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FORT WORTH-After nearly four months of weighing strategic alternatives, Crescent Real Estate Equities Co. has unveiled a plan to become a "pure office REIT." In doing so, it has hired Holliday Fenoglio Fowler LP to help it shed office properties in select Dallas markets, the 1.5-million-sf Austin piece and single assets in Phoenix and Seattle.

The REIT's transformation will be under the spotlight in this morning's conference call. This morning's press release, however, Crescent vice chairman and CEO John C. Goff puts to rest speculation that has been swirling throughout the marketplace, gaining in strength since word got out this week about HFF's hiring. Not only is it churning the office portfolio, but the REIT plans to shed all resort and hotel assets and all resort residential developments.

The Fort Worth-based REIT's analysts tell GlobeSt.com that plans to sell a significant portion of the office portfolio wouldn't come as any surprise. The REIT's executive team, known for being responsive to media and analysts, has been sequestered behind closed doors since mid-November, huddling over strategic alternatives to replace last summer's scuttled plan to sell the entire company.

In its last 10K filed in November, Crescent reported $670.5 million of debt obligations were maturing between September 2006 and September 2007. The bulk of the maturity is this year. The plan, at that time, was to repay 2007 notes with proceeds from new bonds, asset sales or additional leverage on under-leveraged assets. The REIT also reported it faced $162.1 million in cap-ex spending due to new developments of investment property that aren't part of its normal course of operations. The REIT realignment calls for a one-time hit of $5 million for severance packages as its cuts general and admin expenses by more than $17 million.

Crescent's more immediate liquidity is in its office inventory, which can be sold more quickly and easier than its other holdings. And, the office portfolio is a breadwinner, yielding $313.2 million in revenue in the first three quarters of last year, according to the SEC filing.

The REIT is carrying a buy rating, trading well below the $26 per share of its liquidity value. At yesterday's NYSE closing, the stock was $19.89 per share with 578,600 shares trading throughout the day.

"The stock has been trading at significant discount in its asset value," Cedrik Lachance, senior analyst for Newport Beach, CA-based Green Street Advisors Inc., tells GlobeSt.com. "By selling them, Crescent is more likely to realize the value of these assets."

The "to go" office list is made up of six buildings in Austin, 295,515-sf Exchange Building in Seattle's CBD,309,983-sf Financial Plaza in Mesa, AZ and 14 buildings in Greater Dallas. The REIT will be holding it crown jewel, the Crescent in Uptown.

The sale list includes the Fairmont Sonoma Mission Inn & Spa in Arizona, Ventana Inn & Spa in Big Sur, Park Hyatt Beaver Creek Resort & Spa in Colorado and three business-class hotels. All properties of the Crescent Resort Development and Desert Mountain Development Corp. are tagged for sale as well.

"By becoming a pure play office REIT, we will have a simpler business model with a higher quality earnings stream that will be easier to understand and to value," Goff says in the press release. "We believe this is the right path to maximize value to shareholders."

Instant Insights /

Crescent Set for Major Asset Dump

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