Crescent Exceeds FFO Expectations for Second Quarter

Ft. Worth-based Crescent Real Estate Equities Co. has surpassed its second-quarter expectations by 5-cents per share despite an 11-cent per-share drop from the previous year’s same period. The results stem from the REIT’s strategy of selling properties, repurchasing stock and recycling funds while negotiating for a joint venture partner.

The REIT ended the second quarter with an FFO of 63 cents per share or $82 million in comparison to the 74-cents per share or $104.4 million for the same reporting period last year.

To date, Crescent has repurchased about 12.4 million common shares at an average price of $18.87 per share for a cost of $234 million. The buyback got under way in March, three months after a board approval that set a $500-million cap. In a preferred partnership with GMAC, Crescent has received about $241 million in net proceeds, of which $133 million was used to buy 6.6 million common shares and $101 million applied to the purchase of 5.8 million shares from UBS Warburg.

John C. Goff, CEO, and Dennis Alberts, president and COO, attribute the 5-cent per share windfall to favorable office markets, accelerated residential development sales and rent from the behavioral health-care segment of Crescent’s portfolio. Yet, fiscal watchers are monitoring the AmeriCold Logistics operation that deferred $6.7 million in rent but paid about $30 million for the reporting period ending June 30.

Alberts cautions “it’s important not to lose sight of the big picture” in that the warehouse operation, largely dependent upon chicken and fish markets, still showed a 10.5% unleveraged return and a 13% return on a leveraged basis. Crescent’s second quarter 2000 results include a charge for its $1.6-million share of rent receivable valuation while it considers a likely lease restructuring.

Crescent’s asset disposition strategy, which calls for a fund recycling to support other projects, remains on target, with plans to close sales in the third quarter of Valley Center in North Dallas and 160 Spear in San Francisco. A sale or joint venture of its Woodlands holdings in Houston is anticipated for late fourth-quarter or early 2001. To date, nine of 11 target properties have been sold for a realization of $332 million of the $455 million expected net proceeds. Crescent expects to generate $123 million by year’s end with pending sales, posting an overall net gain of more than $40 million for the year. Alberts says 80% of the asset sale revenue will be applied to Crescent’s debt paydown.