UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

CRESCENT REAL ESTATE EQUITIES COMPANY

(Exact name of registrant as specified in its charter)

TEXAS		52-1862813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
777 Main Street, Suite 2100, Fort Worth, Texas		76102
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code (817) 321-2100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days.

YES þ     NO o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

YES o     NO þ

Number of shares outstanding of each of the registrant’s classes of preferred and common shares, as of May 1, 2007:

Series A Convertible Redeemable Cumulative Preferred Shares, par value $0.01 per share:			14,200,000
Series B Redeemable Cumulative Preferred Shares, par value $0.01 per share:			3,400,000
Common Shares, par value $0.01 per share:			102,826,011

 

 

CRESCENT REAL ESTATE EQUITIES COMPANY
FORM 10-Q
TABLE OF CONTENTS

		Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2007 (unaudited) and December 31, 2006 (unaudited)			3
Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 (unaudited)			4
Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2007 (unaudited)			5
Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006 (unaudited)			6
Notes to Consolidated Financial Statements (unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			53
PART II: OTHER INFORMATION
Item 1A. Risk Factors			54
Item 6. Exhibits			54
Amended and Restated Purchase Agreement
Purchase and Sale Agreement (Renaissance Houston)
Purchae and Sale Agreement (Sonoma Mission Inn & Spa)
Purchase and Sale Agreement (Sonoma Golf Club)
Fourth Amended and Restated Agreement of Limited Partnership
Separation Agreement and Release
Certifications Pursuant to Section 302
Certifications Pursuant to Section 906

CRESCENT REAL ESTATE EQUITIES COMPANY

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
(unaudited)

		March 31,				December 31,
		2007				2006
ASSETS:
Investments in real estate:
Land		$	108,431			$	108,431
Buildings and improvements, net of accumulated depreciation of $318,423 and $307,806 at March 31, 2007 and December 31, 2006, respectively			1,072,795				1,054,613
Furniture, fixtures and equipment, net of accumulated depreciation of $7,548 and $7,270 at March 31, 2007 and December 31, 2006, respectively			14,155				14,703
Land held for investment or development			136,804				127,724
Properties held for disposition, net			1,896,635				1,856,303
Net investment in real estate		$	3,228,820			$	3,161,774
Cash and cash equivalents			33,372				51,636
Restricted cash and cash equivalents			87,002				88,470
Defeasance investments			109,244				111,014
Accounts receivable, net			20,025				25,668
Deferred rent receivable			47,870				44,756
Investments in unconsolidated companies			257,500				260,599
Notes receivable, net			157,696				167,535
Income tax asset – deferred			—				3,274
Other assets, net			126,732				132,245
Total assets		$	4,068,261			$	4,046,971
LIABILITIES:
Borrowings under Credit Facility		$	188,500			$	118,000
Notes payable			1,816,833				1,797,082
Junior subordinated notes			77,321				77,321
Accounts payable, accrued expenses and other liabilities			184,859				195,088
Liabilities related to properties held for disposition			610,994				600,329
Tax liability – current and deferred, net			7,382				11,162
Total liabilities		$	2,885,889			$	2,798,982
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS:
Operating partnership, 11,151,423 and 11,320,798 units, at March 31, 2007 and December 31, 2006, respectively		$	62,789			$	75,865
Consolidated real estate partnerships			50,002				49,838
Total minority interests		$	112,791			$	125,703
SHAREHOLDERS’ EQUITY:
Preferred shares, $0.01 par value, authorized 100,000,000 shares:
Series A Convertible Redeemable Cumulative Preferred Shares, liquidation preference of $25.00 per share, 14,200,000 shares issued and outstanding at March 31, 2007 and December 31, 2006		$	319,166			$	319,166
Series B Redeemable Cumulative Preferred Shares, liquidation preference of $25.00 per share, 3,400,000 shares issued and outstanding at March 31, 2007 and December 31, 2006			81,923				81,923
Common shares, $0.01 par value, authorized 250,000,000 shares, 127,933,228 and 127,875,571 shares issued and 102,812,311 and 102,754,654 shares outstanding at March 31, 2007 and December 31, 2006, respectively			1,279				1,279
Additional paid-in capital			2,295,992				2,294,827
Accumulated deficit			(1,168,529	)			(1,114,553	)
Accumulated other comprehensive loss			(118	)			(224	)
		$	1,529,713			$	1,582,418
Less – shares held in treasury, at cost, 25,120,917 common shares at March 31, 2007 and December 31, 2006			(460,132	)			(460,132	)
Total shareholders’ equity		$	1,069,581			$	1,122,286
Total liabilities and shareholders’ equity		$	4,068,261			$	4,046,971

The accompanying notes are an integral part of these consolidated financial statements.

CRESCENT REAL ESTATE EQUITIES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
(unaudited)

		For the three months
		ended March 31,
						2006
						(As Restated
		2007				See Note 1)
REVENUE:
Office Property		$	77,428			$	77,256
Other Property			1,689				1,488
Total Property revenue		$	79,117			$	78,744
EXPENSE:
Office Property real estate taxes		$	7,226			$	6,467
Office Property operating expenses			30,993				30,743
Other Property expenses			2,223				1,635
Total Property expense		$	40,442			$	38,845
Income from Property Operations		$	38,675			$	39,899
OTHER INCOME (EXPENSE):
Interest and other income		$	7,289			$	15,619
Corporate general and administrative			(10,322	)			(14,826	)
Severance and other related costs			(2,980	)			—
Interest expense			(31,201	)			(29,373	)
Amortization of deferred financing costs			(1,787	)			(1,569	)
Extinguishment of debt			(453	)			—
Depreciation and amortization			(21,587	)			(19,719	)
Impairment charges			(1,935	)			—
Other expenses			(2,408	)			(1,957	)
Equity in net income (loss) of unconsolidated companies:
Office Properties			2,230				2,176
Resort Residential Development Properties			(7	)			346
Resort/Hotel Properties			(599	)			(870	)
Temperature-Controlled Logistics Properties			(2,671	)			(322	)
Other			316				115
Total other income (expense)		$	(66,115	)		$	(50,380	)
LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES		$	(27,440	)		$	(10,481	)
Minority interests			5,767				3,042
Income tax expense			(1,049	)			(822	)
LOSS BEFORE DISCONTINUED OPERATIONS		$	(22,722	)		$	(8,261	)
Income from discontinued operations, net of minority interests and taxes			15,748				4,336
Gain on sale of real estate from discontinued operations, net of minority interests			—				96
NET LOSS		$	(6,974	)		$	(3,829	)
Series A Preferred Share distributions			(5,990	)			(5,990	)
Series B Preferred Share distributions			(2,019	)			(2,019	)
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS		$	(14,983	)		$	(11,838	)
BASIC AND DILUTED EARNINGS PER SHARE DATA:
Loss available to common shareholders before discontinued operations		$	(0.30	)		$	(0.16	)
Income from discontinued operations, net of minority interests and taxes			0.15				0.04
Gain on sale of real estate from discontinued operations, net of minority interests			—				—
Net loss available to common shareholders – basic and diluted		$	(0.15	)		$	(0.12	)

The accompanying notes are an integral part of these consolidated financial statements.

CRESCENT REAL ESTATE EQUITIES COMPANY

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)

																																										Accumulated
		Series A								Series B																								Additional								Other
		Preferred Shares								Preferred Shares								Treasury Shares								Common Shares								Paid-in				Accumulated				Comprehensive
		Shares				Net Value				Shares				Net Value				Shares				Net Value				Shares				Par Value				Capital				Deficit				Income (Loss)				Total
SHAREHOLDERS’ EQUITY, December 31, 2006			14,200,000			$	319,166				3,400,000			$	81,923				25,120,917			$	(460,132	)			127,875,571			$	1,279			$	2,294,827			$	(1,114,553	)		$	(224	)		$	1,122,286
Adoption of FIN 48, net of minority interests and taxes			—				—				—				—				—				—				—				—				—				(453	)			—				(453	)
Comprehensive Loss
Net Loss			—				—				—				—				—				—				—				—				—				(6,974	)			—				(6,974	)
Change in Unrealized Net Income on Marketable Securities			—				—				—				—				—				—				—				—				—				—				24				24
Change in Unrealized Net Loss on Cash Flow Hedges			—				—				—				—				—				—				—				—				—				—				82				82
Total Comprehensive Loss																																															(6,868	)
Exercise of Common Share Options			—				—				—				—				—				—				33,900				—				588				—				—				588
Accretion of Discount on Employee Stock Option Notes			—				—				—				—				—				—				—				—				(63	)			—				—				(63	)
Issuance of Shares in Exchange for Operating Partnership Units			—				—				—				—				—				—				23,757				—				146				—				—				146
Amortization of Stock Options and Restricted Shares			—				—				—				—				—				—				—				—				494				—				—				494
Dividends on Common Shares			—				—				—				—				—				—				—				—				—				(38,540	)			—				(38,540	)
Dividends on Preferred Shares			—				—				—				—				—				—				—				—				—				(8,009	)			—				(8,009	)
SHAREHOLDERS’ EQUITY, March 31, 2007			14,200,000			$	319,166				3,400,000			$	81,923				25,120,917			$	(460,132	)			127,933,228			$	1,279			$	2,295,992			$	(1,168,529	)		$	(118	)		$	1,069,581

The accompanying notes are an integral part of these consolidated financial statements.

CRESCENT REAL ESTATE EQUITIES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

		For the Three Months Ended March 31,
						2006
						(As Restated
		2007				See Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(6,974	)		$	(3,829	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization			34,021				38,278
Extinguishment of debt			453				—
Resort Residential Development cost of sales			25,397				61,652
Resort Residential Development capital expenditures			(61,864	)			(79,852	)
Impairment charges			1,935				—
Gain on property sales			—				(113	)
Minority interests			(981	)			(1,728	)
Non-cash compensation			1,851				6,344
Amortization of debt premiums			(237	)			(597	)
Equity in loss (earnings) from unconsolidated investments			654				(1,572	)
Ownership portion of management fees from unconsolidated companies			1,757				1,900
Distributions received from unconsolidated companies			3,304				1,664
Redemption of units under long-term incentive plans			(4,253	)			—
Change in assets and liabilities, net of acquisitions and dispositions:
Restricted cash and cash equivalents			1,464				27,756
Accounts receivable and notes receivable			6,446				2,903
Deferred rent receivable			(3,288	)			(2,767	)
Current and deferred income taxes			(3,210	)			9,989
Other assets			(1,628	)			(10,126	)
Accounts payable, accrued expenses and other liabilities			(12,408	)			(32,375	)
Net cash (used in) provided by operating activities		$	(17,561	)		$	17,527
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from property sales		$	—			$	24,335
Acquisition of investment properties			—				(30,675	)
Development of investment properties			(28,409	)			(33,899	)
Property improvements – Office Properties			(3,450	)			(4,772	)
Property improvements – Resort/Hotel Properties			(5,450	)			(2,092	)
Tenant improvement and leasing costs – Office Properties			(12,159	)			(17,417	)
Resort Residential Development Properties investments			(3,466	)			(4,119	)
Decrease (increase) in restricted cash and cash equivalents			305				(556	)
Proceeds from defeasance investment maturities and other securities			2,652				163,902
Return of investment in unconsolidated companies			2,078				5,507
Investment in unconsolidated companies			(1,282	)			(7,301	)
Decrease in notes receivable			9,347				30,781
Net cash (used in) provided by investing activities		$	(39,834	)		$	123,694
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs		$	(16	)		$	(1,436	)
Borrowings under Credit Facility			75,500				65,000
Payments under Credit Facility			(5,000	)			(85,000	)
Notes payable proceeds			19,490				105,024
Notes payable payments			(5,421	)			(168,116	)
Resort Residential Development Properties note payable borrowings			49,823				54,161
Resort Residential Development Properties note payable payments			(32,748	)			(54,918	)
Capital distributions to joint venture partners			(3,605	)			(7,288	)
Capital contributions from joint venture partners			1,938				5,690
Proceeds from exercise of share and unit options			646				4,834
Series A Preferred Share distributions			(5,990	)			(5,990	)
Series B Preferred Share distributions			(2,019	)			(2,019	)
Dividends and unitholder distributions			(45,796	)			(46,851	)
Net cash provided by (used in) financing activities		$	46,802			$	(136,909	)
(DECREASE ) INCREASE IN CASH AND CASH EQUIVALENTS		$	(10,593	)		$	4,312
CASH AND CASH EQUIVALENTS, Beginning of period			77,550				86,228
CASH AND CASH EQUIVALENTS, End of period		$	66,957			$	90,540

CRESCENT REAL ESTATE EQUITIES COMPANY

1. ORGANIZATION AND BASIS OF PRESENTATION

     References to “we,” “us” or “our” refer to Crescent Real Estate Equities Company and, unless the context otherwise requires, Crescent Real Estate Equities Limited Partnership, which we refer to as our Operating Partnership, and our other direct and indirect subsidiaries. We conduct our business and operations through the Operating Partnership, our other subsidiaries and our joint ventures. References to “Crescent” refer to Crescent Real Estate Equities Company. The sole general partner of the Operating Partnership is Crescent Real Estate Equities, Ltd., a wholly-owned subsidiary of Crescent Real Estate Equities Company, which we refer to as the General Partner.

     We operate as a real estate investment trust, or REIT, for federal income tax purposes and provide management, leasing and development services for some of our properties.

     The following table shows our consolidated subsidiaries that owned or had an interest in real estate assets and the real estate assets that each subsidiary owned or had an interest in as of March 31, 2007.

Operating Partnership		Wholly-owned assets – The Avallon IV, Dupont Centre and Financial Plaza, included in our Office Segment. Non wholly-owned assets, consolidated – 301 Congress Avenue (50% interest), included in our Office Segment. Fairmont Sonoma Mission Inn (80.1% interest), included in our Resort/Hotel Segment.
		Non wholly-owned assets, unconsolidated – 2211 Michelson Office Development – Irvine (40% interest), Miami Center (40% interest), One BriarLake Plaza (30% interest), Five Post Oak Park (30% interest), Houston Center (23.85% interest in three office properties and the Houston Center Shops), The Crescent Atrium (23.85% interest), The Crescent Office Towers (23.85% interest), Trammell Crow Center(1) (23.85% interest), Post Oak Central (23.85% interest in three Office Properties), Fountain Place (23.85% interest), Fulbright Tower (23.85% interest) and One Buckhead Plaza (35% interest), included in our Office Segment. AmeriCold Realty Trust (31.7% interest in 92 properties), included in our Temperature-Controlled Logistics Segment. Canyon Ranch Tucson and Canyon Ranch Lenox (48% interest), included in our Resort/Hotel Segment.
Crescent Real Estate Funding One, L.P. (Funding One)		Wholly-owned assets – Carter Burgess Plaza, 125 E. John Carpenter Freeway, The Aberdeen, Regency Plaza One and The Citadel, included in our Office Segment.
Hughes Center Entities(2)		Wholly-owned assets – Hughes Center Properties (eight Office Properties each in a separate limited liability company), 3883 Hughes Parkway (Office Development), included in our Office Segment.
Crescent Real Estate Funding III, IV and V, L.P. (Funding III, IV and V)(3)		Non wholly-owned assets, consolidated – Greenway Plaza Office Properties (ten Office Properties, 99.9% interest), included in our Office Segment. Renaissance Houston Hotel (99.9% interest), included in our Resort/Hotel Segment.
Crescent Real Estate Funding VIII, L.P. (Funding VIII)		Wholly-owned assets – The Addison, Austin Centre, The Avallon I, II, III and V, Exchange Building, 816 Congress, Greenway I & IA (two Office Properties), Greenway II, Johns Manville Plaza, One Live Oak, Palisades Central I, Palisades Central II, Stemmons Place, 3333 Lee Parkway, 44 Cook and 55 Madison, included in our Office Segment. Omni Austin Hotel and Ventana Inn & Spa, included in our Resort/Hotel Segment.
Crescent Real Estate Funding XII, L.P. (Funding XII)		Wholly-owned assets – Briargate Office and Research Center, MacArthur Center I & II and Stanford Corporate Center, included in our Office Segment. Park Hyatt Beaver Creek Resort & Spa, included in our Resort/Hotel Segment.
Crescent 707 17th Street, LLC		Wholly-owned assets – 707 17th Street, included in our Office Segment and the Denver Marriott City Center, included in our Resort/Hotel Segment.
Crescent Peakview Tower, LLC		Wholly-owned asset – Peakview Tower, included in our Office Segment.
Crescent Alhambra, LLC		Wholly-owned asset – The Alhambra (two Office Properties), included in our Office Segment.
Crescent Datran Center, LLC		Wholly-owned asset – Datran Center (two Office Properties), included in our Office Segment.
Crescent Spectrum Center, L.P.		Non wholly-owned asset, consolidated – Spectrum Center (99.9% interest), included in our Office Segment.
C-C Parkway Austin, L.P.		Non wholly-owned asset, consolidated – Parkway at Oakhill Office Development (90% interest), included in our Office Segment.
Crescent Colonnade, LLC		Wholly-owned asset – The BAC-Colonnade Building, included in our Office Segment.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Mira Vista Development Corp. (MVDC)		Non wholly-owned asset, consolidated – Mira Vista (98% interest), included in our Resort Residential Development Segment.
Crescent Plaza Residential, L.P.		Wholly-owned asset – the Residences at the Ritz-Carlton Development, included in our Resort Residential Development Segment.
Crescent Tower Residential, L.P.		Wholly-owned asset – the Tower Residences and Regency Row at the Ritz-Carlton Development, included in our Resort Residential Development Segment.
Crescent Plaza Hotel Owner, L.P.		Wholly-owned asset – the Ritz-Carlton Hotel Development, included in our Resort/Hotel Segment.
Houston Area Development Corp. (HADC)		Non wholly-owned assets, consolidated – Spring Lakes (98% interest), included in our Resort Residential Development Segment.
Desert Mountain Development Corporation (Desert Mountain) Crescent Resort Development, Inc. (CRDI)(4)		Non wholly-owned asset, consolidated – Desert Mountain (93% interest), included in our Resort Residential Development Segment. Wholly-owned asset – The Residences at Park Hyatt Beaver Creek, included in our Resort Residential Development Segment. Non wholly-owned assets, consolidated – Brownstones (64% interest), Creekside Townhomes at Riverfront Park (64% interest), Delgany (64% interest), One Riverfront (59% interest), The Park at One Riverfront (59% interest), Beaver Creek Landing (59% interest), Eagle Ranch (76% interest), Gray’s Crossing (71% interest), Main Street Vacation Club (30% interest), Northstar Highlands (57% interest), Northstar Village (57% interest), Old Greenwood (71% interest), Riverbend (68% interest), Village Walk (58% interest), Manor Vail (89% interest), Tahoe Mountain Club (71% interest) and Ritz-Carlton Highlands (71% interest), included in our Resort Residential Development Segment. Non wholly-owned assets, unconsolidated – Blue River Land Company, LLC – Three Peaks (33.2% interest), EW Deer Valley, LLC (35.7% interest) and East West Resort Development XIV, L.P., L.L.L.P. (26.8% interest), included in our Resort Residential Development Segment.

     See Note 4, “Discontinued Operations”, for a discussion of and tables including selected financial information related to certain Office, Resort Residential Development and Resort/Hotel Properties which are classified as held for sale as of March 31, 2007. Also see Note 17, “Subsequent Events,” for a discussion of assets sold subsequent to March 31, 2007.

     See Note 7, “Investments in Unconsolidated Companies,” for a table that lists our ownership in significant unconsolidated joint ventures and investments as of March 31, 2007.

     See Note 8, “Notes Payable and Borrowings Under Credit Facility,” for a list of certain other subsidiaries, all of which are consolidated in our financial statements and were formed primarily for the purpose of obtaining secured debt.

Segments

     Our assets and operations consisted of four investment segments at March 31, 2007, as follows:

	•		Office Segment;
	•		Resort Residential Development Segment;
	•		Resort/Hotel Segment; and
	•		Temperature-Controlled Logistics Segment.

     Within these segments, we owned in whole or in part the following operating real estate assets, which we refer to as the Properties, as of March 31, 2007:

•

Office Segment consisted of 71 office properties, which we refer to as the Office Properties, located in 26 metropolitan submarkets in eight states, with an aggregate of approximately 27.6 million net rentable square feet. Fifty-four of the Office Properties are wholly-owned and 17 are owned through joint ventures, one of which is consolidated and 16 of which are unconsolidated.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	•		Resort Residential Development Segment consisted of our ownership of common stock representing interests of 98% to 100% in four Resort Residential Development Corporations and two limited partnerships, which are consolidated. These Resort Residential Development Corporations, through partnership arrangements, owned in whole or in part, have 31 active and planned upscale resort residential development properties, which we refer to as the Resort Residential Development Properties.
	•		Resort/Hotel Segment consisted of five luxury and destination fitness resorts and spas with a total of 949 rooms/guest nights and three upscale business-class hotel properties with a total of 1,376 rooms, which we refer to as the Resort/Hotel Properties. Five of the Resort/Hotel Properties are wholly-owned, one is owned through a joint venture that is consolidated and two are owned through joint ventures that are unconsolidated.
	•		Temperature-Controlled Logistics Segment consisted of our 31.7% interest in AmeriCold Realty Trust, or AmeriCold, a REIT. As of March 31, 2007, AmeriCold operated 105 facilities, of which 91 were wholly-owned or leased, one was partially-owned and 13 were managed for outside owners. The 92 owned or leased and partially-owned facilities, which we refer to as the Temperature-Controlled Logistics Properties, had an aggregate of approximately 497.8 million cubic feet (19.0 million square feet) of warehouse space. AmeriCold also owned one quarry and the related land.

     See Note 3, “Segment Reporting,” for a table showing selected financial information for each of these investment segments for the three months ended March 31, 2007 and 2006, and total assets, consolidated property level financing, consolidated other liabilities and minority interests for each of these investment segments at March 31, 2007 and December 31, 2006.

Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.

     Certain amounts in prior period financial statements have been reclassified to conform to the current year presentation. In accordance with Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, certain assets and liabilities at December 31, 2006, and certain revenues and expenses for the three months ended March 31, 2006, were reclassified to conform to the presentation at and for the three months ended March 31, 2007. See Note 4, “Discontinued Operations,” for a discussion of properties held for disposition. As a result, certain balances differ from the amounts reported in previously filed documents. This reclassification had no impact on net income, earnings per share or shareholders’ equity in any period.

     The consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

     You should read these consolidated financial statements in conjunction with the consolidated financial statements and footnotes thereto in our annual report on Form 10-K for the year ended December 31, 2006.

Restatement of Financial Data

     In connection with the closing of our financial records for the year ended December 31, 2006, our management identified three accounting-related items discussed below that affected our historical financial statements. We reflected all required restatements in our Form 10-K for the year ended December 31, 2006; the impact to the three months ended March 31, 2006 is described below. See our Form 10-K for the year ended December 31, 2006 for further discussion of the restatements.

Calculation of Minority Interest

     Our calculation of minority interest had incorrectly allocated net income between us and other limited partners of the Operating Partnership based on respective ownership percentages and then deducted dividends for our Series A and Series B Preferred Shares against the allocation to us. The impact of this adjustment for the three months ended March 31, 2006 was a reduction of $1.3 million in minority interest expense, decreasing the “Net Loss” line item on both our Consolidated Statement of Operations and our Consolidated Statement of Cash Flows for the three months ended March 31, 2006, by $1.3 million and

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

earnings per share by $0.01. In addition, the “Minority interests” line item on our Consolidated Statement of Operations and our Consolidated Statement of Cash Flows decreased by $1.3 million for the three months ended March 31, 2006.

Refundable Fees for Club Member Services

     We determined that the appropriate methodology associated with refundable fees for club member services is outlined in Staff Accounting Bulletin No. 104, Revenue Recognition, under which revenue related to refundable fees for services should not be recognized until the fee is fixed and determinable. For these memberships, member dues should not have been recognized as revenue until the dues paid exceeded the maximum refund amount available to the member. There was no impact to our results of operations associated with this item for the three months ended March 31, 2006.

Classification of Club Membership Intangible Asset

     We determined that the right to sell a predetermined number of equity club memberships does not meet the criteria for the recording of an identifiable intangible asset. Instead the membership intangible asset should be recorded as goodwill at the time of acquisition and amortized until our adoption of SFAS, No. 142, Goodwill and Other Intangible Assets, then evaluated annually for impairment. There was no impact to our results of operations associated with this item for the three months ended March 31, 2006.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Adoption of New Accounting Standards

     FASB Interpretation 48. In July 2006, the FASB, issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, or FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, and are to be applied to all tax positions upon initial adoption of this standard. Only tax positions that meet a more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. We recognized a liability to record an unrecognized tax benefit and accrued interest of $0.5 million, net of minority interests and federal tax benefit, due to the initial application of FIN 48. This charge was accounted for as a $0.5 million increase to the January 1, 2007, balance of Accumulated Deficit in our Consolidated Statement of Shareholders’ Equity.

     SFAS No. 157. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The new FASB rule defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, or GAAP, and expands disclosures about fair value measurements. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact, if any, to our financial condition or results of operations upon the adoption of SFAS No. 157.

     EITF 06-8. At its November 2006 meeting, the Emerging Issues Task Force, or EITF, ratified the consensus regarding Issue No. 06-8, or EITF 06-8, Applicability of the Assessment of a Buyer’s Continuing Investment under FASB Statement No. 66 for Sales of Condominiums. EITF 06-8 is effective for annual periods beginning after March 15, 2007. The scope of EITF 06-8 is limited to the sale of individual units in a condominium project and requires an entity to evaluate the adequacy of the buyer’s initial and continuing investment for purposes of determining whether the sales price is collectible as required to recognize profit using the percentage-of-completion method under paragraph 37 of SFAS No. 66. If the buyer does not meet the initial and continuing investment criteria, the guidance requires use of the deposit method to recognize profit. We anticipate there will be no impact to our financial condition or results of operations upon the adoption of EITF 06-8.

     SFAS No. 159. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted in certain circumstances provided that the entity also elects to adopt the provisions of SFAS No. 157. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. We are currently evaluating the impact, if any, to our financial condition or results of operations upon the adoption of SFAS No. 159.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Significant Accounting Policies

     SFAS No. 146 and SFAS No. 112. We record a liability for severance and other related costs when incurred, at fair value, in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses the financial accounting and reporting for costs associated with exit or disposal activities, including, but not limited to, one-time involuntary termination benefits, certain contract termination costs and costs to consolidate facilities or relocate employees. We account for ongoing benefit arrangements under SFAS No. 112, Employers’ Accounting for Postemployment Benefits, which requires that a liability be recognized when the costs are probable and reasonably estimable.

     Earnings Per Share. SFAS No. 128, Earnings Per Share, specifies the computation, presentation and disclosure requirements for earnings per share, or EPS.

     Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, where such exercise or conversion would result in a lower EPS amount. We present both basic and diluted earnings per share.

     The following tables present the reconciliation for the three months ended March 31, 2007 and 2006, of basic and diluted earnings per share from “Loss before discontinued operations” to “Net loss available to common shareholders.” The tables also include weighted average shares on a basic and diluted basis.

		For the three months ended March 31,
														2006
		2007												(Restated)
						Wtd.				Per								Wtd.				Per
						Avg.				Share								Avg.				Share
(in thousands, except per share amounts)		Loss				Shares				Amount				Loss				Shares				Amount
Basic/Diluted EPS (1) -
Loss before discontinued operations		$	(22,722	)			102,739							$	(8,261	)			101,476
Series A Preferred Share distributions			(5,990	)											(5,990	)
Series B Preferred Share distributions			(2,019	)											(2,019	)
Loss available to common shareholders before discontinued operations		$	(30,731	)			102,739			$	(0.30	)		$	(16,270	)			101,476			$	(0.16	)
Income from discontinued operations, net of minority interests and taxes			15,748								0.15				4,336								0.04
Gain on sale of real estate from discontinued operations, net of minority interests			—								—				96								—
Net loss available to common shareholders		$	(14,983	)			102,739			$	(0.15	)		$	(11,838	)			101,476			$	(0.12	)

     The effect of the conversion of the Series A Convertible Cumulative Preferred Shares and the exchange of Operating Partnership units are not included in the computation of diluted EPS for the three months ended March 31, 2007 and 2006, since the effect of the conversions are not dilutive.

Supplemental Disclosure to Statements of Cash Flows

		For the three months ended
		March 31,
(in thousands)		2007				2006
Supplemental disclosures of cash flow information:
Cash paid for interest		$	(36,509	)		$	(34,522	)
Cash (paid) received for income taxes		$	(1,286	)		$	8,885
Interest capitalized – Office		$	1,252			$	911
Interest capitalized – Resort Residential Development			2,490				3,950
Interest capitalized – Resort/Hotel			1,050				423
Total interest capitalized		$	4,792			$	5,284
Supplemental disclosures of non cash investing and financing activities:
Assumption of debt in conjunction with acquisition of Office Property		$	—			$	23,605
Interest accrued into construction loans			2,485				1,471

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

3. SEGMENT REPORTING

     For purposes of segment reporting as defined in SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, we have four major investment segments based on property type: the Office Segment; the Resort Residential Development Segment; the Resort/Hotel Segment and the Temperature-Controlled Logistics Segment. Management utilizes this segment structure for making operating decisions and assessing performance.

     See Note 4, “Discontinued Operations,” for a discussion of properties held for disposition, including the majority of properties in both our Resort Residential Development and our Resort/Hotel segments.

     We use funds from operations, or FFO, as the measure of segment profit or loss. FFO, as used in this document, is based on the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, and means:

	•		Net Income (Loss) – determined in accordance with GAAP;
	•		excluding gains (losses) from sales of depreciable operating property;
	•		excluding extraordinary items (as defined by GAAP);
	•		plus depreciation and amortization of real estate assets; and
	•		after adjustments for unconsolidated partnerships and joint ventures.

     We calculate FFO available to common shareholders – diluted in the same manner, except that Net Income (Loss) is replaced by Net Income (Loss) Available to Common Shareholders and we include the effect of Operating Partnership unitholder minority interests.

     NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. We consider FFO available to common shareholders – diluted and FFO appropriate measures of performance for an equity REIT and for its investment segments. However, FFO available to common shareholders – diluted and FFO should not be considered as alternatives to net income determined in accordance with GAAP as an indication of our operating performance.

     Our measures of FFO available to common shareholders – diluted and FFO may not be comparable to similarly titled measures of other REITs if those REITs apply the definition of FFO in a different manner than we apply it.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

     Selected financial information related to each segment for the three months ended March 31, 2007 and 2006, and total assets, consolidated property level financing, consolidated other liabilities, and minority interests for each of the segments at March 31, 2007 and December 31, 2006, are presented in the following tables:

		For the three months ended March 31, 2007
Selected Financial Information:						Resort								Temperature-
						Residential								Controlled
		Office				Development				Resort/Hotel				Logistics				Corporate
(in thousands)		Segment(1)				Segment				Segment				Segment				and Other(2)(3)				Total
Total Property revenue		$	77,428			$	1,682			$	7			$	—			$	—			$	79,117
Total Property expense			38,219				2,058				165				—				—				40,442
Income from Property Operations		$	39,209			$	(376	)		$	(158	)		$	—			$	—			$	38,675
Total other income (expense)			(18,324	)			(117	)			(599	)			(2,671	)			(44,404	)			(66,115	)
Minority interests and income taxes			(1,116	)			4				68				—				5,762				4,718
Discontinued operations – net of minority interests and taxes			3,682				14,147				7,303				—				(9,384	)			15,748
Net income (loss)		$	23,451			$	13,658			$	6,614			$	(2,671	)		$	(48,026	)		$	(6,974	)
Depreciation and amortization of real estate assets		$	25,707			$	1,731			$	2,959			$	—			$	—			$	30,397
Gain on property sales			—				(4,114	)			—				—				—				(4,114	)
Adjustments for investment in unconsolidated companies			4,455				(3,779	)			1,215				4,522				—				6,413
Unitholder minority interest			—				—				—				—				(2,814	)			(2,814	)
Series A Preferred share distributions			—				—				—				—				(5,990	)			(5,990	)
Series B Preferred share distributions			—				—				—				—				(2,019	)			(2,019	)
Adjustments to reconcile net income (loss) to funds from operations available to common shareholders – diluted		$	30,162			$	(6,162	)		$	4,174			$	4,522			$	(10,823	)		$	21,873
Funds from operations available to common shareholders–diluted		$	53,613			$	7,496			$	10,788			$	1,851			$	(58,849	)		$	14,899

See footnotes following the table.

		For the three months ended March 31, 2006 (Restated)
Selected Financial Information:						Resort								Temperature-
						Residential								Controlled
		Office				Development				Resort/Hotel				Logistics				Corporate and
(in thousands)		Segment(1)				Segment				Segment				Segment				Other(2) (3)				Total
Total Property revenue		$	77,256			$	1,480			$	8			$	—			$	—			$	78,744
Total Property expense			37,210				1,603				32				—				—				38,845
Income from Property Operations		$	40,046			$	(123	)		$	(24	)		$	—			$	—			$	39,899
Total other income (expense)			(16,701	)			228				(870	)			(322	)			(32,715	)			(50,380	)
Minority interests and income taxes			(662	)			(211	)			11				—				3,082				2,220
Discontinued operations, net of minority interests and taxes			1,279				1,806				6,241				—				(4,894	)			4,432
Net income (loss)		$	23,962			$	1,700			$	5,358			$	(322	)		$	(34,527	)		$	(3,829	)
Depreciation and amortization of real estate assets		$	25,462			$	2,426			$	4,151			$	—			$	—			$	32,039
Gain on property sales			(113	)			—				—				—				—				(113	)
Adjustments for investment in unconsolidated companies			5,384				(3,092	)			1,121				3,510				—				6,923
Unitholder minority interest			—				—				—				—				(2,194	)			(2,194	)
Series A Preferred share distributions			—				—				—				—				(5,990	)			(5,990	)
Series B Preferred share distributions			—				—				—				—				(2,019	)			(2,019	)
Adjustments to reconcile net income (loss) to funds from operations available to common shareholders – diluted		$	30,733			$	(666	)		$	5,272			$	3,510			$	(10,203	)		$	28,646
Funds from operations available to common shareholders – diluted		$	54,695			$	1,034			$	10,630			$	3,188			$	(44,730	)		$	24,817

     See footnotes following the table.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

						Resort								Temperature-
						Residential								Controlled				Corporate
		Office				Development				Resort/Hotel				Logistics				and
(in millions)		Segment				Segment				Segment				Segment				Other				Total
Total Assets by Segment:(4)
Balance at March 31, 2007(5)		$	2,016			$	1,189			$	388			$	86			$	389	(6)		$	4,068
Balance at December 31, 2006(5)			2,019				1,146				380				87				415	(6)			4,047
Consolidated Property Level Financing:
Balance at March 31, 2007			(978	)			(239	)			(148	)			—				(1,035	)(7)			(2,400	)
Balance at December 31, 2006			(968	)			(220	)			(142	)			—				(966	)(7)			(2,296	)
Consolidated Other Liabilities:
Balance at March 31, 2007			(115	)			(299	)			(33	)			(1	)			(38	)			(486	)
Balance at December 31, 2006			(134	)			(308	)			(32	)			—				(29	)			(503	)
Minority Interests:
Balance at March 31, 2007			(12	)			(32	)			(4	)			—				(65	)			(113	)
Balance at December 31, 2006			(12	)			(32	)			(5	)			—				(77	)			(126	)

4. DISCONTINUED OPERATIONS

     In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the results of operations for the assets sold or held for sale have been presented as “Income from discontinued operations, net of minority interests and taxes” and gain or loss on the assets sold has been presented as “Gain on sale of real estate from discontinued operations, net of minority interests” in the accompanying Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006. The carrying value of the assets held for sale has been reflected as “Properties held for disposition, net” in the accompanying Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006. The carrying value of the liabilities held for sale has been reflected as “Liabilities related to properties held for disposition” in the Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006.

     On March 1, 2007, we announced that we had concluded the review of strategic alternatives first announced on November 1, 2006. Based on that review, we adopted a plan, the Strategic Plan, in which we will concentrate on our core Office Properties’ business. Key elements of the Strategic Plan include:

	•		The opportunistic sale of virtually all suburban Office Properties in Dallas and all Austin properties, as well as our single assets in Phoenix, Arizona and Seattle, Washington;
	•		The sale of certain Resort Residential Development Properties, including CRDI, Desert Mountain and the Sonoma Golf Club; and
	•		The sale of our Resort/Hotel Properties portfolio, including our three luxury resorts and spas and our three upscale business-class hotels.

     These sales are anticipated to occur within one year.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Office Segment

     On March 21, 2007, we entered into an agreement for the sale of The Exchange Building, a wholly-owned Office Property located in Seattle, Washington. See Note 17, “Subsequent Events,” for a discussion of this sale transaction.

     Also, on March 21, 2007, we entered into an agreement for the sale of our 90% partnership interest in Parkway at Oakhill, a consolidated Office development which we own through a joint venture with Champion Partners. See Note 17, “Subsequent Events,” for a discussion of this sale transaction.

     On May 3, 2007, we entered into an agreement for the sale of our joint venture interest in an Office Property. As we consolidate this joint venture interest, the Office Property is classified as held for sale and included in discontinued operations as of March 31, 2007 and December 31, 2006. The closing of the sale, subject to customary closing conditions, is anticipated to occur in the second quarter of 2007.

Resort/Hotel Segment

     On March 5, 2007, we and Walton TCC Hotel Investors V, L.L.C., the Purchaser, entered into a series of purchase and sale agreements which were amended on March 23, 2007 effective as of March 5, 2007 pursuant to which, among other things, we agreed to sell our rights, title and interest in the Fairmont Sonoma Mission Inn & Spa®, the Sonoma Golf Club, the Ventana Inn & Spa®, the Park Hyatt Beaver Creek Resort & Spa, the Omni Austin hotel, the Denver Marriott hotel and the Renaissance Houston hotel.

     On April 2, 2007, Walton terminated the purchase agreements at the end of their due diligence period.

     On April 6, 2007, the original purchase agreements were amended and reinstated to adjust the total gross purchase price and to include the Austin Centre office building adjacent to the Omni Austin hotel. The total gross purchase price is approximately $620.5 million. Our share of the gross purchase price, determined after taking into account the interests of our partners in the sales and incentive payments due as a result of the sales, is approximately $580.0 million. The Purchaser has paid a nonrefundable earnest money deposit of approximately $11.0 million. The closing of the transaction, subject to the satisfaction of certain customary closing conditions, is anticipated to occur during the second quarter of 2007.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Summary of Properties Held for Disposition

     The following table indicates the major classes of assets and liabilities of the properties classified as held for sale.

		As of March 31, 2007																				As of December 31, 2006
						Resort Residential				Resort/																Resort Residential				Resort/
		Office				Development				Hotel				Corporate and								Office				Development				Hotel				Corporate and
(in thousands)		Segment(1)				Segment(2)				Segment(3)				Other				Total				Segment(1)				Segment(2)				Segment(3)				Other				Total
Assets
Land		$	30,469			$	22,312			$	25,568			$	—			$	78,349			$	30,469			$	22,312			$	25,568			$	—			$	78,349
Land Improvements			177				107,048				—				—				107,225				177				106,874				—				—				107,051
Buildings and improvements			576,818				146,205				310,345				2,425				1,035,793				571,824				143,346				307,492				2,425				1,025,087
Furniture, fixtures and equipment			317				26,602				33,407				—				60,326				317				26,540				33,558				—				60,415
Land held for investment or development			3,500				649,525				—				—				653,025				3,500				619,746				—				—				623,246
Accumulated Depreciation			(141,265	)			(69,139	)			(89,848	)			(25	)			(300,277	)			(137,327	)			(66,949	)			(89,498	)			(25	)			(293,799	)
Net investment in real estate		$	470,016			$	882,553			$	279,472			$	2,400			$	1,634,441			$	468,960			$	851,869			$	277,120			$	2,400			$	1,600,349
Cash			15				28,514				5,056				—				33,585				64				18,542				7,308				—				25,914
Restricted cash			211				3,504				984				—				4,699				—				3,660				1,341				—				5,001
Accounts receivable, net			—				28,178				10,714				—				38,892				—				29,673				8,656				—				38,329
Deferred rent receivable			16,509				—				—				4				16,513				16,339				—				—				—				16,339
Investments in unconsolidated companies			—				20,950				—				—				20,950				—				20,271				—				—				20,271
Notes receivable			—				4,530				—				—				4,530				—				7,332				—				—				7,332
Other assets, net			32,420				106,200				4,405				—				143,025				34,263				104,019				4,486				—				142,768
Properties held for disposition, net		$	519,171			$	1,074,429			$	300,631			$	2,404			$	1,896,635			$	519,626			$	1,035,366			$	298,911			$	2,400			$	1,856,303
Liabilities
Notes Payable		$	72,413			$	190,183			$	55,000			$	—			$	317,596			$	70,395			$	178,559			$	55,000			$	—			$	303,954
Accounts payable, accrued expenses and other liabilities			15,418				257,721				20,259				—				293,398				10,458				264,129				21,788				—				296,375
Liabilities related to properties held for disposition		$	87,831			$	447,904			$	75,259			$	—			$	610,994			$	80,853			$	442,688			$	76,788			$	—			$	600,329

     The table above excludes non-unitholder minority interests of $47.1 million and $48.5 million as of March 31, 2007 and December 31, 2006, respectively, related to properties classified as held for sale.

CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

     The following tables present income and gain on sale for the three months ended March 31, 2007 and 2006, for properties included in discontinued operations.

		Three Months Ended March 31, 2007																				Three Months Ended March 31, 2006
						Resort																				Resort
						Residential				Resort/				Corporate												Residential				Resort/				Corporate
		Office				Development				Hotel				and								Office				Development				Hotel				and
(in thousands)		Segment(1)				Segment(2)				Segment(3)				Other				Total				Segment(1)				Segment(2)				Segment(3)				Other				Total
Income from Discontinued Operations
Total revenues		$	24,943			$	82,980			$	38,591			$	57			$	146,571			$	22,902			$	98,023			$	39,803			$	81			$	160,809
Operating and other expenses, net of non-unitholder minority interests and taxes (4)			(17,053	)			(70,709	)			(29,695	)			—				(117,457	)			(15,836	)			(92,393	)			(30,647	)			—				(138,876	)
Depreciation and amortization			(6,171	)			(1,067	)			(3,166	)			—				(10,404	)			(7,653	)			(4,685	)			(4,455	)			—				(16,793	)
Unitholder minority interests			—				—				—				(2,962	)			(2,962	)			—				—				—				(804	)			(804	)
Income from discontinued operations, net of minority interests and taxes		$	1,719			$	11,204			$	5,730			$	(2,905	)		$	15,748			$	(587	)		$	945			$	4,701			$	(723	)		$	4,336
Gain on Sale of real estate from Discontinued Operations
Realized gain on sale of properties		$	—			$	—			$	—			$	—			$	—			$	114			$	—			$	—			$	—			$	114
Unitholder minority interests			—				—				—				—				—				—				—				—				(18	)			(18	)
Gain on sale of real estate from discontinued operations, net of unitholder minority interests		$	—			$	—			$	—			$	—			$	—			$	114			$	—			$	—			$	(18	)		$	96