Crescent Transitioning Into Investment Manager

At yesterday's Smith Barney Citigroup 2004 REIT CEO Conference, Crescent's John C. Goff said "it's a wonderful time to sell joint venture assets and I think you've found we're not bashful." Goff, as he's so often quoted, reiterated that "anything on the balance sheet is for sale at the right price." In nearly three years of plying the partnership market, Crescent has stacked up more than $1 billion in joint ventures.

Goff readily admitted the REIT is aggressive on the JV front, courting the likes of GE Pension Fund, JPMorgan Asset Management and "a host of others." In a strategy to buy and then sell a stake in the game, Crescent already is wooing the JV market for the recently acquired, one-million-sf Hughes Center in Las Vegas. Though not of the same immediacy, Goff also said scouts will go out in the future in search of a JV partner for the Tahoe development, where $150 million of Crescent capital is laying groundwork to start work on 2,200 "ski in, ski out" units in the next two years.

"It's the most opportunistic time to sell joint venture assets that I've ever seen," Goff told the Smith Barney Citigroup crowd. "It's amazing the kind of capital that's out there."

The REIT has $260 million standing ready to deploy as a result of 2003 trading activity. But, Goff said, it will be done with patience. Meanwhile, the buying and selling continues with two of four office properties in Dallas under contract, one hanging in Houston and land for sale that the REIT says is worth $100 million.

Sources tell GlobeSt.com that a contract's in hand for the Liberty Plaza I and II, a 218,813-sf complex at 5055 Keller Springs Rd. in the far north Dallas submarket and Crescent has reached the best-and-final stage for 5050 Quorum, a 133,799-sf building fetching in the $10-million range, also in the far north sector. Crescent's Dallas "to go" list includes the 239,103-sf 12404 Park Central in the LBJ Corridor and 3333 Lee Parkway, a 233,543-sf Uptown building. The Houston contract is rumored to be the 399,777-sf 1800 W. Loop South, which has been up for sale for nearly two years. If all that is up for sale goes this year, it would be a large step toward accomplishing a portfolio-wide goal for a six-point gain to raise occupancy to 92%. The portfolio's crosses to bear include an empty 12404 Park Central and 42%-leased 3333 Lee Parkway.

But, it's not all about just bricks-and-mortar with opportunities arising in mezzanine lending as a possible resting ground for some of the capital that's been amassed or on its way from this year's sales. Goff said the mezzanine arena "kind of reminds me of the old days" with some scenarios offering more gain on the investment debt side than on the equity end of the deal. "We may be a capital supplier in select instances," he said of a marketplace boasting double-digit yields for two- to five-year investments.

Goff's four years of strategic planning now has Crescent poised for its next step. "I see ourselves becoming an investment management business focusing on office," he predicted about the next two to three years. The Crescent office-buying plan is to stick with its primary Texas markets, Denver, Phoenix, Miami and Las Vegas. California's San Diego and Los Angeles are on the radar screen, but the REIT's new team on the ground has yet to produce a win in a tough acquisitions market although it's not for lack of trying, he said.