Trammell Crow's accounting exceeds company and analyst expectations, posting 46 cents per share diluted earnings although e-commerce activity is showing an $884,000 loss plus the company has experienced a marginal decline in net income. The company is shooting for a 15% share growth this year and the same in 2001.

For the quarter ending Sept. 30, revenues have totaled $202.8 million, up $7.1 million from the corresponding quarter in 1999. This year's third-quarter EBITDA totals $37.7 million in comparison with $35.5 million in third quarter 1999. Third-quarter net income, however, has dipped to $16.6 million from $16.7 million for 1999's third quarter.

"The upside surprise is primarily due to our executing business, particularly corporate advisory services ... earlier than anticipated," says Bob Sulentic, Trammell Crow president and CEO.

Overall corporate segment revenues have come in at $89.8 million, up 54% or $31.5 million from third quarter 1999, with EBITDA totals this year at $14.3 million income before income taxes. The figure represents an increase of 182% or $5.1 million in 1999. Institutional segment revenues for the most recent quarter have dropped $24.5 million from 1999's $137.4 million. Third-quarter institutional EBITDA is $24.3 million before income taxes in comparison to 1999's third quarter total of $30.5 million.

In the third quarter, the company's institutional segment has added 4.7 million sf to the property portfolio. It also has secured a contract from Urban Growth Property Trust, a private REIT, to manage street-level retail shops within urban parking structures in Boston, Philadelphia, Chicago and Pittsburgh. In year-to-date sales, Trammell Crow has sold or is currently listing properties with listed values aggregating $4.7 billion.

Sulentic says "strong increases across the board - in facilities management, corporate advisory services and project management business - contributed to this year's third quarter's positive results." He says the decline in the institutional sector has come as no surprise and is in line with expectations. The transaction-mortared segment is predicted to make a strong fourth-quarter showing.

Trammell Crow has joined a growing roster of companies in the region that is setting up shop or buying into the European market. In June, Trammell Crow had bought about 10% of FPD Savills' outstanding shares, forming a joint venture with the Texas entity holding 51% of the operation. Operating under the name of Trammell Crow Savills, the venture will try to gain a foothold in corporate outsourcing business in the European Union, Asia-Pacific and Australia. Acquisitions gained through the alliance has put more than 500 sites, totaling about 4.2 million sf, into Trammell Crow Savills' facilities management portfolio.

As for Crescent, third quarter 2000 has come in 2 cents higher than anticipated, with an FFO of 60 per share. Favorable office results and rent collections from behavioral healthcare properties attribute to the good news for stockholders. Crescent CEO John C. Goff is predicting to end the year with an FFO per share in the range of $2.48 to $2.50.Third quarter FFO has totaled $75 million in comparison to $57.2 million for third quarter 1999. Year-to-date FFO is $232.2 million in comparison to $254.5 million for the same period in 1999.

Crescent's net income available to common shareholders is $78.2 million or $.70 per diluted share for this quarter. In the same period last year, Crescent had showed a loss of $105.7 million or $.88 per diluted share. Year-to-date net income available to common shareholders is $155.8 million in comparison to a loss of $25.5 million for the first nine months of 1999.

Office property same-store NOI, excluding lease termination fees, increased 8.4% for the this last quarter from 1999 while average occupancy is 92.9% in comparison to 1999's 91.5%. Year-to-date office property same-store NOI, excluding lease termination fees, is 5.2% higher than last year's first nine months; average occupancy, 92%, reflecting a 0.3% drop from the previous year.

Crescent had renewed or re-leased 534,000 net rentable sf in the third quarter, with weighted average full-service rental rate increasing 34% and the FFO annual net effective rental rate up 64% over the expiring rates for these leases, all of which have begun or will begin in the next year. Tenant improvements related to these leases are $1.72 per sf annually and leasing costs were $.90 per sf per year. Year-to-date renewed leases total 1.9 million net rentable sf, with weighted average full-service rental rate up 22% and the FFO annual net effective rental rate 40% more than the expiring rates for these leases that will take effect in the next year. Tenant improvements for the leases are $1.36 per sf per year and leasing costs, $.84 per sf annually.

"Looking out over the next three years at our 9.8 million sf of expiring space, we expect rental rate growth to be among the highest in the industry, with embedded office FFO growth expected to range from 25% to 35%, or $5.50 to $7.00 per sf," says Dennis H. Alberts, Crescent president and COO.

Crescent's holdings across-the-board have higher lot sales and generated more revenue in this third quarter than the comparable period in 1999. As of Sept. 30, total debt outstanding totals $2.3 billion, a reduction of $.3 billion, or 12%, from Dec. 31, 1999. Meanwhile, there is a 36% decrease in variable-rate debt since 1999's close.

To date, Crescent has received $399 million in net proceeds from a planned disposition strategy, $67 million of which was received in the third quarter. The overall gain from these asset dispositions is $31 million, $26 million of which had been realized in the last quarter. All 11 non-strategic or non-core wholly owned office properties that had been originally slated for disposition are sold. Third-quarter sales have been Valley Center in Dallas and 160 Spear in San Francisco.

Instant Insights /

Trammell Crow, Crescent Third-Quarter Returns Higher Than Anticipated

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