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FORT WORTH-Industry bets are starting to go down that Crescent Real Estate Equities Co.’s posture to sell is an exit strategy for the REIT to go private rather than fade away in a lock, stock and barrel buy by Istithmar, the venture capital arm of the Dubai government and investment partner of real estate guru Andrew Farkas.

None of the main players will discuss what Crescent has labeled as “market rumor.” The REIT hunkered down with an e-mail Sept. 7–less than 24 hours after it had a strong NYSE trading day–forewarning its team not to respond to any inquiries and refer all calls to investor relations. A source with an inside track confirms the Istithmar offer is real, on the table and now has Crescent in investment bankers’ hands to legitimize a bid that is speculated to be in the $5-billion to $8-billion range.

All signs are in place that the REIT is positioning to prove to shareholders that Istithmar’s offer is the best that will come down the pike. As a public company, Crescent has rules to follow and even more stringent ones if its end goal is to go private. With Farkas at Istithmar’s side in other deals, it’s a pretty safe bet that the founder and CEO who sold his Insignia Financial Group Inc. to CB Richard Ellis for $430 million in 2003 is part of the high-stakes bargaining that’s been under way in New York City, where Crescent’s John C. Goff, vice chairman and CEO, and Dennis Alberts, president and COO, have spent the lion’s share of this year to powerbroker a deal.

Farkas, president of the Manhattan-based merchant banking firm Island Capital Group LLC, was part of Istithmar’s $705-million power play in November 2005 for the Helmsley Building at 230 Park Ave., bought from an investment group led by Fort Worth’s Robert Bass, and June’s $1.2-billion takeover of 280 Park Ave. from Boston Properties. Farkas also was part of Istithmar’s fall 2005 transactions–$500 million for Essex House along Central Avenue South in New York City and $274 million for 1 Trafalgar Square in London. Farkas’ Island Global Yachting Ltd., a developer and manager of luxury marinas, is partnering with Nakheel, also part of the royal Dubai family hierarchy, to map out and manage all of the county’s marinas on its 932 miles of waterfront. He also is vice chairman of Emirates National Securitization Corp., the securitized secondary mortgage system for the oil-rich country.

Istithmar’s wealth comes from the royal Dubai family; its Wall Street savvy comes from David Jackson, who spent 10 years financing large transactions on the Street before becoming the investment group’s chief investment officer. His task is to develop “the overall strategic vision” of Istithmar’s investments in private equity, real estate and strategic investments.

Market sources strongly believe the 12-year-old Crescent has come too far and invested too much into building an empire as an investment manager to simply fold its hand with a buyout. “My perception isn’t that Crescent is looking to go away, but rather reposition itself,” says a capital markets’ pro, who like all others have requested anonymity to guard themselves in a business world cemented by inside relationships. From his perspective, Crescent could be using investment management as a deal point.

A California investor, with foreign backing, has told GlobeSt.com that he’s in line to bid when Crescent opens the door to others as it must do to deter legal challenges. “It’s a public company, it must go on the market,” the investor stresses. In his circle, he says the word is out Crescent is interviewing investment bankers now that at least one offer is in hand.

A real estate attorney, who’s parlayed two REITs this year into the private realm, says the disclosure rule kicks in when Crescent is holding an agreement with a price and solid terms. “Revlon duty,” which is case law, requires Crescent to get the best price for its shareholders while “going-private” regulations set out a roadmap requiring fairness for shareholders, descriptions of offers along with reasons for rejection and full disclosure of all firm offers made in the past two years. At some point, all cards will have to be laid on the table.

“You don’t have to get the highest price, but you do have to exercise fiduciary obligations in reporting,” the attorney adds. “Under the going-private rules, you have to make a statement to security holders in order to do it. It’s much easier to support going private if they have the highest offer.”

The Sarbanes-Oxley Act has caused scores of REITs, particularly those with $100 million revenue or less, to go private since it went into effect three years ago. “It’s very expensive to be a public company,” the attorney explains. “Sarbanes-Oxley caused the cost to go up in multiples.”

Maximum pricing and fairness to shareholders are non-negotiable when it comes to fiduciary duty. “I’d find it extremely rare if they didn’t have an investment banker to make sure they’ve maximized pricing,” the capital markets’ expert says. Crescent, though, isn’t believed to be under any pressure to sell by year’s end although a would-be buyer could be.

REITs are selling at 16 to 17 times their NOI, up five multiples in the past year. “It’s absolutely the best time to sell,” the expert says. “The multiples have never been higher. And sometimes, it’s cheaper to buy the whole company instead of individual assets due to the pricing and then spin off the non-strategic ones to write down the acquisition cost.”

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