses above base year operating expenses (excess operating expenses), payable
to us in equal installments throughout the year based on estimated increases. Any differences
between the estimated increase and actual amounts incurred are adjusted at year end.
Revenue Recognition Resort Residential Development Properties. We use the accrual method
to recognize revenue from the sale of Resort Residential Development Properties after closing has
taken place, title has been transferred, sufficient cash has been received to demonstrate the
buyers commitment to pay for the property and collection of the balance of the sales price, if
any, is reasonably assured. If a sale does not qualify for the accrual method of recognition,
deferral methods are used as appropriate. In certain cases, when we receive an inadequate cash
down payment and take a promissory note for the balance of the sales price, revenue recognition is
deferred until such time as sufficient cash has been received to meet minimum down payment
requirements. The cost of resort residential property sold is defined based on the type of product
being purchased. The cost of sales for resort residential lots is generally determined as a
specific percentage of the sales revenue recognized for each Resort Residential Development
project. The percentages are based on total estimated development costs and sales revenue for each
Resort Residential Development project. These estimates are based on
95
the then-current development strategy and operating assumptions utilizing internally developed
projections for product type, revenue and related development costs. The cost of sales for resort
residential units (such as townhomes and condominiums) is determined using the relative sales value
method. If the resort residential unit has been sold prior to the completion of infrastructure
cost, and those uncompleted costs are not significant in relation to total costs, the full accrual
method is utilized. Under this method, 100% of the revenue is recognized, and a commitment
liability is established to reflect the allocated estimated future costs to complete the resort
residential unit. If our estimates of costs or the percentage of completion is incorrect, it could
result in either an increase or decrease in cost of sales expense or revenue recognized and
therefore, an increase or decrease in net income.
At our golf clubs, members are expected to pay an advance initiation fee or refundable deposit
upon their acceptance as a member to the club. These initiation fees and deposits vary in amount
based on a variety of factors such as the supply and demand for our services in each particular
market, number of golf courses and breadth of amenities available to the members, and the prestige
of having the right to membership of the club. A significant portion of our initiation fees are
deferred equity memberships which are recorded as deferred revenue when sold and recognized as
membership fee revenue on a straight-line basis over the number of months remaining until the
turnover date of the club to the members. Refundable deposits relate to the non-equity membership
portion of each membership sold which will be refunded upon resignation by the member and upon
reissuance of the membership, or at the termination of the membership as provided by the membership
agreement. Refundable deposits are not recorded as revenue but rather as a liability due to the
refundable nature of the deposit. For certain refundable deposits,
the difference between the amount paid by the member and the present
value of the refund obligation is deferred and recognized as revenue
over the average expected life of the membership and the present
value of the refund obligation accretes to the refund amount over the
nonrefundable term. A limited number of non-equity
members may be entitled to repayment of a portion of their dues up to
a fixed amount per member upon surrender of their memberships. Revenue
associated with these refundable dues is deferred until we are
relieved from this repayment obligation. The deferred revenue and refundable deposits, net of related
deferred expenses, are presented in our Consolidated Balance Sheets in Accounts payable, accrued
expenses, and other liabilities.
Revenue Recognition Resort/Hotel Properties. We recognize revenue for room sales and guest
nights and revenue from guest services whenever rooms were occupied and services had been rendered.
Lease revenue is recognized for the Omni Austin Hotel. Also, we record taxes collected from
customers and remitted to governmental authorities on a net basis in that they are excluded from
revenues.
Revenue Recognition Mezzanine Notes. We recognize interest income on mezzanine notes over
the term of the note using the effective interest method and on an accrual basis. Fees received in
connection with loan commitments and loan origination costs are deferred until the loan is funded
and are then recognized over the term of the loan as an adjustment to yield.
Income Taxes. We have elected to be taxed as a REIT under Sections 856 through 860 of the
U.S. Internal Revenue Code of 1986, as amended, or the Code, and operate in a manner intended to
enable us to continue to qualify as a REIT. As a REIT, we generally will not be subject to
corporate federal income tax on net income that we currently distribute to our shareholders,
provided that we satisfy certain organizational and operational requirements including the
requirement to distribute at least 90% of our REIT taxable income to our shareholders each year.
Accordingly, we do not believe we will be liable for federal income taxes on our REIT taxable
income or state income taxes in most of the states in which we operate.
We have elected to treat certain of our corporate subsidiaries as taxable REIT subsidiaries,
each of which we refer to as a TRS. In general, a TRS may perform additional services for tenants
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, state and local taxes.
Use of Estimates. The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from those estimates.
Earnings Per Share. SFAS No. 128, Earnings Per Share, specifies the computation, presentation
and disclosure requirements for earnings per share or EPS.
Basic EPS is computed by dividing net income available to common shareholders by the weighted
average number of shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common shares were exercised or
converted into common shares, where such exercise or conversion would result in a lower EPS amount.
We present both basic and diluted earnings per share.
96
The following table
presents a reconciliation for the years ended December 31, 2006, 2005 and
2004 of basic and diluted earnings per share from Income before discontinued operations and
cumulative effect of a change in accounting principle to Net income available to common
shareholders. The table also includes weighted average shares on a basic and diluted basis.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
(Restated) |
|
(Restated) |
|
|
|
|
|
|
Wtd. |
|
Per |
|
|
|
|
|
Wtd. |
|
Per |
|
|
|
|
|
Wtd. |
|
Per |
|
|
Income |
|
Avg. |
|
Share |
|
Income |
|
Avg. |
|
Share |
|
Income |
|
Avg. |
|
Share |
(in thousands, except per share amounts) |
|
(Loss) |
|
Shares |
|
Amount |
|
(Loss) |
|
Shares |
|
Amount |
|
(Loss) |
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Basic EPS - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before discontinued operations
and cumulative effect of a change in
accounting principle |
|
$ |
19,678 |
|
|
|
102,055 |
|
|
|
|
|
|
$ |
9,298 |
|
|
|
100,179 |
|
|
|
|
|
|
$ |
170,741 |
|
|
|
99,025 |
|
|
|
|
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
|
|
|
|
(23,723 |
) |
|
|
|
|
|
|
|
|
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders
before discontinued operations and cumulative
effect of a change in accounting principle |
|
$ |
(12,360 |
) |
|
|
102,055 |
|
|
$ |
(0.12 |
) |
|
$ |
(22,740 |
) |
|
|
100,179 |
|
|
$ |
(0.23 |
) |
|
|
138,943 |
|
|
|
99,025 |
|
|
$ |
1.40 |
|
(Loss) income from discontinued operations, net
of minority interests and taxes |
|
|
(502 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
4,006 |
|
|
|
|
|
|
|
0.04 |
|
|
|
10,407 |
|
|
|
|
|
|
|
0.11 |
|
Impairment charges related to real estate
assets from discontinued operations, net of
minority interests |
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
(953 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
(2,978 |
) |
|
|
|
|
|
|
(0.03 |
) |
Gain on sale of real estate from discontinued
operations, net of minority interests and
taxes |
|
|
14,362 |
|
|
|
|
|
|
|
0.14 |
|
|
|
89,234 |
|
|
|
|
|
|
|
0.89 |
|
|
|
1,052 |
|
|
|
|
|
|
|
0.01 |
|
Cumulative effect of a change in accounting
principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders |
|
$ |
1,395 |
|
|
|
102,055 |
|
|
$ |
0.01 |
|
|
$ |
69,547 |
|
|
|
100,179 |
|
|
$ |
0.69 |
|
|
$ |
147,061 |
|
|
|
99,025 |
|
|
$ |
1.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
2006 |
|
2005 |
|
2004 |
|
|
|
|
(Restated) |
|
(Restated) |
|
|
|
|
|
|
Wtd. |
|
Per |
|
|
|
|
|
Wtd. |
|
Per |
|
|
|
|
|
|
|
|
|
Per |
|
|
Income |
|
Avg. |
|
Share |
|
Income |
|
Avg. |
|
Share |
|
Income |
|
Wtd. Avg. |
|
Share |
(in thousands, except per share amounts) |
|
(Loss) |
|
Shares |
|
Amount |
|
(Loss) |
|
Shares |
|
Amount |
|
(Loss) |
|
Shares |
|
Amount |
|
|
|
|
|
|
|
Diluted EPS - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before discontinued operations
and cumulative effect of a change in
accounting principle |
|
$ |
19,678 |
|
|
|
102,055 |
|
|
|
|
|
|
$ |
9,298 |
|
|
|
100,179 |
|
|
|
|
|
|
$ |
170,741 |
|
|
|
99,025 |
|
|
|
|
|
Series A Preferred Share distributions |
|
|
(23,963 |
) |
|
|
|
|
|
|
|
|
|
|
(23,963 |
) |
|
|
|
|
|
|
|
|
|
|
(23,723 |
) |
|
|
|
|
|
|
|
|
Series B Preferred Share distributions |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share and unit options |
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income available to common shareholders
before discontinued operations and cumulative
effect of a change in accounting principle |
|
$ |
(12,360 |
) |
|
|
102,055 |
|
|
$ |
(0.12 |
) |
|
$ |
(22,740 |
) |
|
|
100,179 |
|
|
$ |
(0.23 |
) |
|
$ |
138,943 |
|
|
|
99,244 |
|
|
$ |
1.40 |
|
(Loss) income from discontinued operations, net
of minority interests and taxes |
|
|
(502 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
4,006 |
|
|
|
|
|
|
|
0.04 |
|
|
|
10,407 |
|
|
|
|
|
|
|
0.10 |
|
Impairment charges related to real estate
assets from discontinued operations, net of
minority interests |
|
|
(105 |
) |
|
|
|
|
|
|
|
|
|
|
(953 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
(2,978 |
) |
|
|
|
|
|
|
(0.03 |
) |
Gain on sale of real estate from discontinued
operations, net of minority interests and
taxes |
|
|
14,362 |
|
|
|
|
|
|
|
0.14 |
|
|
|
89,234 |
|
|
|
|
|
|
|
0.89 |
|
|
|
1,052 |
|
|
|
|
|
|
|
0.01 |
|
Cumulative effect of a change in accounting
principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders |
|
$ |
1,395 |
|
|
|
102,055 |
|
|
$ |
0.01 |
|
|
$ |
69,547 |
|
|
|
100,179 |
|
|
$ |
0.69 |
|
|
$ |
147,061 |
|
|
|
99,244 |
|
|
$ |
1.48 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Share and unit options (in common share equivalents) of
1,463,992 and 824,019 for the years ended December 31, 2006 and
2005, respectively, are not included because the effect of their conversion
would be antidilutive to loss available to common shareholders before discontinued operations
and cumulative effect of a change in accounting principle. |
The effect of the conversion of the Series A Convertible Cumulative Preferred Shares or
the convertible Operating Partnership units are not included in the computation of Diluted EPS for
the years ended December 31, 2006, 2005 and 2004, since the effect of the conversions are
antidilutive.
97
Supplemental Disclosure to Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
For the years ended December 31, |
|
(in thousands) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Cash paid for interest |
|
$ |
156,694 |
|
|
$ |
160,918 |
|
|
$ |
169,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (received) paid for income taxes |
|
$ |
(853 |
) |
|
$ |
738 |
|
|
$ |
8,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized Resort Residential Development |
|
$ |
25,068 |
|
|
$ |
20,017 |
|
|
$ |
15,556 |
|
Interest capitalized Resort/Hotel |
|
|
3,195 |
|
|
|
898 |
|
|
|
294 |
|
Interest capitalized Office |
|
|
5,418 |
|
|
|
1,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest capitalized |
|
$ |
33,681 |
|
|
$ |
21,932 |
|
|
$ |
15,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non cash activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture of Office Properties debt |
|
$ |
|
|
|
$ |
158,350 |
|
|
$ |
|
|
Assumption of debt in conjunction with acquisitions of Office Properties |
|
|
23,605 |
|
|
|
|
|
|
|
139,807 |
|
Financed sale of land parcel |
|
|
|
|
|
|
|
|
|
|
4,878 |
|
Financed purchase of land parcel |
|
|
|
|
|
|
|
|
|
|
7,500 |
|
Satisfaction of debt in conjunction with disposition of properties |
|
|
81,792 |
|
|
|
|
|
|
|
|
|
Interest
accrued into construction loans |
|
|
12,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of 2004 consolidation of Elijah: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
$ |
(848 |
) |
Investments in unconsolidated companies |
|
|
|
|
|
|
|
|
|
|
(2,478 |
) |
Notes receivable, net |
|
|
|
|
|
|
|
|
|
|
4,363 |
|
Income tax asset current and deferred, net |
|
|
|
|
|
|
|
|
|
|
(274 |
) |
Minority interest consolidated real estate partnerships |
|
|
|
|
|
|
|
|
|
|
(140 |
) |
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
139 |
|
Cumulative effect of a change in accounting principle |
|
|
|
|
|
|
|
|
|
|
(428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash |
|
|
|
|
|
|
|
|
|
$ |
334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3. SEGMENT REPORTING
For purposes of segment reporting as defined in SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, we have four major investment segments based on property
type: the Office Segment; the Resort Residential Development Segment; the Resort/Hotel Segment and
the Temperature-Controlled Logistics Segment. Management utilizes this segment structure for
making operating decisions and assessing performance.
We use funds from operations, or 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, or 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. |
We calculate FFO available to common shareholders diluted in this manner, except that Net
Income (Loss) is replaced by Net Income (Loss) Available to Common Shareholders and we include the
effect of Operating Partnership unitholder minority interests.
98
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.
We consider FFO available to common shareholders diluted and FFO appropriate measures of
performance for an equity REIT and for its investment segments. However, FFO available to common
shareholders diluted and FFO should not be considered as alternatives to net income determined in
accordance with GAAP as an indication of our operating performance.
Our measures of FFO available to common shareholders diluted and FFO may not be comparable
to similarly titled measures of other REITs if those REITs apply the definition of FFO in a
different manner than we apply it. Selected financial information related to each segment for the
three years ended December 31, 2006, 2005, and 2004, and total assets, consolidated property level
financing, consolidated other liabilities and minority interests for each of the segments at
December 31, 2006 and 2005, are presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006 |
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Resort/Hotel |
|
|
Logistics |
|
|
Corporate |
|
|
|
|
(in thousands) |
|
Segment(1) |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
and Other(2) |
|
|
Total |
|
Total Property revenue |
|
$ |
414,343 |
|
|
$ |
372,148 |
|
|
$ |
142,205 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
928,696 |
|
Total Property expense |
|
|
206,563 |
|
|
|
342,994 |
|
|
|
108,391 |
|
|
|
|
|
|
|
76 |
|
|
|
658,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
207,780 |
|
|
$ |
29,154 |
|
|
$ |
33,814 |
|
|
$ |
|
|
|
$ |
(76 |
) |
|
$ |
270,672 |
|
Total other income (expense) |
|
|
(53,585 |
) |
|
|
(15,100 |
) |
|
|
(22,797 |
) |
|
|
(15,668 |
) |
|
|
(144,658 |
) |
|
|
(251,808 |
) |
Minority interests and income taxes |
|
|
(3,072 |
) |
|
|
1,967 |
|
|
|
4,048 |
|
|
|
|
|
|
|
(2,129 |
) |
|
|
814 |
|
Discontinued operations -income, gain on real estate and impairment
charges related to real estate assets, net of minority interests and
taxes |
|
|
10,830 |
|
|
|
6,552 |
|
|
|
|
|
|
|
|
|
|
|
(3,627 |
) |
|
|
13,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
161,953 |
|
|
$ |
22,573 |
|
|
$ |
15,065 |
|
|
$ |
(15,668 |
) |
|
$ |
(150,490 |
) |
|
$ |
33,433 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
$ |
105,997 |
|
|
$ |
9,830 |
|
|
$ |
16,312 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
132,139 |
|
Gain on property sales |
|
|
(25,206 |
) |
|
|
(3,282 |
) |
|
|
|
|
|
|
|
|
|
|
(359 |
) |
|
|
(28,847 |
) |
Gain from sale of development operating property |
|
|
(10,138 |
) |
|
|
(6,083 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,221 |
) |
Gain from promoted interest |
|
|
(22,575 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,575 |
) |
Adjustments for investment in unconsolidated companies |
|
|
21,217 |
|
|
|
(10,616 |
) |
|
|
4,773 |
|
|
|
17,917 |
|
|
|
|
|
|
|
33,291 |
|
Unitholder minority interest and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266 |
|
|
|
266 |
|
Series A Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,963 |
) |
|
|
(23,963 |
) |
Series B Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to funds from operations
available to common shareholders diluted |
|
$ |
69,295 |
|
|
$ |
(10,151 |
) |
|
$ |
21,085 |
|
|
$ |
17,917 |
|
|
$ |
(32,131 |
) |
|
$ |
66,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders-diluted |
|
$ |
231,248 |
|
|
$ |
12,422 |
|
|
$ |
36,150 |
|
|
$ |
2,249 |
|
|
$ |
(182,621 |
) |
|
$ |
99,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See footnotes to the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 (Restated) |
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Resort/Hotel |
|
|
Logistics |
|
|
Corporate |
|
|
|
|
(in thousands) |
|
Segment(1) |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
and Other |
|
|
Total |
|
Total Property revenue |
|
$ |
372,759 |
|
|
$ |
502,723 |
|
|
$ |
142,618 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,018,100 |
|
Total Property expense |
|
|
195,781 |
|
|
|
432,203 |
|
|
|
111,277 |
|
|
|
|
|
|
|
|
|
|
|
739,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
176,978 |
|
|
$ |
70,520 |
|
|
$ |
31,341 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
278,839 |
|
Total other income (expense) |
|
|
(65,271 |
) |
|
|
(14,208 |
) |
|
|
(20,603 |
) |
|
|
234 |
|
|
|
(150,164 |
) |
|
|
(250,012 |
) |
Minority interests and income taxes |
|
|
(4,058 |
) |
|
|
(14,692 |
) |
|
|
1,941 |
|
|
|
|
|
|
|
(2,720 |
) |
|
|
(19,529 |
) |
Discontinued operations -income, gain on real estate and impairment
charges related to real estate assets, net of minority interests and
taxes |
|
|
108,557 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(16,266 |
) |
|
|
92,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
216,206 |
|
|
$ |
41,616 |
|
|
$ |
12,679 |
|
|
$ |
234 |
|
|
$ |
(169,150 |
) |
|
$ |
101,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
$ |
103,958 |
|
|
$ |
9,413 |
|
|
$ |
18,021 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
131,392 |
|
Gain on property sales |
|
|
(102,373 |
) |
|
|
|
|
|
|
(141 |
) |
|
|
|
|
|
|
(289 |
) |
|
|
(102,803 |
) |
Gain from sale of development operating property |
|
|
(13,369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,369 |
) |
Gain from promoted interest |
|
|
(13,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,579 |
) |
Adjustments for investment in unconsolidated companies |
|
|
18,872 |
|
|
|
(5,543 |
) |
|
|
3,881 |
|
|
|
18,210 |
|
|
|
|
|
|
|
35,420 |
|
Unitholder minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,379 |
|
|
|
12,379 |
|
Series A Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,963 |
) |
|
|
(23,963 |
) |
Series B Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to funds from operations
available to common shareholders diluted |
|
$ |
(6,491 |
) |
|
$ |
3,870 |
|
|
$ |
21,761 |
|
|
$ |
18,210 |
|
|
$ |
(19,948 |
) |
|
$ |
17,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders-diluted |
|
$ |
209,715 |
|
|
$ |
45,486 |
|
|
$ |
34,440 |
|
|
$ |
18,444 |
|
|
$ |
(189,098 |
) |
|
$ |
118,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See footnotes to the following table.
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2004 (Restated) |
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Resort/Hotel |
|
|
Logistics |
|
|
Corporate |
|
|
|
|
(in thousands) |
|
Segment(1) |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
and Other(2) |
|
|
Total |
|
Total Property revenue |
|
$ |
475,797 |
|
|
$ |
309,945 |
|
|
$ |
214,531 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,000,273 |
|
Total Property expense |
|
|
234,161 |
|
|
|
271,310 |
|
|
|
179,825 |
|
|
|
|
|
|
|
|
|
|
|
685,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Property Operations |
|
$ |
241,636 |
|
|
$ |
38,635 |
|
|
$ |
34,706 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
314,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
149,072 |
|
|
|
(14,753 |
) |
|
|
(24,777 |
) |
|
|
6,153 |
|
|
|
(239,456 |
) |
|
|
(123,761 |
) |
Minority interests and income taxes |
|
|
(1,789 |
) |
|
|
(1,710 |
) |
|
|
8,306 |
|
|
|
|
|
|
|
(25,282 |
) |
|
|
(20,475 |
) |
Discontinued operations income, gain on real
estate and impairment charges related to real
estate assets, net of minority interests |
|
|
3,908 |
|
|
|
(126 |
) |
|
|
7,177 |
|
|
|
|
|
|
|
(2,478 |
) |
|
|
8,481 |
|
Cumulative effect of a change in accounting
principle, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363 |
) |
|
|
(363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
392,827 |
|
|
$ |
22,046 |
|
|
$ |
25,412 |
|
|
$ |
6,153 |
|
|
$ |
(267,579 |
) |
|
$ |
178,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
$ |
124,857 |
|
|
$ |
8,078 |
|
|
$ |
23,775 |
|
|
$ |
|
|
|
$ |
56 |
|
|
$ |
156,766 |
|
(Gain) loss on property sales |
|
|
(263,308 |
) |
|
|
115 |
|
|
|
(4,209 |
) |
|
|
|
|
|
|
349 |
|
|
|
(267,053 |
) |
Adjustments for investment in unconsolidated companies |
|
|
11,601 |
|
|
|
(242 |
) |
|
|
|
|
|
|
22,549 |
|
|
|
|
|
|
|
33,908 |
|
Unitholder minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,319 |
|
|
|
26,319 |
|
Series A Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,723 |
) |
|
|
(23,723 |
) |
Series B Preferred share distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,075 |
) |
|
|
(8,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net (loss) income to funds from
operations available to common shareholders diluted |
|
$ |
(126,850 |
) |
|
$ |
7,951 |
|
|
$ |
19,566 |
|
|
$ |
22,549 |
|
|
$ |
(5,074 |
) |
|
$ |
(81,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from
operations available to common shareholdersdiluted |
|
$ |
265,977 |
|
|
$ |
29,997 |
|
|
$ |
44,978 |
|
|
$ |
28,702 |
|
|
$ |
(272,653 |
) |
|
$ |
97,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
footnotes to the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
Controlled |
|
Corporate |
|
|
|
|
Office |
|
Development |
|
Resort/Hotel |
|
Logistics |
|
and |
|
|
(in millions) |
|
Segment |
|
Segment |
|
Segment |
|
Segment |
|
Other |
|
Total |
Total Assets by Segment: (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006(4) |
|
$ |
2,019 |
|
|
$ |
1,146 |
|
|
$ |
380 |
|
|
$ |
87 |
|
|
$ |
415 |
(5) |
|
$ |
4,047 |
|
Balance at December 31, 2005(4) (Restated) |
|
|
2,024 |
|
|
|
985 |
|
|
|
340 |
|
|
|
162 |
|
|
|
652 |
(5) |
|
|
4,163 |
|
Consolidated Property Level Financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
|
(968 |
) |
|
|
(220 |
) |
|
|
(142 |
) |
|
|
|
|
|
|
(966 |
) (6) |
|
|
(2,296 |
) |
Balance at December 31, 2005 |
|
|
(851 |
) |
|
|
(143 |
) |
|
|
(59 |
) |
|
|
|
|
|
|
(1,206 |
) (6) |
|
|
(2,259 |
) |
Consolidated Other Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
|
(134 |
) |
|
|
(308 |
) |
|
|
(32 |
) |
|
|
|
|
|
|
(29 |
) |
|
|
(503 |
) |
Balance at December 31, 2005 (Restated) |
|
|
(116 |
) |
|
|
(310 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
(44 |
) |
|
|
(500 |
) |
Minority Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
|
(12 |
) |
|
|
(32 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
(126 |
) |
Balance at December 31, 2005 (Restated) |
|
|
(15 |
) |
|
|
(32 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
(99 |
) |
|
|
(152 |
) |
|
|
|
(1) |
|
The property revenue includes lease termination fees (net of the write-off of
deferred rent receivables) of approximately $39.3 million, $11.2 million and $9.0 million for
the years ended December 31, 2006, 2005 and 2004, respectively. The 2006 lease termination
fees are primarily due to the El Paso lease termination and related re-leasing. |
|
(2) |
|
For purposes of this Note, Corporate and Other includes the total of: income from
investment land sales, net, interest and other income, corporate general and administrative
expense, interest expense, extinguishment of debt, other expenses and equity in net income of
unconsolidated companies-other. |
|
(3) |
|
Total assets by segment are inclusive of investments in unconsolidated companies. |
|
(4) |
|
Non-income producing land held for investment or development of $75.6 million and
$84.4 million at December 31, 2006 and 2005, respectively, by segment is as follows: Office
$7.0 million and $24.3 million, Resort Residential Development $9.6 million and $9.6 million,
Resort/Hotel $7.3 million and $7.3 million and Corporate $51.7 million and $43.2 million,
respectively. |
|
(5) |
|
Includes mezzanine notes and defeasance investments. |
|
(6) |
|
Inclusive of Corporate bonds, Credit Facility, Junior Subordinated Notes, the Morgan
Stanley and Goldman Sachs repurchase facilities, the Funding I defeased debt and Nomura
Funding VI defeased debt. Balance at December 31, 2005 also includes Funding II defeased
debt. |
100
4. ACQUISITIONS
Asset Acquisitions
The following table summarizes the office acquisitions that we made during the years
ended December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
Date |
|
|
|
|
|
Purchase |
|
(in millions) |
|
Property |
|
Location |
|
Price |
|
2006 |
|
|
|
|
|
|
|
|
January 23, 2006 |
|
Financial Plaza Class A Office Property |
|
Phoenix, Arizona |
|
$ |
55.0 |
(1) |
2005 |
|
|
|
|
|
|
|
|
February 7, 2005 |
|
Exchange Building Class A Office Property |
|
Seattle, Washington |
|
$ |
52.5 |
(2) |
April 8, 2005 |
|
One Buckhead Plaza Class A Office Property |
|
Atlanta, Georgia |
|
|
130.5 |
(3) |
|
|
|
(1) |
|
The acquisition was funded by the assumption of a $23.6 million loan from
Allstate, a new $15.9 million loan from Allstate and a draw on our credit facility. This
property is wholly-owned. |
|
(2) |
|
The acquisition was funded by a draw on our credit facility. |
|
(3) |
|
The acquisition was funded by an $85.0 million loan from Morgan Stanley and
a draw on our credit facility. In June 2005, we contributed One Buckhead Plaza to Crescent
One Buckhead Plaza, L.P., a limited partnership in which we have a 35% interest and Metzler US
Real Estate Fund L.P. has a 65% interest. |
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
(Loss) Income from discontinued operations, net of minority interests and taxes, gain or loss on
the assets sold or held for sale have been presented as Gain on real estate from discontinued
operations, net of minority interests and taxes and impairments on the assets sold or held for
sale have been presented as Impairment charges related to real estate assets from discontinued
operations, net of minority interests in the accompanying Consolidated Statements of Operations
for the years ended December 31, 2006, 2005 and 2004. Minority interests for wholly-owned
properties represent unitholders share of related income, gains, losses and impairments. 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 December 31, 2006 and 2005. We consider
a property as held for sale when we have met the criteria outlined in SFAS No. 144.
101
Asset Dispositions
Office Segment
The following table presents the significant dispositions of Office Properties for the
years ended December 31, 2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
Gain |
|
(in millions) Date |
|
Property |
|
Location |
|
Proceeds |
|
|
Impairment |
|
|
(Loss) (1) |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 17, 2006 |
|
Waterside Commons |
|
Dallas, Texas |
|
$ |
24.8 |
(2) |
|
$ |
1.0 |
(3) |
|
$ |
0.1 |
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 7, 2005 |
|
Albuquerque Plaza |
|
Albuquerque, New Mexico |
|
$ |
34.7 |
(4) |
|
$ |
|
|
|
$ |
1.4 |
|
August 16, 2005 |
|
Barton Oaks Plaza One |
|
Austin, Texas |
|
|
14.4 |
(4) |
|
|
|
|
|
|
4.5 |
|
September 19, 2005 |
|
Chancellor Park |
|
San Diego, California |
|
|
55.4 |
(4) |
|
|
|
|
|
|
27.0 |
|
September 28, 2005 |
|
Two Renaissance Square |
|
Phoenix, Arizona |
|
|
116.8 |
(4) |
|
|
|
|
|
|
57.2 |
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 23, 2004 |
|
1800 West Loop South |
|
Houston, Texas |
|
|
28.2 |
(2) |
|
|
13.9 |
(5) |
|
|
0.2 |
|
April 13, 2004 |
|
Liberty Plaza |
|
Dallas, Texas |
|
|
10.8 |
(2) |
|
|
3.6 |
(5) |
|
|
(0.2 |
) |
June 17, 2004 |
|
Ptarmigan Place |
|
Denver, Colorado |
|
|
25.3 |
(4) |
|
|
0.5 |
(6) |
|
|
(2.0 |
) |
June 29, 2004 |
|
Addison Tower |
|
Dallas, Texas |
|
|
8.8 |
(2) |
|
|
|
|
|
|
0.2 |
|
July 2, 2004 |
|
5050 Quorum |
|
Dallas, Texas |
|
|
8.9 |
(2) |
|
|
0.8 |
(6) |
|
|
(0.1 |
) |
July 29, 2004 |
|
12404 Park Central |
|
Dallas, Texas |
|
|
9.3 |
(4) |
|
|
4.0 |
(7) |
|
|
|
|
|
|
|
(1) |
|
Amounts are net of Operating Partnership minority interests. |
|
(2) |
|
Proceeds were used primarily to pay down our credit facility. |
|
(3) |
|
Impairment was recognized during the year ended December 31, 2005. |
|
(4) |
|
Proceeds were used to pay down a portion of the Bank of America Fund XII Term Loan. |
|
(5) |
|
Impairment was recognized during the year ended December 31, 2003. |
|
(6) |
|
Impairment was recognized during the year ended December 31, 2004. |
|
(7) |
|
Of the $4.0 million in impairment recorded, $2.9 million was recorded during the
year ended December 31, 2003, and $1.1 million was recorded during the year ended December 31,
2004. |
Joint Venture Paseo Del Mar
On September 21, 2005, we entered into a joint venture arrangement, Crecent-JMIR Paseo Del Mar
LLC, with JMI Realty. The joint venture committed to co-develop a 232,330 square-foot,
three-building office complex in the Del Mar Heights submarket of San Diego, California. The
development was completed in August 2006. The joint venture was structured such that we owned an
80% interest and JMI Realty owned the remaining 20% interest. On December 14, 2006, we completed
the sale of our 80% interest in Crescent JMIR Paseo Del Mar LLC. The sale generated proceeds,
net of selling costs, of approximately $42.1 million and a net gain of approximately $10.4 million,
net of promoted interest due JMI Realty and income taxes. Proceeds from the sale were used to pay
down our credit facility.
Resort Residential Development Segment
On October 21, 2004, we entered into a partnership agreement with affiliates of JPI
Multi-Family Investments, L.P. to develop a multi-family luxury apartment project in Dedham,
Massachusetts. The development was completed in November 2006. On December 8, 2006, the
partnership, Jefferson Station, L.P., completed the sale of the apartment project. We consolidated
the partnership which was owned 50% by JPI Multi-Family Investments, L.P. and 50% by us. The sale
generated proceeds, net of selling costs and after the repayment of the $38.8 million loan with
Bank of America, of approximately $35.9 million and a gain of approximately $20.3 million. Our
share of the gain, net of minority interests and taxes, was approximately $5.4 million. Our share
of the proceeds was approximately $24.1 million, which was used to pay down our credit facility.
102
On September 14, 2004, we completed the sale of the Breckenridge Commercial Retail Center in
Breckenridge, Colorado. The sale generated proceeds, net of selling costs and repayment of debt,
of $1.5 million, and a net loss of $0.1 million, net of minority interests and income tax. We
previously recorded an impairment charge of approximately $0.7 million, net of minority interests
and income tax, during the year ended December 31, 2003. The proceeds from the sale were used
primarily to pay down our credit facility.
Resort / Hotel Segment
On October 19, 2004, we completed the sale of the Hyatt Regency Hotel in Albuquerque, New
Mexico. The sale generated proceeds, net of selling costs, of $32.2 million and a net gain of $3.6
million, net of minority interests. This property was wholly-owned. The proceeds were used to pay
down $26.0 million of our Bank of America Fund XII Term Loan and the remainder was used to pay down
our credit facility.
Properties Held for Disposition
Summary of Assets Held for Sale
The following tables indicate the major classes of assets and liabilities of the
Properties held for sale as of the years ended December 31, 2006 and 2005.
Assets
|
|
|
|
|
|
|
|
|
(in thousands) |
|
December 31, 2006 |
|
|
December 31, 2005 |
|
Land |
|
$ |
|
|
|
$ |
24,650 |
|
Buildings and improvements |
|
|
2,425 |
|
|
|
98,916 |
|
Furniture, fixtures and equipment |
|
|
|
|
|
|
218 |
|
Accumulated depreciation |
|
|
(25 |
) |
|
|
(7,465 |
) |
Other assets, net |
|
|
|
|
|
|
1,886 |
|
|
|
|
|
|
|
|
Net investment in real estate |
|
$ |
2,400 |
|
|
$ |
118,205 |
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
(in thousands) |
|
December 31, 2006 |
|
|
December 31, 2005 |
|
Notes payable |
|
$ |
|
|
|
$ |
14,606 |
|
Accounts
payable, accrued expenses and other liabilities |
|
|
|
|
|
|
4,700 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
19,306 |
|
|
|
|
|
|
|
|
103
The following tables present income, impairment charges and gain (loss) on sale for the years
ended December 31, 2006, 2005 and 2004, for properties included in discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Total revenues |
|
$ |
2,445 |
|
|
$ |
17,897 |
|
|
$ |
50,515 |
|
Operating
and other expenses, net of non-unitholder minority interests |
|
|
(2,683 |
) |
|
|
(9,218 |
) |
|
|
(30,678 |
) |
Depreciation and amortization |
|
|
(1,002 |
) |
|
|
(3,873 |
) |
|
|
(7,846 |
) |
Income tax benefit (expense) |
|
|
642 |
|
|
|
(86 |
) |
|
|
279 |
|
Unitholder minority interests |
|
|
96 |
|
|
|
(714 |
) |
|
|
(1,863 |
) |
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued
operations, net of minority
interests and taxes |
|
$ |
(502 |
) |
|
$ |
4,006 |
|
|
$ |
10,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Impairment charges related to real estate assets |
|
$ |
(125 |
) |
|
$ |
(1,122 |
) |
|
$ |
(3,511 |
) |
Unitholder minority interests |
|
|
20 |
|
|
|
169 |
|
|
|
533 |
|
|
|
|
|
|
|
|
|
|
|
Impairment charges related to real estate
assets from discontinued operations, net of
minority interests |
|
$ |
(105 |
) |
|
$ |
(953 |
) |
|
$ |
(2,978 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2006 |
|
|
2005 |
|
|
2004 |
|
Realized gain on sale of properties, net of non-unitholder minority interests |
|
$ |
28,334 |
|
|
$ |
105,117 |
|
|
$ |
1,241 |
|
Income tax expense |
|
|
(11,232 |
) |
|
|
|
|
|
|
|
|
Unitholder minority interests |
|
|
(2,740 |
) |
|
|
(15,883 |
) |
|
|
(189 |
) |
|
|
|
|
|
|
|
|
|
|
Gain on real estate from discontinued operations, net of minority
interests and taxes |
|
$ |
14,362 |
|
|
$ |
89,234 |
|
|
$ |
1,052 |
|
|
|
|
|
|
|
|
|
|
|
6. JOINT VENTURES
2006 Transactions
Office
Parkway at Oakhill
On March 31, 2006, we entered into a joint venture arrangement, C-C Parkway Austin, L.P., or
Parkway, with Champion Partners. The joint venture has committed to co-develop a 144,380
square-foot, two-building office complex in Austin, Texas. The venture is structured such that we
own a 90% interest and Champion Partners owns the remaining 10% interest. In connection with the
joint venture, Parkway entered into a maximum $18.3 million construction loan. Our equity
commitment to the joint venture was $8.2 million, of which $7.0 million has been funded as of
December 31, 2006. The development, which is currently underway, is scheduled for delivery in the
third quarter of 2007. We consolidate Parkway in accordance with FIN 46R, as it was determined to be a VIE of
which we are the primary beneficiary. The lender of the construction loan has no recourse to
Crescent. The carrying value of the assets that secure the construction loan as of December 31,
2006, was $14.5 million.
Chase Tower
On June 20, 2006, we completed the sale of Chase Tower on behalf of Austin PT BK One Tower
Office Limited Partnership, the joint venture which was owned 80% by an affiliate of GE Asset
Management, or GE, and 20% by us. The sale generated proceeds to the joint venture, net of selling
cost and after a $36.0 million loan repayment, of approximately $28.0 million and a net gain of
approximately $10.1 million. Our share of the net gain,
including recognition of the unamortized deferred gain was approximately
$4.3 million. Our share of the
proceeds was approximately $5.6 million, which was used to pay down the credit facility.
Four Westlake Park
On September 26, 2006, we completed the sale of Four Westlake Park on behalf of Houston PT
Four Westlake Office Limited Partnership, the joint venture which was owned 80% by an affiliate of
GE and 20% by us. The sale generated proceeds to the joint venture, net of selling costs and after
a $46.1 million loan repayment, of approximately $73.0 million and a net gain of approximately
$55.0 million. Our share of the net gain, including a
promoted interest of approximately $14.7 million, was approximately $24.2 million. Our share of
the proceeds was approximately $28.7 million, which was used to pay down our credit facility.
104
Three Westlake Park
On December 11, 2006, we completed the sale of Three Westlake Park on behalf of Houston PT
Three Westlake Office Limited Partnership, the joint venture which was owned 80% by an affiliate of
GE and 20% by us. The sale generated proceeds to the joint venture, net of selling costs and after
a $33.0 million loan repayment, of approximately $46.7 million and a net gain of approximately
$33.4 million. Our share of the net gain, including a promoted interest of approximately $7.7
million, recognition of the unamortized deferred gain and write-off of unamortized deal costs
from the original joint venture of the property, was approximately $17.3 million. Our share of the
proceeds was approximately $15.8 million, which was used to pay down our credit facility.
Bank One Center
On December 14, 2006, we completed the sale of Bank One Center on behalf of Main Street
Partners, L.P., the joint venture which was owned 50% by an affiliate of The Blackstone Group and
50% by us. The sale generated proceeds to the joint venture, net of selling cost and after a
$104.7 million loan repayment, of approximately $110.0 million and a net gain of approximately $4.4
million. Our share of the net gain was approximately $1.6 million inclusive of the write-off of
unamortized deal costs from the original joint venture of the property. Our share of the proceeds
was approximately $55.0 million, which was used to pay down our credit facility.
Resort Residential Development
Riverfront Village
On March 21, 2006, CRDI entered into a joint venture arrangement, East West Resort Development
XIV, L.P., L.L.L.P. (Riverfront Village), with affiliates of Crow Holdings and our development
partner. The joint venture was formed to co-develop a hotel and condominiums in Avon, Colorado.
The development, which is currently underway, is scheduled for delivery in 2008. We provided 41.9%
of the initial capitalization and the venture is structured such that we own a 26.8% interest after
we receive a preferred return on our invested capital and return of our capital. Our initial
equity commitment to the joint venture is $22.6 million, of which $17.2 million was funded as of
December 31, 2006. In connection with construction financing obtained in November 2006 for the
Riverfront Village project, the partners committed to contribute up to an additional $17.1 million
in capital should certain financial covenants not be maintained. Our share of this capital
commitment is $7.2 million, of which none was funded as of December 31, 2006. We determined that
Riverfront Village is a VIE under FIN 46R of which we are not the primary beneficiary; therefore we
do not consolidate the entity. Our maximum exposure to loss is limited to the amount of our
capital investment. We account for our interest in Riverfront Village under the equity method.
2005 Transactions
Office
Fulbright Tower
On February 24, 2005, we contributed Fulbright Tower, subject to the Morgan Stanley Mortgage
Capital Inc. Note of $73.4 million, and an adjacent parking garage, to Crescent 1301 McKinney,
L.P., a limited partnership in which we have a 23.85% interest, a fund advised by JPMorgan Asset
Management, or JPMorgan, has a 60% interest and GE has a 16.15% interest. The property was valued
at $106.0 million and the transaction generated net proceeds to us of approximately $33.4 million
which were used to pay down our credit facility. The joint venture was accounted for as a partial
sale of the Office Property, resulting in a net gain of approximately $0.5 million. None of the
mortgage financing at the joint venture level is guaranteed by us. We manage this property on
behalf of the joint venture. We account for our interest in Crescent 1301 McKinney, L.P. under the
equity method.
2211 Michelson
On June 9, 2005, we entered into a joint-venture arrangement, Crescent Irvine, LLC, with an
affiliate of Hines. The joint venture purchased a land parcel located in the John Wayne submarket
in Irvine, California, for $12.0 million. In addition, we have committed to co-develop a 267,000
square-foot Class A office property on the acquired site. Hines owns a 60% interest and we own a
40% interest in the joint venture. Our equity commitment
105
to the joint venture is $5.6 million, all
of which has been funded as of December 31, 2006. In 2006, Crescent Irvine, LLC entered into a
maximum $85.6 million construction loan. In the event of default on the construction loan, the
partners would be required to make a capital contribution. The development is scheduled for
delivery in the second quarter of 2007. We account for our interest in Crescent Irvine, LLC under
the equity method.
One Buckhead Plaza
On June 29, 2005, we contributed One Buckhead Plaza, subject to the Morgan Stanley Note of
$85.0 million, to Crescent One Buckhead Plaza, L.P., a limited partnership in which we have a 35%
interest and Metzler US Real Estate Fund L.P. has a 65% interest. The property was valued at
$130.5 million and the transaction generated net proceeds to us of approximately $28.1 million,
which were used to pay down our credit facility. The joint venture was accounted for as a partial
sale of the Office Property, resulting in a net gain of approximately $0.4 million. None of the
mortgage financing at the joint venture level is guaranteed by us. We manage the property on
behalf of the joint venture. We account for our interest in Crescent One Buckhead Plaza, L.P.
under the equity method.
106
5 Houston Center
On December 20, 2005, we completed the sale of 5 Houston Center on behalf of Crescent 5
Houston Center, L.P., the joint venture which was owned 75% by a fund advised by JPM, and 25% by
us. The sale generated proceeds, net of selling costs, of approximately $164.6 million and a net
gain of approximately $68.0 million. Our share of the net gain, including a promoted interest of
approximately $13.6 million, was approximately $29.9 million. Our share of the proceeds was
approximately $32.3 million, which was used to pay down our credit facility.
Resort/Hotel Segment
Canyon Ranch
On January 18, 2005, we contributed Canyon Ranch Tucson, our 50% interest and our preferred
interest in CR Las Vegas, LLC and our 30% interest in CR License, L.L.C., CR License II, L.L.C., CR
Orlando LLC and CR Miami LLC, to two newly formed entities, CR Spa, LLC and CR Operating, LLC. In
exchange, we received a 48% common equity interest in each new entity. The remaining 52% interest
in these entities is held by the founders of Canyon Ranch, who contributed their interests in CR
Las Vegas, LLC, CR License II, L.L.C., CR Orlando LLC and CR Miami LLC and the resort management
contracts. In addition, we sold Canyon Ranch Lenox to a subsidiary of CR Operating, LLC. The
founders of Canyon Ranch sold their interest in CR License, L.L.C. to a subsidiary of CR Operating,
LLC. As a result of these transactions, the new entities own the following assets: Canyon Ranch
Tucson, Canyon Ranch Lenox, Canyon Ranch SpaClub at the Venetian Resort in Las Vegas, Canyon Ranch
SpaClub on the Queen Mary 2 ocean liner, Canyon Ranch Living Community in Miami, Florida, Canyon
Ranch SpaClub at The Gaylord Palms Resort in Kissimmee, Florida, and the Canyon Ranch trade names
and trademarks.
In addition, the newly formed entities completed a private placement of Mandatorily Redeemable
Convertible Preferred Membership Units for aggregate gross proceeds of approximately $110.0
million. In this private placement, Richard E. Rainwater, Chairman of our Board of Trust Managers,
and certain of his family members purchased approximately $27.1 million of these units on terms
identical to those extended to all other investors. The units are convertible into a 25% common
equity interest in CR Spa, LLC and CR Operating, LLC and pay distributions at the rate of 8.5% per
year in years one through seven, and 11% in years eight through ten. At the end of ten years, or
upon earlier redemption, the holders of the units are entitled to receive a premium in an amount
sufficient to result in a cumulative return of 11% per year. The units are redeemable after seven
years at the option of the issuer. Also on January 18, 2005, the new entities completed a $95.0
million financing with Bank of America. The loan has an interest-only term until maturity in
February 2015, bears interest at 5.94% and is secured by the Canyon Ranch Tucson and Canyon Ranch
Lenox Resort/Hotel Properties. As a result of these transactions, we received proceeds of
approximately $91.9 million, which was used to pay down or defease debt related to our previous
investment in the Properties and to pay down our credit facility. No gain or loss was recorded in
connection with the above transactions. Following these transactions, we account for our interests
in CR Spa, LLC and CR Operating, LLC under the equity method.
Other Segment
Redtail Capital Partners, L.P.
On May 10, 2005, we entered into an agreement with Capstead Mortgage Corporation pursuant to
which we formed a joint venture, Redtail Capital Partners, L.P., to invest up to $100.0 million in
select mezzanine loans on commercial real estate over a two-year period. The Redtail Capital
Partners joint venture agreement also provides that we and Capstead may form a second joint venture
to invest up to an additional $100.0 million in equity. Capstead is committed to 75% of the
capital of the second joint venture, or up to $75.0 million, and we are committed to 25%, or up to
$25.0 million. We will be responsible for identifying investment opportunities and managing the
portfolios and will earn a management fee and incentives based on portfolio performance. A
wholly-owned subsidiary of this joint venture has a $225.0 million warehouse borrowing facility in
the form of a repurchase agreement. Borrowings under the warehouse facility are secured by the
subsidiarys financed participation interests and mezzanine loans, and guaranteed by the joint
venture. Total investments of the joint venture in mezzanine loans, assuming leverage, could be as
much as $325.0 million. For the year ended December 31, 2006, we have made capital contributions of $7.4
million. We account for our interest in Redtail Capital Partners, L.P. under the equity method.
107
2004 Transactions
Office
The Crescent, Houston Center and Post Oak Central
On November 10, 2004, we contributed nine of our Office Properties to a limited partnership in
which we initially had a 40% interest and a fund advised by JPM has a 60% interest. The Office
Properties contributed to the partnership are The Crescent (two Office Properties) in Dallas, Texas
and Houston Center (four Office Properties) and Post Oak Central (three Office Properties), both in
Houston, Texas. The Office Properties were valued at $897.0 million. This transaction generated
net proceeds of approximately $290.0 million after the pay off of the JP Morgan Mortgage Note, pay
down of a portion of the Fleet Fund I Term Loan and defeasance of a portion of LaSalle Note I. The
joint venture was accounted for as a partial sale of the Office Properties, resulting in a net gain
of approximately $194.1 million. On December 23, 2004, an affiliate of General Electric Pension
Fund, which we refer to as GE Pension Fund, purchased a 16.15% interest in the partnership from us,
reducing our ownership interest to 23.85%. This transaction generated net proceeds of
approximately $49.0 million and a net gain of $56.7 million. The net proceeds from both
transactions were used to pay off the remaining portion of the Fleet Fund I Term Loan and pay down
our credit facility. We incurred debt pre-payment penalties of approximately $35.0 million
relating to the early extinguishment of the JP Morgan Mortgage Note and the partial defeasance of
LaSalle Note I, which is reflected in the Extinguishment of debt line item in the Consolidated
Statements of Operations. For the year ended December 31, 2005, we recorded an adjustment in the
(Loss) gain on joint venture of properties line item in the Consolidated Statements of Operations
related to the write-off of capitalized internal leasing costs related to this joint venture.
Fountain Place and Trammell Crow Center
On November 23, 2004, we contributed two of our Office Properties to a limited partnership in
which we have a 23.85% interest and a fund advised by JPM has a 76.15% interest. The two Office
Properties contributed to the partnership are Fountain Place and Trammell Crow Center, both in
Dallas, Texas. The Office Properties were valued at $320.5 million. This transaction generated
net proceeds of approximately $71.5 million after the pay off of the Lehman Capital Note. The
joint venture was accounted for as a partial sale of the Office Properties, resulting in a net gain
of approximately $14.9 million. The net proceeds from this transaction were used to pay down a
portion of our credit facility. For the year ended December 31, 2005, we recorded an adjustment in
the (Loss) gain on joint venture of properties line item in the Consolidated Statements of
Operations related to the write-off of capitalized internal leasing costs related to this joint
venture.
As a result of GE Pension Funds purchase of an interest in the first partnership, GE Pension
Fund serves along with us as general partner, and we serve as the sole and managing general partner
of the second partnership. Each of the Office Properties contributed to the partnerships is owned
by a separate limited partnership. Each of those property partnerships (excluding Trammell Crow
Center) has entered into a separate leasing and management agreement with us, and, in the case of
Trammell Crow Center, the property partnership also has entered into a management oversight
agreement and a mortgage servicing agreement with us. We have no commitment to reinvest the cash
proceeds back into the joint ventures. None of the mortgage financing at the joint-venture level
is guaranteed by us. We account for our interest in these partnerships as unconsolidated equity
investments.
108
7. OTHER TRANSACTIONS
Office Segment
Significant Tenant Lease Termination
In June 2005, we entered into an agreement with our largest office tenant, El Paso Energy
Services Company and certain of its subsidiaries, which terminated El Pasos leases totaling
888,000 square feet at Greenway Plaza in Houston, Texas, effective December 31, 2007. Under the
agreement, El Paso is required to pay us $65.0 million in termination fees in periodic installments
through December 31, 2007, and $62.0 million in rent according to the original lease terms from
July 1, 2005 through December 31, 2007. As of December 31, 2006, we have collected $35.0 million of
the lease termination fee. For the years ended December 31, 2006
and 2005, we recognized $38.8 million and $8.5 million,
respectively, in
net termination fees, which includes accelerated termination fees and contractual full-service
rents resulting from the re-lease of approximately 463,000 square feet. As of December 31, 2006,
El Paso was current on all rent obligations.
Resort Residential Development Segment
During the year ended December 31, 2004, the Sonoma Club was demolished in order to begin
construction on a new clubhouse. Accordingly, we recorded an impairment charge of approximately
$2.5 million, net of income tax, included in the Impairment charges related to real estate assets
line item in the accompanying Consolidated Statements of Operations.
Undeveloped Land Sales
The following table presents the significant dispositions of undeveloped land for the
years ended December 31, 2006, 2005 and 2004 including location of the land, net proceeds received
and net gain on sale included in the Income from investment land sales line item in the
Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
(dollars in millions) Date |
|
Location |
|
Proceeds |
|
Net Gain |
2005 |
|
|
|
|
|
|
|
|
|
|
March 31, 2005 |
|
Houston, Texas |
|
$ |
5.8 |
(1) |
|
$ |
3.5 |
|
June 30, 2005 |
|
Houston, Texas |
|
|
6.1 |
(1) |
|
|
4.1 |
|
2004 |
|
|
|
|
|
|
|
|
|
|
June 17, 2004 |
|
Denver, Colorado |
|
$ |
2.9 |
|
|
$ |
0.9 |
|
August 16, 2004 |
|
Houston, Texas |
|
|
6.4 |
(2) |
|
|
7.6 |
|
November 12, 2004 |
|
Monterey, California |
|
|
1.0 |
|
|
|
0.7 |
|
December 17, 2004 |
|
Houston, Texas |
|
|
22.3 |
|
|
|
8.3 |
|
December 23, 2004 |
|
Houston, Texas |
|
|
4.0 |
|
|
|
1.4 |
|
|
|
|
(1) |
|
The proceeds were used primarily to pay down our credit facility. |
|
(2) |
|
In addition to the $6.4 million net cash proceeds, we also received a note
receivable of $5.6 million. The note provides for payments of principal of $0.5 million
due in December 2004, annual installments of $1.0 million each due August 2005 through
August 2008 and $1.1 million due at maturity in August 2009 and does not bear interest. |
109
8. MEZZANINE NOTES
The following table presents our significant investments in mezzanine notes as of
December 31, 2006. These notes are reflected in the Notes receivable, net line item in the
consolidated financial statements. Mezzanine notes are loans that are subordinate to a
conventional first mortgage loan and senior to the borrowers equity in a transaction. These loans
may be in the form of a junior participating interest in the senior debt or in the form of loans to
the direct or indirect parent of the property owner secured by pledges of ownership interests in
entities that directly or indirectly control the real property or subordinated loans secured by
second mortgage liens on the property.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December |
|
|
Interest Rate at |
|
Note |
|
|
|
|
|
Date of Transaction |
|
|
Maturity Date |
|
|
31, 2006 |
|
|
December 31, 2006 |
|
Fixed Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Dallas Office Properties |
|
|
(1) |
|
|
|
8/31/05 |
|
|
|
2010 |
|
|
$ |
7.6 |
|
|
|
11.04 |
% |
21 California Condominiums |
|
|
(2) |
|
|
|
12/28/06 |
|
|
|
2008 |
|
|
|
9.8 |
(3) |
|
|
17.00 |
% |
Variable Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas Office Property |
|
|
(4) |
|
|
|
6/9/05 |
|
|
|
2007 |
|
|
|
12.0 |
|
|
|
13.85 |
% |
Two Luxury
Hotel Properties in California |
|
|
(5) |
|
|
|
11/16/05 |
|
|
|
2007 |
|
|
|
15.0 |
|
|
|
16.35 |
% |
Office Portfolio in Southeastern U.S. |
|
|
(6) |
|
|
|
12/30/05 |
|
|
|
2007 |
|
|
|
20.7 |
|
|
|
12.23 |
% |
Florida Hotel Portfolio Investment |
|
|
(7) |
|
|
|
1/20/06 |
|
|
|
2009 |
|
|
|
15.0 |
|
|
|
13.35 |
% |
California Ski Resort |
|
|
(8) |
|
|
|
4/12/06 |
|
|
|
2009 |
|
|
|
20.0 |
|
|
|
9.85 |
% |
New York City Residential |
|
|
(9) |
|
|
|
5/8/06 |
|
|
|
2007 |
|
|
|
24.2 |
|
|
|
18.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Mezzanine Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
124.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Weighted Average Interest Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The loan has an interest-only term through September 2007. Beginning
October 2007, the borrower must make principal payments based on a 30-year amortization
schedule until maturity. We determined that the entity to which the loan was funded is a
VIE under FIN 46R of which we are not the primary beneficiary; therefore, we do not
consolidate the entity. Our maximum exposure to loss is limited to the amount of the loan. |
|
(2) |
|
The loan has an interest-only term until maturity, subject to the right of
the borrower to extend the loan pursuant to one six-month extension. |
|
(3) |
|
The condominiums securing this note were sold by CRDI to a
third party. Due to restrictions under SFAS No. 66 Accounting
for Sales of Real Estate regarding seller financed transactions,
the profit from the sale of $4.7 million was deferred and recorded under the cost
recovery method and reflected as a reduction of the note such that the face value of the
note is included in the table above. |
|
(4) |
|
The loan bears interest at LIBOR plus 850 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options. |
|
(5) |
|
The loan bears interest at LIBOR plus 1,100 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to five one-year extension options. |
|
(6) |
|
The loan bears interest at LIBOR plus 685 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to three one-year extension options. |
|
(7) |
|
The loan bears interest at LIBOR plus 800 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. |
|
(8) |
|
The loan bears interest at LIBOR plus 450 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. |
|
(9) |
|
The loan bears interest at LIBOR plus 1,283 basis points with an
interest-only term until maturity, subject to the right of the borrower to extend the loan
pursuant to two one-year extension options. We determined that the entity to which the loan
was funded is a VIE under FIN 46R of which we are not the primary beneficiary; therefore, we
do not consolidate the entity. Our maximum exposure to loss is limited to the amount of the
loan. |
In 2006, we received approximately $110.2 million of net proceeds, after the repayment of
debt, for the repayment of five of our mezzanine notes, which included $6.2 million of prepayment
fees.
110
9. TEMPERATURE-CONTROLLED LOGISTICS
As of December 31, 2006, the Temperature-Controlled Logistics Segment consisted of our
31.7% interest in AmeriCold. AmeriCold operates 104 facilities, of which 91 were wholly-owned or leased, one
was partially-owned and twelve were managed for outside owners. We account for our interest in
AmeriCold as an unconsolidated equity investment.
On November 18, 2004, Vornado Crescent Portland Partnership, or VCPP, the partnership through
which we owned our 40% interest in AmeriCold, sold a 20.7% interest in AmeriCold to The Yucaipa
Companies for $145.0 million, resulting in a gain of approximately $12.3 million, net of
transaction costs, to us. Yucaipa may earn a promote of up to 20% of the increase in value of
AmeriCold through December 31, 2007. Our portion of the promote is payable out of the proceeds
from a future sale of our interest in AmeriCold subject to certain limitations.
Immediately following this transaction, VCPP dissolved and, after the payment of all of its
liabilities, distributed its remaining assets to its partners. The assets distributed to us
consisted of common shares, cash and a note receivable. In connection with the dissolution of the
partnership, Vornado Realty L.P. or Vornado, agreed to terminate the preferential allocation
payable to it under the partnership agreement. In consideration of this, we agreed to pay Vornado
an annual management fee of $4.5 million, payable only out of dividends we receive from AmeriCold
and proceeds from sales of the common shares of AmeriCold that we own. Unpaid annual management
fees will accrue without interest. The amount of the annual management fee will be reduced in
proportion to any sales by us of our interest in AmeriCold. We also agreed to pay Vornado, from
the proceeds of any sales of the common shares of AmeriCold that we own, a termination fee equal to
the product of $23.8 million and the percentage reduction in our ownership of AmeriCold, as of
November 18, 2004, represented by the sale. Our obligation to pay the annual management fee and
the termination fee will end on October 30, 2027, or, if earlier, the date on which we sell all of
the common shares of AmeriCold that we own.
In August 2006, AmeriCold entered into a definitive agreement to acquire from ConAgra Foods,
Inc. or ConAgra, four refrigerated warehouse facilities and the lease on a fifth facility, with an
option to purchase. The aggregate purchase price is approximately $190.0 million, consisting of
$152.0 million in cash to ConAgra and $38.0 million representing the recording of a capital lease
obligation for the fifth facility. During the fourth quarter of 2006, AmeriCold completed the
acquisition of two of these facilities and assumed the leasehold on the fifth facility and the
related capital lease obligation. In January 2007, AmeriCold completed the acquisition of the
third facility. The acquisition of the remaining facility is expected to be completed during the
first half of 2007.
In December 2006, AmeriCold completed a 5.45% fixed-rate, interest-only financing in an
aggregate principal amount of $1.05 billion which matures in approximately equal tranches in seven,
nine and ten years. The proceeds were used to repay $449.0 million of fixed-rate mortgages with a
rate of 6.89% and a $430.0 million variable rate mortgage. The mortgages that were repaid were
collateralized by 84 temperature-controlled warehouses which were released upon repayment. Fifty
of the warehouses are used to collateralize the new loan. A portion of the remaining proceeds were
distributed to the owners, of which our portion was approximately $58.7 million.
111
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INVESTMENTS IN UNCONSOLIDATED COMPANIES
The following is a summary of our ownership in significant unconsolidated joint ventures
and investments as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Ownership |
|
|
|
|
|
|
|
|
as of |
|
|
|
|
Entity |
|
Classification |
|
December 31, 2006 |
|
|
|
|
Crescent Irvine, LLC |
|
Office (2211 Michelson Office Development Irvine) |
|
|
40.0 |
% (1) |
|
|
|
|
Crescent Miami Center, LLC |
|
Office (Miami Center Miami) |
|
|
40.0 |
% (2) (3) |
|
|
|
|
Crescent One Buckhead Plaza, L.P. |
|
Office (One Buckhead Plaza Atlanta) |
|
|
35.0 |
% (4) (3) |
|
|
|
|
Crescent POC Investors, L.P. |
|
Office (Post Oak Central Houston) |
|
|
23.9 |
% (5) (3) |
|
|
|
|
Crescent HC Investors, L.P. |
|
Office (Houston Center Houston) |
|
|
23.9 |
% (5) (3) |
|
|
|
|
Crescent TC Investors, L.P. |
|
Office (The Crescent Dallas) |
|
|
23.9 |
% (5) (3) |
|
|
|
|
Crescent Ross Avenue Mortgage Investors, L.P. |
|
Office (Trammell Crow Center, Mortgage Dallas) |
|
|
23.9 |
% (6) (3) |
|
|
|
|
Crescent Ross Avenue Realty Investors, L.P. |
|
Office (Trammell Crow Center, Ground Lessor Dallas) |
|
|
23.9 |
% (6) (3) |
|
|
|
|
Crescent Fountain Place, L.P. |
|
Office (Fountain Place Dallas) |
|
|
23.9 |
% (6) (3) |
|
|
|
|
Crescent Five Post Oak Park L.P. |
|
Office (Five Post Oak Park Houston) |
|
|
30.0 |
% (7) (3) |
|
|
|
|
Crescent One BriarLake Plaza, L.P. |
|
Office (One BriarLake Plaza Houston) |
|
|
30.0 |
% (8) (3) |
|
|
|
|
Crescent 1301 McKinney, L.P. |
|
Office (Fulbright Tower Houston) |
|
|
23.9 |
% (9) (3) |
|
|
|
|
AmeriCold Realty Trust |
|
Temperature-Controlled Logistics |
|
|
31.7 |
% (10) |
|
|
|
|
CR Operating, LLC |
|
Resort/Hotel |
|
|
48.0 |
% (11) |
|
|
|
|
CR Spa, LLC |
|
Resort/Hotel |
|
|
48.0 |
% (11) |
|
|
|
|
East West Resort Development XIV, L.P., L.L.L.P. |
|
Resort Residential Development |
|
|
26.8 |
% (12) |
|
|
|
|
Blue River Land Company, LLC |
|
Resort Residential Development |
|
|
33.2 |
% (13) |
|
|
|
|
EW Deer Valley, LLC |
|
Resort Residential Development |
|
|
35.7 |
% (14) |
|
|
|
|
SunTx Fulcrum Fund, L.P. (SunTx) |
|
Other |
|
|
26.5 |
% (15) |
|
|
|
|
Redtail Capital Partners, L.P. (Redtail) |
|
Other |
|
|
25.0 |
% (16) (3) |
|
|
|
|
Fresh Choice, LLC |
|
Other |
|
|
40.0 |
% (17) |
|
|
|
|
G2 Opportunity Fund, L.P. (G2) |
|
Other |
|
|
12.5 |
% (18) |
|
|
|
|
|
|
|
(1) |
|
The remaining 60% interest is owned by an affiliate of Hines. |
|
(2) |
|
The remaining 60% interest is owned by an affiliate of a fund managed by JP Morgan
Investment Management, Inc., or JPM. |
|
(3) |
|
We have negotiated performance based incentives, which we refer to as promoted
interest, which allow for additional equity to be earned if return targets are exceeded. |
|
(4) |
|
The remaining 65% interest is owned by Metzler US Real Estate Fund, L.P. |
|
(5) |
|
Each limited partnership is owned by Crescent Big Tex I, L.P., which is owned 60% by
a fund advised by JPM and 16.1% by affiliates of GE. |
|
(6) |
|
Each limited partnership is owned by Crescent Big Tex II, L.P., which is owned 76.1%
by a fund advised by JPM. |
|
(7) |
|
The remaining 70% interest is owned by an affiliate of GE.
|
|
(8) |
|
The remaining 70% interest is owned by affiliates of JPM. |
|
(9) |
|
The partnership is owned by Crescent Big Tex III, L.P., which is owned 60% by a fund
advised by JPM and 16.1% by affiliates of GE. |
|
(10) |
|
Of the remaining 68.3% interest, 47.6% is owned by Vornado and 20.7% is owned by
The Yucaipa Companies. |
|
(11) |
|
The remaining 52% interest is owned by the founders of Canyon Ranch and their
affiliates. CR Spa, LLC operates three resort spas which offer guest programs and services
and sells Canyon Ranch branded skin care products exclusively at the destination health
resorts and the resort spas. CR Operating, LLC operates and manages the two Canyon Ranch
destination health resorts, Tucson and Lenox, and collaborates with select real estate
developers in developing residential lifestyle communities. |
|
(12) |
|
We provided 41.9% of the initial capitalization and the venture is structured such
that we own a 26.8% interest after we receive a preferred return on our invested capital and
return of our capital. The remaining 73.2% economic interest is owned by parties unrelated to
us. East West Resort Development XIV, L.P., L.L.L.P. was formed to co-develop a hotel and
condominiums in Avon, Colorado. |
|
(13) |
|
The remaining 66.8% interest is owned by parties unrelated to us. Blue River Land
Company, LLC was formed to acquire, develop and sell certain real estate property in Summit
County, Colorado. |
|
(14) |
|
The remaining 64.3% interest is owned by parties unrelated to us. EW Deer Valley,
LLC was formed to acquire, hold and dispose of its 3.3% ownership interest in Empire Mountain
Village, L.L.C. Empire Mountain Village, LLC was formed to acquire, develop and sell certain
real estate property at Deer Valley Ski Resort next to Park City, Utah. |
|
(15) |
|
Of the remaining 73.5%, approximately 42.5% is owned by SunTx Capital Partners,
L.P. and the remaining 31.0% is owned by a group of individuals unrelated to us. Of our
limited partnership interest in SunTx, 6.3% is through an unconsolidated investment in SunTx
Capital Partners, L.P., the general partner of SunTx. SunTx Fulcrum Fund, L.P.s objective is
to invest in a portfolio of entities that offer the potential for substantial capital
appreciation. |
|
(16) |
|
The remaining 75% interest is owned by Capstead Mortgage Corporation. Redtail was
formed to invest up to $100.0 million in equity in select mezzanine loans on commercial real
estate over a two-year period. |
|
(17) |
|
The remaining 60% interest is owned by Cedarlane Natural Foods, Inc. Fresh Choice
is a restaurant owner, operator and developer. |
|
(18) |
|
G2 was formed for the purpose of investing in commercial mortgage backed securities
and other commercial real estate investments. The remaining 87.5% interest is owned by
Goff-Moore Strategic Partners, L.P., or GMSPLP, and by parties unrelated to us. G2 is managed
and controlled by an entity that is owned equally by GMSPLP and GMAC Commercial Mortgage
Corporation, or GMACCM. The ownership structure of GMSPLP consists of an approximately 92%
limited partnership interest owned directly and indirectly by Richard E. Rainwater, Chairman
of our Board of Trust Managers, of which approximately 6% is owned by Darla Moore, who is
married to Mr. Rainwater. Approximately 6% general partner interest is owned by John C. Goff,
Vice-Chairman of our Board of Trust Managers and our Chief Executive Officer. The remaining
approximately 2% general partnership interest is owned by unrelated parties. |
112
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fresh Choice
On November 16, 2005, the Bankruptcy Court entered an order approving the First Amended
Joint Plan of Reorganization of Fresh Choice, LLC, or Fresh Choice, jointly proposed by us,
Cedarlane Natural Foods, Inc., or Cedarlane, and the Official Committee of Unsecured Creditors
appointed in the bankruptcy filing. The Plan became effective on December 21, 2005. Pursuant to
the Plan, we and Cedarlane acquired 100% of the new equity interest in Fresh Choice. Our portion
of the new capital investment was 40% of $3.0 million, or $1.2 million. In addition, we and
Cedarlane entered into a loan agreement for up to $3.0 million, of which $2.9 million has been
funded as of December 31, 2006. The loan matures in January 2010. Also, as part of the Plan,
Fresh Choice obtained new financing with GE Capital Franchise Financing Corporation of $5.0
million, of which 50% is guaranteed by us and Cedarlane in proportion to respective ownership
interests. The unsecured creditors agreed to accept payment in the form of a two year non-interest
bearing note of $2.5 million. Following these transactions, we account for our interests in Fresh
Choice under the equity method.
On January 5, 2007, we entered into a recapitalization agreement whereby we sold a portion of
our interests in Fresh Choice. The agreement calls for a two-part close transaction due to
restrictions in place related to the debt of Fresh Choice. Upon the first closing in January 2007,
the buyer acquired an interest in the entities that own Fresh Choice for cash of $3.0 million, of
which we received approximately $1.6 million. The second closing is expected to occur in the
second quarter of 2007.
Summary Financial Information
We report our share of income and losses based on our ownership interest in our
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 December 31, 2006:
|
|
|
Office This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Crescent Irvine, LLC, Crescent Miami Center, LLC, Crescent Five Post Oak Park L.P.,
Crescent One BriarLake Plaza, L.P., Crescent Big Tex III, L.P. and Crescent One
Buckhead Plaza, L.P.; |
|
|
|
|
Temperature-Controlled Logistics This includes AmeriCold Realty Trust; |
|
|
|
|
Resort/Hotel This includes CR Operating, LLC and CR Spa, LLC; |
|
|
|
|
Resort Residential Development This includes East West Resort Development
XIV, L.P., L.L.L.P., Blue River Land Company, LLC and EW Deer Valley, LLC; and |
|
|
|
|
Other This includes SunTx, Redtail, Fresh Choice, LLC and G2. |
Balance Sheets as of December 31, 2005:
|
|
|
Office This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Main Street Partners, L.P., Crescent Irvine, LLC, Houston PT Three Westlake Office
Limited Partnership, Houston PT Four Westlake Office Limited Partnership, Austin PT
BK One Tower Office Limited Partnership, Crescent Miami Center, LLC, Crescent Five
Post Oak Park L.P., Crescent One BriarLake Plaza, L.P., Crescent Big Tex III, L.P.
and Crescent One Buckhead Plaza, L.P.; |
|
|
|
|
Temperature-Controlled Logistics This includes AmeriCold Realty Trust; |
|
|
|
|
Resort/Hotel This includes CR Operating, LLC and CR Spa, LLC ; |
|
|
|
|
Resort Residential Development This includes Blue River Land Company, LLC and
EW Deer Valley, LLC; and |
|
|
|
|
Other This includes SunTx, Redtail, Fresh Choice, LLC and G2. |
113
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary Statements of Operations for the year ended December 31, 2006:
|
|
|
Office This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Main Street Partners, L.P., Crescent Irvine, LLC, Houston PT Three Westlake Office
Limited Partnership, Houston PT Four Westlake Office Limited Partnership, Austin PT
BK One Tower Office Limited Partnership, Crescent Miami Center, LLC, Crescent Five
Post Oak Park L.P., Crescent One BriarLake Plaza, L.P., Crescent Big Tex III, L.P.
and Crescent One Buckhead Plaza, L.P.; |
|
|
|
|
Temperature-Controlled Logistics This includes AmeriCold Realty Trust; |
|
|
|
|
Resort/Hotel This includes CR Operating, LLC and CR Spa, LLC; |
|
|
|
|
Resort Residential Development This includes East West Resort Development
XIV, L.P., L.L.L.P., Blue River Land Company, LLC, and EW Deer Valley, LLC; and |
|
|
|
|
Other This includes SunTx, Redtail, Fresh Choice, LLC and G2. |
Summary Statements of Operations for the year ended December 31, 2005:
|
|
|
Office This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
Main Street Partners, L.P., Crescent Irvine, LLC, 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, LLC, Crescent Five Post Oak Park L.P., Crescent One BriarLake Plaza,
L.P., Crescent Big Tex III, L.P. and Crescent One Buckhead Plaza, L.P.; |
|
|
|
|
Temperature-Controlled Logistics This includes AmeriCold Realty Trust; |
|
|
|
|
Resort/Hotel This includes CR Operating, LLC and CR Spa, LLC; |
|
|
|
|
Resort Residential Development This includes Blue River Land Company, LLC and
EW Deer Valley, LLC; and |
|
|
|
|
Other This includes SunTx, Redtail, Fresh Choice, LLC and G2. |
Summary Statements of Operations for the year ended December 31, 2004:
|
|
|
Office This includes Crescent Big Tex I, L.P., Crescent Big Tex II, L.P.,
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, LLC,
Crescent Five Post Oak Park L.P. and Crescent One BriarLake Plaza, L.P.; |
|
|
|
|
Temperature-Controlled Logistics This includes AmeriCold Reality Trust,
Vornado Crescent Portland Partnership and Vornado Crescent and KC Quarry, L.L.C.; |
|
|
|
|
Resort/Hotel This includes CR License, L.L.C., CR License II, L.L.C. and
Canyon Ranch Las Vegas, L.L.C.; |
|
|
|
|
Resort Residential Development This includes Blue River Land Company, LLC and
EW Deer Valley, LLC; and |
|
|
|
|
Other This includes SunTx and G2. |
Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 |
|
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
(in thousands) |
|
Office |
|
|
Logistics |
|
|
Resort/Hotel |
|
|
Development |
|
|
Other |
|
|
Total |
|
Real estate, net |
|
$ |
1,628,384 |
|
|
$ |
1,211,120 |
|
|
$ |
113,367 |
|
|
$ |
39,349 |
|
|
$ |
12,238 |
|
|
|
|
|
Cash |
|
|
71,167 |
|
|
|
92,672 |
|
|
|
32,986 |
|
|
|
9,183 |
|
|
|
2,649 |
|
|
|
|
|
Restricted cash |
|
|
18,113 |
|
|
|
8,984 |
|
|
|
224 |
|
|
|
|
|
|
|
17,162 |
|
|
|
|
|
Other assets |
|
|
241,747 |
|
|
|
166,589 |
|
|
|
12,921 |
|
|
|
21,948 |
|
|
|
224,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,959,411 |
|
|
$ |
1,479,365 |
|
|
$ |
159,498 |
|
|
$ |
70,480 |
|
|
$ |
256,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
1,061,171 |
|
|
$ |
1,125,078 |
|
|
$ |
95,000 |
|
|
$ |
3,500 |
|
|
$ |
49,862 |
|
|
|
|
|
Notes
payable to the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,152 |
|
|
|
|
|
Other liabilities |
|
|
182,960 |
|
|
|
91,952 |
|
|
|
29,036 |
|
|
|
19,166 |
|
|
|
6,027 |
|
|
|
|
|
Preferred membership units |
|
|
|
|
|
|
|
|
|
|
109,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
715,280 |
|
|
|
262,335 |
|
|
|
(73,544 |
) |
|
|
47,814 |
|
|
|
199,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,959,411 |
|
|
$ |
1,479,365 |
|
|
$ |
159,498 |
|
|
$ |
70,480 |
|
|
$ |
256,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of unconsolidated debt |
|
$ |
287,911 |
|
|
$ |
356,875 |
|
|
$ |
45,600 |
|
|
$ |
1,467 |
|
|
$ |
13,745 |
|
|
$ |
705,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investments in
unconsolidated companies |
|
$ |
115,990 |
|
|
$ |
87,069 |
|
|
$ |
1,036 |
|
|
$ |
20,202 |
|
|
$ |
56,573 |
|
|
$ |
280,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005 |
|
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
(in thousands) |
|
Office |
|
|
Logistics |
|
|
Resort/Hotel |
|
|
Development |
|
|
Other |
|
|
Total |
|
Real estate, net |
|
$ |
1,944,942 |
|
|
$ |
1,122,155 |
|
|
$ |
108,943 |
|
|
$ |
11,789 |
|
|
$ |
13,077 |
|
|
|
|
|
Cash |
|
|
71,361 |
|
|
|
25,418 |
|
|
|
52,100 |
|
|
|
920 |
|
|
|
5,875 |
|
|
|
|
|
Restricted cash |
|
|
36,121 |
|
|
|
61,367 |
|
|
|
217 |
|
|
|
|
|
|
|
388 |
|
|
|
|
|
Other assets |
|
|
279,437 |
|
|
|
163,925 |
|
|
|
12,258 |
|
|
|
4,787 |
|
|
|
165,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,331,861 |
|
|
$ |
1,372,865 |
|
|
$ |
173,518 |
|
|
$ |
17,496 |
|
|
$ |
184,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
1,244,499 |
|
|
$ |
765,640 |
|
|
$ |
95,000 |
|
|
$ |
|
|
|
$ |
34,566 |
|
|
|
|
|
Notes payable to the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800 |
|
|
|
|
|
Other liabilities |
|
|
196,100 |
|
|
|
109,161 |
|
|
|
28,523 |
|
|
|
101 |
|
|
|
9,216 |
|
|
|
|
|
Preferred membership units |
|
|
|
|
|
|
|
|
|
|
104,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
891,262 |
|
|
|
498,064 |
|
|
|
(54,236 |
) |
|
|
17,395 |
|
|
|
140,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
2,331,861 |
|
|
$ |
1,372,865 |
|
|
$ |
173,518 |
|
|
$ |
17,496 |
|
|
$ |
184,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of unconsolidated debt |
|
$ |
348,663 |
|
|
$ |
242,708 |
|
|
$ |
45,600 |
|
|
$ |
|
|
|
$ |
10,021 |
|
|
$ |
646,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investments in
unconsolidated companies |
|
$ |
178,440 |
|
|
$ |
162,438 |
|
|
$ |
6,200 |
|
|
$ |
6,657 |
|
|
$ |
39,800 |
|
|
$ |
393,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006 |
|
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
(in thousands) |
|
Office |
|
|
Logistics(1) |
|
|
Resort/Hotel |
|
|
Development |
|
|
Other |
|
|
Total |
|
Total revenues |
|
$ |
337,476 |
|
|
$ |
780,761 |
|
|
$ |
145,166 |
|
|
$ |
12,637 |
|
|
$ |
58,358 |
|
|
|
|
|
Operating expense |
|
|
168,122 |
|
|
|
657,115 |
|
|
|
130,584 |
|
|
|
15,477 |
|
|
|
50,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income |
|
$ |
169,354 |
|
|
$ |
123,646 |
|
|
$ |
14,582 |
|
|
$ |
(2,840 |
) |
|
$ |
7,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
68,005 |
|
|
$ |
81,890 |
|
|
$ |
5,981 |
|
|
$ |
|
|
|
$ |
3,011 |
|
|
|
|
|
Depreciation and amortization |
|
|
97,574 |
|
|
|
73,254 |
|
|
|
10,585 |
|
|
|
|
|
|
|
2,102 |
|
|
|
|
|
Taxes and other (income) expense |
|
|
(3,325 |
) |
|
|
(4,588 |
) |
|
|
2,139 |
|
|
|
(440 |
) |
|
|
(46,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses (income) |
|
$ |
162,254 |
|
|
$ |
150,556 |
|
|
$ |
18,705 |
|
|
$ |
(440 |
) |
|
$ |
(41,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets |
|
|
102,727 |
|
|
|
2,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends |
|
|
|
|
|
|
|
|
|
|
(12,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common interests |
|
$ |
109,827 |
|
|
$ |
(24,746 |
) |
|
$ |
(16,626 |
) |
|
$ |
(2,400 |
) |
|
$ |
48,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our equity in net income (loss)
of unconsolidated companies |
|
$ |
9,231 |
|
|
$ |
(15,669 |
) |
|
$ |
(5,109 |
) |
|
$ |
(355 |
) |
|
$ |
12,157 |
|
|
$ |
255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In connection with the dissolution of Vornado Crescent Portland Partnership, we
agreed to pay Vornado Realty, L.P. an annual management fee of $4.5 million, payable only out
of dividends or sale proceeds on the shares of AmeriCold that we own, which is included in our
share of equity in net income (loss) for Temperature-Controlled Logistics. |
115
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 |
|
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
(in thousands) |
|
Office |
|
|
Logistics(1) |
|
|
Resort/Hotel |
|
|
Development |
|
|
Other |
|
|
Total |
|
Total revenues |
|
$ |
344,268 |
|
|
$ |
846,881 |
|
|
$ |
136,537 |
|
|
$ |
8,553 |
|
|
$ |
551 |
|
|
|
|
|
Operating expense |
|
|
160,187 |
|
|
|
699,701 |
|
|
|
115,002 |
|
|
|
3,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income |
|
$ |
184,081 |
|
|
$ |
147,180 |
|
|
$ |
21,535 |
|
|
$ |
4,882 |
|
|
$ |
551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
68,851 |
|
|
$ |
56,273 |
|
|
$ |
5,580 |
|
|
$ |
|
|
|
$ |
255 |
|
|
|
|
|
Depreciation and amortization |
|
|
100,880 |
|
|
|
73,776 |
|
|
|
10,396 |
|
|
|
|
|
|
|
89 |
|
|
|
|
|
Taxes and other (income) expense |
|
|
(899 |
) |
|
|
243 |
|
|
|
22 |
|
|
|
(155 |
) |
|
|
(99,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses (income) |
|
$ |
168,832 |
|
|
$ |
130,292 |
|
|
$ |
15,998 |
|
|
$ |
(155 |
) |
|
$ |
(98,745 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends |
|
$ |
|
|
|
$ |
|
|
|
$ |
(12,043 |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common interests |
|
$ |
15,249 |
|
|
$ |
16,888 |
|
|
$ |
(6,506 |
) |
|
$ |
5,037 |
|
|
$ |
99,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our equity in net income (loss)
of unconsolidated companies |
|
$ |
11,464 |
|
|
$ |
234 |
|
|
$ |
(1,541 |
) |
|
$ |
(491 |
) |
|
$ |
17,885 |
(2) |
|
$ |
27,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In connection with the dissolution of Vornado Crescent Portland
Partnership, we agreed to pay Vornado Realty, L.P. an annual management fee of $4.5
million, payable only out of dividends or sale proceeds on the shares of AmeriCold that
we own, which is included in our share of equity in net income (loss) for
Temperature-Controlled Logistics. |
|
(2) |
|
Includes approximately $5.1 million of income recorded in the second quarter
of 2005 resulting from an increase in 2004 actual results from previously estimated
results related to SunTx. |
Summary Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2004 |
|
|
|
|
|
|
|
Temperature- |
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
|
|
|
|
|
|
|
Controlled |
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
(in thousands) |
|
Office |
|
|
Logistics |
|
|
Resort/Hotel |
|
|
Development |
|
|
Other |
|
|
Total |
|
Total revenues |
|
$ |
156,670 |
|
|
$ |
223,990 |
|
|
$ |
34,249 |
|
|
$ |
3,981 |
|
|
$ |
|
|
|
|
|
|
Operating expense |
|
|
77,684 |
|
|
|
121,935 |
(1) |
|
|
29,748 |
|
|
|
5,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Operating Income |
|
$ |
78,986 |
|
|
$ |
102,055 |
|
|
$ |
4,501 |
|
|
$ |
(1,350 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
34,368 |
|
|
$ |
52,069 |
|
|
$ |
12 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
Depreciation and amortization |
|
|
35,916 |
|
|
|
59,813 |
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes and other (income) expense |
|
|
113 |
|
|
|
1,509 |
|
|
|
|
|
|
|
94 |
|
|
|
(23,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
expenses (income) |
|
$ |
70,397 |
|
|
$ |
113,391 |
|
|
$ |
762 |
|
|
$ |
94 |
|
|
$ |
(23,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale of assets |
|
$ |
|
|
|
$ |
32,975 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common interests |
|
$ |
8,589 |
|
|
$ |
21,639 |
|
|
$ |
3,739 |
|
|
$ |
(1,444 |
) |
|
$ |
23,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our equity in net income (loss)
of unconsolidated companies |
|
$ |
6,262 |
|
|
$ |
6,153 |
|
|
$ |
(245 |
) |
|
$ |
(2,266 |
) |
|
$ |
(280 |
)(2) |
|
$ |
9,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Inclusive of the preferred return paid to Vornado (1% per annum of the
total combined assets through November 18, 2004). |
|
(2) |
|
Does not include approximately $5.1 million of income recorded in the second
quarter 2005 resulting from an increase in 2004 actual results from previously estimated
results related to SunTx. |
116
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unconsolidated Debt Analysis
The following table shows, as of December 31, 2006, information about our 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Our Share of |
|
|
|
|
|
|
|
|
|
|
|
Outstanding at |
|
|
Balance at |
|
|
|
|
|
|
|
|
|
Our |
|
December 31, |
|
|
December 31, |
|
|
Interest Rate at |
|
|
|
|
Description |
|
Ownership |
|
2006 |
|
|
2006 |
|
|
December 31, 2006 |
|
Maturity Date |
|
Fixed/Variable (1) |
|
|
|
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|
|
|
Temperature-Controlled Logistics Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AmeriCold Realty Trust |
|
31.72% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche Bank/JPMorgan Chase (2) |
|
|
|
$ |
350,000 |
|
|
$ |
111,020 |
|
|
5.40% |
|
12/10/2015 |
|
Fixed |
Citigroup (3) |
|
|
|
|
325,000 |
|
|
|
103,090 |
|
|
5.46% |
|
12/10/2013 |
|
Fixed |
UBS 1A (4) |
|
|
|
|
194,000 |
|
|
|
61,537 |
|
|
5.55% |
|
12/10/2016 |
|
Fixed |
UBS 1B, 1C (5) |
|
|
|
|
181,000 |
|
|
|
57,413 |
|
|
5.43% |
|
12/10/2016 |
|
Fixed |
Other |
|
|
|
|
75,078 |
|
|
|
23,815 |
|
|
3.48% to 22.53% |
|
6/15/2007 to 4/1/2017 |
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,125,078 |
|
|
$ |
356,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crescent HC Investors, L.P. |
|
23.85% |
|
|
269,705 |
|
|
|
64,325 |
|
|
5.03% |
|
11/7/2011 |
|
Fixed |
Crescent TC Investors, L.P. |
|
23.85% |
|
|
214,770 |
|
|
|
51,223 |
|
|
5.00% |
|
11/1/2011 |
|
Fixed |
Crescent Fountain Place, L.P. |
|
23.85% |
|
|
105,932 |
|
|
|
25,265 |
|
|
4.95% |
|
12/1/2011 |
|
Fixed |
Crescent POC Investors, L.P. |
|
23.85% |
|
|
97,504 |
|
|
|
23,255 |
|
|
4.98% |
|
12/1/2011 |
|
Fixed |
Crescent One Buckhead Plaza, L.P. |
|
35.00% |
|
|
85,000 |
|
|
|
29,750 |
|
|
5.47% |
|
4/8/2015 |
|
Fixed |
Crescent Miami Center, LLC |
|
40.00% |
|
|
81,000 |
|
|
|
32,400 |
|
|
5.04% |
|
9/25/2007 |
|
Fixed |
Crescent 1301 McKinney, L.P. (6) |
|
23.85% |
|
|
73,350 |
|
|
|
17,494 |
|
|
6.58% |
|
1/9/2008 |
|
Variable |
Crescent One BriarLake Plaza, L.P. |
|
30.00% |
|
|
50,000 |
|
|
|
15,000 |
|
|
5.40% |
|
11/1/2010 |
|
Fixed |
Crescent Five Post Oak Park, L.P. |
|
30.00% |
|
|
43,656 |
|
|
|
13,097 |
|
|
4.82% |
|
1/1/2008 |
|
Fixed |
Crescent Irvine, LLC (7) |
|
40.00% |
|
|
40,254 |
|
|
|
16,102 |
|
|
8.10% |
|
3/7/2009 |
|
Variable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,061,171 |
|
|
$ |
287,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort/Hotel Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CR Resort, LLC |
|
48.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of America |
|
|
|
$ |
95,000 |
|
|
$ |
45,600 |
|
|
5.94% |
|
2/1/2015 |
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort Residential Development Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East West Resort Development XIV, L.P., L.L.L.P.(8) |
|
41.90% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Vail Corporation |
|
|
|
$ |
3,500 |
|
|
$ |
1,467 |
|
|
5.00% |
|
4/28/2008 |
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redtail Capital Partners One, LLC |
|
25.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morgan Stanley Bank (9) |
|
|
|
$ |
41,330 |
|
|
$ |
10,333 |
|
|
7.14% |
|
8/9/2008 |
|
Variable |
Fresh Choice, LLC |
|
40.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE Capital Franchise Finance Corporation(10) |
|
|
|
|
4,276 |
|
|
|
1,710 |
|
|
10.07% |
|
1/1/2011 |
|
Variable |
Various Loans and Capital Leases |
|
|
|
|
4,256 |
|
|
|
1,702 |
|
|
0.00% to 9.53% |
|
3/1/2007 to 12/31/2029 |
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
49,862 |
|
|
$ |
13,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unconsolidated Debt |
|
|
|
$ |
2,334,611 |
|
|
$ |
705,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate/Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
5.41% |
|
7.01 years |
|
|
Variable Rate/Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
7.37% |
|
1.70 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
5.53% |
|
6.67 years |
|
|
|
|
|
(1) |
|
All unconsolidated debt is secured. |
|
(2) |
|
The loan is a nine-year, interest-only financing that is collateralized by 20 of its
Temperature-Controlled Logistics Properties. |
|
(3) |
|
The loan is a seven-year, interest-only financing that is collateralized by 15 of
its Temperature-Controlled Logistics Properties. |
|
(4) |
|
The loan is a ten-year, interest-only financing that is collateralized by 4 of its
Temperature-Controlled Logistics Properties. |
|
(5) |
|
The loan is a ten-year, interest-only financing that is collateralized by 11 of its
Temperature-Controlled Logistics Properties. |
|
(6) |
|
On January 10, 2007, this loan was paid off and replaced with a new $89.0 million,
five year, interest-only financing. |
|
(7) |
|
This loan has one two-year extension option. The loan bears interest at LIBOR plus
275 basis points. In May 2006, Crescent Irvine, LLC, entered into an interest rate swap
agreement struck at 5.34%. |
|
(8) |
|
We provided 41.9% of the initial capitalization and the venture is structured such
that we own a 26.8% interest after we receive a preferred return on our invested capital and
return of our capital. |
|
(9) |
|
This loan has one one-year extension option. Redtail Capital Partners One, LLC is
owned 100% by Redtail. The loans supporting this facility are subject to daily valuations by
Morgan Stanley and we are subject to a margin call if the overall leverage exceeds certain
thresholds. The loan bears interest as follows: $28.8 million at LIBOR plus 185 basis points
and $12.5 million at LIBOR plus 170 basis points. |
|
(10) |
|
We guarantee $1.0 million of this loan. The loan bears interest at LIBOR plus 470
basis points. |
117
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. OTHER ASSETS AND OTHER LIABILITIES
Other Assets
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
2005 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
Leasing costs |
|
$ |
125,033 |
|
|
$ |
112,607 |
|
Goodwill |
|
|
40,469 |
|
|
|
40,469 |
|
Other intangibles |
|
|
51,417 |
|
|
|
50,147 |
|
Intangible office leases |
|
|
80,317 |
|
|
|
77,239 |
|
Deferred financing costs |
|
|
44,929 |
|
|
|
46,611 |
|
Prepaid expenses |
|
|
20,669 |
|
|
|
20,860 |
|
Marketable securities |
|
|
5,094 |
|
|
|
21,579 |
|
Other |
|
|
9,377 |
|
|
|
22,781 |
|
|
|
|
|
|
|
|
|
|
$ |
377,305 |
|
|
$ |
392,293 |
|
Less accumulated amortization |
|
|
(102,291 |
) |
|
|
(79,927 |
) |
|
|
|
|
|
|
|
|
|
$ |
275,014 |
|
|
$ |
312,366 |
|
|
|
|
|
|
|
|
Goodwill and Identified Intangible Assets
The following summarizes
our goodwill, identified intangible assets and identified intangible liabilities as of
December 31, 2006 and 2005.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
2005 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
Goodwill (included in other assets): |
|
|
|
|
|
|
|
|
Resort Residential Development Segment: |
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
40,469 |
|
|
$ |
40,469 |
|
|
|
|
|
|
|
|
Identified intangible assets (included in other assets): |
|
|
|
|
|
|
|
|
Resort Residential Development Segment: |
|
|
|
|
|
|
|
|
Intangibles(1) |
|
$ |
51,417 |
|
|
$ |
50,147 |
|
Accumulated amortization |
|
|
(3,767 |
) |
|
|
(2,852 |
) |
|
|
|
|
|
|
|
Net intangibles |
|
$ |
47,650 |
|
|
$ |
47,295 |
|
|
|
|
|
|
|
|
Office Segment: |
|
|
|
|
|
|
|
|
Intangibles(2) |
|
$ |
80,317 |
|
|
$ |
77,239 |
|
Accumulated amortization |
|
|
(22,973 |
) |
|
|
(15,520 |
) |
|
|
|
|
|
|
|
Net intangibles |
|
$ |
57,344 |
|
|
$ |
61,719 |
|
|
|
|
|
|
|
|
Identified intangible liabilities (included in accounts payable, accrued
expenses and other liabilities): |
|
|
|
|
|
|
|
|
Office Segment: |
|
|
|
|
|
|
|
|
Intangibles(3) |
|
$ |
10,938 |
|
|
$ |
9,876 |
|
Accumulated amortization |
|
|
(3,443 |
) |
|
|
(2,026 |
) |
|
|
|
|
|
|
|
Net intangibles |
|
$ |
7,495 |
|
|
$ |
7,850 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consists primarily of water rights. |
|
(2) |
|
Consists of acquired in-place leases and above market leases. Of these amounts,
approximately $9.7 million and $8.5 million were acquired in the year ended December 31,
2006 and 2005, respectively. |
|
(3) |
|
Consists of acquired below market leases. Of these amounts, approximately $1.4
million and $4.5 million were acquired in the year ended December 31, 2006 and 2005,
respectively. |
Amortization of acquired above market leases net of
acquired below market leases resulted
in a decrease to rental income of $1.7 million, $2.9 million and $2.1 million for the years ended
December 31, 2006, 2005, and 2004, respectively. The weighted average amortization period of
acquired above and below market leases is approximately
6.5 years. The following table outlines the estimated annual
amortization of acquired above market leases net of acquired below market leases for each of the
five succeeding years which will result in a decrease (increase) to
rental income:
|
|
|
|
|
|
|
Estimated |
(in thousands) |
|
Annual Amortization |
2007 |
|
$ |
1,028 |
|
2008 |
|
|
137 |
|
2009 |
|
|
(118 |
) |
2010 |
|
|
(332 |
) |
2011 |
|
|
(299 |
) |
118
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average amortization periods of all other identified intangible assets in
the Resort Residential Development and Office segments are 20.8 years and 11.3 years, respectively.
The estimated annual amortization of all other identified intangible assets (a component of
depreciation and amortization expense) including water rights and acquired
in-place leases for each of the five succeeding years is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort |
|
|
|
|
|
|
Residential |
|
|
|
|
(in thousands) |
|
Development |
|
Office |
|
Total |
2007 |
|
$ |
936 |
|
|
$ |
6,234 |
|
|
$ |
7,170 |
|
2008 |
|
|
936 |
|
|
|
6,231 |
|
|
|
7,167 |
|
2009 |
|
|
922 |
|
|
|
6,230 |
|
|
|
7,152 |
|
2010 |
|
|
898 |
|
|
|
6,177 |
|
|
|
7,075 |
|
2011 |
|
|
898 |
|
|
|
5,690 |
|
|
|
6,588 |
|
Marketable Securities
The following tables present the cost, fair value and unrealized gains and losses as of
December 31, 2006 and 2005, and the realized gains and change in Accumulated Other Comprehensive
Income, or OCI, for the years ended December 31, 2006, 2005 and 2004 for our marketable securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
(in thousands) |
|
|
|
|
|
Fair |
|
|
Unrealized |
|
|
|
|
|
|
Fair |
|
|
Unrealized |
|
Type of Security |
|
Cost |
|
|
Value |
|
|
Gain/(Loss) |
|
|
Cost |
|
|
Value |
|
|
Gain/(Loss) |
|
Held to maturity(1) |
|
$ |
115,371 |
|
|
$ |
114,657 |
|
|
$ |
(714 |
) |
|
$ |
274,134 |
|
|
$ |
271,659 |
|
|
$ |
(2,475 |
) |
Trading(2) |
|
|
679 |
|
|
|
737 |
|
|
|
N/A |
|
|
|
690 |
|
|
|
728 |
|
|
|
N/A |
|
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,284 |
|
|
|
20,852 |
|
|
|
568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
116,050 |
|
|
$ |
115,394 |
|
|
$ |
(714 |
) |
|
$ |
295,108 |
|
|
$ |
293,239 |
|
|
$ |
(1,907 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
For the year ended |
|
|
For the year ended |
|
|
|
December 31, 2006 |
|
|
December 31, 2005 |
|
|
December 31, 2004 |
|
(in thousands) |
|
Realized |
|
|
Change |
|
|
Realized |
|
|
Change |
|
|
Realized |
|
|
Change |
|
Type of Security |
|
Gain/(Loss) |
|
|
In OCI |
|
|
Gain/(Loss) |
|
|
In OCI |
|
|
Gain/(Loss) |
|
|
In OCI |
|
Held to maturity(1) |
|
$ |
|
|
|
|
N/A |
|
|
$ |
|
|
|
|
N/A |
|
|
$ |
|
|
|
$ |
N/A |
|
Trading(2) |
|
|
53 |
|
|
|
N/A |
|
|
|
139 |
|
|
|
N/A |
|
|
|
1,149 |
|
|
|
N/A |
|
Available for sale |
|
|
65 |
(3) |
|
|
(568 |
) |
|
|
(19 |
) |
|
|
(468 |
) |
|
|
6 |
|
|
|
1,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
118 |
|
|
$ |
(568 |
) |
|
$ |
120 |
|
|
$ |
(468 |
) |
|
$ |
1,155 |
|
|
$ |
1,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Held to maturity securities are carried at amortized cost and consist of $111.0
million of defeasance investments, included in Defeasance investments in the accompanying
Consolidated Balance Sheets, which consist of U.S. Treasury and government sponsored agency
securities purchased for the sole purpose of funding debt service payments on LaSalle Note I
and the Nomura Funding VI Note and $4.4 million of bonds. In March 2006, the LaSalle Note II
was paid off with the proceeds from maturities of defeasance investment securities. |
|
(2) |
|
Trading securities primarily consist of marketable securities purchased in
connection with our dividend incentive unit program. These securities are included in Other
assets, net in the accompanying Consolidated Balance Sheets and are marked to market value on
a monthly basis with the change in fair value recognized in earnings. |
|
(3) |
|
We received approximately $20.5 million, inclusive of $0.4 million interest, during
the year ended December 31, 2006 from the sale of these marketable securities. |
Accounts Payable, Accrued Expenses and Other Liabilities
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
2005 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
Accounts payable and accrued expenses |
|
$ |
236,305 |
|
|
$ |
207,584 |
|
Deferred revenue |
|
|
138,680 |
|
|
|
147,988 |
|
Resort Residential contract deposits |
|
|
53,189 |
|
|
|
70,491 |
|
Accrued property taxes |
|
|
36,434 |
|
|
|
34,180 |
|
Accrued interest |
|
|
21,862 |
|
|
|
21,109 |
|
Resort/Hotel deposits |
|
|
8,625 |
|
|
|
8,621 |
|
Office security deposits |
|
|
6,919 |
|
|
|
5,945 |
|
|
|
|
|
|
|
|
|
|
$ |
502,014 |
|
|
$ |
495,918 |
|
|
|
|
|
|
|
|
119
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY
The significant terms of our primary debt financing arrangements existing as of December
31, 2006 and 2005, are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity |
Description |
|
Asset |
|
2006 |
|
2005 |
|
Interest Rate |
|
2006 |
|
2005 |
|
Date |
|
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
Secured Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AEGON Partnership Note (1) |
|
Greenway Plaza |
|
$ |
242,290 |
|
|
$ |
248,678 |
|
|
|
|
7.53% |
|
|
|
|
|
July 2009 |
Prudential Note |
|
707 17th Street/Denver Marriott |
|
|
70,000 |
|
|
|
70,000 |
|
|
|
|
5.22 |
|
|
|
|
|
June 2010 |
JP Morgan Chase III |
|
Datran Center |
|
|
65,000 |
|
|
|
65,000 |
|
|
|
|
4.88 |
|
|
|
|
|
October 2015 |
Bank of America Note I (2) |
|
Fairmont Sonoma Mission Inn |
|
|
55,000 |
|
|
|
|
|
|
|
|
5.40 |
|
|
|
|
|
February 2011 |
Morgan Stanley I |
|
The Alhambra |
|
|
50,000 |
|
|
|
50,000 |
|
|
|
|
5.06 |
|
|
|
|
|
October 2011 |
Allstate Life Note |
|
Financial Plaza |
|
|
38,949 |
|
|
|
|
|
|
|
|
5.47 |
|
|
|
|
|
October 2010 |
Bank of America Note II (3) |
|
The BAC - Colonnade Building |
|
|
37,439 |
|
|
|
37,922 |
|
|
|
|
5.53 |
|
|
|
|
|
May 2013 |
Metropolitan Life Note VII |
|
Dupont Centre |
|
|
35,500 |
|
|
|
35,500 |
|
|
|
|
4.31 |
|
|
|
|
|
May 2011 |
Column Financial |
|
Peakview Tower |
|
|
33,000 |
|
|
|
33,000 |
|
|
|
|
5.59 |
|
|
|
|
|
April 2015 |
Mass Mutual Note |
|
3800 Hughes |
|
|
32,203 |
|
|
|
34,177 |
|
|
|
|
7.75 |
|
|
|
|
|
July 2007 |
Northwestern Life Note |
|
301 Congress |
|
|
26,000 |
|
|
|
26,000 |
|
|
|
|
4.94 |
|
|
|
|
|
November 2008 |
JP Morgan Chase II |
|
3773 Hughes |
|
|
24,755 |
|
|
|
24,755 |
|
|
|
|
4.98 |
|
|
|
|
|
September 2011 |
Allstate Note (4) |
|
3993 Hughes |
|
|
24,025 |
|
|
|
24,781 |
|
|
|
|
6.65 |
|
|
|
|
|
September 2010 |
Metropolitan Life Note VI (4) |
|
3960 Hughes |
|
|
22,074 |
|
|
|
23,011 |
|
|
|
|
7.71 |
|
|
|
|
|
October 2009 |
Construction, Acquisition and other obligations(4) |
|
Various Office and Resort Residential Assets |
|
|
40,690 |
|
|
|
36,526 |
|
|
|
|
2.90 to 13.75 |
|
|
|
|
|
July 2007 to Dec. 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Fixed Rate Defeased Debt (5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LaSalle Note II |
|
Funding II Defeasance |
|
|
|
|
|
|
155,188 |
|
|
|
|
|
|
|
|
|
|
|
LaSalle Note I |
|
Funding I Defeasance |
|
|
100,017 |
|
|
|
101,723 |
|
|
|
|
7.83 |
|
|
|
|
|
August 2007 |
Nomura Funding VI Note |
|
Funding VI Defeasance |
|
|
7,208 |
|
|
|
7,445 |
|
|
|
|
10.07 |
|
|
|
|
|
July 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
904,150 |
|
|
$ |
973,706 |
|
|
|
|
6.38% |
|
|
6.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2009 Notes (6) (7) |
|
|
|
$ |
375,000 |
|
|
$ |
375,000 |
|
|
|
|
9.25% |
|
|
|
|
|
April 2009 |
The 2007 Notes (6) |
|
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
|
7.50 |
|
|
|
|
|
September 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
625,000 |
|
|
$ |
625,000 |
|
|
|
|
8.55% |
|
|
8.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Variable Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GACC Note (8) |
|
Funding One Assets |
|
$ |
165,000 |
|
|
$ |
165,000 |
|
|
LIBOR + 147 bps |
|
6.82% |
|
|
|
|
|
June 2007 |
Morgan Stanley II (9) |
|
Mezzanine Investments |
|
|
22,311 |
|
|
|
|
|
|
LIBOR + 150 to 230 bps |
|
7.37 |
|
|
|
|
|
March 2009 |
Goldman Sachs (9) |
|
Mezzanine Investments |
|
|
10,000 |
|
|
|
|
|
|
LIBOR + 140 bps |
|
6.72 |
|
|
|
|
|
May 2009 |
KeyBank II |
|
Distributions from Funding III, IV & V |
|
|
75,000 |
|
|
|
|
|
|
LIBOR + 200 bps |
|
7.35 |
|
|
|
|
|
June 2007 |
National Bank of Arizona (10) |
|
DMDC Assets |
|
|
15,654 |
|
|
|
6,157 |
|
|
Prime + 50 bps |
|
8.75 |
|
|
|
|
|
October 2007 |
Acquisition and other obligations |
|
Various Office and Other Assets |
|
|
13,416 |
|
|
|
23,650 |
|
|
LIBOR + 128 to 131 bpsor Prime - 75 to 100 bps |
|
6.60 to 6.63 |
|
|
|
|
|
Feb. 2008 to Dec. 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Variable Rate Construction Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KeyBank I (11) |
|
Ritz-Carlton Dallas Construction |
|
|
80,296 |
|
|
|
15,162 |
|
|
LIBOR + 225 bps |
|
7.60% |
|
|
|
|
|
July 2008 |
JP Morgan Chase (12) |
|
Northstar Big Horn Construction |
|
|
56,342 |
|
|
|
17,164 |
|
|
Prime - 50 bps |
|
7.75 |
|
|
|
|
|
October 2007 |
Societe Generale I (13) |
|
3883 Hughes Construction |
|
|
30,587 |
|
|
|
314 |
|
|
LIBOR + 180 bps |
|
7.22 |
|
|
|
|
|
September 2008 |
First Bank of Vail (14) |
|
Village Walk Construction |
|
|
14,041 |
|
|
|
|
|
|
Prime - 50 bps |
|
7.75 |
|
|
|
|
|
February 2008 |
US Bank II (15) |
|
Northstar Trailside Construction |
|
|
1,991 |
|
|
|
|
|
|
LIBOR + 250 bps |
|
8.10 |
|
|
|
|
|
March 2009 |
US Bank I (16) |
|
Beaver Creek Landing Construction |
|
|
16,446 |
|
|
|
|
|
|
Prime - 115 bps |
|
7.10 |
|
|
|
|
|
February 2008 |
California Bank & Trust (17) |
|
One Riverfront Construction |
|
|
13,861 |
|
|
|
|
|
|
Prime + 12.5 bps |
|
8.38 |
|
|
|
|
|
March 2008 |
JP Morgan Chase Bank (18) |
|
Old Greenwood Construction |
|
|
16,150 |
|
|
|
10,235 |
|
|
Prime |
|
8.25 |
|
|
|
|
|
March 2007 |
Construction,
acquisition and other obligations |
|
Various Office and Resort
Residential Assets |
|
|
40,792 |
|
|
|
29,961 |
|
|
LIBOR + 213 to 393 |
|
7.45 to 9.25 |
|
|
|
|
|
June 2007 to Dec. 2010 |
Bank One |
|
Northstar Ironhorse Construction |
|
|
|
|
|
|
42,671 |
|
|
|
|
|
|
|
|
|
|
|
Bank One |
|
Jefferson Station Apts. Construction |
|
|
|
|
|
|
24,526 |
|
|
|
|
|
|
|
|
|
|
|
Guaranty Bank |
|
Paseo Del Mar Construction |
|
|
|
|
|
|
14,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
571,887 |
|
|
$ |
349,446 |
|
|
|
|
7.39% |
|
|
6.43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Variable Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility (19) |
|
|
|
$ |
118,000 |
|
|
$ |
234,000 |
|
|
LIBOR + 160 bps |
|
6.95% |
|
|
|
|
|
February 2008 |
Junior Subordinated Notes (20) |
|
|
|
|
51,547 |
|
|
|
51,547 |
|
|
LIBOR + 200 bps |
|
7.38 |
|
|
|
|
|
June 2035 |
Junior Subordinated Notes (20) |
|
|
|
|
25,774 |
|
|
|
25,774 |
|
|
LIBOR + 200 bps |
|
7.38 |
|
|
|
|
|
July 2035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Weighted Average |
|
|
|
$ |
195,321 |
|
|
$ |
311,321 |
|
|
|
|
7.12% |
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average |
|
|
|
$ |
2,296,358 |
|
|
$ |
2,259,473 |
|
|
|
|
7.29% |
(21) |
|
7.08 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average remaining term |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 years |
|
|
|
|
|
|
120
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
(1) |
|
The remaining outstanding balance of this note at maturity will be approximately
$223.4 million. |
|
(2) |
|
Obtaining this loan was a reconsideration event under FIN 46R. We determined that
the entity that operates Fairmont Sonoma Mission Inn is a VIE of which we are the primary
beneficiary. This entity was previously consolidated under other GAAP; therefore there is no
impact to our Consolidated Financial Statements. |
|
(3) |
|
The outstanding principal balance of this loan at maturity will be approximately
$33.7 million. |
|
(4) |
|
We assumed these loans in connection with the Hughes Center properties acquisitions.
The following table lists the unamortized premium associated with the assumption of above
market interest rate debt which is included in the balance outstanding at December 31, 2006,
the effective interest rate of the debt including the premium and the outstanding principal
balance at maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
Unamortized |
|
|
|
|
|
|
Balance at |
|
Loan |
|
Premium |
|
|
Effective Rate |
|
|
Maturity |
|
Northwestern |
|
$ |
173 |
|
|
|
3.80 |
% |
|
$ |
8,663 |
|
Allstate Note |
|
|
941 |
|
|
|
5.19 |
% |
|
|
20,771 |
|
Metropolitan Life Note VI |
|
|
1,098 |
|
|
|
5.68 |
% |
|
|
19,239 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,212 |
|
|
|
|
|
|
$ |
48,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The premium was recorded as an increase in the carrying amount of the underlying debt and is
being amortized using the effective interest rate method as a reduction of interest expense
through maturity of the underlying debt. |
|
(5) |
|
We purchased U.S. Treasuries and government sponsored agency securities, or
defeasance investments, to substitute as collateral for these loans. The cash flow from
defeasance investments (principal and interest) matches the debt service payment of the loans. |
|
(6) |
|
To incur any additional debt, the indenture requires us to meet thresholds for a
number of customary financial and other covenants including maximum leverage ratios, minimum
debt service coverage ratios, maximum secured debt as a percentage of total undepreciated
assets, and ongoing maintenance of unencumbered assets. Additionally, as long as the 2009
Notes are not rated investment grade, there are restrictions on our ability to make certain
payments, including distributions to shareholders and investments. |
|
(7) |
|
At our option, these notes can be called beginning in April 2007 for 102.3% and in
April 2008 and thereafter for par. |
|
(8) |
|
This note consists of a $110.0 million senior loan at LIBOR plus 108 basis points, a
$40.0 million first mezzanine loan at LIBOR plus 225 basis points and a $15.0 million second
mezzanine loan at LIBOR plus 225 basis points. This note has three one-year extension
options. |
|
(9) |
|
This loan has one one-year extension option. The loans supporting this facility
are subject to daily valuations by Morgan Stanley and Goldman Sachs, respectively, and we are
subject to a margin call if the overall leverage of the facility exceeds certain thresholds. |
|
(10) |
|
The maximum facility amount is $30.0 million. |
|
(11) |
|
The maximum facility amount is $169.0 million. This loan has three one-year
extension options. |
|
(12) |
|
The maximum facility amount is $84.9 million. |
|
(13) |
|
The maximum facility amount is $52.3 million. This loan has two one-year extension
options. The rate on this loan decreases to LIBOR plus 170 basis points when the following
are met: 85% leased and 75% occupied. |
|
(14) |
|
The maximum facility amount is $41.8 million.
|
|
(15) |
|
The maximum facility amount is $36.0 million. |
|
(16) |
|
The maximum facility amount is $33.4 million. This loan has one six-month
extension option. |
|
(17) |
|
The maximum facility amount is $27.5 million. This loan has one one-year extension
option. The partners have committed to contribute up to an additional $17.1 million in
capital should certain financial covenants not be maintained. |
|
(18) |
|
The maximum facility amount is $21.0 million. |
|
(19) |
|
Availability under the line of credit is subject to certain covenants including
limitations on total leverage, fixed charge ratio, debt service coverage ratio, minimum
tangible net worth, and a specific mix of office and hotel assets and average occupancy of
Office Properties. At December 31, 2006, the maximum borrowing capacity under the credit
facility was $366.8 million. The outstanding balance excludes letters of credit issued under
our credit facility of $9.5 million which reduces our maximum borrowing capacity. The spread
to LIBOR on this loan decreases to 150 basis points if we reduce leverage below 45% and it
increases to 175 basis points if we exceed 55% leverage. |
|
(20) |
|
In 2005, we completed private offerings of $75.0 million of trust preferred
securities through our trust subsidiaries. The securities are callable at no premium after
June and July 2010. |
|
(21) |
|
The overall weighted average interest rate does not include the effect of our cash
flow hedge agreements. Including the effect of these agreements, the overall weighted average
interest rate would have been 7.27%. |
The following table shows information about our consolidated fixed and variable rate debt
and does not take into account any extension options, hedging arrangements or our anticipated
payoff dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
Average |
|
|
Weighted Average |
|
(in thousands) |
|
Balance |
|
|
of Debt (1) |
|
|
Rate |
|
|
Maturity |
|
Fixed Rate Debt |
|
$ |
1,529,150 |
|
|
|
66.6 |
% |
|
|
7.27 |
% |
|
2.8 years |
Variable Rate Debt |
|
|
767,208 |
|
|
|
33.4 |
|
|
|
7.32 |
|
|
3.7 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt |
|
$ |
2,296,358 |
|
|
|
100.0 |
% |
|
|
7.29 |
% (2) |
|
3.1 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Balance excludes hedges. The percentages for fixed rate debt and variable
rate debt, including the $287.6 million of hedged variable rate debt, are 79% and 21%,
respectively. |
|
(2) |
|
Including the effect of hedge arrangements, the overall weighted average interest
rate would have been 7.27%. |
121
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Listed below are the aggregate principal payments by year required as of December 31,
2006, under our indebtedness. Scheduled principal installments and amounts due at maturity are
included.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured |
|
|
Defeased |
|
|
|
|
|
|
|
(in thousands) |
|
Debt |
|
|
Debt |
|
|
Unsecured Debt |
|
|
Total (1) |
|
2007 |
|
$ |
399,719 |
|
|
$ |
100,279 |
|
|
$ |
250,000 |
|
|
$ |
749,998 |
|
2008 |
|
|
234,290 |
|
|
|
289 |
|
|
|
118,000 |
|
|
|
352,579 |
|
2009 |
|
|
280,489 |
|
|
|
320 |
|
|
|
375,000 |
|
|
|
655,809 |
|
2010 |
|
|
134,043 |
|
|
|
6,337 |
|
|
|
|
|
|
|
140,380 |
|
2011 |
|
|
181,120 |
|
|
|
|
|
|
|
|
|
|
|
181,120 |
|
Thereafter |
|
|
139,151 |
|
|
|
|
|
|
|
77,321 |
|
|
|
216,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,368,812 |
|
|
$ |
107,225 |
|
|
$ |
820,321 |
|
|
$ |
2,296,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on contractual maturity and does not include extension options on
Wells Fargo Bank Loan, Societe Generale Loan, KeyBank I Construction Loan, California Bank
& Trust Loan, US Bank I Loan, Morgan Stanley II Loan, GACC Note or Goldman Sachs Loan. |
We are generally obligated by our debt agreements to comply with financial covenants,
affirmative covenants and negative covenants, or some combination of these types of covenants.
Failure to comply with covenants generally will result in an event of default under that debt
instrument. Any uncured or unwaived events of default under our loans can trigger an increase in
interest rates, an acceleration of payment on the loan in default, and for our secured debt,
foreclosure on the property securing the debt. In addition, a default by us or any of our
subsidiaries with respect to any indebtedness in excess of $5.0 million generally will result in a
default under the Credit Facility, the 2007 Notes, 2009 Notes, KeyBank I Loan, Morgan Stanley II
Loan, Goldman Sachs Loan, Societe Generale I Construction Loan and KeyBank II Loan after the notice
and cure periods for the other indebtedness have passed. As of December 31, 2006, no event of
default had occurred. Our secured debt facilities generally prohibit loan prepayment for an
initial period, allow prepayment with a penalty during a following specified period and allow
prepayment without penalty after the expiration of that period. During the year ended December 31,
2006, there were no circumstances that required prepayment penalties or increased collateral
related to our existing debt.
In addition to the subsidiaries listed in Note 1, Organization and Basis of Presentation,
certain other of our subsidiaries were formed primarily for the purpose of obtaining secured and
unsecured debt or joint venture financings. These entities, all of which are consolidated and are
grouped based on the Properties to which they relate, are: Funding One Properties (CREF One Parent,
L.P., CREF One Parent GP, LLC, CREF One Holdings, L.P., CRE Management One, LLC); Funding III
Properties (CRE Management III Corp.); Funding IV Properties (CRE Management IV Corp.); Funding V
Properties (CRE Management V Corp.); Funding VIII Properties (CRE Management VIII, LLC); Funding
XII Properties (CREF XII Parent GP, LLC, CREF XII Parent, L.P., CREF XII Holding GP, LLC, CREF XII
Holdings, L.P., CRE Management XII, LLC); Spectrum Center (Spectrum Mortgage Associates, L.P., CSC
Holdings Management, LLC, Crescent SC Holdings, L.P., CSC Management, LLC); The BAC-Colonnade
Building (CEI Colonnade Holdings, LLC); Crescent Finance Company, Crescent Real Estate Capital MS,
L.P. and Crescent Real Estate Capital GS, L.P.
Warehouse Facilities
On March 24, 2006, we entered into a Master Repurchase Agreement with Morgan Stanley Bank.
Pursuant to the agreement, up to 70% of the value of the mezzanine loans that we make can be
financed up to a maximum principal amount of $100.0 million. The investments can be financed
through March 2008, after which four equal payments are due quarterly. The loan has a provision
for a one-year extension which is subject to Morgan Stanleys approval. The interest rate and
advance percentage associated with each draw is dependent on the loan-to-value ratio at the
underlying property(ies) and the purchase rate as specified in the Master Repurchase Agreement.
The loan bears interest ranging from LIBOR plus 140 basis points to 230 basis points and is secured
by the note receivable associated with each advance. At December 31, 2006, approximately $22.3
million with a weighted average interest rate of 7.37% was outstanding under this agreement.
On May 5, 2006, we entered into a Master Repurchase Agreement with Goldman Sachs Mortgage
Company. Pursuant to the agreement, up to 80% of the value of the loans that we make can be
financed up to a maximum principal amount of $100.0 million. The investments can be financed
through May 2009, at which time
full payment is due. The financing and payment can be extended one year subject to Goldman
Sachs approval. If extended, payments will be made in twelve monthly installments during the
extension period. The interest rate and advance percentage associated with each draw is dependent
on the loan-to-value ratio at the underlying property(ies) and the purchase rate as specified in
the Master Repurchase Agreement. The loan bears interest ranging from LIBOR plus 110 basis points
to 250 basis points and is
122
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
secured by the note receivable associated with each advance. At
December 31, 2006, approximately $10.0 million with an interest rate of 6.72% was outstanding under
this agreement.
13. INTEREST RATE SWAPS AND CAPS
We use derivative financial instruments to convert a portion of our variable rate debt to
fixed rate debt and to manage the fixed to variable rate debt ratio. As of December 31, 2006, we
had interest rate swaps and interest rate caps designated as cash flow hedges, which are accounted
for in conformity with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities an Amendment of FASB Statement No. 133 and SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities.
The following table shows information regarding the fair value of our interest rate swaps and
caps designated as cash flow hedge agreements, which are included in the Other assets, net and
Accounts payable, accrued expenses and other liabilities line items in the Consolidated Balance
Sheets, and additional interest expense and unrealized gains (losses) recorded in Accumulated other
comprehensive (loss) income, or OCI, for the year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Change in |
|
|
|
Notional |
|
|
Maturity |
|
|
Reference |
|
|
Fair Market |
|
|
(Reduction) Interest |
|
|
Unrealized Gains |
|
Effective Date |
|
Amount |
|
|
Date |
|
|
Rate |
|
|
Value |
|
|
Expense |
|
|
(Losses) in OCI |
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/15/03 |
|
$ |
100,000 |
|
|
|
2/15/06 |
|
|
|
3.26 |
% |
|
$ |
|
|
|
$ |
(147 |
) |
|
$ |
(138 |
) |
2/15/03 |
|
|
100,000 |
|
|
|
2/15/06 |
|
|
|
3.25 |
% |
|
|
|
|
|
|
(148 |
) |
|
|
(139 |
) |
9/02/03 |
|
|
200,000 |
|
|
|
9/01/06 |
|
|
|
3.72 |
% |
|
|
|
|
|
|
(1,603 |
) |
|
|
(1,264 |
) |
1/17/05 |
|
|
|
|
|
|
10/16/06 |
|
|
|
3.74 |
% |
|
|
|
|
|
|
|
(1) |
|
|
(205 |
) |
4/25/06 |
|
|
79,761 |
|
|
|
12/26/07 |
|
|
|
5.20 |
% |
|
|
3 |
|
|
|
|
(1) |
|
|
3 |
|
9/29/06 |
|
|
200,000 |
|
|
|
9/4/07 |
|
|
|
5.20 |
% |
|
|
56 |
|
|
|
(66 |
) |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
59 |
|
|
$ |
(1,964 |
) |
|
$ |
(1,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/07/05 |
|
$ |
7,800 |
|
|
|
2/01/08 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
4 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
59 |
|
|
$ |
(1,960 |
) |
|
$ |
(1,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
A portion of the interest on the debt that this swap is hedging is
capitalized. |
In addition, three of our unconsolidated companies have interest rate caps and swaps
designated as cash flow hedges of which our portion of change in unrealized losses reflected in OCI
was $0.1 million for the year ended December 31, 2006.
We have designated our cash flow hedge agreements as cash flow hedges of LIBOR-based monthly
interest payments on a designated pool of variable rate LIBOR indexed debt. The interest rate
swaps have been and are expected to remain highly effective. Changes in the fair value of these
highly effective hedging instruments are recorded in OCI. The effective portion that has been
deferred in OCI will be recognized in earnings as interest expense when the hedged items impact
earnings. If an interest rate swap falls outside 80%-125% effectiveness for a quarter, all changes
in the fair value of the hedge for the quarter will be recognized in earnings during the current
period. If it is determined based on prospective testing that it is no longer likely a hedge will
be highly effective on a prospective basis, the hedge will no longer be designated as a cash flow
hedge in conformity with SFAS No. 133, as amended. An immaterial amount of hedge ineffectiveness
on the designated hedges, due to index and reset date mismatches between the hedges and hedged debt,
was recognized in other income and expense during 2006.
Over the next 12 months, an estimated $0.1 million of Accumulated OCI will be recognized as a
reduction to interest expense related to the effective portions of the cash flow hedge agreements.
123
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Undesignated Caps
In connection with the GACC Note, we entered into LIBOR interest rate caps struck at
6.00% on a notional amount corresponding to each loan, for a total of $165.0 million through June
2008. Simultaneously, we sold a LIBOR interest rate cap with the same terms. Since these
instruments do not reduce our net interest rate exposure, they were not designated as hedges and
changes to their respective fair values are charged to earnings as the charges occur. As the
significant terms of these arrangements are the same, the effects of a revaluation of these
instruments are expected to offset each other.
14. RENTALS UNDER OPERATING LEASES
As of December 31, 2006, we received rental income from the lessees of 55 consolidated
Office Properties and one Resort/Hotel Property under operating leases.
We lease one Resort/Hotel Property for which we recognize rental income under an operating
lease that provides for percentage rent. For the years ended December 31, 2006, 2005 and 2004, the
percentage rent amounts for the one Resort/Hotel Property were $6.6 million, $5.5 million and $4.7
million, respectively.
In general, Office Property leases provide for the payment of fixed base rents and the
reimbursement by the tenant to us of annual increases in operating expenses in excess of base year
operating expenses. The excess operating expense amounts totaled $48.4 million, $46.9 million and
$66.0 million, for the years ended December 31, 2006, 2005 and 2004, respectively. These excess
operating expenses are generally payable in equal installments throughout the year, based on
estimated increases, with any differences adjusted at year end based upon actual expenses.
For non-cancelable operating leases for consolidated Office Properties as of December 31,
2006, future minimum rentals (base rents) during the next five years and thereafter (excluding
tenant reimbursements of operating expenses for Office Properties) are as follows:
|
|
|
|
|
|
|
Future |
|
|
|
Minimum |
|
(in millions) |
|
Rentals |
|
2007 |
|
$ |
304.5 |
|
2008 |
|
|
242.4 |
|
2009 |
|
|
218.0 |
|
2010 |
|
|
193.6 |
|
2011 |
|
|
166.3 |
|
Thereafter |
|
|
432.3 |
|
|
|
|
|
|
|
$ |
1,557.1 |
|
|
|
|
|
See Note 2, Summary of Significant Accounting Policies, for discussion of revenue
recognition.
124
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS, CONTINGENCIES AND LITIGATION
Lease Commitments
We had 16 wholly-owned Office Properties at December 31, 2006, located on land that is
subject to long-term ground leases, which expire between 2015 and 2080. Lease expense associated
with ground leases during each of the three years ended December 31, 2006, 2005 and 2004 was $2.8
million, $2.7 million and $4.2 million, respectively, recognized on a straight-line basis. Future
minimum lease payments due under such leases as of December 31, 2006, are as follows:
|
|
|
|
|
|
|
Future Minimum |
|
(in millions) |
|
Lease Payments |
|
2007 |
|
$ |
1.9 |
|
2008 |
|
|
1.9 |
|
2009 |
|
|
1.9 |
|
2010 |
|
|
2.0 |
|
2011 |
|
|
2.0 |
|
Thereafter |
|
|
137.3 |
|
|
|
|
|
|
|
$ |
147.0 |
|
|
|
|
|
Guarantee Commitments
The FASB issued Interpretation 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45), requiring a guarantor
to disclose its guarantees. For our guarantees on indebtedness, no triggering events or conditions
are anticipated to occur that would require payment under the guarantees and management believes
the assets associated with the loans that are guaranteed are sufficient to cover the maximum
potential amount of future payments and therefore, would not require us to provide additional
collateral to support the guarantees. We recorded a liability for the Fresh Choice and U.S. Bank
National Association guarantees in an amount not significant to our operations. We have not
recorded a liability associated with the other guarantees as they were entered into prior to the
adoption of FIN 45. Our guarantees in place as of December 31, 2006, are listed in the table
below.
|
|
|
|
|
|
|
|
|
|
|
Guaranteed |
|
|
Maximum |
|
|
|
Amount |
|
|
Guaranteed |
|
(in thousands) |
|
Outstanding at |
|
|
Amount at |
|
Debtor |
|
December 31, 2006 |
|
|
December 31, 2006 |
|
CRDI U.S. Bank National Association(1) |
|
$ |
14,346 |
|
|
$ |
20,393 |
|
CRDI Eagle Ranch Metropolitan District Letter of Credit (2) |
|
|
7,840 |
|
|
|
7,840 |
|
Fresh Choice, LLC(3) |
|
|
1,000 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
Total Guarantees |
|
$ |
23,186 |
|
|
$ |
29,233 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We entered into a Payment and Completion Guaranty with U.S. Bank National
Association for the repayment of bonds that were issued by the Northstar Community Housing
Corporation to fund construction of an employee housing project. The initial guaranty of
$20.4 million decreases to $5.1 million once construction is complete and certain
conditions are met and decreases further and is eventually released as certain debt service
coverage ratios are achieved. |
|
(2) |
|
We provide a $7.8 million letter of credit to support the payment of interest and
principal of the Eagle Ranch Metropolitan District Revenue Development Bonds. |
|
(3) |
|
We provide a guarantee of up to $1.0 million to GE Capital Franchise Financing
Corporation as part of Fresh Choices bankruptcy reorganization. |
Other Commitments
In July 2005, we purchased comprehensive insurance that covers us, contractors and other
parties involved in the construction of the Ritz-Carlton hotel and condominium project in Dallas,
Texas. Our insurance carrier, which will pay the associated claims as they occur under this program
and will be reimbursed by us within our deductibles, requires us to provide a $1.7 million letter
of credit supporting payment of claims. We believe there is a remote likelihood that payment will
be required under the letter of credit.
125
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Canyon Ranch transaction, we have agreed to indemnify the founders
regarding the tax treatment of the transaction, not to exceed $2.5 million, and certain other
matters. We believe there is a remote likelihood that payment will ever be required related to
these indemnities.
See Note 9, Temperature-Controlled Logistics, for a description of our commitments related
to our ownership of common shares in AmeriCold and the termination of our partnership with Vornado.
Contingencies
Environmental Matters
All of the Properties have been subjected to Phase I environmental assessments, and some
Properties have been subjected to Phase II soil and ground water sampling as part of the Phase I
assessments. Such assessments have not revealed, nor is management aware of, any environmental
liabilities that management believes would have a material adverse effect on our financial position
or results of operations.
We own several Office Properties that contain asbestos. For certain of these Office
Properties, we estimated the fair value of the conditional asset retirement obligation in
accordance with FASB Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations, or FIN 47, and determined a conditional asset retirement obligation was not required.
With respect to certain other Office Properties, we have not recorded any related asset retirement
obligation, as the fair value of the liability cannot be reasonably estimated, due to uncertainties
in the timing and manner of settlement of these obligations.
Litigation
We are involved from time to time in various claims and legal actions in the ordinary course
of business. Management does not believe that the impact of such matters will have a material
adverse effect on our financial condition or results of operations when resolved.
16. STOCK AND UNIT BASED COMPENSATION
Stock and Unit Option Plans
Effective January 1, 2006, we adopted SFAS No. 123R using the modified prospective application
method which requires, among other things, that we recognize compensation cost for all options
outstanding at January 1, 2006, for which the requisite service has not yet been rendered.
Effective January 1, 2003, we adopted the fair value expense recognition provisions of SFAS No. 123
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. The compensation expense
recognized for stock and unit options for the year ended December 31, 2006, was approximately $1.7
million, of which $1.4 million relates to additional expense recognized as a result of the adoption
of SFAS No. 123R. For the years ended December 31, 2005 and 2004, compensation expense recognized
for stock and unit options was approximately $0.2 million and $0.1 million, respectively.
The weighted average grant-date fair value of options granted during the years ended December
31, 2006, 2005 and 2004 was $1.83, $1.12 and $1.05, respectively. The total intrinsic value of
options exercised during the years ended December 31, 2006, 2005 and 2004, was $3.3 million, $2.4
million and $0.2 million, respectively. The fair value of each option is estimated at the date of
grant using the Black-Scholes option-pricing model based on the expected weighted average
assumptions in the following table. We estimated the expected term of options granted during the
quarter by adding the vesting term plus the contractual term divided by two. We estimated stock
price volatility using historical volatility data. The risk-free rate for the periods within the
contractual life is based on the U.S. Treasury yield curve in effect at the time of grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended |
|
|
December 31, |
|
|
2006 |
|
2005 |
|
2004 |
Expected term |
|
6.5 years |
|
10 years |
|
10 years |
Risk-free rate |
|
|
4.6 |
% |
|
|
4.2 |
% |
|
|
4.3 |
% |
Expected dividends |
|
|
7.4 |
% |
|
|
8.8 |
% |
|
|
8.8 |
% |
Expected volatility |
|
|
22.2 |
% |
|
|
25.0 |
% |
|
|
24.9 |
% |
126
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2006, there was approximately $0.8 million of total unrecognized
compensation cost related to nonvested stock and unit options. That cost is expected to be
recognized over a weighted average period of 1.2 years.
With respect to our stock options which were granted prior to 2003 and prior to the adoption
of SFAS No. 123, we accounted for stock-based compensation using the intrinsic value method
prescribed in APB Opinion No. 25, and related Interpretations. Had compensation cost been
determined based on the fair value at the grant dates for awards under the plans consistent with
SFAS No. 123R, our net loss and loss per share would have been:
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
(in thousands, except per share amounts) |
|
2005
(Restated) |
|
|
2004
(Restated) |
|
Net income available to common
shareholders, as reported |
|
$ |
69,547 |
|
|
$ |
147,061 |
|
Add: stock-based employee compensation
expense included in reported net income |
|
|
13,548 |
|
|
|
2,340 |
|
Deduct: total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of minority interest |
|
|
(15,153 |
) |
|
|
(4,270 |
) |
|
|
|
|
|
|
|
Pro forma net income available
to common shareholders |
|
$ |
67,942 |
|
|
$ |
145,131 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic as reported |
|
$ |
0.69 |
|
|
$ |
1.49 |
|
Basic pro forma |
|
$ |
0.68 |
|
|
$ |
1.47 |
|
Diluted as reported |
|
$ |
0.69 |
|
|
$ |
1.48 |
|
Diluted pro forma |
|
$ |
0.68 |
|
|
$ |
1.46 |
|
Crescent has two stock incentive plans, the 1995 Stock Incentive Plan and the 1994 Stock
Incentive Plan. The 1995 Plan and the 1994 Plan expired on June 11, 2005, and March 31, 2004,
respectively. The Operating Partnership has two unit incentive plans, the 1995 Unit Incentive Plan
and the 1996 Unit Incentive Plan. The 1995 Unit Plan expired on June 30, 2005, and the 1996 Unit
Plan expired on July 16, 2006. The Operating Partnership has also granted unit options under the
Operating Partnership agreement. These plans are collectively referred to as The Plans. Under The
Plans, options were granted at a price not less than the market value of the shares on the date of
grant, generally vest over five years of continuous service and expire ten years from the date of
grant. We have a policy of issuing new shares to satisfy share option exercises under shareholder
approved plans.
On February 19, 2002, John Goff, Vice-Chairman of our Board of Trust Managers and our Chief
Executive Officer, was granted the right to earn 300,000 restricted shares under the 1995 Plan.
These shares vest at 100,000 shares per year on February 19, 2005, February 19, 2006, and February
19, 2007. Compensation expense is being recognized on a straight-line basis. For each of the
years ended December 31, 2006, 2005 and 2004, approximately $1.1 million, $1.1 million and $1.9 million was recorded as compensation expense, respectively
related to this grant. The grant-date fair value of the restricted shares which vested in each of
the years ended December 31, 2006 and 2005 was $17.51 per restricted share for a total of $1.8 million.
A summary of the status of The Plans as of December 31, 2006, and changes during the year then
ended is presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
Wtd. Avg. |
|
|
|
|
|
|
Underlying |
|
|
Wtd. Avg. |
|
|
Years |
|
|
|
|
|
|
Stock and |
|
|
Exercise |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Unit |
|
|
Price Per |
|
|
Contractual |
|
|
Intrinsic |
|
(in thousands, except per share amounts) |
|
Options |
|
|
Share |
|
|
Term |
|
|
Value |
|
Outstanding at January 1, 2006 |
|
|
12,363 |
|
|
$ |
18 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
35 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,314 |
) |
|
|
18 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(17 |
) |
|
|
17 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
(185 |
) |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2006 |
|
|
10,882 |
|
|
$ |
19 |
|
|
|
4.6 |
|
|
$ |
22,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2006 |
|
|
9,224 |
|
|
$ |
19 |
|
|
|
4.3 |
|
|
$ |
19,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the status of nonvested stock and unit options (shown in common share
equivalents) as of December 31, 2006, is presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
Shares Underlying |
|
|
Weighted |
|
|
|
Stock and Unit |
|
|
Average Grant- |
|
(in
thousands, except per share amounts) |
|
Options |
|
|
Date Fair Value |
|
Nonvested at January 1, 2006 |
|
|
3,092 |
|
|
$ |
1.20 |
|
Granted |
|
|
35 |
|
|
|
1.97 |
|
Vested |
|
|
(1,452 |
) |
|
|
1.27 |
|
Forfeited |
|
|
(17 |
) |
|
|
1.05 |
|
|
|
|
|
|
|
|
Nonvested at December 31, 2006 |
|
|
1,658 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
127
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2004 and 2005 Unit Plans
The 2004 Unit Plan provides for the issuance by the Operating Partnership of up to
1,802,500 restricted units (3,605,000 common share equivalents) to our officers. Restricted units
granted under the 2004 Unit Plan vest in 20% increments when the average closing price of Crescent
common shares on the New York Stock Exchange for the immediately preceding 40 trading days equals
or exceeds $19.00, $20.00, $21.00, $22.50 and $24.00. The 2005 Unit Plan provides for the issuance
by the Operating Partnership of up to 1,275,000 restricted units (2,550,000 common share
equivalents). Restricted units granted under the 2005 Unit Plan vest in 20% increments when the
average closing price of Crescent Common Shares on the New York Stock Exchange for the immediately
preceding 40 trading days equals or exceeds $21.00, $22.50, $24.00, $25.50 and $27.00. Any
restricted unit that is not vested on or prior to June 30, 2010, will be forfeited. Each vested
restricted unit will be exchangeable, beginning on the second anniversary of the date of grant and
subject to a six-month hold period following vesting, for cash equal to the value of two Crescent
common shares based on the closing price of the common shares on the date of exchange, unless,
prior to the date of the exchange, Crescent requests and obtains shareholder approval authorizing
it, at its discretion, to deliver instead two common shares in exchange for each such restricted
unit. Regular quarterly distributions accrue on unvested restricted units and are payable upon
vesting of the restricted units.
We obtained a third-party valuation to determine the fair value of the restricted units issued
under the 2004 and 2005 Unit Plans. The third-party used a lattice-based valuation model which
incorporated a range of assumptions for inputs including the expected weighted average assumptions
in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended |
|
|
December 31, |
|
|
2006 |
|
2005 |
|
2004 |
Expected term |
|
|
1.5 to 5.2 years |
|
|
|
1.5 to 5.5 years |
|
|
|
1.5 to 5.5 years |
|
Risk-free rate |
|
|
3.8% |
|
|
|
3.8% |
|
|
|
3.4% |
|
Expected dividends |
|
|
9.0% |
|
|
|
9.0% |
|
|
|
9.1% |
|
Expected volatility |
|
|
23.0% |
|
|
|
23.1% |
|
|
|
25.0% |
|
The weighted average grant-date fair value of the restricted units granted during the
years ended December 31, 2006, 2005 and 2004, was $7.31, $6.19 and $7.05, respectively, which is
being amortized on a straight-line basis over the related service period, except for when
performance targets are achieved. For the years ended December 31, 2006, 2005 and 2004,
approximately $10.6 million, $12.3 million and $0.4 million was recorded as compensation costs
related to the 2004 and 2005 Unit Plans, respectively, of which approximately $1.0 million and $1.2
million was capitalized in 2006 and 2005, respectively.
A summary of the status of nonvested restricted units (shown in common share equivalents) is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Shares |
|
Average |
(share amounts in thousands) |
|
Underlying |
|
Grant-Date |
Nonvested Units |
|
Units |
|
Fair Value |
|
Nonvested at January 1, 2006 |
|
|
4,294 |
|
|
$ |
6.54 |
|
Granted |
|
|
25 |
|
|
|
7.31 |
|
Vested |
|
|
(1,148 |
) |
|
|
6.66 |
|
Forfeited |
|
|
(10 |
) |
|
|
7.52 |
|
|
|
|
Nonvested at December 31, 2006 |
|
|
3,161 |
|
|
$ |
6.49 |
|
|
|
|
As of December 31, 2006, there was approximately $14.7 million of total unrecognized
compensation cost related to nonvested units. That cost is expected to be recognized over a
weighted average period of 2.1 years.
As of December 31, 2006, the first three performance targets under the 2004 Unit Plan and the
first performance target under the 2005 Unit Plan have been achieved. Upon achieving these
targets, 1,292,500 units (2,585,000 common share equivalents) vested. Of this amount, 1,002,250
units (2,004,500 common share equivalents) were redeemable for cash in 2006, 287,750 units (575,500
common share equivalents) will be redeemable in 2007 and 2,500 units (5,000 common share
equivalents) will be redeemable in 2008 unless, prior to the date of exchange, Crescent obtains
shareholder approval authorizing it, in its discretion, to deliver instead two common shares for
each such restricted unit. As of December 31, 2006, 98,875 units (197,750 common share
equivalents) have been redeemed for cash. The total grant-date fair value of units vested during
the years ended December 31, 2006 and 2005 was $7.6 million and $10.1 million, respectively.
128
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. MINORITY INTERESTS
Minority interests in the Operating Partnership represent the proportionate share of the
equity in the Operating Partnership of limited partners other than Crescent. The ownership share
of limited partners other than Crescent is evidenced by Operating Partnership units. Of the total
outstanding amount of Operating Partnership units, 1,189,125 vested restricted units (2,378,250
common share equivalents) are subject to redemption for cash as part of the 2004 Unit Plan. See
Note 16, Stock and Unit Based Compensation, for a description of the plan. The Operating
Partnership pays a regular quarterly distribution to the holders of Operating Partnership units.
Each Operating Partnership unit generally may be exchanged for either two common shares of
Crescent or, at the election of Crescent, cash equal to the fair market value of two common shares
at the time of the exchange. When a unitholder exchanges a unit, Crescents percentage interest in
the Operating Partnership increases. During the year ended December 31, 2006, there were 459,793
units exchanged for 919,586 common shares of Crescent.
Minority interests in real estate partnerships represent joint venture or preferred equity
partners proportionate share of the equity in certain real estate partnerships. We hold a
controlling interest in the real estate partnerships and consolidate the real estate partnerships
into our financial statements. Income in the real estate partnerships is allocated to minority
interests based on weighted average percentage ownership during the year.
The following table summarizes minority interests as of December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
Limited partners in the Operating Partnership |
|
$ |
23,461 |
|
|
$ |
70,178 |
|
Limited partners in the Operating Partnership Units subject to redemption at fair
market value |
|
|
46,970 |
|
|
|
28,481 |
|
Limited partners in the Operating Partnership Unvested units subject to redemption |
|
|
5,434 |
|
|
|
|
|
Development joint venture partners Resort Residential Development Segment |
|
|
32,399 |
|
|
|
31,546 |
|
Joint venture partners Office Segment |
|
|
11,543 |
|
|
|
15,354 |
|
Joint venture partners Resort/Hotel Segment |
|
|
5,368 |
|
|
|
5,853 |
|
Other |
|
|
528 |
|
|
|
127 |
|
|
|
|
|
|
|
|
|
|
$ |
125,703 |
|
|
$ |
151,539 |
|
|
|
|
|
|
|
|
The
following table summarizes the minority interests share of
income from continuing operations for the years ended
December 31, 2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
|
(Restated) |
|
Limited partners in the Operating Partnership |
|
$ |
(2,358 |
) |
|
$ |
(4,048 |
) |
|
$ |
24,866 |
|
Development joint venture partners Resort Residential Development Segment |
|
|
5,377 |
|
|
|
15,545 |
|
|
|
9,201 |
|
Joint venture partners Office Segment |
|
|
(632 |
) |
|
|
(138 |
) |
|
|
(163 |
) |
Joint venture partners Resort/Hotel Segment |
|
|
(126 |
) |
|
|
(661 |
) |
|
|
(1,131 |
) |
Other |
|
|
400 |
|
|
|
369 |
|
|
|
(67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,661 |
|
|
$ |
11,067 |
|
|
$ |
32,706 |
|
|
|
|
|
|
|
|
|
|
|
129
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. SHAREHOLDERS EQUITY
Share Repurchase Program
We commenced our Share Repurchase Program in March 2000. On October 15, 2001, our Board of
Trust Managers increased from $500.0 million to $800.0 million the amount of outstanding common
shares that can be repurchased from time to time in the open market or through privately negotiated
transactions. There were no share repurchases under the program for the years ended December 31,
2006 or 2005. As of December 31, 2006, we had repurchased 20,256,423 common shares under the share
repurchase program, at an aggregate cost of approximately $386.9 million, resulting in an average
repurchase price of $19.10 per common share. All repurchased shares were recorded as treasury
shares.
Distributions
The distributions to common shareholders and unitholders paid during the years ended December
31, 2006, 2005 and 2004, were $184.1 million, $178.9 million, and $175.6 million, respectively.
These distributions represented an annualized distribution of $1.50 per common share and equivalent
unit for the years ended December 31, 2006, 2005, and 2004. On February 15, 2007, we distributed
$45.8 million to common shareholders and unitholders.
Distributions to Series A Preferred shareholders for each of the years ended December 31,
2006, 2005 and 2004, was $24.0 million. The distributions per Series A Preferred share were
$1.6875 per preferred share annualized for each of the three years. On February 15, 2007, we
distributed $6.0 million to Series A Preferred shareholders. The Series A Preferred Shares are
convertible at any time, in whole or in part, at the option of the holders into common shares at a
conversion price of $40.86 per common share (equivalent to a conversion rate of 0.6119 common
shares per Series A Preferred Share). The Series A
Preferred Shares, on or after February 28, 2003, may be
redeemed, in whole or in part, at our option. We pay distributions on
the Series A Preferred Shares in an amount totaling $1.6875 per share
each year (equivalent to 6.75% of the $25.00 liquidation preference
per share), payable on a quarterly basis.
Distributions to Series B Preferred shareholders for each of the years ended December 31,
2006, 2005 and 2004, were $8.1 million. The distributions per Series B Preferred share were
$2.3750 per preferred share annualized for each of the three years. On February 16, 2007, we
distributed $2.0 million to Series B Preferred shareholders. The Series B Preferred Shares are
redeemable on or after May 17, 2007, in whole or in part, at our option. We pay distributions on
the Series B Preferred Shares in an amount totaling $2.375 per share each year (equivalent to 9.50%
of the $25.00 liquidation preference per share), payable on a quarterly basis.
19. INCOME TAXES
Taxable Consolidated Entities
Deferred income taxes reflect the net tax effect of temporary differences between the
financial reporting carrying amounts of assets and liabilities of the taxable consolidated entities
and the income tax basis. For the year ended December 31, 2006, the taxable consolidated entities
were comprised of our taxable REIT subsidiaries.
We intend to maintain our qualification as a REIT under the Code. As a REIT, we generally
will not be subject to federal corporate income taxes as long as we satisfy certain technical
requirements of the Code, including the requirement to distribute 90% of our REIT taxable income to
our shareholders. Accordingly, we do not believe that we will be liable for current income taxes
on our REIT taxable income at the federal level or in most of the states in which we operate. We
consolidate certain taxable REIT subsidiaries, which are subject to federal and state income tax.
130
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of our deferred tax liabilities and assets at December 31, 2006 and
2005 from continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
December 31, |
|
|
2005 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Resort
Residential Development costs |
|
$ |
(7,108 |
) |
|
$ |
(27,234 |
) |
Minority interests |
|
|
(4,661 |
) |
|
|
(4,834 |
) |
Land value adjustments |
|
|
(10,604 |
) |
|
|
(11,273 |
) |
Depreciable and amortizable assets |
|
|
(722 |
) |
|
|
|
|
Other |
|
|
(3,629 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities: |
|
$ |
(26,724 |
) |
|
$ |
(43,341 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Deferred revenue |
|
$ |
23,754 |
|
|
$ |
29,871 |
|
Hotel lease acquisition costs |
|
|
|
|
|
|
85 |
|
Depreciable and amortizable assets |
|
|
|
|
|
|
1,650 |
|
Net operating loss carryforwards |
|
|
7,515 |
|
|
|
10,784 |
|
Impairment of assets |
|
|
1,464 |
|
|
|
1,464 |
|
Related party interest expense not currently deductible |
|
|
6,107 |
|
|
|
8,999 |
|
Other |
|
|
|
|
|
|
2,617 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
$ |
38,840 |
|
|
$ |
55,470 |
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax assets |
|
|
(8,842 |
) |
|
|
(9,688 |
) |
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance |
|
$ |
29,998 |
|
|
$ |
45,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred
tax assets |
|
$ |
3,274 |
|
|
$ |
2,441 |
|
|
|
|
|
|
|
|
In
addition to the net deferred tax assets of approximately
$3.3 million and $2.4 million at December 31, 2006 and
2005, respectively,
we had a current tax payable of $0.6 million on our Consolidated Balance Sheets at December 31,
2006. At December 31, 2005, we had a current income tax
receivable of approximately $8.3 million.
SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the
deferred tax assets reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After consideration of
all the evidence, both positive and negative, management determined that an $8.8 million and a $9.7
million valuation allowance at December 31, 2006 and 2005, respectively were necessary to reduce
the deferred tax assets to the amount that will more likely than not be realized. When assessing
the adequacy of the valuation allowance, management considered both anticipated reversals of
deferred tax liabilities and other potential sources of taxable income in future years. We have
available state and federal net operating loss carryforwards of approximately $7.5 million at
December 31, 2006, arising from operations of the taxable REIT subsidiaries. The net operating
loss carryforwards will expire between 2007 and 2026.
131
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated (loss) income from continuing operations subject to tax was $(4.1) million, $22.7
million and $(31.4) million for the years ended December 31, 2006, 2005 and 2004, respectively.
The reconciliation of (i) income tax attributable to consolidated (loss) income subject to tax
computed at the U.S. statutory rate to (ii) income tax benefit (expense) is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
|
Year ended |
|
|
|
Year ended |
|
|
December 31, 2005 |
|
|
December 31, 2004 |
|
|
|
December 31, 2006 |
|
|
(Restated) |
|
|
(Restated) |
|
(in thousands) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Tax at U.S. statutory
rates on consolidated
income (loss) subject to tax |
|
$ |
1,439 |
|
|
|
35.0 |
% |
|
$ |
(7,954 |
) |
|
|
(35.0 |
)% |
|
$ |
10,982 |
|
|
|
35.0 |
% |
State income tax, net of
federal income tax benefit |
|
|
106 |
|
|
|
2.6 |
|
|
|
(980 |
) |
|
|
(4.3 |
) |
|
|
1,254 |
|
|
|
4.0 |
|
Disallowed expenses |
|
|
(508 |
) |
|
|
(12.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair market value charitable
contribution deduction |
|
|
1,732 |
|
|
|
42.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
(139 |
) |
|
|
(3.4 |
) |
|
|
41 |
|
|
|
0.2 |
|
|
|
701 |
|
|
|
2.2 |
|
Change in valuation allowance |
|
|
845 |
|
|
|
20.6 |
|
|
|
431 |
|
|
|
1.9 |
|
|
|
(706 |
) |
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,475 |
|
|
|
84.5 |
% |
|
$ |
(8,462 |
) |
|
|
(37.2 |
)% |
|
$ |
12,231 |
|
|
|
39.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
2004 |
|
(in thousands) |
|
2006 |
|
|
(Restated) |
|
|
(Restated) |
|
Current tax benefit (expense) |
|
$ |
2,642 |
|
|
$ |
7,104 |
|
|
$ |
381 |
|
Deferred tax benefit (expense) |
|
|
833 |
|
|
|
(15,566 |
) |
|
|
11,850 |
|
|
|
|
|
|
|
|
|
|
|
Federal income tax benefit (expense) |
|
$ |
3,475 |
|
|
$ |
(8,462 |
) |
|
$ |
12,231 |
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2006, our income tax benefit from continuing operations was
$3.5 million. Our $3.5 million income tax benefit consists
primarily of $7.4 million for the
Resort Residential Development Segment and $3.9 million for the Resort/Hotel Segment; partially
offset by income tax expense of $(4.1) million for the other taxable REIT subsidiaries and $(3.7)
million for the Office Segment. Additionally, tax benefit (expense) amounts of $(10.6) million, $0
million and $0.3 million are included in the gain on sale of real estate from discontinued
operations and (loss) income from discontinued operations, net of minority interest and taxes for
the years ended December 31, 2006, 2005 and 2004, respectively.
20. RELATED PARTY TRANSACTIONS
Loans to Employees and Trust Managers of the Company for Exercise of Stock Options and Unit
Options
As of December 31, 2006, we had approximately $37.9 million in loan balances outstanding
reflected in the Additional paid-in capital line item in the Consolidated Balance Sheets,
inclusive of current interest accrued of approximately $0.2 million, to certain of our employees
and trust managers on a recourse basis under stock and unit incentive plans pursuant to an
agreement approved by our Board of Trust Managers and its Executive Compensation Committee. The
employees and the trust managers used the loan proceeds to acquire common shares of Crescent
pursuant to the exercise of vested stock and unit options. The loans bear interest at 2.52% per
year (based on the Applicable Federal Rate at the time the interest
rates on the notes were fixed), payable quarterly, mature on July 28, 2012, and may be repaid in full or in part at any time
without premium or penalty. Mr. Goff had a loan representing $26.4 million of the $37.9 million
total outstanding loans at December 31, 2006. No conditions exist at December 31, 2006 which would
cause any of the loans to be in default.
Other
We have a policy which allows employees to purchase our residential properties marketed
and sold by our subsidiaries in the ordinary course of business. This policy requires the
individual to purchase the property for personal use or investment and requires the property to be
held for at least two years. In addition this policy requires, among other things, that the prices
paid by affiliates must be equivalent to the prices paid by unaffiliated third parties for similar
properties in the same development and that the other terms and conditions of the transaction
must be at least as beneficial to us as the terms and conditions with respect to the other
properties in the same development. In 2005, two executive
132
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
officers entered into binding contracts
to purchase three condominium units and one lot at three of our resort residential development
projects. The contracts for one of the condominiums and the lot closed in 2005.
21. QUARTERLY FINANCIAL INFORMATION (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 2006 Quarter Ended |
|
|
March 31, |
|
June 30, |
|
September 30, |
|
|
(in thousands) |
|
(Restated) |
|
(Restated) |
|
(Restated) |
|
December 31, |
|
Total Property revenues |
|
$ |
238,603 |
|
|
$ |
195,004 |
|
|
$ |
204,218 |
|
|
$ |
290,871 |
|
Total Property expenses |
|
|
172,197 |
|
|
|
123,687 |
|
|
|
139,921 |
|
|
|
222,219 |
|
(Loss) income from continuing operations before minority interests and
income taxes |
|
|
(4,493 |
) |
|
|
(832 |
) |
|
|
9,554 |
|
|
|
14,635 |
|
Minority interests |
|
|
1,741 |
(1) |
|
|
178 |
(1) |
|
|
(1,823 |
)(1) |
|
|
(2,757 |
)(1) |
Income tax (expense) benefit |
|
|
(1,143 |
) |
|
|
5,291 |
|
|
|
3,124 |
|
|
|
(3,797 |
) |
(Loss) income from discontinued operations, net of minority interests and
taxes |
|
|
(30 |
) |
|
|
(37 |
) |
|
|
(185 |
) |
|
|
(250 |
) |
Impairment charges related to real estate assets from discontinued
operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
(105 |
) |
|
|
|
|
Gain (loss) on sale of real estate from discontinued operations, net of
minority interests and taxes |
|
|
96 |
|
|
|
(8 |
) |
|
|
50 |
|
|
|
14,224 |
|
Net (loss) income |
|
$ |
(3,829 |
) |
|
$ |
4,592 |
|
|
$ |
10,615 |
|
|
$ |
22,055 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-(Loss) income available to common shareholders before discontinued
operations and cumulative effect of a change in accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.03 |
|
|
$ |
|
|
- (Loss) income from discontinued operations, net of minority interests
and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Impairment charges related to real estate assets from discontinued
operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Gain (loss) on sale of real estate from discontinued operations, net of
minority interests and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.14 |
|
- Net (loss) income available to common shareholders Basic |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.03 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-(Loss) income available to common shareholders before discontinued
operations and cumulative effect of a change in accounting principle |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.03 |
|
|
$ |
|
|
- (Loss) income from discontinued operations, net of minority interests
and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Impairment charges related to real estate assets from discontinued
operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Gain (loss) on sale of real estate from discontinued operations, net
of minority interests and taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.14 |
|
- Net (loss) income available to common shareholders Diluted |
|
$ |
(0.12 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.03 |
|
|
$ |
0.14 |
|
|
|
|
(1) |
|
Includes adjustments associated with the Calculation of Minority Interest restatement
of $1.3 million for each of the first, second and third quarters of 2006, and $1.2 million
for the fourth quarter of 2006. See Note 1, Organization and Basis of Presentation, for
further description of this restatement. |
|
(2) |
|
Includes $2.7 million associated with prior year adjustments at AmeriCold, an equity
investee in which we hold a 31.7% interest. |
133
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 2005 Quarter Ended |
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
(in thousands) |
|
(Restated) |
|
(Restated) |
|
(Restated) |
|
(Restated) |
|
Total Property revenues |
|
$ |
183,224 |
|
|
$ |
208,414 |
|
|
$ |
210,471 |
|
|
$ |
415,991 |
|
Total Property expenses |
|
|
126,986 |
|
|
|
144,697 |
|
|
|
145,323 |
|
|
|
322,255 |
|
(Loss)
income from continuing operations before minority interests and income taxes |
|
|
(6,210 |
) |
|
|
(6,567 |
) |
|
|
(12,236 |
) |
|
|
53,840 |
(1) |
Minority interests |
|
|
1,719 |
(2) |
|
|
182 |
(2) |
|
|
1,852 |
(2) |
|
|
(14,820 |
)(2) |
Income tax benefit (expense) |
|
|
1,216 |
|
|
|
326 |
|
|
|
755 |
|
|
|
(10,759 |
) |
Income (loss) from discontinued operations, net of minority interests |
|
|
1,683 |
|
|
|
1,710 |
|
|
|
813 |
|
|
|
(200 |
) |
Impairment
charges related to real estate assets from discontinued operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
(64 |
) |
|
|
(889 |
) |
Gain (loss) on real estate from discontinued operations, net of minority
interests |
|
|
1,504 |
|
|
|
|
|
|
|
89,735 |
|
|
|
(2,005 |
) (1) |
Net (loss) income |
|
$ |
(88 |
) |
|
$ |
(4,349 |
) |
|
$ |
80,855 |
|
|
$ |
25,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-(Loss) income available to common shareholders before discontinued
operations and cumulative effect of a change in accounting principle |
|
$ |
(0.11 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.18 |
) |
|
$ |
0.20 |
|
- Income (loss) from discontinued operations, net of minority interests |
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
|
|
- Impairment charges related to real estate assets from discontinued
operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01 |
) |
- Gain (loss) on real estate from discontinued operations, net of
minority interests |
|
|
0.01 |
|
|
|
|
|
|
|
0.89 |
|
|
|
(0.02 |
) |
- Net (loss) income available to common shareholders Basic |
|
$ |
(0.08 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.72 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-(Loss) income available to common shareholders before discontinued
operations and cumulative effect of a change in accounting principle |
|
$ |
(0.11 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.18 |
) |
|
$ |
0.20 |
|
- Income (loss) from discontinued operations, net of minority interests |
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.01 |
|
|
|
|
|
- Impairment charges related to real estate assets from discontinued
operations, net of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01 |
) |
- Gain (loss) on real estate from discontinued operations, net of
minority interests |
|
|
0.01 |
|
|
|
|
|
|
|
0.89 |
|
|
|
(0.02 |
) |
- Net (loss) income available to common shareholders Diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.12 |
) |
|
$ |
0.72 |
|
|
$ |
0.17 |
|
|
|
|
(1) |
|
Includes $4.9 million of expense related to the write-off of capitalized internal
leasing costs related to prior year office dispositions and the joint venture of
properties. |
|
(2) |
|
Includes adjustments associated with the Calculation of
Minority Interest restatement of $1.2 million for each of the
first, second and third quarter of 2005, and $1.0 million for the
fourth quarter of 2005. See Note 1, Organization and Basis of
Presentation, for further description of this restatement. |
134
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. COPI
On February 14, 2002, we entered into an agreement with Crescent Operating, Inc., or
COPI, pursuant to which we and COPI agreed to jointly seek approval by the bankruptcy court of a
pre-packaged bankruptcy plan for COPI. Until February 14, 2002, Richard E. Rainwater, the Chairman
of the Companys Board of Trust Managers, and John C. Goff, the Chief Executive Officer of the
Company and the Vice-Chairman of the Companys Board of Trust Managers, were, respectively, the
Chairman of the Board of Directors of COPI and the Chief Executive Officer of COPI and Vice
Chairman of the Board of Directors of COPI. Until their resignations on February 14, 2002, Anthony
M. Frank and Paul E. Rowsey III, who are members of the Companys Board of Trust Managers, were
members of the Board of Directors of COPI. On January 19, 2005, the bankruptcy plan became
effective upon COPIs providing notification to the bankruptcy court that all conditions to
effectiveness had been satisfied. Following the effectiveness of the bankruptcy plan, we issued
184,075 common shares to the stockholders of COPI in satisfaction of our final obligation under the
agreement with COPI. The common shares were valued at approximately $3.0 million in accordance
with the terms of our agreement with COPI and the provisions of the bankruptcy plan, and the
issuance of the shares was recorded as a reduction to the liability recorded in 2001. As
stockholders of COPI, certain of our trust managers and executive officers, as a group, received an
aggregate of approximately 25,426 common shares.
On March 10, 2003, COPI filed a plan under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Northern District of Texas. On June 22, 2004, the
bankruptcy court confirmed the bankruptcy plan, as amended. On November 4, 2004, COPI sold its
interest in AmeriCold Logistics to AmeriCold Realty Trust for approximately $19.1 million. In
accordance with the confirmed bankruptcy plan, COPI used approximately $15.4 million of the
proceeds to repay the loan from Bank of America, including accrued interest. In addition, in
accordance with the bankruptcy plan COPI used approximately $4.4 million of the proceeds to satisfy
a portion of its debt obligations to us. Of the $4.4 million, $0.7 million has been recorded as a
reduction of the amounts paid by us in connection with the accrued liability recorded in 2001
relating to the COPI bankruptcy. Because we also wrote off COPI debt obligations to us in 2001,
the remaining $3.7 million has been included in Interest and other income in our Consolidated
Statements of Operations for the year ended December 31, 2004. In addition, approximately $2.6
million of the accrued liability related to the COPI bankruptcy was reversed in December 2004,
resulting in a reduction in the amounts included in the Other expenses line item in our
Consolidated Statements of Operations.
23. SUBSEQUENT EVENTS (UNAUDITED)
On March 1, 2007, we announced that we had concluded the review of strategic alternatives
first announced on November 1, 2006. Based on that review, we adopted a plan, the Strategic Plan,
which concentrates on our core office properties business. Key elements of the Strategic Plan
include the opportunistic sale of certain office properties and the
sale of resort residential development and resort and hotel assets
anticipated to occur within one year. Following are the carrying amounts of the major classes of assets and
liabilities, by segment, associated with these assets for the years ended December 31, 2006 and
2005, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
(in thousands) |
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
|
|
Land |
|
$ |
30,469 |
|
|
$ |
22,312 |
|
|
$ |
25,567 |
|
|
$ |
78,348 |
|
|
$ |
26,952 |
|
|
$ |
22,312 |
|
|
$ |
25,567 |
|
|
$ |
74,831 |
|
Land Improvements |
|
|
177 |
|
|
|
106,874 |
|
|
|
|
|
|
|
107,051 |
|
|
|
195 |
|
|
|
100,083 |
|
|
|
|
|
|
|
100,278 |
|
Buildings and
improvements |
|
|
560,496 |
|
|
|
143,346 |
|
|
|
307,492 |
|
|
|
1,011,334 |
|
|
|
508,164 |
|
|
|
129,915 |
|
|
|
297,180 |
|
|
|
935,259 |
|
Furniture, fixtures
and equipment |
|
|
317 |
|
|
|
26,540 |
|
|
|
33,558 |
|
|
|
60,415 |
|
|
|
317 |
|
|
|
21,648 |
|
|
|
29,710 |
|
|
|
51,675 |
|
Land held for
investment or
development |
|
|
|
|
|
|
619,746 |
|
|
|
|
|
|
|
619,746 |
|
|
|
|
|
|
|
448,173 |
|
|
|
|
|
|
|
448,173 |
|
Accumulated
Depreciation |
|
|
(137,327 |
) |
|
|
(66,949 |
) |
|
|
(89,498 |
) |
|
|
(293,774 |
) |
|
|
(117,324 |
) |
|
|
(54,761 |
) |
|
|
(81,490 |
) |
|
|
(253,575 |
) |
|
|
|
Net investment in
real estate |
|
|
454,132 |
|
|
|
851,869 |
|
|
|
277,119 |
|
|
|
1,583,120 |
|
|
|
418,304 |
|
|
|
667,370 |
|
|
|
270,967 |
|
|
|
1,356,641 |
|
Cash |
|
|
|
|
|
|
18,543 |
|
|
|
7,735 |
|
|
|
26,278 |
|
|
|
|
|
|
|
43,920 |
|
|
|
7,983 |
|
|
|
51,903 |
|
Restricted cash |
|
|
146 |
|
|
|
3,660 |
|
|
|
1,341 |
|
|
|
5,147 |
|
|
|
2,447 |
|
|
|
23,726 |
|
|
|
1,932 |
|
|
|
28,105 |
|
Accounts
receivable, net |
|
|
|
|
|
|
29,673 |
|
|
|
8,655 |
|
|
|
38,328 |
|
|
|
|
|
|
|
21,889 |
|
|
|
8,458 |
|
|
|
30,347 |
|
Deferred rent
receivable |
|
|
16,339 |
|
|
|
|
|
|
|
|
|
|
|
16,339 |
|
|
|
13,427 |
|
|
|
|
|
|
|
|
|
|
|
13,427 |
|
Investments in
unconsolidated
companies |
|
|
|
|
|
|
19,979 |
|
|
|
|
|
|
|
19,979 |
|
|
|
|
|
|
|
6,417 |
|
|
|
|
|
|
|
6,417 |
|
Notes receivable |
|
|
|
|
|
|
7,332 |
|
|
|
|
|
|
|
7,332 |
|
|
|
|
|
|
|
6,275 |
|
|
|
|
|
|
|
6,275 |
|
Income tax asset
current and
deferred |
|
|
|
|
|
|
(4,122 |
) |
|
|
|
|
|
|
(4,122 |
) |
|
|
|
|
|
|
(5,192 |
) |
|
|
|
|
|
|
(5,192 |
) |
Other assets, net |
|
|
34,168 |
|
|
|
103,965 |
|
|
|
4,485 |
|
|
|
142,618 |
|
|
|
28,108 |
|
|
|
111,408 |
|
|
|
3,673 |
|
|
|
143,189 |
|
|
|
|
Total assets |
|
$ |
504,785 |
|
|
$ |
1,030,899 |
|
|
$ |
299,335 |
|
|
$ |
1,835,019 |
|
|
$ |
462,286 |
|
|
$ |
875,813 |
|
|
$ |
293,013 |
|
|
$ |
1,631,112 |
|
|
|
|
|
Liabilities |
|
(in thousands) |
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
|
|
Notes Payable |
|
$ |
64,949 |
|
|
$ |
178,560 |
|
|
$ |
55,000 |
|
|
$ |
298,509 |
|
|
$ |
26,000 |
|
|
$ |
110,145 |
|
|
$ |
|
|
|
$ |
136,145 |
|
Accounts payable,
accrued expenses and
other liabilities |
|
|
8,932 |
|
|
|
274,668 |
|
|
|
21,787 |
|
|
|
305,387 |
|
|
|
7,566 |
|
|
|
284,796 |
|
|
|
19,812 |
|
|
|
312,174 |
|
Deferred tax liability |
|
|
|
|
|
|
(10,648 |
) |
|
|
|
|
|
|
(10,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
73,881 |
|
|
$ |
442,580 |
|
|
$ |
76,787 |
|
|
$ |
593,248 |
|
|
$ |
33,566 |
|
|
$ |
394,941 |
|
|
$ |
19,812 |
|
|
$ |
448,319 |
|
|
|
|
|
Minority Interests |
|
(in thousands) |
|
As of December 31, 2006 |
|
|
As of December 31, 2005 |
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
|
|
|
|
Resort Residential |
|
|
Resort/ |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Office |
|
|
Development |
|
|
Hotel |
|
|
|
|
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
Segment |
|
|
Segment |
|
|
Segment |
|
|
Total |
|
|
|
|
Minority interests |
|
$ |
|
|
|
$ |
31,637 |
|
|
$ |
|
|
|
$ |
31,637 |
|
|
$ |
|
|
|
$ |
30,792 |
|
|
$ |
|
|
|
$ |
30,792 |
|
|
|
|
Total minority interests |
|
$ |
|
|
|
$ |
31,637 |
|
|
$ |
|
|
|
$ |
31,637 |
|
|
$ |
|
|
|
$ |
30,792 |
|
|
$ |
|
|
|
$ |
30,792 |
|
|
|
|
On
March 10, 2007, an agreement became effective for the sale of all
assets included in the Resort/Hotel segment in the table above. The
purchaser has the right to terminate the agreement until the
expiration of a due diligence period on March 26, 2007. If the
purchaser has not terminated the agreement by the expiration of the
due diligence period, closing of the transaction, subject to the
satisfaction of certain customary closing conditions, is anticipated
to occur during the second quarter of 2007.
135
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Americold Realty Trust and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Americold Realty Trust and
subsidiaries (the Company) as of December 31, 2006, and the related statements of
income, stockholders equity, and cash flows for the year then
ended (not presented separately herein). These financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards as established by
the Auditing Standards Board (United States) and in accordance with the auditing standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2006, and the results of its
operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Notes 2 and 11 to the consolidated financial statements, in 2006 the Company
adopted Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans an amendment to FASB Statements No. 87, 88, 106
and 132R.
/s/ Deloitte
& Touche LLP
Atlanta, Georgia
February 28, 2007
136
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. We maintain disclosure controls and procedures that
are designed to ensure that information required to be disclosed in our reports under the
Securities Exchange Act of 1934, or the Exchange Act, such as this report on Form 10-K, is
recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commissions rules and forms, and that such information is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. These controls and
procedures are based closely on the definition of disclosure controls and procedures in Rule
13a-15(e) promulgated under the Exchange Act. Rules adopted by the SEC require that we present the
conclusions of the Chief Executive Officer and Chief Financial Officer about the effectiveness of
our disclosure controls and procedures as of the end of the period covered by this report.
Internal Control Over Financial Reporting. Internal control over financial reporting is a
process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial
Officer, as appropriate, and effected by our employees, including management and our Board of Trust
Managers, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. This process includes policies and procedures that:
|
|
pertain to the maintenance of records that accurately and fairly
reflect the transactions and dispositions of our assets in
reasonable detail; |
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that
our receipts and expenditures are made only in accordance with the
authorization procedures we have established; and |
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of any
of our assets in circumstances that could have a material adverse
effect on our financial statements. |
Limitations on the Effectiveness of Controls. Management, including our Chief Executive
Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or
internal control over financial reporting will prevent all errors and fraud. In designing and
evaluating our control system, management recognizes that any control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives. Further, the design of a control system must reflect the fact that
there are resource constraints, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, that may affect our operations
have been detected.
These inherent limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people, or
by managements override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events, and there can be no assurance
that our design will succeed in achieving its stated goals under all potential future conditions.
Over time, our current controls may become inadequate because of changes in conditions that cannot
be anticipated at the present time, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
137
Scope of the Evaluation. The evaluations by our Chief Executive Officer and our Chief
Financial Officer of our disclosure controls and procedures and our internal control over financial
reporting included a review of
procedures and our internal audit, as well as discussions with our Disclosure Committee,
independent public accountants and others in our organization, as appropriate. In conducting the
evaluation, our management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control Integrated Framework. In the course of
the evaluation, we sought to identify data errors, control problems or acts of fraud and to confirm
that appropriate corrective action, including process improvements, were being undertaken. The
evaluation of our disclosure controls and procedures and our internal control over financial
reporting is done on a quarterly basis, so that the conclusions concerning the effectiveness of
such controls can be reported in our Quarterly Reports on Form 10-Q and Annual Reports on Form
10-K. Our internal control over financial reporting is also assessed on an ongoing basis by
personnel in our accounting department and by our independent auditors in connection with their
audit and review activities.
The overall goals of these various evaluation activities are to monitor our disclosure
controls and procedures and our internal control over financial reporting and to make modifications
as necessary. Our intent in this regard is that the disclosure controls and procedures and
internal control over financial reporting will be maintained and updated (including with
improvements and corrections) as conditions warrant. Among other matters, we sought in our
evaluation to determine whether there were any significant deficiencies or material weaknesses
in our internal control over financial reporting, or whether we had identified any acts of fraud
involving personnel who have a significant role in our internal control over financial reporting.
This information is important both for the evaluation generally and because the Section 302
certifications require that our Chief Executive Officer and our Chief Financial Officer disclose
that information to the Audit Committee of our Board of Trust Managers and our independent auditors
and also require us to report on related matters in this section of the Annual Report on Form 10-K.
In the Public Company Accounting Oversight Boards Auditing Standard No. 2, a significant
deficiency is a control deficiency, or a combination of control deficiencies, that adversely
affects the ability to initiate, authorize, record, process or report external financial data
reliably in accordance with GAAP such that there is more than a remote likelihood that a
misstatement of the annual or interim financial statements that is more than inconsequential will
not be prevented or detected.
Periodic Evaluation and Conclusion of Disclosure Controls and Procedures. Our Chief Executive
Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that such controls and procedures were not effective as of the end of the period covered by this
report as a result of material weaknesses identified and described
below in Managements Report on Internal Control Over Financial
Reporting.
Changes
in Internal Control Over Financial Reporting. Except as described
below in Managements Report on Internal Control Over Financial
Reporting, we made no changes to our internal
controls over financial reporting during the fourth quarter of the fiscal year to which this report
relates that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
138
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Crescent Real Estate Equities Company is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under
the Securities Exchange Act of 1934. Internal control over financial reporting is a process
designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer
and effected by our employees, including management and the Board of Trust Managers, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. Management conducted an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006, based on the framework established in Internal
Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, that may affect
our fair presentation of published financial statements have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake.
A material weakness is a control deficiency, or combination of control deficiencies that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.
Based
on our assessment, management believes that, as of December 31, 2006, our internal
control over financial reporting was not effective as a result of material weaknesses identified
with respect to controls over (i) the preparation and review of the calculation of minority interest
associated with our Series A and Series B Preferred Share
Offerings; and (ii) the selection, application and monitoring of
accounting policies utilized by a consolidated subsidiary.
These material weaknesses resulted in the misapplication of generally
accepted accounting principles in our previously issued consolidated
financial statements, which we have restated as discussed further
below.
DESCRIPTION AND REMEDIATION OF MATERIAL WEAKNESSES
Calculation of Minority Interest. We identified
that our preparation and review of the calculation of minority
interest associated with our Series A and Series B
Preferred Share Offerings resulted in an
incorrect allocation of net income between us and the other limited
partners of the Operating Partnership, whom we refer to as
Unitholders. As a result of this material weakness, Net Income for the years ending
December 31, 1998 through 2005 was understated. We have
restated our audited consolidated financial statements through a
cumulative adjustment to decrease Accumulated Deficit as of December 31, 2003
by $5.0 million and decreased our Minority Interest
portion of Net Income, increasing
the amounts by $4.8 million for each of the years ended December 31, 2005 and 2004,
respectively, to correct these errors.
Remediation
Steps to Address Material Weakness. To remediate the material
weakness in our internal control over financial reporting,
subsequent to year end we have modified our methodology for the
calculation of the minority interest and improved training to support
understanding of that methodology.
Refundable Fees for Club Member Services. We
identified
that the selection, application and monitoring of accounting policies
utilized by a consolidated subsidiary resulted in the incorrect
application of generally accepted accounting principles associated with accounting for refundable fees for club member
services. As a result of
this material weakness, Net Income was overstated. We have
restated our audited consolidated financial statements through a cumulative adjustment to
increase Accumulated Deficit as of December 31, 2003 by
$4.1 million and decreased our Net Income by $0.2 million and
$0.4 million for the years ended December 31, 2005 and
2004, respectively, to correct these errors.
Classification
of Club Membership Intangible Asset. We identified that the
selection, application and monitoring of accounting policies
utilized by a consolidated subsidiary resulted in the incorrect
application of generally accepted accounting principles associated with the classification
of a club membership intangible asset. As a result of this
material weakness, Net Income for the years ended
December 31, 1997 through 2005 was overstated. We have restated
our audited consolidated financial statements through a cumulative
adjustment to increase Accumulated Deficit as of December 31, 2003
by $3.5 million and increased our Net Income by $1.7 million
and $1.5 million for the years ended December 31, 2005 and
December 31, 2004, respectively, to correct these errors.
Remediation
Steps to Address Material Weaknesses. With respect to both the
Refundable Fees for Club Member Services and Classification of Club
Member Intangible Asset items above, to remediate the material
weaknesses in our internal control over financial reporting,
subsequent to year end we have modified our application of accounting
principles and improved training at our consolidated subsidiary to
ensure application of the correct generally accepted accounting
principles to support understanding of those accounting principles.
139
Managements
Report on Internal Control over
Financial Reporting as of December 31, 2006 has been audited by Ernst
& Young LLP, an independent registered public accounting firm
as stated in their report which appears on the following
page of this Annual Report on Form 10-K.
140
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trust Managers and Shareholders of
Crescent Real Estate Equities Company
We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting, that Crescent Real Estate Equities Company (the
Company) did not maintain effective internal control over
financial reporting as of December 31, 2006, because of the
effect of material weaknesses identified with respect to controls
over (i) the preparation and review of the calculation of
minority interest and (ii) the selection, application and
monitoring of accounting policies utilized by a consolidated
subsidiary, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management
is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is
to express an opinion on managements assessment and an opinion on the effectiveness of the
Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of the effectiveness to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The following material weaknesses have
been identified and included in managements assessment:
Management identified as a material weakness the Companys ineffective controls over the
preparation and review of the calculation of minority interest associated with the Companys Series
A and Series B Preferred Share Offerings.
Management identified as a material weakness the Companys ineffective controls over the selection,
application and monitoring of accounting policies utilized by a
consolidated subsidiary, including
refundable fees for club member services and intangible assets.
As a result of these material weaknesses in internal control, the Company concluded its previously
issued financial statements should be restated. The restatement is discussed in detail in Note 1
of the Notes to Consolidated Financial Statements set forth in Part II, Item 8, Financial
Statements and Supplementary Data. These material weaknesses were considered in determining the
nature, timing, and extent of audit tests applied in our audit of the 2006 financial statements, and
this report does not affect our report dated March 13, 2007, on those financial statements.
In our
opinion, managements assessment that the Company did not maintain effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on
the COSO criteria. Also in our opinion, because of the effect of the
material weaknesses described above on the achievement of the
objectives of the control criteria, the Company has not maintained effective
internal control over financial reporting as of December 31, 2006, based on the COSO criteria.
ERNST & YOUNG LLP
Dallas, Texas
March 13, 2007
141
Item 9B. Other Information
Not applicable
PART III
Certain information required in Part III is omitted from this Report. We will file a
definitive proxy statement with the SEC not later than 120 days after the end of the fiscal year
covered by this Report, and certain information to be included in the Proxy Statement is
incorporated into this Report by reference. Only those sections of the Proxy Statement which
specifically address the items set forth in this Report are incorporated by reference. The
Compensation Committee Report included in the Proxy Statement is not incorporated by reference into
this Report.
Item 10. Trust Managers, Executive Officers of the Registrant and Corporate Governance
The information this Item requires is incorporated by reference to our Proxy Statement to
be filed with the SEC for our 2007 annual shareholders meeting.
Item 11. Executive Compensation
The information this Item requires is incorporated by reference to our Proxy Statement to
be filed with the SEC for our 2007 annual shareholders meeting.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
The information this Item requires is incorporated by reference to our Proxy Statement to
be filed with the SEC for our 2007 annual shareholders meeting.
Item 13. Certain Relationships and Related Transactions, and Trust Manager Independence
The information this Item requires is incorporated by reference to our Proxy Statement to
be filed with the SEC for our 2007 annual shareholders meeting.
Item 14. Principal Accounting Fees and Services
The information this Item requires is incorporated by reference to our Proxy Statement to
be filed with the SEC for our 2007 annual shareholders meeting.
142
PART IV
Item 15. Exhibits and Financial Statement Schedules
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(a)(1)
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Financial Statements |
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Report of Independent Registered Public Accounting Firm |
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Crescent Real Estate Equities Company Consolidated Balance Sheets at December 31, 2006 and
2005. |
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Crescent Real Estate Equities Company Consolidated Statements of Operations for the years
ended December 31, 2006, 2005 and 2004. |
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Crescent Real Estate Equities Company Consolidated Statements of Shareholders Equity for
the years ended December 31, 2006, 2005 and 2004. |
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Crescent Real Estate Equities Company Consolidated Statements of Cash Flows for the years
ended December 31, 2006, 2005 and 2004. |
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Crescent Real Estate Equities Company Notes to Consolidated Financial Statements. |
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(a)(2)
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Financial Statement Schedules and Financial Statements of Subsidiaries Not Consolidated
and Fifty-Percent-or-Less-Owned Persons |
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Financial Statement Schedules |
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Schedule III Crescent Real Estate Equities Company Consolidated Real Estate Investments and
Accumulated Depreciation at December 31, 2006. |
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Schedule IV Crescent Real Estate Equities Company Mortgage Loans on Real Estate
Investments at December 31, 2006. |
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All other schedules have been omitted either because they are not applicable or because the
required information has been disclosed in the Financial Statements and related notes
included in the consolidated statements. |
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The financial statement schedules and financial statements listed in this Item 15(a)(2) are
contained in Item 8. Financial Statements and Supplementary Data. |
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(a)(3)
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Exhibits |
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The exhibits required by this item are set forth on the Exhibit Index attached hereto. |
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(b)
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Exhibits |
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See Item 15(a)(3) above. |
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(c)
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Financial Statement Schedules and Financial Statements of Subsidiaries Not Consolidated and
Fifty-Percent-or-Less-Owned Persons |
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See Item 15(a)(2) above. |
143
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
SCHEDULE III
DECEMBER 31, 2006
(dollars in thousands)
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Costs |
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Capitalized |
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Impairment |
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Gross Amount Carried at |
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Subsequent to |
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to Carrying |
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Close of Period |
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Initial Costs(1) |
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Acquisition |
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Value |
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12/31/06 |
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Land, Buildings, |
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Buildings, |
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Buildings, |
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Life on Which |
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Improvements, |
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Improvements, |
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Improvements, |
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Depreciation in |
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Furniture, |
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Furniture, |
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Furniture, |
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Latest Income |
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Buildings and |
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Fixtures and |
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Fixtures and |
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Fixtures and |
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Accumulated |
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Date of |
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Acquisition |
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Statement Is |
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Description |
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Land |
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Improvements |
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Equipment |
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Equipment |
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Land |
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Equipment |
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Total (2) |
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Depreciation |
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Construction |
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Date |
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Computed |
|
The Citadel, Denver, CO |
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$ |
1,803 |
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$ |
17,259 |
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$ |
2,246 |
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$ |
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$ |
1,803 |
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$ |
19,505 |
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$ |
21,308 |
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$ |
(14,387 |
) |
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1987 |
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1987 |
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(3 |
) |
Carter Burgess Plaza, Fort Worth, TX |
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1,375 |
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66,649 |
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27,189 |
|
|
|
|
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|
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1,375 |
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|
|
93,838 |
|
|
|
95,213 |
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(47,255 |
) |
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1982 |
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1990 |
|
|
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(3 |
) |
MacArthur Center I & II, Irving, TX |
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704 |
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|
|
17,247 |
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|
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2,828 |
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|
|
|
|
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880 |
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|
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19,899 |
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|
20,779 |
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|
|
(7,402 |
) |
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1982/1986 |
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1993 |
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(3 |
) |
125. E. John Carpenter Freeway, Irving, TX |
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2,200 |
|
|
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48,744 |
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|
9,876 |
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|
|
|
|
|
|
2,200 |
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|
|
58,620 |
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|
|
60,820 |
|
|
|
(19,882 |
) |
|
|
1982 |
|
|
|
1994 |
|
|
|
(3 |
) |
Regency Plaza One, Denver, CO |
|
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950 |
|
|
|
31,797 |
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|
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5,932 |
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|
|
|
|
|
|
950 |
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|
|
37,729 |
|
|
|
38,679 |
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|
|
(11,570 |
) |
|
|
1985 |
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|
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1994 |
|
|
|
(3 |
) |
The Avallon, Austin, TX |
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|
475 |
|
|
|
11,207 |
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|
|
12,472 |
|
|
|
|
|
|
|
1,069 |
|
|
|
23,085 |
|
|
|
24,154 |
|
|
|
(6,254 |
) |
|
|
1986 |
|
|
|
1994 |
|
|
|
(3 |
) |
Waterside Commons, Irving, TX (4) |
|
|
3,650 |
|
|
|
20,135 |
|
|
|
(22,738 |
) |
|
|
(1,047 |
) |
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
1986 |
|
|
|
1994 |
|
|
|
(3 |
) |
Denver Marriott City Center, Denver, CO |
|
|
|
|
|
|
50,364 |
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|
|
8,376 |
|
|
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|
|
|
|
|
|
|
|
58,740 |
|
|
|
58,740 |
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|
|
(20,018 |
) |
|
|
1982 |
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|
|
1995 |
|
|
|
(3 |
) |
707 17th Street, Denver, CO |
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|
|
|
|
|
56,593 |
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|
|
20,414 |
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|
|
|
|
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|
|
|
|
|
77,007 |
|
|
|
77,007 |
|
|
|
(23,022 |
) |
|
|
1982 |
|
|
|
1995 |
|
|
|
(3 |
) |
Spectrum Center, Dallas, TX |
|
|
2,000 |
|
|
|
41,096 |
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|
|
20,400 |
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|
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2,000 |
|
|
|
61,496 |
|
|
|
63,496 |
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|
|
(18,137 |
) |
|
|
1983 |
|
|
|
1995 |
|
|
|
(3 |
) |
Stanford Corporate Centre, Dallas, TX |
|
|
|
|
|
|
16,493 |
|
|
|
9,465 |
|
|
|
(1,200 |
) |
|
|
|
|
|
|
24,758 |
|
|
|
24,758 |
|
|
|
(9,132 |
) |
|
|
1985 |
|
|
|
1995 |
|
|
|
(3 |
) |
The Aberdeen, Dallas, TX |
|
|
850 |
|
|
|
25,895 |
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|
|
3,004 |
|
|
|
|
|
|
|
850 |
|
|
|
28,899 |
|
|
|
29,749 |
|
|
|
(7,705 |
) |
|
|
1986 |
|
|
|
1995 |
|
|
|
(3 |
) |
Briargate
Office and Research Center, Colorado Springs, CO |
|
|
2,000 |
|
|
|
18,044 |
|
|
|
5,892 |
|
|
|
|
|
|
|
2,000 |
|
|
|
23,936 |
|
|
|
25,936 |
|
|
|
(6,523 |
) |
|
|
1988 |
|
|
|
1995 |
|
|
|
(3 |
) |
Park Hyatt Beaver Creek, Avon, CO |
|
|
10,882 |
|
|
|
40,789 |
|
|
|
31,415 |
|
|
|
|
|
|
|
10,882 |
|
|
|
72,204 |
|
|
|
83,086 |
|
|
|
(15,650 |
) |
|
|
1989 |
|
|
|
1995 |
|
|
|
(3 |
) |
Sonoma Mission Inn & Spa, Sonoma, CA |
|
|
10,000 |
|
|
|
44,922 |
|
|
|
44,278 |
|
|
|
|
|
|
|
10,000 |
|
|
|
89,200 |
|
|
|
99,200 |
|
|
|
(22,327 |
) |
|
|
1927 |
|
|
|
1996 |
|
|
|
(3 |
) |
3333 Lee Parkway, Dallas, TX |
|
|
1,450 |
|
|
|
13,177 |
|
|
|
6,853 |
|
|
|
|
|
|
|
1,450 |
|
|
|
20,030 |
|
|
|
21,480 |
|
|
|
(5,155 |
) |
|
|
1983 |
|
|
|
1996 |
|
|
|
(3 |
) |
Greenway I & IA, Richardson, TX |
|
|
1,701 |
|
|
|
15,312 |
|
|
|
3,146 |
|
|
|
|
|
|
|
1,701 |
|
|
|
18,458 |
|
|
|
20,159 |
|
|
|
(4,748 |
) |
|
|
1983 |
|
|
|
1996 |
|
|
|
(3 |
) |
Frost Bank Plaza, Austin, TX |
|
|
|
|
|
|
36,019 |
|
|
|
6,147 |
|
|
|
|
|
|
|
|
|
|
|
42,166 |
|
|
|
42,166 |
|
|
|
(10,842 |
) |
|
|
1984 |
|
|
|
1996 |
|
|
|
(3 |
) |
301 Congress Avenue, Austin, TX |
|
|
2,000 |
|
|
|
41,735 |
|
|
|
15,050 |
|
|
|
|
|
|
|
2,000 |
|
|
|
56,785 |
|
|
|
58,785 |
|
|
|
(15,435 |
) |
|
|
1986 |
|
|
|
1996 |
|
|
|
(3 |
) |
Greenway
Plaza Office Portfolio & Hotel, Houston, TX |
|
|
29,232 |
|
|
|
184,765 |
|
|
|
144,890 |
|
|
|
|
|
|
|
27,228 |
|
|
|
331,659 |
|
|
|
358,887 |
|
|
|
(109,476 |
) |
|
|
1969-1982 |
|
|
|
1996 |
|
|
|
(3 |
) |
55 Madison, Denver, CO |
|
|
1,451 |
|
|
|
13,253 |
|
|
|
2,636 |
|
|
|
|
|
|
|
1,451 |
|
|
|
15,889 |
|
|
|
17,340 |
|
|
|
(4,985 |
) |
|
|
1982 |
|
|
|
1997 |
|
|
|
(3 |
) |
44 Cook, Denver, CO |
|
|
1,451 |
|
|
|
13,253 |
|
|
|
3,388 |
|
|
|
|
|
|
|
1,451 |
|
|
|
16,641 |
|
|
|
18,092 |
|
|
|
(4,912 |
) |
|
|
1984 |
|
|
|
1997 |
|
|
|
(3 |
) |
Greenway II, Richardson, TX |
|
|
1,823 |
|
|
|
16,421 |
|
|
|
6,395 |
|
|
|
|
|
|
|
1,823 |
|
|
|
22,816 |
|
|
|
24,639 |
|
|
|
(5,742 |
) |
|
|
1985 |
|
|
|
1997 |
|
|
|
(3 |
) |
Ventana Country Inn, Big Sur, CA |
|
|
2,782 |
|
|
|
26,744 |
|
|
|
7,687 |
|
|
|
|
|
|
|
2,064 |
|
|
|
35,149 |
|
|
|
37,213 |
|
|
|
(9,902 |
) |
|
|
1975-1988 |
|
|
|
1997 |
|
|
|
(3 |
) |
Palisades Central I, Dallas, TX |
|
|
1,300 |
|
|
|
11,797 |
|
|
|
2,535 |
|
|
|
|
|
|
|
1,300 |
|
|
|
14,332 |
|
|
|
15,632 |
|
|
|
(3,812 |
) |
|
|
1980/1986 |
|
|
|
1997 |
|
|
|
(3 |
) |
Palisades Central II, Dallas, TX |
|
|
2,100 |
|
|
|
19,176 |
|
|
|
5,030 |
|
|
|
|
|
|
|
2,100 |
|
|
|
24,206 |
|
|
|
26,306 |
|
|
|
(6,804 |
) |
|
|
1980/1986 |
|
|
|
1997 |
|
|
|
(3 |
) |
Stemmons Place, Dallas, TX |
|
|
|
|
|
|
37,537 |
|
|
|
5,935 |
|
|
|
|
|
|
|
|
|
|
|
43,472 |
|
|
|
43,472 |
|
|
|
(11,434 |
) |
|
|
1980/1986 |
|
|
|
1997 |
|
|
|
(3 |
) |
The Addison, Dallas, TX |
|
|
1,990 |
|
|
|
17,998 |
|
|
|
2,690 |
|
|
|
|
|
|
|
1,990 |
|
|
|
20,688 |
|
|
|
22,678 |
|
|
|
(5,305 |
) |
|
|
1980/1986 |
|
|
|
1997 |
|
|
|
(3 |
) |
Sonoma Golf Course, Sonoma, CA |
|
|
14,956 |
|
|
|
|
|
|
|
21,595 |
|
|
|
(4,354 |
) |
|
|
15,952 |
|
|
|
16,245 |
|
|
|
32,197 |
|
|
|
(1,715 |
) |
|
|
1929 |
|
|
|
1998 |
|
|
|
(3 |
) |
Austin Centre, Austin, TX |
|
|
1,494 |
|
|
|
36,475 |
|
|
|
5,499 |
|
|
|
|
|
|
|
1,494 |
|
|
|
41,974 |
|
|
|
43,468 |
|
|
|
(10,241 |
) |
|
|
1986 |
|
|
|
1998 |
|
|
|
(3 |
) |
Omni Austin Hotel, Austin, TX |
|
|
2,409 |
|
|
|
56,670 |
|
|
|
3,924 |
|
|
|
|
|
|
|
2,409 |
|
|
|
60,594 |
|
|
|
63,003 |
|
|
|
(15,821 |
) |
|
|
1986 |
|
|
|
1998 |
|
|
|
(3 |
) |
Datran Center, Miami, FL |
|
|
|
|
|
|
71,091 |
|
|
|
11,765 |
|
|
|
|
|
|
|
|
|
|
|
82,856 |
|
|
|
82,856 |
|
|
|
(19,555 |
) |
|
|
1986-1992 |
|
|
|
1998 |
|
|
|
(3 |
) |
Avallon Phase II, Austin, TX |
|
|
1,102 |
|
|
|
23,401 |
|
|
|
(11,339 |
) |
|
|
|
|
|
|
640 |
|
|
|
12,524 |
|
|
|
13,164 |
|
|
|
(1,748 |
) |
|
|
1997 |
|
|
|
|
|
|
|
(3 |
) |
Plaza Park Garage, Fort Worth, TX |
|
|
2,032 |
|
|
|
14,125 |
|
|
|
613 |
|
|
|
|
|
|
|
2,032 |
|
|
|
14,738 |
|
|
|
16,770 |
|
|
|
(3,482 |
) |
|
|
1998 |
|
|
|
|
|
|
|
(3 |
) |
Johns Manville Plaza, Denver, CO |
|
|
9,128 |
|
|
|
74,937 |
|
|
|
4,957 |
|
|
|
|
|
|
|
9,128 |
|
|
|
79,894 |
|
|
|
89,022 |
|
|
|
(9,470 |
) |
|
|
1978 |
|
|
|
2002 |
|
|
|
(3 |
) |
The Colonnade, Coral Gables, FL |
|
|
2,600 |
|
|
|
39,557 |
|
|
|
1,162 |
|
|
|
|
|
|
|
2,600 |
|
|
|
40,719 |
|
|
|
43,319 |
|
|
|
(3,738 |
) |
|
|
1989 |
|
|
|
2003 |
|
|
|
(3 |
) |
Hughes Center, Las Vegas, NV |
|
|
29,802 |
|
|
|
178,705 |
|
|
|
11,009 |
|
|
|
|
|
|
|
29,822 |
|
|
|
189,694 |
|
|
|
219,516 |
|
|
|
(19,232 |
) |
|
|
1986-1999 |
|
|
|
2003-2004 |
|
|
|
(3 |
) |
Desert Mountain Development Corp.(7) |
|
|
120,907 |
|
|
|
60,487 |
|
|
|
25,487 |
|
|
|
|
|
|
|
128,230 |
|
|
|
78,651 |
|
|
|
206,881 |
|
|
|
(53,238 |
) |
|
|
|
|
|
|
2002 |
|
|
|
(3 |
) |
Crescent Resort Development, Inc. (7) |
|
|
367,647 |
|
|
|
23,357 |
|
|
|
288,731 |
|
|
|
|
|
|
|
604,747 |
|
|
|
74,988 |
|
|
|
679,735 |
|
|
|
(11,996 |
) |
|
|
|
|
|
|
2002 |
|
|
|
(3 |
) |
Mira Vista Development Company (7) |
|
|
3,059 |
|
|
|
2,234 |
|
|
|
2,090 |
|
|
|
|
|
|
|
2,093 |
|
|
|
5,290 |
|
|
|
7,383 |
|
|
|
(2,173 |
) |
|
|
|
|
|
|
2003 |
|
|
|
(3 |
) |
Houston Area Development Corporation (7) |
|
|
2,740 |
|
|
|
|
|
|
|
(1,977 |
) |
|
|
|
|
|
|
763 |
|
|
|
|
|
|
|
763 |
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
(3 |
) |
Crescent Plaza Phase I & II, Dallas, TX (7) |
|
|
10,997 |
|
|
|
|
|
|
|
114,848 |
|
|
|
|
|
|
|
65,233 |
|
|
|
60,612 |
|
|
|
125,845 |
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
|
(3 |
) |
JPI
multi-family luxury apartment project Deedham, MA (7) |
|
|
17,095 |
|
|
|
|
|
|
|
(17,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
(3 |
) |
Dupont Centre, Irvine, CA |
|
|
10,000 |
|
|
|
34,668 |
|
|
|
1,735 |
|
|
|
|
|
|
|
10,000 |
|
|
|
36,403 |
|
|
|
46,403 |
|
|
|
(2,879 |
) |
|
|
1986 |
|
|
|
2004 |
|
|
|
(3 |
) |
The Alhambra, Miami, FL |
|
|
5,500 |
|
|
|
52,276 |
|
|
|
4,649 |
|
|
|
|
|
|
|
5,500 |
|
|
|
56,925 |
|
|
|
62,425 |
|
|
|
(4,065 |
) |
|
|
1961-1987 |
|
|
|
2004 |
|
|
|
(3 |
) |
Paseo Del Mar, San Diego, CA (5) |
|
|
21,000 |
|
|
|
|
|
|
|
(21,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
(3 |
) |
3883 Hughes Center, Las Vegas, NV |
|
|
3,304 |
|
|
|
|
|
|
|
53,338 |
|
|
|
|
|
|
|
3,514 |
|
|
|
53,128 |
|
|
|
56,642 |
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
|
(3 |
) |
The Exchange Building, Seattle, WA |
|
|
7,050 |
|
|
|
40,442 |
|
|
|
2,731 |
|
|
|
|
|
|
|
7,050 |
|
|
|
43,173 |
|
|
|
50,223 |
|
|
|
(3,523 |
) |
|
|
1929 |
|
|
|
2005 |
|
|
|
(3 |
) |
One Live Oak, Atlanta, GA |
|
|
3,380 |
|
|
|
23,323 |
|
|
|
2,976 |
|
|
|
|
|
|
|
3,380 |
|
|
|
26,299 |
|
|
|
29,679 |
|
|
|
(1,793 |
) |
|
|
1981 |
|
|
|
2004 |
|
|
|
(3 |
) |
Peakview Tower, Denver, CO |
|
|
2,724 |
|
|
|
36,411 |
|
|
|
1,513 |
|
|
|
|
|
|
|
2,724 |
|
|
|
37,924 |
|
|
|
40,648 |
|
|
|
(3,104 |
) |
|
|
2001 |
|
|
|
2004 |
|
|
|
(3 |
) |
Financial Plaza, Phoenix, AZ (6) |
|
|
3,517 |
|
|
|
41,492 |
|
|
|
562 |
|
|
|
|
|
|
|
3,517 |
|
|
|
42,054 |
|
|
|
45,571 |
|
|
|
(1,615 |
) |
|
|
1986 |
|
|
|
2006 |
|
|
|
(3 |
) |
Parkway at Oakhill, Austin, TX (6) |
|
|
3,500 |
|
|
|
|
|
|
|
11,328 |
|
|
|
|
|
|
|
3,500 |
|
|
|
11,328 |
|
|
|
14,828 |
|
|
|
|
|
|
|
2006 |
|
|
|
2006 |
|
|
|
(3 |
) |
Land held for development or sale, Houston, TX |
|
|
49,420 |
|
|
|
|
|
|
|
(30,786 |
) |
|
|
|
|
|
|
18,634 |
|
|
|
|
|
|
|
18,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Land held for development or sale, Dallas, TX |
|
|
27,288 |
|
|
|
|
|
|
|
(9,516 |
) |
|
|
|
|
|
|
17,772 |
|
|
|
|
|
|
|
17,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Land held for development or sale, Las Vegas, NV |
|
|
10,000 |
|
|
|
|
|
|
|
5,333 |
|
|
|
|
|
|
|
15,333 |
|
|
|
|
|
|
|
15,333 |
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
(3 |
) |
Crescent Real Estate Equities L.P. |
|
|
|
|
|
|
|
|
|
|
23,913 |
|
|
|
(352 |
) |
|
|
|
|
|
|
23,561 |
|
|
|
23,561 |
|
|
|
(7,228 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
Other |
|
|
18,588 |
|
|
|
11,351 |
|
|
|
9,340 |
|
|
|
|
|
|
|
10,166 |
|
|
|
29,113 |
|
|
|
39,279 |
|
|
|
(4,443 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
835,408 |
|
|
$ |
1,775,423 |
|
|
$ |
910,816 |
|
|
$ |
(6,953 |
) |
|
$ |
1,044,800 |
|
|
$ |
2,469,894 |
|
|
$ |
3,514,694 |
|
|
$ |
(608,875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Initial costs include purchase price, excluding any purchase price adjustments related to SFAS 141 intangibles, and any costs associated with closing of the Property. |
|
(2) |
|
The aggregate cost for Federal income tax purposes as of December 31, 2005 was approximately $3.5 billion. |
|
(3) |
|
Depreciation of the real estate assets is calculated over the following estimated useful lives using the straight-line method: |
|
|
|
|
|
|
Building and improvements |
|
|
2 to 46 years |
|
|
|
|
|
|
Tenant improvements |
|
|
Terms of leases, which approximates the useful life of the asset |
|
|
|
|
|
|
Furniture, fixtures, and equipment |
|
|
2 to 5 years |
|
|
|
(4) |
|
This Office Property was sold during the year ended December 31, 2006. |
|
(5) |
|
Our investment in this Office Property was sold during the year ended December 31, 2006. |
|
(6) |
|
This Office Property was acquired during the year ended December 31, 2006. |
|
(7) |
|
Land and cost capitalized subsequent to acquisition includes property under development and is net of residential development cost of sales. |
144
A summary of combined real estate investments and accumulated depreciation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
Real estate investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
$ |
3,182,235 |
|
|
$ |
3,262,894 |
|
|
$ |
3,862,286 |
|
Acquisitions |
|
|
48,509 |
|
|
|
192,024 |
|
|
|
437,359 |
|
Improvements |
|
|
471,730 |
|
|
|
239,040 |
|
|
|
154,300 |
|
Dispositions |
|
|
(187,655 |
) |
|
|
(510,601 |
) |
|
|
(1,183,185 |
) |
Impairments |
|
|
(125 |
) |
|
|
(1,122 |
) |
|
|
(7,866 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
3,514,694 |
|
|
$ |
3,182,235 |
|
|
$ |
3,262,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
|
$ |
528,006 |
|
|
$ |
516,205 |
|
|
$ |
697,813 |
|
Depreciation |
|
|
117,419 |
|
|
|
116,156 |
|
|
|
145,210 |
|
Dispositions |
|
|
(36,550 |
) |
|
|
(104,355 |
) |
|
|
(326,818 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
608,875 |
|
|
$ |
528,006 |
|
|
$ |
516,205 |
|
|
|
|
|
|
|
|
|
|
|
145
CRESCENT REAL ESTATE EQUITIES COMPANY
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE INVESTMENTS
DECEMBER 31, 2006
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Loans Subject |
|
|
Interest Rate |
|
Original |
|
|
|
|
|
Periodic |
|
|
|
|
|
Face |
|
Carrying |
|
to Delinquent |
|
|
at December |
|
Maturity |
|
Loan |
|
Payment |
|
Prior |
|
Amount of |
|
Amount of |
|
Principal or |
Type of Investment |
|
31, 2006 |
|
Date |
|
Extensions |
|
Term(1)(2) |
|
Liens |
|
Mortgages |
|
Mortgages(3) |
|
Interest(4) |
Mezzanine Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas Office Property |
|
|
13.85 |
% |
|
|
2007 |
|
|
Three 1-Year |
|
Interest Only |
|
$ |
65,750 |
|
|
$ |
12,000 |
|
|
$ |
11,989 |
|
|
$ |
|
|
Three Dallas Office Properties |
|
|
11.04 |
% |
|
|
2010 |
|
|
N/A |
|
Principal and Interest(5) |
|
|
80,000 |
|
|
|
7,660 |
|
|
|
7,601 |
|
|
|
|
|
Two California Luxury Hotel Properties |
|
|
16.35 |
% |
|
|
2007 |
|
|
Five 1-Year |
|
Interest Only |
|
|
250,000 |
(6) |
|
|
15,000 |
|
|
|
14,947 |
|
|
|
|
|
Southeastern U.S. Office Portfolio |
|
|
12.23 |
% |
|
|
2007 |
|
|
Three 1-Year |
|
Interest Only |
|
|
290,000 |
|
|
|
20,700 |
|
|
|
20,630 |
|
|
|
|
|
Six Florida Hotel Properties |
|
|
13.35 |
% |
|
|
2009 |
|
|
Two 1-Year |
|
Interest Only |
|
|
95,000 |
|
|
|
15,000 |
|
|
|
14,891 |
|
|
|
|
|
California Ski Resort |
|
|
9.85 |
% |
|
|
2009 |
|
|
Two 1-Year |
|
Interest Only |
|
|
230,000 |
|
|
|
20,000 |
|
|
|
19,845 |
|
|
|
|
|
New York City Residential Property |
|
|
18.18 |
% |
|
|
2007 |
|
|
Two 1-Year |
|
Interest Only |
|
|
342,615 |
|
|
|
24,185 |
|
|
|
24,013 |
|
|
|
|
|
California Residential Property |
|
|
17.00 |
% |
|
|
2008 |
|
|
One 6-Month |
|
Interest Only |
|
|
34,000 |
|
|
|
9,775 |
(7) |
|
|
9,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,387,365 |
|
|
$ |
124,320 |
|
|
$ |
123,497 |
(8) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest only payments are due monthly, principal is due at
maturity except as otherwise noted in footnote (5). |
|
(2) |
|
Prepayment of certain loans will trigger additional fees,
such as prepayment fees, exit fees, spread maintenance premiums and
breakage costs, due from the borrower at the time of prepayment. |
|
(3) |
|
The carrying amounts approximate the Federal income tax basis. |
|
(4) |
|
No mortgage loans are delinquent with respect to principal or interest. |
|
(5) |
|
Interest only payments are due monthly through September 2007. Beginning October 2007, principal payments are due monthly until maturity. |
|
(6) |
|
We have a 25% interest in Redtail Capital Partners, L.P., that has a $25.0 million mortgage loan secured by these properties. |
|
(7) |
|
The condominiums securing this note were sold by CRDI to a
third party. Due to restrictions under SFAS No. 66,
Accounting for Sales of Real Estate regarding seller financed
transactions, the profit from the sale of $4.7 million was
deferred and recorded under the cost recovery method and reflected as
a reduction of the note such that the face value of the note is
included in the table above. |
|
(8) |
|
The following is a summary of changes in the carrying amount of investments for the years ended December 31, 2006 and December 31, 2005: |
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Balance at January 1, 2005 |
|
$ |
172,126 |
|
|
$ |
21,877 |
|
Additions during period: |
|
|
|
|
|
|
|
|
Investments in mezzanine loans |
|
|
73,575 |
|
|
|
150,582 |
|
Cost of acquiring mezzanine investments |
|
|
|
|
|
|
402 |
|
Accretion of unearned revenue |
|
|
778 |
|
|
|
303 |
|
Deductions during period: |
|
|
|
|
|
|
|
|
Collection of principal |
|
|
(121,837 |
) |
|
|
|
|
Amortization of premium and cost to acquire
mezzanine investments |
|
|
(311 |
) |
|
|
(152 |
) |
Unearned revenue |
|
|
(834 |
) |
|
|
(886 |
) |
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
$ |
123,497 |
|
|
$ |
172,126 |
|
|
|
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on the 14th day of March, 2007.
|
|
|
|
|
|
|
|
|
CRESCENT REAL ESTATE EQUITIES COMPANY |
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
By
|
|
/s/John C. Goff |
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Goff |
|
|
|
|
|
|
Trust Manager and Chief Executive Officer |
|
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacity and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Richard E. Rainwater |
|
Trust Manager and Chairman of the Board |
|
March 14, 2007 |
|
|
|
|
|
Richard E. Rainwater |
|
|
|
|
|
|
|
|
|
/s/ John C. Goff |
|
Trust Manager and Chief Executive Officer |
|
March 14, 2007 |
|
|
|
|
|
John C. Goff |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Jerry R. Crenshaw Jr. |
|
Managing Director and Chief Financial Officer |
|
March 14, 2007 |
|
|
|
|
|
Jerry R. Crenshaw Jr. |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Dennis H. Alberts |
|
Trust Manager, President and Chief Operating Officer |
|
March 14, 2007 |
|
|
|
|
|
Dennis H. Alberts |
|
|
|
|
|
|
|
|
|
/s/ Anthony M. Frank |
|
Trust Manager |
|
March 14, 2007 |
|
|
|
|
|
Anthony M. Frank |
|
|
|
|
|
|
|
|
|
/s/ William F. Quinn |
|
Trust Manager |
|
March 14, 2007 |
|
|
|
|
|
William F. Quinn |
|
|
|
|
|
|
|
|
|
/s/ Paul E. Rowsey, III |
|
Trust Manager |
|
March 14, 2007 |
|
|
|
|
|
Paul E. Rowsey, III |
|
|
|
|
|
|
|
|
|
/s/ Robert W. Stallings |
|
Trust Manager |
|
March 14, 2007 |
|
|
|
|
|
Robert W. Stallings |
|
|
|
|
|
|
|
|
|
/s/ Terry N. Worrell |
|
Trust Manager |
|
March 14, 2007 |
|
|
|
|
|
Terry N. Worrell |
|
|
|
|
INDEX TO EXHIBITS
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
3.01
|
|
Restated Declaration of Trust of Crescent Real Estate Equities
Company, as amended (filed as Exhibit No. 3.1 to the Registrants
Current Report on Form
8-K filed April 25, 2002 (the April 2002 8-K) and incorporated
herein by reference) |
|
|
|
3.02
|
|
Fourth Amended and Restated Bylaws of Crescent Real Estate
Equities Company (filed as Exhibit No. 3.02 to the Registrants
Annual Report of Form 10-K for the fiscal year ended December 31,
2005 (the 2005 10K) and incorporated herein by reference) |
|
|
|
4.01
|
|
Form of Common Share Certificate (filed as Exhibit No. 4.03 to the
Registrants Registration Statement on Form S-3 (File No.
333-21905) and incorporated herein by reference) |
|
|
|
4.02
|
|
Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
February 13, 1998 (filed as Exhibit No. 4.07 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31,
1997 (the 1997 10-K) and incorporated herein by reference) |
|
|
|
4.03
|
|
Form of Certificate of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company (filed
as Exhibit No. 4 to the Registrants Registration Statement on
Form 8-A/A filed on February 18, 1998 and incorporated by
reference) |
|
|
|
4.04
|
|
Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
April 25, 2002 (filed as Exhibit No. 4.1 to the April 2002 8-K and
incorporated herein by reference) |
|
|
|
4.05
|
|
Statement of Designation of 6-3/4% Series A Convertible Cumulative
Preferred Shares of Crescent Real Estate Equities Company dated
January 14, 2004 (filed as Exhibit No. 4.1 to the Registrants
Current Report on Form 8-K filed January 15, 2004 (the January
2004 8-K) and incorporated herein by reference) |
|
|
|
4.06
|
|
Form of Global Certificate of 6-3/4% Series A Convertible
Cumulative Preferred Shares of Crescent Real Estate Equities
Company (filed as Exhibit No. 4.2 to the January 2004 8-K and
incorporated herein by reference) |
|
|
|
4.07
|
|
Statement of Designation of 9.50% Series B Cumulative Redeemable
Preferred Shares of Crescent Real Estate Equities Company dated
May 13, 2002 (filed as Exhibit No. 2 to the Registrants Form 8-A
dated May 14, 2002 (the Form 8-A) and incorporated herein by
reference) |
|
|
|
4.08
|
|
Form of Certificate of 9.50% Series B Cumulative Redeemable
Preferred Shares of Crescent Real Estate Equities Company (filed
as Exhibit No. 4 to the Form 8-A and incorporated herein by
reference) |
|
|
|
4*
|
|
Pursuant to Regulation S-K Item 601 (b) (4) (iii), the Registrant
by this filing agrees, upon request, to furnish to the Securities
and Exchange Commission a copy of instruments defining the rights
of holders of long-term debt of the Registrant |
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
10.01
|
|
Fourth Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of
April 30, 2006 (filed as Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
(the 1Q 2006 10-Q) and incorporated herein by reference) |
|
|
|
10.02
|
|
Noncompetition Agreement of Richard E. Rainwater, as assigned to
Crescent Real Estate Equities Limited Partnership on May 5, 1994
(filed as Exhibit No. 10.02 to the 1997 10-K and incorporated
herein by reference) |
|
|
|
10.03
|
|
Noncompetition Agreement of John C. Goff, as assigned to Crescent
Real Estate Equities Limited Partnership on May 5, 1994 (filed as
Exhibit No. 10.03 to the 1997 10-K and incorporated herein by
reference) |
|
|
|
10.04*
|
|
Employment Agreement by and between Crescent Real Estate Equities
Limited Partnership, Crescent Real Estate Equities Company and John
C. Goff, dated as of February 19, 2002 (filed as Exhibit No. 10.01
to the Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002 (the 1Q 2002 10-Q) and incorporated herein by
reference) |
|
|
|
10.05
|
|
Form of Officers and Trust Managers Indemnification Agreement as
entered into between the Registrant and each of its executive
officers and trust managers (filed as Exhibit No. 10.07 to the
Registration Statement on Form S-4 (File No. 333-42293) of Crescent
Real Estate Equities Limited Partnership and incorporated herein by
reference) |
|
|
|
10.06*
|
|
Crescent Real Estate Equities Company 1994 Stock Incentive Plan
(filed as Exhibit No. 10.07 to the Registrants Registration
Statement on Form S-11 (File No. 33-75188) (the Form S-11) and
incorporated herein by reference) |
|
|
|
10.07*
|
|
Third Amended and Restated 1995 Crescent Real Estate Equities
Company Stock Incentive Plan (filed as Exhibit No. 10.01 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 and incorporated herein by reference) |
|
|
|
10.08*
|
|
Amendment dated as of November 4, 1999 to the Crescent Real Estate
Equities Company 1994 Stock Incentive Plan (filed as Exhibit No.
10.10 to the Registrants Annual Report on Form 10-K for the fiscal
year ended December 31, 2000 (the 2000 10-K) and incorporated
herein by reference) |
|
|
|
10.09*
|
|
Amendment dated as of November 1, 2001 to the Crescent Real Estate
Equities Company 1994 Stock Incentive Plan and the Third Amended
and Restated 1995 Crescent Real Estate Equities Company Stock
Incentive Plan (filed as Exhibit No. 10.11 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31,
2001 and incorporated herein by reference) |
|
|
|
10.10*
|
|
Second Amended and Restated 1995 Crescent Real Estate Equities
Limited Partnership Unit Incentive Plan (filed as Exhibit No. 10.10
to the Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 and incorporated herein by reference) |
|
|
|
10.11*
|
|
1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan, as amended (filed as Exhibit No. 10.14 to the
Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 and incorporated herein by reference) |
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
10.12*
|
|
Amendment dated as of November 5, 1999 to the 1996 Crescent Real
Estate Equities Limited Partnership Unit Incentive Plan (filed as
Exhibit No. 10.13 to the 2000 10-K and incorporated herein by
reference) |
|
|
|
10.13*
|
|
Crescent Real Estate Equities, Ltd. Dividend Incentive Unit Plan
(filed as Exhibit No. 10.14 to the 2000 10-K and incorporated
herein by reference) |
|
|
|
10.14*
|
|
Annual Incentive Compensation Plan for select Employees of
Crescent Real Estate Equities, Ltd. (filed as Exhibit No. 10.15 to
the 2000 10-K and incorporated herein by reference) |
|
|
|
10.15
|
|
Form of Registration Rights, Look-Up and Pledge Agreement (filed
as Exhibit No. 10.05 to the Form S-11 and incorporated herein by
reference) |
|
|
|
10.16*
|
|
Restricted Stock Agreement by and between Crescent Real Estate
Equities Company and John C. Goff, dated as of February 19, 2002
(filed as Exhibit No. 10.02 to the 1Q 2002 10-Q and incorporated
herein by reference) |
|
|
|
10.17*
|
|
Unit Option Agreement Pursuant to the 1996 Plan by and between
Crescent Real Estate Equities Limited Partnership and John C.
Goff, dated as of February 19, 2002 (filed as Exhibit No. 10.01 to
the Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 and incorporated herein by reference) |
|
|
|
10.18*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and John C. Goff, dated as of February 19,
2002 (filed as Exhibit No. 10.04 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.19*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Dennis H. Alberts, dated as of February
19, 2002 (filed as Exhibit No. 10.05 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.20*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Kenneth S. Moczulski, dated as of February
19, 2002 (filed as Exhibit No. 10.06 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.21*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and David M. Dean, dated as of February 19,
2002 (filed as Exhibit No. 10.07 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.22*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jane E. Mody, dated as of February 19,
2002 (filed as Exhibit No. 10.08 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.23*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jerry R. Crenshaw, Jr., dated as of
February 19, 2002 (filed as Exhibit No. 10.09 to the 1Q 2002 10-Q
and incorporated herein by reference) |
|
|
|
10.24*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Jane B. Page, dated as of February 19,
2002 (filed as Exhibit No. 10.10 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
EXHIBIT |
|
|
NUMBER |
|
DESCRIPTION OF EXHIBIT |
|
|
|
10.25*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and John L. Zogg, Jr., dated as of February
19, 2002 (filed as Exhibit No. 10.11 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.26*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnership and Dennis H. Alberts, dated as of March 5,
2001 (filed as Exhibit No. 10.12 to the 1Q 2002 10-Q and
incorporated herein by reference) |
|
|
|
10.27*
|
|
Unit Option Agreement by and between Crescent Real Estate Equities
Limited Partnerships and Paul R. Smith, dated as of May 16, 2005
(filed as Exhibit No. 10.03 to the Registrants Quarterly Report
on Form 10-Q for the quarter ended June 30, 2005 (the 2Q 2005
10-Q) and incorporated herein by reference) |
|
|
|
10.28*
|
|
2004 Crescent Real Estate Equities Limited Partnership Long-Term
Incentive Plan (filed as Exhibit 10.27 to the Registrants Annual
Report on Form 10-K for the fiscal year ended December 31, 2004
(the 2004 10-K) and incorporated herein by reference) |
|
|
|
10.29
|
|
2005 Crescent Real Estate Equities Limited Partnership Long-Term
Incentive Plan (filed as Exhibit 10.02 to the 2Q 2005 10-Q and
incorporated herein by reference) |
|
|
|
10.30
|
|
Revolving Credit Agreement of Crescent Real Estate Funding VIII,
L.P., dated February 8, 2005, and Unconditional Guaranty of
Payment and Performance of Crescent Real Estate Equities Limited
Partnership (filed as Exhibit 10.28 to the 2004 10-K and
incorporated herein by reference) |
|
|
|
10.31
|
|
Contribution Agreement effective as of November 10, 2004, relating
to the contribution by Crescent Real Estate Funding I, L.P. of The
Crescent Office Property to Crescent Big Tex I, L.P. (filed as
Exhibit 10.29 to the 2004 10-K and incorporated herein by
reference) |
|
|
|
10.32
|
|
Purchase and Sale Agreement effective as of November 10, 2004,
relating to the sale by Crescent Real Estate Equities Limited
Partnership of Houston Center Office Property to Crescent Big Tex
I, L.P. (filed as Exhibit 10.30 to the 2004 10-K and incorporated
herein by reference) |
|
|
|
10.33
|
|
Purchase and Sale Agreement effective as of November 10, 2004,
relating to the sale by Crescent Real Estate Funding X, L.P. of
Post Oak Central Office Property to Crescent Big Tex I, L.P.
(filed as Exhibit 10.31 to the 2004 10-K and incorporated herein
by reference) |
|
|
|
21.01
|
|
List of Subsidiaries (filed herewith) |
|
|
|
23.01
|
|
Consent of Ernst & Young LLP (filed herewith) |
|
|
|
23.02
|
|
Consent of Deloitte & Touche LLP (filed herewith) |
|
|
|
31.01
|
|
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a 14(a) as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
32.01
|
|
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) |
|
|
|
|
|
This exhibit is attached to the copy of this report available through our website at
www.crescent.com and to the copy of this report available at
the SECs website at www.sec.gov. |