Edgar Filing: CRESCENT REAL ESTATE EQUITIES CO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12

CRESCENT REAL ESTATE EQUITIES COMPANY
------------------------------------------------
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

CRESCENT REAL ESTATE EQUITIES COMPANY

777 Main Street, Suite 2100
Fort Worth, Texas 76102

---------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To be held June 10, 2002

The Annual Meeting of Shareholders (the "Meeting") of Crescent Real Estate
Equities Company, a Texas real estate investment trust (the "Company"), will be
held at The Crescent Court Hotel, 400 Crescent Court, Dallas, Texas, on June 10,
2002, at 10:00 a.m., Central Daylight Savings Time, for the following purposes:

1. To elect three trust managers of the Company to serve three-year terms,
or until their respective successors are elected and qualified.

2. To consider the shareholder proposal urging the Board of Trust Managers
to declassify the Board for purposes of elections of trust managers, if such
proposal is properly presented at the Meeting.

3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy
Statement, which is attached and made a part of this Notice.

The Board of Trust Managers has fixed the close of business on April 12,
2002, as the record date for determining the shareholders entitled to notice of
and to vote at the Meeting and any adjournment or postponement thereof.

Shareholders are cordially invited to attend the Meeting in person.

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION AND THE
PRESENCE OF A QUORUM AT THE MEETING. ALTERNATIVELY, YOU MAY VOTE BY INTERNET.
INSTRUCTIONS REGARDING INTERNET VOTING ARE INCLUDED ON THE ENCLOSED PROXY CARD.
IF YOU SEND IN YOUR PROXY CARD OR VOTE BY INTERNET AND THEN DECIDE TO ATTEND THE
MEETING TO VOTE YOUR SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS
REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROXY STATEMENT.

By Order of the Board of Trust Managers,

May 16, 2002 David M. Dean
Fort Worth, Texas Secretary

CRESCENT REAL ESTATE EQUITIES COMPANY

777 Main Street, Suite 2100
Fort Worth, Texas 76102

----------

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

To Be Held On June 10, 2002

This Proxy Statement is furnished to shareholders of Crescent Real Estate
Equities Company, a Texas real estate investment trust (the "Company"), in
connection with the solicitation of proxies by its board of trust managers (the
"Board of Trust Managers" or the "Board") on behalf of the Company for use at
the 2002 Annual Meeting of Shareholders of the Company (the "Meeting") to be
held at The Crescent Court Hotel, 400 Crescent Court, Dallas, Texas, on Monday,
June 10, 2002, at 10:00 a.m., Central Daylight Savings Time, for the purposes
set forth in the Notice of Annual Meeting. This Proxy Statement and the
accompanying form of proxy are first being sent or given to shareholders on or
about May 20, 2002.

The Company owns its assets and conducts its operations through Crescent
Real Estate Equities Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), and its other subsidiaries. The sole general partner
of the Operating Partnership is Crescent Real Estate Equities, Ltd., a Delaware
corporation (the "General Partner"), which is a wholly owned subsidiary of the
Company.

RECORD DATE AND OUTSTANDING CAPITAL SHARES

The record date for determination of the shareholders entitled to notice of
and to vote at the Meeting is the close of business on April 12, 2002 (the
"Record Date"). At the close of business on the Record Date, 105,207,192 of the
Company's common shares of beneficial interest, par value $.01 per share (the
"Common Shares"), were issued, outstanding and entitled to vote at the Meeting.
This number excludes 14,468,623 issued and outstanding Common Shares held by
Crescent SH IX, Inc., an indirect wholly owned subsidiary of the Company,
because Crescent SH IX, Inc. is not entitled to vote those Common Shares under
applicable law.

PROCEDURAL MATTERS

Any proxy, if received in time, properly signed and not revoked, will be
voted at the Meeting in accordance with the directions of the shareholder. If no
directions are specified, the proxy will be voted FOR Proposal 1 (Item 1 on the
proxy card) and AGAINST the shareholder proposal (Item 2 on the proxy card). If
any other matter or business is brought before the Meeting or any adjournment
thereof, the proxy holders may vote the proxy in their discretion. The Board of
Trust Managers does not know of any such matter or business to be presented for
consideration.

A proxy may be revoked by (i) delivering a written statement to the
Secretary of the Company stating that the proxy is revoked, (ii) presenting at
the Meeting a subsequent proxy executed by the person executing the prior proxy,
or (iii) attending the Meeting and voting in person.

QUORUM AND VOTING

The presence, in person or by proxy, of the holders of a majority of the
Common Shares outstanding and entitled to vote as of the Record Date is
necessary to constitute a quorum for the transaction of business at the

Meeting. In deciding all questions, a holder of Common Shares is entitled to one
vote, in person or by proxy, for each Common Share held in such holder's name on
the Record Date, except that Crescent SH IX, Inc. is not entitled to vote its
14,468,623 Common Shares.

REQUIRED AFFIRMATIVE VOTE AND VOTING PROCEDURES

The vote required to elect the nominees as trust managers (Proposal Number
1) is a majority of the votes cast at the Meeting by the holders of Common
Shares entitled to vote on such matter. The vote required to approve the
shareholder proposal (Proposal Number 2) urging the Board of Trust Managers to
take the steps necessary to declassify the Board is a majority of the votes
cast at the Meeting by the holders of Common Shares entitled to vote on such
matter. Common Shares held by shareholders present at the Meeting in person who
do not vote and ballots marked "abstain," "against" or "withhold authority" will
be counted as present at the Meeting for quorum purposes. Under the Company's
Restated Declaration of Trust, as amended (the "Declaration of Trust"), Amended
and Restated Bylaws, as amended (the "Bylaws"), and applicable law, abstentions
constitute votes cast but broker non-votes do not. As a result, abstentions
with respect to the election of the trust managers or the shareholder proposal
effectively constitute votes against those matters. Broker non-votes will
have no effect on the outcome of the vote on either proposal.

COSTS OF PROXY SOLICITATION

The Company will bear the cost of preparing, assembling and mailing the
proxy material. Upon request, the Company will reimburse brokers, banks,
nominees and other fiduciaries for postage and reasonable clerical expenses of
forwarding the proxy materials to their principals, the beneficial owners of the
Common Shares and the Preferred Shares. In an effort to have as large a
representation at the Meeting as possible, special solicitation of proxies may,
in certain instances, be made personally, or by telephone, facsimile, or mail by
one or more employees of the General Partner, who will not receive any
additional compensation in connection therewith. In addition, the Company has
engaged D. F. King & Co., Inc. to assist in the solicitation of proxies. The
Company anticipates that it will incur total fees of $8,000 plus $4.00 per phone
call plus out-of-pocket expenses. Neither the number of phone calls nor the
out-of-pocket expenses can be estimated at this time.

INDEPENDENT AUDITORS

Arthur Andersen LLP has served as the Company's independent auditors from
inception through the fiscal year ended December 31, 2001. A representative of
Arthur Andersen LLP is expected to be present at the Meeting. The representative
will have an opportunity to make a statement and will be able to respond to
appropriate questions.

The Company's Audit Committee has closely monitored the congressional
investigations and public disclosures concerning the bankruptcy filing of Enron
Corp. and Arthur Andersen LLP's involvement as independent auditor of Enron
Corp. In addition, the Audit Committee has met with representatives of Arthur
Andersen LLP to discuss these recent events. The Audit Committee, in its
discretion, may direct the appointment of different independent auditors at any
time during the year if the Audit Committee believes that such an appointment
would be in the best interests of our shareholders. Although members of the
Audit Committee have not reached a decision regarding our independent auditors
for 2002, they may consider engaging an independent accounting firm other than
Arthur Andersen LLP for reasons that are unrelated to Arthur Andersen LLP's
prior audits of our financial statements. For this reason, we will not be asking
shareholders to ratify Arthur Andersen LLP as our independent auditors at the
Meeting. If members of the Audit Committee decide to appoint different
independent auditors, we will promptly provide the disclosure required by the
regulations of the Securities and Exchange Commission (the "Commission").

Fiscal 2001 Audit Firm Fee Summary. During fiscal year 2001, the Company
retained Arthur Andersen LLP to provide services in the following categories and
amounts:

Audit Fees.................................... $287,400
Financial Information Systems Design and
Implementation Fees........................... $ 0
All Other Fees:
Audit-Related Fees*.................. $204,300
Other Fees*.......................... $142,675
--------
Total All Other Fees................. $346,975

----------

* Audit-related fees includes operating expense audits required by lease
agreements, audits required by partnership and note agreements, accounting
consultation, acquisition due diligence, and the benefit plan audit. Other fees
include tax consultation and tax federal and state compliance.

The Audit Committee of the Board of Trust Managers has considered those
services provided by Arthur Andersen LLP for the Company that were not provided
in conjunction with the audit and review of its financial statements and has
determined that such services are compatible with maintaining the independence
of Arthur Andersen LLP.

PROPOSAL NUMBER 1
ELECTION OF TRUST MANAGERS

BOARD OF TRUST MANAGERS

The trust managers of the Company are divided into three classes, with the
shareholders electing a portion of the trust managers annually. In May 2002,
pursuant to the authority granted to them under the Bylaws the trust managers
approved an increase in the size of the Board of Trust Managers to nine members,
and elected Robert W. Stallings, Dennis H. Alberts and Terry N. Worrell to fill
the three newly created vacancies on the Board of Trust Managers. Because the
Company's Declaration of Trust and Bylaws require the Board of Trust Managers to
be divided into three classes as nearly equal in number as possible, Mr.
Stallings was elected to hold office for a term expiring at the Meeting (on June
10, 2002), and Mr. Alberts and Mr. Worrell were elected to hold office for a
term expiring at the Annual Meeting of Shareholders in 2004 and, in each case,
until his successor has been duly elected and qualified. The trust managers
whose terms will expire at the Meeting are John C. Goff, Paul E. Rowsey, III and
Robert W. Stallings. Messrs. Goff, Rowsey and Stallings have been nominated and
have agreed to stand for election at the Meeting as trust managers, to hold
office until the Annual Meeting of Shareholders in 2005, or until their
respective successors are elected and qualified.

The nominees who receive a majority of the votes cast by shareholders who
are present in person or represented by proxy at the Meeting and entitled to
vote on the election of trust managers will be elected as trust managers of the
Company.

THE BOARD OF TRUST MANAGERS RECOMMENDS A VOTE FOR JOHN C. GOFF, PAUL E.
ROWSEY, III AND ROBERT W. STALLINGS AS TRUST MANAGERS TO HOLD OFFICE UNTIL THE
ANNUAL MEETING OF SHAREHOLDERS IN 2005, OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE
ELECTED AND QUALIFIED.

If Mr. Goff, Mr. Rowsey or Mr. Stallings become unable to serve as trust
managers for any reason, the Board of Trust Managers may designate substitute
nominees, in which event the persons named in the enclosed proxy will vote for
the election of such substitute nominee or nominees or may reduce the number of
trust managers on the Board of Trust Managers.

Set forth below is information with respect to the current nine trust
managers of the Company, including the nominees, and the executive officers of
the Company and the General Partner.

TERM
NAME EXPIRES AGE POSITION
---- ------- --- --------

Richard E. Rainwater... 2003 57 Chairman of the Board of Trust
Managers of the Company

John C. Goff........... 2002 46 Vice Chairman of the Board of Trust
Managers of the Company, Chief
Executive Officer of the Company and
the General Partner, and Sole
Director of the General Partner

Dennis H. Alberts...... 2004 53 Trust Manager of the Company and
President and Chief Operating
Officer of the Company and the
General Partner

Anthony M. Frank....... 2003 70 Trust Manager of the Company

William F. Quinn....... 2003 54 Trust Manager of the Company

Paul E. Rowsey, III.... 2002 47 Trust Manager of the Company

David M. Sherman....... 2004 44 Trust Manager of the Company

Robert W. Stallings.... 2002 53 Trust Manager of the Company

Terry N. Worrell....... 2004 57 Trust Manager of the Company

Kenneth S. Moczulski... N/A 50 President of Investments and Chief
Investment Officer of the Company
and the General Partner

David M. Dean.......... N/A 41 Executive Vice President, Law and
Administration, and Secretary of the
Company and the General Partner

Jane E. Mody........... N/A 51 Executive Vice President, Capital
Markets of the Company and the
General Partner

Jerry R. Crenshaw, Jr.. N/A 38 Senior Vice President, Chief
Financial and Accounting Officer of
the Company and Senior Vice
President and Chief Financial
Officer of the General Partner

Jane B. Page........... N/A 41 Senior Vice President, Asset
Management and Leasing, Houston
Region of the General Partner

John L. Zogg, Jr....... N/A 38 Senior Vice President, Asset
Management and Leasing, Dallas
Region, of the General Partner

Christopher T. Porter.. N/A 36 Vice President and Treasurer of the
Company and the General Partner

TRUST MANAGERS AND EXECUTIVE OFFICERS

The Board of Trust Managers of the Company currently consists of nine
members, divided into three classes serving staggered three-year terms. The
following is a summary of the experience of the current and proposed trust
managers and the current executive officers.

Richard E. Rainwater has been an independent investor since 1986. From 1970
to July 1986, he served as the chief investment advisor to the Bass family,
whose overall wealth increased dramatically during his tenure. During that time,
Mr. Rainwater was principally responsible for numerous major corporate and real
estate acquisitions and dispositions. Upon beginning his independent investment
activities, he founded ENSCO International Incorporated, an oil field service
and offshore drilling company, in December 1986. Additionally, in June 1988, he
co-founded Columbia Hospital Corporation, and in March 1989 he participated in a
management-led buy out of HCA-Hospital Corporation of America. In November 1992,
Mr. Rainwater co-founded Mid Ocean Limited, a provider of casualty re-insurance.
In February 1994, he assisted in the merger of Columbia Hospital Corporation and
HCA-Hospital Corporation of America that created Columbia/HCA Healthcare
Corporation. Mr. Rainwater is a graduate of the University of Texas at Austin
and the Graduate School of Business at Stanford University. Mr. Rainwater has
served as the Chairman of the Board of Trust Managers since the Company's
inception in 1994.

John C. Goff co-founded the Company with Mr. Rainwater while serving as
principal of Rainwater, Inc. Mr. Goff served as Chief Executive Officer and as a
trust manager from the Company's inception in February 1994 through December
1996, when he became Vice Chairman. In June 1999, Mr. Goff returned as Chief
Executive Officer of the Company and remains as Vice Chairman. Mr. Goff has
served as the managing principal of Goff Moore Strategic Partners, L.P., a
private investment partnership, since its formation in February 1998. From June
1987 to May 1994, Mr. Goff was vice president of Rainwater, Inc. Prior to
joining Rainwater, Inc., Mr. Goff was employed by KPMG Peat Marwick, with Mr.
Rainwater as one of his principal clients. Mr. Goff also serves on the boards of
Gainsco, Inc., The Staubach Company, OpenConnect Systems, Inc. and The National
Association of Real Estate Investment Trusts. Mr. Goff is a graduate of the
University of Texas and is a Certified Public Accountant.

Dennis H. Alberts, prior to joining the Company, served as President and
Chief Executive Officer of Pacific Retail Trust, a privately held retail
shopping center REIT, which he founded in 1993. While at Pacific Retail Trust,
Mr. Alberts directed all aspects of the company, including acquisition,
development and operational activities, from 1993 until 1999 when Pacific Retail
Trust merged into Regency Realty, Inc., a publicly traded REIT. In 1999, Mr.
Alberts also served as a consultant to Regency Realty, Inc. Prior to founding
Pacific Retail Trust, Mr. Alberts served as President and Chief Operating
Officer of First Union Real Estate Investments, a publicly held retail,
multi-family and office REIT, in 1992. From 1987 to 1991, Mr. Alberts served as
President and Chief Executive Officer of Rosewood Property Company where he
focused on asset management and leasing of Rosewood's office portfolio. Before
joining Rosewood Property Company, he served as President and Managing Partner
of Trammell Crow Residential Companies of Dallas from 1984 to 1987. Mr. Alberts
holds a Bachelor of Science degree and Master of Business Administration degree
from the University of Missouri. Since April 2000, Mr. Alberts has served as
President and Chief Operating Officer of the Company and the General Partner. In
May 2002, Mr. Alberts was elected, along with Messrs. Stallings and Worrell, to
serve as a trust manager by the six members of the Board of Trust Managers then
comprising the Board.

Anthony M. Frank currently serves as Founding Chairman of Belvedere Capital
Partners, general partner of the California Community Financial Institutions
Fund LP. From March 1988 to March 1992, he served as Postmaster General of the
United States. From April 1992 until June 1993, he served as the founding
chairman of Independent Bancorp of Arizona. Mr. Frank has also served as a
Director of: Temple Inland, Inc., a manufacturer of paper and timber products,
since May 1992; Bedford Property Investors, Inc., an office and commercial
property real estate investment trust ("REIT") investing primarily on the West
Coast, since May 1992; Charles Schwab & Co., one of the nation's largest
discount brokerages, since July 1993; and Cotelligent, Inc., a provider of
temporary office support services, since May 1995. Mr. Frank received a Bachelor
of Arts degree from Dartmouth College and a Master of Business Administration
degree from the Amos Tuck School of Business at Dartmouth. Mr. Frank has served
as a Trust Manager since the Company's inception in 1994.

William F. Quinn has served as President of AMR Investment Services, Inc.,
the investment services affiliate of American Airlines, with responsibility for
the management of pension and short-term fixed income assets, since November
1986. Prior to being named to his current position in 1986, Mr. Quinn held
several management positions with American Airlines and its subsidiaries. He has
served as Chairman of the Board of American Airlines Federal Credit Union since
November 1989, President and Trustee of the American AAdvantage Funds since July
1987, and on the advisory board for Southern Methodist University's Endowment
Fund since September 1996. Mr. Quinn holds a Bachelor of Science degree in
accounting from Fordham University and is a Certified Public Accountant. Mr.
Quinn has served as a Trust Manager since the Company's inception in 1994.

Paul E. Rowsey, III, has served as President of Eiger, Inc., a private real
estate investment management and investment firm, and the manager of Eiger Fund
I, L.P., a real estate equity investment fund, since their formation in January
1999. He was formerly President and a member of the Board of Directors of
Rosewood Property Company, a real estate investment company, a position he held
from February 1988 until December 1998. Mr. Rowsey has served as a member of the
Board of Directors of ENSCO International Incorporated, an offshore oil field
service and drilling company, since January 2000. Mr. Rowsey began his career in
1980 as an attorney specializing in commercial real estate. Mr. Rowsey holds a
Bachelor of Arts degree from Duke University and a Juris Doctor degree from
Southern Methodist University School of Law. Mr. Rowsey has served as a Trust
Manager since the Company's inception in 1994.

David M. Sherman has served as President of D. Sherman & Company, Inc., a
firm founded and wholly owned by Mr. Sherman which provides services to public
real estate companies, since February 2000. In addition, he has been an adjunct
professor of real estate at Columbia University Graduate School of Business
Administration since February 2000. Prior to being named to both of these
positions, and beginning in 1995, Mr. Sherman was the Managing Director, Senior
Analyst and Head of the REIT Equity Research Team at Salomon Smith Barney, Inc.
In addition, Mr. Sherman has served on the Board of Trustees, as well as the
audit committee, for Keystone Property Trust, a fully integrated REIT and one of
the largest owners and developers of industrial properties in the Eastern United
States, since June 2000. He also has served as a member of the advisory
committee for the Primus Fund, a REIT fund sponsored by Deutsche Bank Realty
Advisors. Mr. Sherman holds a Bachelor of Arts degree in Math/Economics from
Brown University and a Master of Business Administration degree in Finance from
Columbia University Graduate School of Business Administration. Mr. Sherman has
served as a Trust Manager since October 2000.

Robert W. Stallings currently serves as Chairman and President of Stallings
Capital Group, Inc., a Dallas-based merchant banking firm specializing in the
financial services industry. In addition, he is non-executive Chairman of
Gainsco, Inc., for whom he also provides consulting services. Mr. Stallings also
serves as a director of Texas Capital Bank. He is the recently-retired Chairman
and founder of ING Pilgrim Capital Corporation, a $20 billion asset management
firm which was acquired by ING Group in September 2000 and with which he had
been associated since 1991. Mr. Stallings received a Bachelor of Arts degree in
Business from Johnson & Wales University. In May 2002, Mr. Stallings was
elected, along with Messrs. Alberts and Worrell, to serve as a trust manager by
the six members of the Board of Trust Managers then comprising the Board.

Terry N. Worrell has been a private investor in commercial properties and
other business ventures with Worrell Investments since 1989. From 1974 to 1989,
he served as President and Chief Executive Officer of Sound Warehouse of Dallas,
Inc. prior to its purchase by Shamrock Holdings. Mr. Worrell serves as a
director of Regency Centers Corp., a developer/operator of shopping centers and
Tremont Corp., a holding company with operations conducted primarily through NL
Industries and Titanium Metals. Mr. Worrell received a Master of Business
Administration degree from the University of North Texas. In May 2002, Mr.
Worrell was elected, along with Messrs. Alberts and Stallings, to serve as a
trust manager by the six members of the Board of Trust Managers then comprising
the Board.

Kenneth S. Moczulski, prior to joining the Company, served as President of
Transworld Properties, Inc., a subsidiary of a privately held international oil
company, which he founded in January 1992. While at Transworld Properties, Inc.,
Mr. Moczulski was responsible for the formation and implementation of real
estate investment strategy, as well as management of on-going real estate
development, asset management, and dispositions. Prior to founding Transworld
Properties, Inc., Mr. Moczulski served as Vice President of Jaymont Properties
in New York from April 1987 to December 1991, where he was responsible, on a
national basis, for all acquisition and

disposition activities. From February 1979 to March 1987, Mr. Moczulski served
as Development Manager for a number of commercial developments for Gerald D.
Hines Interests. Mr. Moczulski holds a Bachelor of Science degree in Civil
Engineering from the University of Cincinnati and a Master of Business
Administration degree from Harvard Graduate School of Business. Mr. Moczulski
has served as President of Investments and Chief Investment Officer of the
Company and the General Partner since November 2000.

David M. Dean, prior to joining the Company, was an attorney for Burlington
Northern Railroad Company from 1992 to 1994, and he served as Assistant General
Counsel in 1994. At Burlington Northern, he was responsible for the majority of
that company's transactional and general corporate legal work. Mr. Dean was
previously engaged in the private practice of law from 1986 to 1990 with Kelly,
Hart & Hallman, and from 1990 to 1992 with Jackson & Walker, L.L.P., where he
worked primarily on acquisition, financing and venture capital transactions for
Mr. Rainwater and related investor groups. Mr. Dean graduated with honors from
Texas A&M University with Bachelor of Arts degrees in English and philosophy in
1983. He also holds a Juris Doctor degree and a Master of Laws degree in
taxation from Southern Methodist University School of Law. Mr. Dean served as
Senior Vice President, Law, and Secretary from the time he joined the Company in
August 1994 to September 1999 when he became Senior Vice President, Law and
Administration and Secretary, a position which he held until January 2001. Since
January 2001, Mr. Dean has served as Executive Vice President, Law and
Administration and Secretary of the Company and the General Partner.

Jane E. Mody, prior to joining the Company, served as Vice President of
Goldman, Sachs & Co. from February 2000 to February 2001. While at Goldman,
Sachs & Co., Ms. Mody worked with the real estate merchant banking division and
was responsible for fund reporting for nine real estate opportunity funds. She
served as Managing Director and Chief Financial Officer of Pacific Retail Trust,
a private real estate investment trust, which she co-founded, from December 1993
until February 1999 when Pacific Retail Trust merged into Regency Realty, Inc.,
a publicly traded REIT. From February 1999 to August 1999 Ms. Mody served as a
consultant to Regency Realty, Inc. Prior to co-founding Pacific Retail Trust,
Ms. Mody served as Executive Vice President of Rosewood Property Company, a real
estate investment company, from April 1988 to December 1993. Ms. Mody graduated
from Austin College with a Bachelor of Arts degree and holds a Master of
Business Administration degree in International Business from the University of
Dallas. Ms. Mody has served as Executive Vice President, Capital Markets of the
Company and the General Partner since February 2001.

Jerry R. Crenshaw, Jr., prior to joining the Company, was the Controller of
Carrington Laboratories, Inc., a pharmaceutical and medical device company, from
1991 until February 1994. From 1986 until 1991, Mr. Crenshaw was an audit senior
in the real estate services group of Arthur Andersen LLP. Mr. Crenshaw holds a
Bachelor of Business Administration degree in accounting from Baylor University
and is a Certified Public Accountant. Mr. Crenshaw served as Controller from the
Company's inception in 1994 to March 1997 when he became Vice President and
served as Vice President, Controller until December 1998 and Vice President,
Finance until September 1999. In addition, Mr. Crenshaw served as Interim
Co-Chief Financial Officer of the Company and the General Partner from August
1998 until April 1999. Since September 1999, Mr. Crenshaw has served as Senior
Vice President and Chief Financial Officer of the Company and the General
Partner.

Jane B. Page, prior to joining the Company, was employed by Metropolitan
Life Real Estate Investments from July 1984 to January 1998, holding positions
of director of corporate property management and regional asset manager of
Metropolitan's institutional portfolio in Houston, Austin and New Orleans. Ms.
Page's 14-year tenure at Metropolitan also included membership on Metropolitan's
Investment Committee, which reviewed and approved all significant transactions
on a national basis. Ms. Page serves on the Boards of the Greater Houston
Partnership, Central Houston, Inc. and the Downtown Houston Management District.
Ms. Page graduated with a Bachelor of Arts degree from Point Loma College in San
Diego and with a Master of Business Administration degree from the University of
San Francisco. She also holds Certified Commercial Investments Manager and
Certified Property Manager designations. Ms. Page served as Director of Asset
Management, Houston Region from the time she joined the Company in January 1998
to December 1998, when she became Vice President, Houston Region Asset
Management and served in that capacity until September 1999 when she became Vice
President, Asset Management, Houston Region. Since May 2000, Ms. Page has served
as Senior Vice President, Asset Management and Leasing, Houston Region.

John L. Zogg, Jr. served as Vice President of the commercial real estate
group of Rosewood Property Company, responsible for marketing and leasing office
space in the Dallas and Denver areas, from January 1989 to May 1994. For three
years prior to joining Rosewood Property Company, Mr. Zogg worked as Marketing
Manager of Gerald D. Hines Interests, responsible for office leasing in the
Dallas metropolitan area from June 1985 to January 1988. He graduated from the
University of Texas at Austin with a Bachelor of Arts degree in economics and
holds a Master of Business Administration degree from the University of Dallas.
Mr. Zogg joined the Company as a Vice President in May 1994 and served as Vice
President, Leasing and Marketing, from June 1997 to September 1999 when he
became Vice President, Leasing/Marketing, Southwest Region. Since May 2000, Mr.
Zogg has served as Senior Vice President, Asset Management and Leasing, Dallas
Region.

Christopher T. Porter, prior to joining the Company, held the office of
Senior Vice President, Investor Relations, for Associates First Capital
Corporation, a leading financial services firm, from January 1999 through
October 1999. Prior to 1999, Mr. Porter served as Vice President and Assistant
Treasurer in banking relations and cash management at Associates First Capital
Corporation from November 1991 through January 1999. Mr. Porter received a
Bachelor of Science degree in economics from the University of Texas at Austin
and a Master of Business Administration degree in finance from the University of
North Texas and is a certified cash manager. Mr. Porter has served as Vice
President and Treasurer of the Company and the General Partner since December
1999.

TRUST MANAGER COMPENSATION

During 2001, each trust manager who is not also an officer of the Company
received an annual fee of $30,000 (payable in cash or, at the election of the
trust manager, in Common Shares in an amount determined by dividing the fees
otherwise payable by 90% of the fair market value of the Common Shares), a
meeting fee of $1,000 for each Board of Trust Managers or committee meeting
attended in person, a fee of $1,000 for participation in each telephonic meeting
of the Board of Trust Managers and a fee of $500 for participation in each
telephonic committee meeting. Trust managers who are also officers receive no
separate compensation for their service as trust managers.

COMMITTEES OF THE BOARD OF TRUST MANAGERS

Audit Committee. The Audit Committee consists of Anthony M. Frank,
Chairman, and William F. Quinn and Paul E. Rowsey, III. The Audit Committee,
which held seven meetings in 2001, makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services that the independent public accountants provide, reviews
the independence of the public accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls. The Board of Trust Managers has determined that all current members of
the Audit Committee are "independent" as that term is defined in Section
303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing standards.

Executive Compensation Committee. The Executive Compensation Committee
consists of Paul E. Rowsey, III, Chairman, and Anthony M. Frank. The Executive
Compensation Committee, which held two meetings in 2001, determines compensation
for the Company's executive officers and administers the stock incentive and
other compensation plans that the Company adopts. The Executive Compensation
Committee also nominates persons to serve as members of the Board of Trust
Managers. The Executive Compensation Committee will consider nominees that
management, shareholders and others recommend, and these recommendations may be
delivered in writing to the attention of the Executive Compensation Committee in
care of the Company Secretary at the Company's principal executive offices. See
"Shareholder Proposals for the Company's 2003 Annual Meeting of Shareholders"
below for a description of the procedures by which shareholders may nominate
candidates for trust manager.

Intercompany Evaluation Committee. The Intercompany Evaluation Committee
consists of William F. Quinn, Chairman, and David M. Sherman. The Board of Trust
Managers appointed the Intercompany Evaluation Committee to review, confirm and
ratify, in the Company's capacity as sole stockholder of the General Partner,
all

determinations and acts of the Operating Partnership and the General Partner
relating to the Intercompany Agreement between the Operating Partnership and
Crescent Operating, Inc. ("COPI"), dated June 3, 1997 (the "Intercompany
Agreement"), and any other transactions with COPI or its affiliates that the
General Partner may present to the committee from time to time. The Intercompany
Agreement was terminated on February 14, 2002 pursuant to an agreement between
the Company and COPI. The Intercompany Evaluation Committee continues to serve
its functions with respect to any transactions with COPI or its affiliates that
the General Partner presents to the committee. The Intercompany Evaluation
Committee held four meetings in 2001.

During the last fiscal year, the Board of Trust Managers held five
meetings, and no trust manager attended fewer than 75% of the aggregate of all
meetings of the Board of Trust Managers and the committees, if any, upon which
such trust manager served and which were held during the period of time that
such person served on the Board of Trust Managers or such committee.

PROPOSAL NUMBER 2
PROPOSAL BY SHAREHOLDER

SHAREHOLDER PROPOSAL BY SEIU

THE FOLLOWING PROPOSAL HAS BEEN SUBMITTED BY SERVICE EMPLOYEES
INTERNATIONAL UNION ("SEIU"), 1313 L STREET, N.W., WASHINGTON, D.C. 20005 IN THE
FORM IN WHICH IT WAS SUBMITTED TO THE COMPANY. SEIU IS THE OWNER OF 147 SHARES
OF THE COMPANY.

RESOLVED: That the shareholders of Crescent Real Estate Equities Co.
urge the Board of Trustees to take the necessary steps to declassify
the Board of Trustees for the purpose of Trustee elections. The Board
declassification shall be done in a manner that does not affect the
unexpired terms of Trustees previously elected.

SHAREHOLDER SUPPORTING STATEMENT BY SEIU

We believe the election of Trustees is the most powerful way that
shareholders influence the strategic direction of our company.
Currently the Board of Trustees of Crescent Real Estate Equities Co.
is divided into three classes serving staggered three-year terms. It
is our belief that the classification of the Board of Trustees is not
in the best interests of Crescent Real Estate Equities Co. and its
shareholders. The elimination of the staggered board would require
each Trustee to stand for election annually. This procedure would
allow shareholders an opportunity to annually register their views on
the performance of the board collectively and each Trustee
individually. Concerns that the annual election of Trustees would
leave Crescent Real Estate Equities Co. without experienced board
members in the event that all incumbents are voted out are unfounded.
If the owners should choose to replace the entire board, it would be
obvious that the incumbent Trustee contributions were not valued.

A classified board of Trustees protects the incumbency of the board of
Trustees and current management, which in turn limits accountability
to stockholders. It is our belief Crescent Real Estate Equities Co.'s
corporate governance procedures and practices, and the level of
management accountability they impose, are related to the financial
performance of the company. While Crescent Real Estate Equities Co.'s
current performance is good, we believe sound corporate governance
practices, such as the annual election of Trustees, will impose the
level of management accountability necessary to help insure that a
good performance record continues over the long term.

Classified boards like ours have become increasingly unpopular in
recent years. Last year a majority of shareholders supported proposals
asking their boards to repeal classified board structures at a number
of respected companies, including Kroger, Merck, Airborne, Albertson's
Inc., U.S. Bancorp., Delphi Automotive, Maytag, United Health Group,
Wisconsin Energy, and Alaska Air Group.

For a greater voice in the governance of Crescent Real Estate Equities
Co. and annual Board of Trustees accountability we ask shareholders to
vote YES on this proposal.

OPPOSITION STATEMENT BY CRESCENT REAL ESTATE EQUITIES COMPANY

The Company's current system for electing trust managers by classes was
approved by the shareholders in 1994 and has been in place since prior to the
Company's initial public offering. Under this system, the Board of Trust
Managers is divided into three classes, each constituting approximately
one-third of the total number of trust managers.

With the classified Board, the likelihood of continuity and stability in
the Board's business strategies and policies is enhanced since, generally,
approximately two-thirds of the trust managers at all times will have had prior
experience and familiarity with the business and affairs of the Company. This
experience and familiarity contributes to more effective long-range strategic
planning and a focus on long-term performance.

The classified Board is intended to encourage persons who may seek to
acquire control of the Company to initiate such action through negotiations with
the Board. If a potential acquiror does not negotiate with the Company, the
existence of the classified Board means that at least two meetings of
shareholders would generally be required to replace a majority of the Board. By
reducing the threat of an abrupt change in the composition of the entire Board,
classification of trust managers would provide the Board with an adequate
opportunity to fulfill its duties to the Company's shareholders to review any
takeover proposal, study appropriate alternatives and achieve the best results
for all shareholders. The Board believes that a classified Board enhances the
ability to negotiate favorable terms with the proponent of an unfriendly or
unsolicited proposal, but that it does not preclude takeover offers.

The Board believes that trust managers elected to a classified Board are no
less accountable to shareholders than they would be if all trust managers were
elected annually. The same standards of performance and fiduciary duties apply
to all trust managers regardless of their term of service. The Board addresses
many important issues during the year and is confident that its attention to
these issues is in no way affected by the timing of elections.

Adoption of this proposal would not automatically eliminate the classified
Board. Further action by the shareholders would be required to amend the
Declaration of Trust and Amended and Restated Bylaws, as amended. Under these
documents, the approval of two-thirds of the outstanding Common Shares would be
required for approval of any amendment. Under Texas law, an amendment to the
Declaration of Trust requires a recommendation from the Board of Trust Managers
prior to submission to shareholders. While the Board would consider such an
amendment, it remains subject to its fiduciary duty to act in a manner it
believes to be in the best interest of the Company and its shareholders
generally.

THEREFORE, YOUR BOARD OF TRUST MANAGERS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.

VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS

The following table sets forth the beneficial ownership of Common Shares
for (i) each shareholder of the Company who beneficially owns more than 5% of
the Common Shares, (ii) each trust manager, nominee for trust manager and Named
Executive Officer (as defined below) of the Company or the General Partner, and
(iii) the trust managers and executive officers of the Company or the General
Partner as a group. Unless otherwise indicated in the footnotes, the listed
beneficial owner directly owns all Common Shares.

BENEFICIAL OWNERSHIP(1)

NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(2) COMMON SHARES(3) COMMON SHARES(7)
--------------------------------------- ----------------- ----------------

(4)(5)(6)

Richard E. Rainwater.................... 13,538,404(8) 12.1%
John C. Goff............................ 3,630,248(9) 3.4%
Dennis H. Alberts....................... 345,000(10) *
Anthony M. Frank........................ 72,400 *
William F. Quinn........................ 78,040 *
Paul E. Rowsey, III..................... 56,587 *
David M. Sherman........................ 27,721 *
Robert W. Stallings..................... 22,000 *
Terry N. Worrell........................ 0 *
Kenneth S. Moczulski.................... 70,200(11) *
David M. Dean........................... 270,396(12) *
Jane E. Mody............................ 41,000(13) *
Barrow, Hanley, Mewhinney & Strauss..... 7,834,250(14) 7.5%
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204-2429
Franklin Resources, Inc................. 6,110,006(15) 5.8%
One Franklin Parkway
San Mateo, California 94403-1906
Trust Managers and Executive Officers
as a Group (16 persons) ................ 18,676,881(8)(9)(12)(13) 16.9%

----------

* Less than 1%

(1) All information is as of April 12, 2002, the Record Date, unless
otherwise indicated. For purposes of calculations of percentage
ownership interests, the number of Common Shares outstanding as of the
Record Date excludes the 14,468,623 Common Shares held of record by
Crescent SH IX, Inc., an indirect wholly owned subsidiary of the
Company, because Crescent SH IX, Inc. is not entitled to vote those
Common Shares under applicable law. The number of Common Shares
beneficially owned is reported on the basis of regulations of the
Commission governing the determination of beneficial ownership of
securities. Accordingly, the number of Common Shares a person
beneficially owns includes (i) the number of Common Shares that such
person has the right to acquire within 60 days of the Record Date upon
the exercise of options ("Options") granted pursuant to the 1994
Crescent Real Estate Equities, Inc. Stock Incentive Plan (the "1994
Plan") or the 1995 Crescent Real Estate Equities, Inc. Stock Incentive
Plan (the "1995 Plan"), (ii) the number of Common Shares that may be
issued within 60 days of the Record Date upon exchange of partnership
units of the Operating Partnership ("Units") that such person owns for
Common Shares, with such exchange made on the basis of two Common
Shares for each Unit exchanged (assuming the Company elects to issue
Common Shares rather than pay cash upon such exchange), (iii) the
number of Common Shares that may be issued within 60 days of the
Record Date upon exercise of options (the "Plan Unit Options") granted
under the 1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (the "Unit Plan"), as amended, to purchase Units and
the subsequent exchange of such Units for Common Shares, with such
exchange made on the basis of two Common Shares for each Unit
exchanged (assuming the Company elects to issue Common Shares rather
than pay cash upon such exchange) and (iv) the number of Common Shares
that may be issued within 60 days of the Record Date upon exercise of
options (the "Unit Options") granted pursuant to an agreement to
purchase Units and the subsequent exchange of such Units for Common
Shares, with such exchange made on the basis of two Common Shares for
each Unit exchanged (assuming the Company elects to issue Common
Shares rather than pay cash upon such exchange). In addition, the
number of Common Shares a person beneficially owns is deemed to
include the number of Common Shares issuable upon exchange of the
Preferred Shares, each of which is currently convertible into .6119
Common Shares. As of the Record Date, none of the persons listed in
the Beneficial Ownership table, and no executive officer not listed in
the table, beneficially owned any Preferred Shares.

(2) Unless otherwise indicated, the address of each beneficial owner is
777 Main Street, Suite 2100, Fort Worth, Texas 76102.

(3) The number of Common Shares the following persons beneficially own
includes the number of Common Shares indicated due to the vesting of
unexercised Options, as follows: Anthony M. Frank -- 39,200; William
F. Quinn -- 65,400; Paul E. Rowsey, III -- 47,600; David M. Sherman --
25,000; Dennis A. Alberts -- 140,000; Kenneth S. Moczulski -- 70,000;
David M. Dean -- 78,850; Jane E. Mody -- 36,000; and Trust Managers
and Executive Officers as a Group -- 770,450.

(4) The number of Common Shares the following persons beneficially own
includes the number of Common Shares owned indirectly through
participation in the General Partner's 401(k) Plan as of March 31,
2002, as follows: John C. Goff -- 5,990; David M. Dean -- 7,125; and
Executive Officers as a Group -- 17,634.

(5) The number of Common Shares the following persons beneficially own
includes the number of Common Shares that may be issued upon exchange
of Units that such person owns, as follows: Richard E. Rainwater --
6,651,202; John C. Goff -- 1,912,970; and Trust Managers and Executive
Officers as a Group -- 8,564,172.

(6) The number of Common Shares the following person beneficially owns
includes the number of Common Shares owned through participation in
the General Partner's Employee Stock Purchase Plan as of April 3,
2002, as follows: John C. Goff -- 2,282; and Executive Officers as a
Group -- 2,282.

(7) The percentage of Common Shares that a person listed in the Beneficial
Ownership table beneficially owns assumes that (i) as to that person,
all Units are exchanged for Common Shares, all Preferred Shares are
exchanged for Common Shares, all Options exercisable within 60 days of
the Record Date are exercised and all Plan Unit Options and Unit
Options exercisable within 60 days of the Record Date are exercised
and the Units so acquired are subsequently exchanged for Common
Shares, and (ii) as to all other persons, no Units are exchanged for
Common Shares, no Preferred Shares are exchanged for Common Shares,
and no Options, Plan Unit Options or Unit Options are exercised.

(8) The number of Common Shares that Mr. Rainwater beneficially owns
includes 743,920 Common Shares and 264 Common Shares that may be
issued upon exchange of Units that Darla Moore, Mr. Rainwater's
spouse, owns. Mr. Rainwater disclaims beneficial ownership of these
Common Shares. In addition, the number of Common Shares that Mr.
Rainwater beneficially owns includes 2,943,744 Common Shares and
6,320,468 Common Shares that may be issued upon exchange of Units that
Mr. Rainwater owns indirectly, including (i) 12,346 Common Shares and
49,506 Common Shares that may be issued upon exchange of Units owned
by Rainwater, Inc., a Texas corporation, of which Mr. Rainwater is a
director and the sole owner, (ii) 6,270,962 Common Shares that may be
issued upon exchange of Units owned by Office Towers LLC, a Nevada
limited liability company, of which Mr. Rainwater and Rainwater, Inc.
own an aggregate 100% interest, and (iii) 2,931,398 Common Shares
owned by the Richard E. Rainwater 1995 Charitable Remainder Unitrust
No. 1, of which Mr. Rainwater is the settlor and has the power to
remove the trustee and designate a successor, including himself.

(9) The number of Common Shares that Mr. Goff beneficially owns includes
(i) 152,560 Common Shares that may be issued upon exchange of Units
that the Goff Family, L.P., a Delaware limited partnership, owns, (ii)
428,572 Common Shares that may be issued upon exchange of Units due to
the vesting of Plan Unit Options and (iii) 300,000 shares of
restricted stock, which will vest (i.e., the restrictions will lapse)
one-third on February 19, 2005, one-third on February 19, 2006 and
one-third on February 19, 2007. Mr. Goff disclaims beneficial
ownership of the Common Shares that may be issued upon exchange of
Units that the Goff Family, L.P. owns in excess of his pecuniary
interest in such Units. Mr. Goff has sole voting power with respect to
the shares of restricted stock.

(10) The number of Units that Mr. Alberts beneficially owns includes 60,000
Common Shares that may be issued upon exchange of Units due to vesting
of Unit Options.

(11) The number of Common Shares that Mr. Moczulski beneficially owns
includes 200 Common Shares that are owned by The Kenneth and Cara
Moczulski Living Trust, of which Mr. Moczulski and his spouse Cara A.
Moczulski are co-settlors, co-beneficiaries and co-trustees. Mr.
Moczulski disclaims beneficial ownership of all shares held by the
Trust in excess of his pecuniary interest in the Trust.

(12) The number of Common Shares that Mr. Dean beneficially owns includes
33,884 Common Shares, 23,000 Common Shares that may be issued upon
exercise of Options, and 4,052 Common Shares of the General Partner's
401(k) Plan, all of which are owned by Theresa E. Black, Mr. Dean's
spouse. Mr. Dean disclaims beneficial ownership of all of Ms. Black's
Common Shares.

(13) The number of Common Shares that Ms. Mody beneficially owns includes
5,000 Common Shares owned by the Mody Family Living Trust, of which
Ms. Mody and her spouse Haji Mody are the Trustees and beneficiaries.

(14) Barrow, Hanley, Mewhinney & Strauss ("Barrow") filed a Schedule 13G
("Barrow Schedule 13G"), as of February 8, 2002, reporting that Barrow
beneficially owns 7,834,250 Common Shares. Barrow holds 4,645,750 of
the 7,834,250 Common Shares for the benefit of its general account and
has sole voting and dispositive power as to such Common Shares. All
information presented above relating to Barrow is based solely on the
Barrow Schedule 13G.

(15) Franklin Resources, Inc. ("Franklin") filed a Schedule 13G/A
("Franklin Schedule 13G/A"), as of January 25, 2002, reporting that
Franklin beneficially owns 6,110,006 Common Shares. Franklin does not
have the power to vote or dispose of any of these Common Shares.
According to the Franklin Schedule 13G/A, the 6,110,006 Common Shares
are beneficially owned by one or more open-end or closed-end
investment companies and other managed accounts. These investment
companies and managed accounts are advised by direct and indirect
advisory subsidiaries (the "Adviser Subsidiaries") of Franklin. Under
the advisory contracts, the Adviser Subsidiaries hold all voting and
dispositive power with regard to these Common Shares and, therefore,
according to the Franklin Schedule 13G/A, may be deemed to have
beneficial ownership of the securities. Each of Charles B. Johnson and
Rupert H. Johnson, Jr. (the "Principal Stockholders") own in excess of
10% of the outstanding common stock of Franklin and are the principal
stockholders of Franklin. Franklin and the Principal Stockholders may
be deemed to be the beneficial owner of securities held by Adviser
Subsidiaries. Each of Franklin, the Adviser Subsidiaries and the
Principal Stockholders disclaim any economic interest in or beneficial
ownership of the securities covered by the Franklin Schedule 13G/A.
Each of Franklin, the Principal Stockholders, and the Adviser
Subsidiaries state in the Franklin Schedule 13G/A that they do not
believe that they are acting as a "group" for purposes of Schedule
13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and that they are not otherwise required to attribute
to each other the "beneficial ownership" of securities held by any of
them or by any persons or entities advised by Adviser Subsidiaries.
All information presented above relating to Franklin is based solely
on the Franklin Schedule 13G/A.

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation paid
or awarded for the years ended December 31, 2001, 2000, and 1999, to the
Company's current Chief Executive Officer and to the four most highly
compensated executive officers of the Company and the General Partner
(collectively, the "Named Executive Officers"). As a result of the Company's
umbrella partnership REIT structure, the General Partner, rather than the
Company, compensates all employees. The Company did not grant any stock
appreciation rights ("SARs") during this period.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------------------ -------------------------------------------------
AWARDS PAYOUTS
---- ---------- --------- ---------------- ------------------------ -------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARDS ($) OPTIONS (#) PAYOUTS ($)
--------------------------- ---- ---------- --------- ---------------- ---------- ----------- ------- ------------

John C. Goff 2001 750,000 750,000 -- -- -- -- 55,171(1)
Chief Executive Officer 2000 684,615 2,000,000 826,700(2) -- -- -- 5,250(3)
1999 355,814(4) 200,000 -- -- 600,000(5) -- 919(3)

Dennis H. Alberts 2001 366,827 353,000 -- -- -- (41,828)(1)
President and Chief 2000 235,577 525,000 550,000(2) -- 700,000(6) -- --
Operating Officer 1999 -- -- -- -- 300,000 -- --

Kenneth S. Moczulski 2001 300,000 270,000 -- -- -- -- 2,520(3)
President of Investments 2000 38,077 25,000 -- -- 350,000 -- --
and Chief Investment Officer 1999 -- -- -- -- -- -- --

David M. Dean 2001 286,346 207,000 -- -- -- -- 16,577(1)
Executive Vice President, 2000 250,000 275,000 276,700(2) -- -- -- 6,133(3)
Law and Administration, 1999 204,339 165,000(7) -- -- 240,000 -- 3,414(3)
and Secretary

Jane E. Mody 2001 238,692 207,000 -- -- 180,000 -- --
Executive Vice President, 2000 -- -- -- -- -- -- --
Capital Markets 1999 -- -- -- -- -- -- --

----------

(1) Amounts represent matching contributions that the General Partner made to
Mr. Goff's, Mr. Albert's and Mr. Dean's individual 401(k) Plan accounts in
the amount of $7,875, $1,404 and $7,893, respectively, and dividends earned
on dividend incentive units ("DIUs") of $47,296, $(43,312) and $8,684,
respectively, that are invested in public mutual funds made available to
the holders by the General Partner. See Note 2 below for an additional
explanation of DIUs.

(2) This amount includes a non-cash distribution for DIUs into separate
interest bearing accounts maintained by the Company for Mr. Goff, Mr.
Alberts and Mr. Dean at December 31, 2000 ($825,000, $550,000 and $275,000,
respectively). The amount of the distribution to any account is based on
the number of DIUs held by the participant, the amount of dividends paid by
the Company (with each DIU entitled to an amount equal to the dividend per
Common Share) and the performance multiples associated with the performance
targets that are achieved or surpassed. The amount also includes interest
on the amounts invested in public mutual funds made available to the
holders by the General Partner. The amounts will be paid to the participant
on or about the fifth anniversary of the date the DIUs were granted. See "
-- Report of the Executive Compensation Committee" for a definition of
DIUs.

(3) Amounts represent matching contributions that the General Partner made to
the individual's 401(k) Plan account.

(4) Amount includes a portion of salary that was paid in January 2000 but
earned in 1999 and inadvertently omitted in the Company's Proxy Statement
for its 2000 annual meeting of shareholders.

(5) Amount includes 200,000 Common Shares, which represents the number of
Common Shares that may be issued following (i) exercise of Plan Unit
Options for Units on a one-for-one basis, and (ii) exchange of Units for
Common Shares on the basis of two Common Shares for each Unit.

(6) Amount includes 300,000 Common Shares, which represents the number of
Common Shares that may be issued following (i) exercise of Unit Options for
Units on a one-for-one basis, and (ii) exchange of Units for Common Shares
on the basis of two Common Shares for each Unit.

(7) Amount includes $45,000 of restricted stock. These Common Shares were
acquired by the General Partner as part of the Company's on-going share
repurchase program and granted to Mr. Dean as restricted stock during the
second quarter of 2000. On March 6, 2002, the restrictions on such stock
were lifted.

The following table provides certain information regarding Options granted
to the Named Executive Officers for the year ended December 31, 2001. The
Company did not grant any SARs during this period.

OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 2001

INDIVIDUAL GRANTS
-----------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM ($)(1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR PRICE($/SH.) DATE 5% 10%
---- ----------- ----------- ------------ ---------- ------ ------
(IN THOUSANDS)

John C. Goff ............ -- -- -- -- -- --
Dennis H. Alberts ....... 700,000(2)(3) 52.45 21.84 March 2011 9,615 24,365

Kenneth S. Moczulski .... -- -- -- -- -- --
David M. Dean ........... -- -- -- -- -- --
Jane E. Mody ............ 180,000(4) 13.49 22.50 February 2011 2,254 5,988

----------

(1) Potential Realizable Value is the value of the granted Options, based on
the assumed annual growth rates of the share price shown during their
10-year Option term. For example, a 5% growth rate, compounded annually,
for Mr. Alberts' grant results in a share price of $35.58 per share, and a
10% growth rate, compounded annually, results in a share price of $56.65
per share. These potential realizable values are listed to comply with the
regulations of the Commission, and the Company cannot predict whether these
values will be achieved. Actual gains, if any, on Option exercises are
dependent on the future performance of the Common Shares.

(2) Amount includes 400,000 Options that vest in equal one-fifth installments
on March 4, 2001, 2002, 2003, 2004 and 2005.

(3) Amount includes 300,000 Common Shares, which represents the number of
Common Shares that may be issued following (i) exercise of Unit Options for
Units on a one-for-one basis, and (ii) exchange of Units for Common Shares
on the basis of two Common Shares for each Unit. Such Unit Options become
fully vested if and when the average fair market value of a Common Share
for the 10 trading days ending with that date reaches $25.00.

(4) Options vest in equal one-fifth installments on February 20, 2002, 2003,
2004, 2005 and 2006.

The following table provides information about Options that the Named
Executive Officers exercised during the year ended December 31, 2001 and Options
that each of them held at December 31, 2001. The Company did not grant any SARs
during this period.

AGGREGATED OPTION EXERCISES DURING 2001
AND OPTION VALUES AT DECEMBER 31, 2001

SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
------------ FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE ------------------------------ -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------- ------------ ------------ ------------ ------------- ------------ -------------
(IN THOUSANDS)

John C. Goff ........... -- -- 428,572(2) 1,028,572(3) 236 1,614
Dennis H. Alberts ...... 60,000 310,650 -- 940,000(4) -- 12
Kenneth S. Moczulski ... -- -- 70,000 280,000 -- --
David M. Dean .......... 24,000 48,180 161,850 175,900 232 331
Jane E. Mody ........... -- -- -- 180,000 -- --

----------

(1) Market value of securities underlying in-the-money Options is based on the
closing price of the Common Shares on December 31, 2001 (the last trading
day of the fiscal year) on the New York Stock Exchange of $18.11, minus the
exercise price.

(2) The number of securities underlying exercisable but unexercised Options
represents 428,572 Common Shares that may be issued following (i) vesting
of Plan Unit Options, (ii) exercise of Plan Unit Options for Units on a
one-for-one basis, and (iii) exchange of Units for Common Shares on the
basis of two Common Shares for each Unit.

(3) The number of securities underlying unexercisable and unexercised options
includes 642,858 Common Shares that may be issued following (i) vesting of
Plan Unit Options, (ii) exercise of Plan Unit Options for Units on a
one-for-one basis, and (iii) exchange of Units for Common Shares on the
basis of two Common Shares for each Unit.

(4) The number of securities underlying unexercisable and unexercised options
includes 300,000 Common Shares that may be issued following (i) vesting of
Plan Unit Options, (ii) exercise of Unit Options for Units on a one-for-one
basis, and (iii) exchange of Units for Common Shares on the basis of two
Common Shares for each Unit (assuming the Company elects to issue Common
Shares rather than pay cash upon such exchange).

EMPLOYMENT AGREEMENT

As part of the transactions in connection with formation of the Company,
the Operating Partnership assumed an Employment Agreement between Rainwater,
Inc. and John C. Goff. The Operating Partnership takes action through the
General Partner. Mr. Goff serves as the sole member of the board of directors of
the General Partner. As of January 1, 2002, Mr. Goff served as Vice Chairman of
the Board of Trust Managers of the Company and as Chief Executive Officer of the
Company and the General Partner, and he was entitled to an annual salary of
$750,000. The term of the Employment Agreement with Mr. Goff would have expired
on April 14, 2002, but a new employment agreement, replacing the prior
employment agreement, was entered into effective February 19, 2002. Pursuant to
the new employment agreement, which will terminate on February 19, 2007, Mr.
Goff is entitled to an annual salary of $750,000 and a bonus as determined in
the discretion of the Compensation Committee of the General Partner. In
addition, pursuant to the employment agreement, Mr. Goff was provided the right
to earn (i) 300,000 shares of restricted stock, one-third of which will be
earned on each of the third, fourth and fifth anniversaries of Mr. Goff's
employment agreement and (ii) 1,500,000 Unit Options, one-fifth of which will be
earned on each of the first through fifth anniversaries of Mr. Goff's employment
agreement. The Units underlying such Unit Options are convertible into two
Common Shares of the Company upon the satisfaction of certain conditions.

The salary under the Employment Agreement, which is not subject to a cap,
may be increased at the discretion of the Operating Partnership, although at its
request, the Executive Compensation Committee of the Company may

review and ratify all such increases in salary. The Operating Partnership
similarly determines any bonus to be paid under the Employment Agreement,
although at its request, the Executive Compensation Committee may review and
ratify all such bonuses granted to Mr. Goff.

AGREEMENTS NOT TO COMPETE

The Company and the Operating Partnership are dependent on the services of
Richard E. Rainwater and John C. Goff. Mr. Rainwater serves as Chairman of the
Board of Trust Managers but has no employment agreement with the Company and,
therefore, is not obligated to remain with the Company for any specified term.
In connection with the initial public offering of the Common Shares in May 1994,
each of Messrs. Rainwater and Goff entered into a Noncompetition Agreement with
the Company that restricts him from engaging in certain real estate-related
activities during specified periods of time.

The restrictions that Mr. Rainwater's Noncompetition Agreement imposes will
terminate one year after the later to occur of (i) the date on which Mr.
Rainwater ceases to serve as a trust manager of the Company, and (ii) the date
on which Mr. Rainwater's beneficial ownership of the Company (including Common
Shares and Units) first represents less than a 2.5% ownership interest in the
Company. The restrictions that Mr. Goff's Noncompetition Agreement imposes will
terminate one year after Mr. Goff first ceases to be a trust manager or an
executive officer of the Company. The Noncompetition Agreements do not, among
other things, prohibit Messrs. Rainwater and Goff from engaging in certain
activities in which they were engaged at the time of formation of the Company in
1994 or from making certain passive real estate investments.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers, trust
managers and persons who own more than 10% of the Common Shares or the Preferred
Shares to file reports of ownership on Form 3 and changes in ownership on Forms
4 and 5 with the Commission and the New York Stock Exchange. The Commission
rules also require such officers, trust managers and 10% holders to furnish the
Company with copies of all Section 16(a) forms that they file.

Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, trust managers and
10% shareholders were complied with for the fiscal year ended December 31, 2001,
except that Mr. Rainwater filed on an untimely basis one Statement of Changes in
Beneficial Ownership on Form 4 reporting a single transaction involving the
private transfer to an individual of 7,548 units of the Operating Partnership
(equivalent to 15,096 shares of the Company) to satisfy a preexisting
contractual obligation to the transferee.

Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the Report of the Audit Committee, the Report of the Executive
Compensation Committee and the Performance Graph, each of which appears below,
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission, nor shall such information be incorporated by reference into any
previous or future filings under the Securities Act of 1933 or the Exchange Act,
except to the extent that the Company incorporates it by specific reference into
any such filings.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is composed of Messrs. Frank, Quinn and Rowsey. A
majority of the full Board of Trust Managers selects members of the Audit
Committee.

Statement of Policy. The Audit Committee shall provide assistance to the
Board of Trust Managers in fulfilling its oversight responsibility to the
shareholders, potential shareholders, the investment community, and

others relating to the Company's financial statements and the financial
reporting process, the systems of internal accounting and financial controls,
the internal audit function, the annual independent audit of the Company's
financial statements, and the legal compliance and ethics programs as
established by management and the Board of Trust Managers. In so doing, it is
the responsibility of the Audit Committee to maintain free and open
communication between the Audit Committee, the independent auditors, the
internal auditors and management of the Company. In discharging its oversight
role, the Audit Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel of
the Company and the power to retain outside counsel, or other experts for this
purpose.

Responsibility - Accounting, Auditing, and Financial Reporting Practices of
the Company. In accordance with the Audit Committee Charter adopted by the Board
of Trust Managers of the Company, the Audit Committee assists the Board of Trust
Managers in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, and financial reporting practices of the
Company. During fiscal year 2001, the Audit Committee met seven times, and Mr.
Frank, the Committee chair, as representative of the Committee, discussed the
interim financial information contained in each quarterly earnings announcement
with Jerry R. Crenshaw, Senior Vice President, Chief Financial and Accounting
Officer of the Company, and Arthur Andersen LLP, the Company's independent
auditors (the "Independent Auditors"), prior to public release.

Responsibility - Audit Process. In discharging its oversight responsibility
as to the audit process, the Audit Committee obtained from the Independent
Auditors a formal written statement describing all relationships between the
Independent Auditors and the Company that might bear on the Independent
Auditors' independence consistent with Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees" and discussed with the
Independent Auditors any relationships that may impact their objectivity and
independence. The Audit Committee has satisfied itself that such relationships
and the provision of non-audit services to the Company is compatible with the
Independent Auditors' independence. The Audit Committee also discussed with
management, Deloitte & Touche LLP, the Company's internal auditors (the
"Internal Auditors") and the Independent Auditors the quality and adequacy of
the Company's internal controls and the internal audit function's organization,
responsibilities, budget, and staffing. The Audit Committee reviewed with both
the Independent Auditors and the Internal Auditors its audit plans, audit scope,
and identification of audit risks.

Independent Auditors/Internal Audit. The Audit Committee discussed and
reviewed with the Independent Auditors all communications required by generally
accepted auditing standards, including those described in Statement on Auditing
Standards No. 61, as amended by SAS 90, "Communication with Audit Committees"
and, with and without management present, discussed and reviewed the results of
the Independent Auditors' examination of the financial statements. The Audit
Committee also discussed the results of the internal audit examinations.

Review of Financial Statements. The Audit Committee reviewed and discussed
the audited financial statements of the Company as of and for the fiscal year
ended December 31, 2001, with management and the Independent Auditors.
Management has the responsibility for the preparation of the Company's financial
statements and the Independent Auditors have the responsibility for the
examination of those statements.

Review of Special Circumstances Relating to the Independent Auditors. The
Audit Committee has closely monitored the congressional investigations and
public disclosures concerning the bankruptcy filing of Enron Corp. and the
Independent Auditors' involvement as independent auditor of Enron Corp. In
addition, the Audit Committee has met with representatives of the Independent
Auditors to discuss these recent events. The Audit Committee, in its discretion,
may direct the appointment of different Independent Auditors at any time during
the year if the Audit Committee believes that such an appointment would be in
the best interests of our shareholders. Although members of the Audit Committee
have not reached a decision regarding our Independent Auditors for 2002, they
may consider engaging an independent accounting firm other than Arthur Andersen
LLP for reasons that are unrelated to Arthur Andersen LLP's prior audits of our
financial statements. For this reason, we will not be asking shareholders to
ratify Arthur Andersen LLP as our Independent Auditors at the Meeting. If
members of the Audit Committee decide to appoint different Independent Auditors,
we will promptly provide the disclosure required by the regulations of the
Commission.

Further Action Taken by Audit Committee. The Audit Committee has discussed
and reviewed with outside counsel the procedures and practices that it should
utilize in order to effectively fulfill its oversight responsibility. It has
reviewed the required documentation relating to its oversight of the audit
process, including the audited financial statements of the Company, the
committee's Charter and any relevant analysts' reports. In addition, the Audit
Committee has inquired of management and the Independent Auditors as to any
significant risks or exposures for the Company, assessed the steps taken by
management to minimize these risks and exposures, reviewed with management and
the Independent Auditors the adequacy and effectiveness of the accounting and
financial controls of the Company and elicited any recommendations for the
improvement of such internal control procedures.

Recommendation. Based on the above-mentioned review and discussions with
management and the Independent Auditors, the Audit Committee recommended to the
Board that the Company's audited financial statements be included in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, for filing with
the Commission.

AUDIT COMMITTEE

Anthony M. Frank
William F. Quinn
Paul E. Rowsey, III

REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE

The Executive Compensation Committee is composed of Messrs. Frank and
Rowsey. A majority of the full Board of Trust Managers select members of the
Executive Compensation Committee.

Compensation Philosophy and Objectives. The Executive Compensation
Committee determines the compensation for the Company's executive officers and
administers the stock incentive and other compensation plans that the Company
adopts. In addition, the Executive Compensation Committee makes recommendations
to the Board of Trust Managers, acting for the Company in its capacity as the
sole stockholder of the General Partner regarding certain compensation decisions
of the sole director of the General Partner with respect to the compensation of
the executive officers of the General Partner. For purposes of the following
discussion, the term "Company" includes, unless the context otherwise requires,
the Operating Partnership and the other subsidiaries of the Company and the
Operating Partnership, in addition to the Company.

The philosophy of the Company's compensation program is to employ, retain
and reward executives capable of leading the Company in achieving its business
objectives. These objectives include enhancing shareholder value, maximizing
financial performance, preserving a strong financial posture, increasing the
value of the Company's assets and positioning its assets and business in
geographic markets offering long-term growth opportunities. The accomplishment
of these objectives is measured against the conditions characterizing the
industry within which the Company operates. In implementing the Company's
compensation program, it generally is the policy of the Executive Compensation
Committee to seek to qualify executive compensation for deductibility by the
Company for purposes of Section 162(m) of the Code to the extent that such
policy is consistent with the Company's overall objectives and executive
compensation policy.

Executive Officer Compensation. The compensation of the executive officers
of the Company consists of a current component and a long term incentive. The
executive officers, in addition to their regular salaries, may be compensated
for the current performance of the Company in the form of (i) cash bonus awards,
generally pursuant to the Annual Incentive Plan ("Bonus Plan"), and (ii)
dividend incentive units under the Dividend Incentive Unit Plan ("DIU Plan").
The Bonus Plan and the DIU Plan were adopted by the General Partner in March
2000 in order to provide appropriate incentives and rewards for services
rendered by officers to the Company. The General Partner adopted the plans with
the approval of the Executive Compensation Committee and the Board of Trust
Managers, based on recommendations contained in the October 1999 report of FPL
Associates, the consultant hired by the Company to perform an analysis of
compensation of the executive officers of the Company. The Bonus Plan and the
DIU Plan, together with recommendations by the management of the Company, were
used by the General Partner and its Compensation Committee in determining the
executive compensation for 2001 and will be used in determining the future
current component of executive compensation. The Compensation Committee of the
General Partner (the "Committee") is also composed of Messrs. Frank and Rowsey
and is appointed by the Board of Directors of the General Partner.

Under the Bonus Plan, at the beginning of the year, the Committee
designated (i) the positions covered by the Bonus Plan, (ii) the minimum and
maximum annual incentive opportunity or bonus that the individual holding each
position is eligible to earn for the year, and (iii) the performance necessary
to earn each level of bonus in three components. One of these components, the
Corporate component, provides for a certain portion of the bonus to be paid
based upon the Company's achievement of the thresholds relating to total return
to shareholders and FFO for the year. FFO, based on the revised definition
adopted by the Board of Governors of the National Association of Real Estate
Investment Trusts, effective January 1, 2000, and as used in this document,
means net income (loss) (determined in accordance with generally accepted
accounting principles ("GAAP")) (i) excluding gains (or losses) from sales of
depreciable operating property, (ii) excluding extraordinary items (as defined
by GAAP), (iii) plus depreciation and amortization of real estate assets, and
(iv) after adjustments for unconsolidated partnerships and joint ventures. Most
positions also are assigned a second component, the Functional Unit component,
which provides for a certain portion of the bonus to be earned upon the
achievement of individualized measures of functional unit performance. For each
officer, a third component, the Individual component, provides for a certain
portion of the officer's bonus to be earned based upon an evaluation of the
officer's individual performance for the year.

Under the DIU Plan, prior to the beginning of the year, the Committee
designates each employee eligible to receive dividend incentive units and the
number of Units allocated to the employee. In addition, the Committee adopts
performance targets for the Company for the year based upon total return to
shareholders and FFO for the year, as well as a performance multiple for each
target. Pursuant to the DIU Plan, the Committee is required to determine the
extent to which those targets were achieved or surpassed and, in the event that
targets are achieved, the amount to be credited to the account of each
participant who was employed by the Company on the last day of the year; this
amount is equal to the annual dividends that the participant would have received
if he held one share of stock in the Company for each Unit held in his account,
multiplied by the number of Units the participant held throughout the year,
multiplied by the performance multiple associated with the targets achieved for
the year.

Executive officers of the General Partner are also eligible to participate,
on the same basis as other employees, in the employer matching provision of the
profit sharing plan that the General Partner established, whereby employees may
save for their future retirement on a tax-deferred basis through the Section
401(k) savings feature of the plan, with the General Partner contributing an
additional percentage of the amount each employee saves. Such executive officers
are also eligible to participate in the other employee benefit and welfare plans
that the General Partner maintains on the same terms as non-executive personnel
who meet applicable eligibility criteria, subject to any legal limitations on
the amounts that may be contributed or the benefits that may be payable under
such plans.

The long term incentives awarded by the Company consist of (i) restricted
stock grants, either under the 1995 Plan or as a result of open market purchases
by the General Partner, and (ii) Options under the 1995 Plan and the 1996
Operating Partnership Incentive Plan and pursuant to the provisions of the
partnership agreement for the Operating Partnership.

Compensation Awards for 2001. The performance thresholds established by the
Committee for 2001 under the Bonus Plan, together with the performance of the
Company and the Operating Partnership in light of conditions characterizing the
REIT industry generally, were a key consideration in the deliberations of the
Committee regarding the salary increases and bonuses awarded in 2001. While the
Committee determined that the FFO and total return to shareholders targets
established under the Bonus Plan for 2001 with respect to the Corporate
component had not been met, it also considered other factors, including industry
business conditions, the economic slowdown which began at mid-year and
accelerated following the tragic events of September 11th, and the Company's
success in achieving short-term and long-term goals and objectives, such as the
completion of the repositioning of the Company called for under the 1999
strategic plan, the performance of the office portfolio, the completion of $970
million of debt refinancing, and the acquisition of the hotel/resort and
residential development investments operated by Crescent Operating, Inc. The
Committee also considered the General Partner's determinations regarding each
officer's achievement of the Functional Unit goals set for the office as well as
each officer's Individual performance for the year. Bonuses aggregating
$1,621,000 were paid to executive officers other than the Chief Executive
Officer of the Company, who does not participate in the Bonus Plan. The
Committee also gave consideration to the Company's achievement of specified
business objectives when reviewing 2002 executive officer salary increases.

Based on the Company's performance for 2001, the Committee determined that
none of the 2001 targets under the DIU Plan had been achieved, and thus, that no
payments would be made to plan participants with respect to 2001 under the DIU
Plan.

Long Term Incentives. Options were used in 2001 to incentivize certain
officers and other key personnel and to retain them through the potential of
capital gains and equity buildup in the Company. The Executive Compensation
Committee determined the number of Options based upon its subjective evaluation
of each executive or employee's ability to influence the Company's long-term
growth and profitability. All Options were issued at a price not less than the
market price of the Common Shares on the date of grant.

With respect to the management team (other than the Chief Executive
Officer), on February 18, 2002, the General Partner, with the approval of the
Committee, provided certain rights to earn Options as part of an overall long
term compensation package (in addition to current salary, bonus and DIU awards)
to more closely align the actions of management with shareholder considerations
and further instill shareholder values in management's actions. On that date,
the General Partner granted to the senior management team (other than the CEO)
the right to earn options on 1,250,000 Units in the Operating Partnership over a
five-year term bearing a strike price equal to the New York Stock Exchange
closing price on February 19, 2002 (each Unit being convertible into two Common
Shares of the Company upon the satisfaction of certain conditions). The Company,
the Executive Compensation Committee and the Committee do not intend at this
time to provide to the management team any additional rights to earn Options for
the next two to three years.

CEO Base Salary and Bonus for 2001. Mr. Goff serves as the Chief Executive
Officer of the Company and as the Vice Chairman of the Board of Trust Managers
for the Company. Mr. Goff's 2001 base annual salary was $750,000 and was based
upon his employment agreement with the Operating Partnership originally entered
into in April 1994. The Committee also approved a bonus of $750,000 for Mr. Goff
with respect to 2001 based upon the Committee's evaluation of a number of
factors, including industry business conditions, the economic slowdown which
began at mid-year and accelerated following the tragic events of September 11th,
and the Company's success in achieving short-term and long-term goals and
objectives, such as the realignment and strengthening of the Company's
management team, the completion of the repositioning of the Company called for
under the 1999 strategic plan, the continuing success of the share repurchase
program, the performance of the office portfolio, the completion of $970 million
of debt refinancing, and the acquisition of the hotel/resort and residential
development investments operated by Crescent Operating, Inc.

Long Term Incentive and New Contract for Chief Executive Officer. On
February 18, 2002, Mr. Goff and the Committee agreed to the terms of a new
five-year employment contract providing for a long term compensation package
including an annual salary of $750,000 and DIU awards and annual bonus to be
determined by the Committee and the Board of Trust Managers of the Company. Also
on February 18, 2002 and as part of the overall long term compensation package
outlined in the new employment agreement, (i) the General Partner, with the
approval of the Committee, provided to Mr. Goff, the right to earn options on
1,500,000 Units in the Operating Partnership over a five-year term bearing a
strike price equal to the New York Stock Exchange closing price on February 19,
2002 (each Unit being convertible into two Common Shares of the Company upon the
satisfaction of certain conditions) and (ii) the Executive Compensation
Committee provided to Mr. Goff the right to earn 300,000 shares of restricted
stock in the Company, one-third of which shall be earned on each of the third,
fourth and fifth anniversary of such date. The Executive Compensation Committee
and the Committee made their determinations based upon their subjective
evaluation of Mr.Goff's ability in the future to lead the Company's long-term
growth and profitability. The Executive Compensation Committee and the Committee
also considered the long term compensation packages provided to the chief
executive officers of other real estate companies that the Committee considered
to be comparable to the Company. The Committee and the Executive Compensation
Committee believe that the Unit Options and restricted stock represent an
effective incentive for Mr. Goff to remain with the Company and create value for
the shareholders. The Board of Trust Managers has considered and ratified each
of the foregoing determinations relating to Mr. Goff's 2001 and long term
compensation package.

EXECUTIVE COMPENSATION COMMITTEE

Anthony M. Frank
Paul E. Rowsey, III

PERFORMANCE GRAPH

The following line graph sets forth a comparison of the percentage change in
the cumulative total shareholder return on the Common Shares compared to the
cumulative total return of the NAREIT Equity REIT Return Index, the S&P 500
Index and SNL Securities LP Office REITs Index for the period December 31, 1996,
through December 31, 2001. The graph depicts the actual increase in the market
value of the Common Shares relative to an initial investment of $100 on December
31, 1996, assuming a reinvestment of cash distributions.

[PERFORMANCE GRAPH]

PERIOD ENDING
INDEX 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01

Crescent Real Estate Equities
Company 100.00 157.42 97.28 86.28 116.92 104.21
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
SNL Office REITs 100.00 129.89 103.84 104.37 141.93 149.08
NAREIT All Equity REIT Index 100.00 120.26 99.21 94.63 119.59 136.24

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Frank and Rowsey, who are the sole members of the Executive
Compensation Committee of the Board of Trust Managers, have borrowed certain
funds from the Operating Partnership in connection with the exercise of Options,
as described in "Certain Relationships and Related Transactions" below.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For purposes of the following discussion, the term "Company" includes,
unless the context otherwise requires, the Operating Partnership and the other
subsidiaries of the Company and the Operating Partnership, in addition to the
Company.

Loans to Trust Managers and Officers for Exercise of Options and Plan Options

LOANS TO TRUST MANAGERS FOR EXERCISE OF OPTIONS. Effective July 17, 1996,
February 2, 1998, June 12, 1998 and November 26, 1999, the Company loaned to Mr.
Frank, an independent trust manager of the Company, $187,425, $45,298, $120,869
and $45,297 respectively, on a recourse basis, pursuant to the 1994 Plan and the
1995 Plan. Mr. Frank used the proceeds of the first loan, together with $75.00
in cash, to acquire 15,000 Common Shares pursuant to the exercise of 15,000
Options that were granted to him on May 5, 1994 under the 1994 Plan. Mr. Frank
used the proceeds of the second loan, together with $28.00 in cash, to acquire
2,800 Common Shares pursuant to the exercise of 2,800 Options that were granted
to him on March 14, 1996 under the 1995 Plan. Mr. Frank used the proceeds of the
third loan, together with $56.00 in cash, to acquire 5,600 Common Shares
pursuant to the exercise of 2,800 Options that were granted to him on March 14,
1996 under the 1995 Plan and 2,800 Options that were granted to him on June 9,
1997 under the 1995 Plan. Mr. Frank used the proceeds of the fourth loan,
together with $28.00 in cash, to acquire 2,800 Common Shares pursuant to the
exercise of 2,800 Options that were granted to him on March 14, 1996 under the
1995 Plan.

On July 17, 2001, the loan that Mr. Frank entered into on July 17, 1996
matured and was extended for an additional three years, until July 17, 2004, at
its original interest rate of 6.115%. Each of the loans made to Mr. Frank is
payable, interest only, on a quarterly basis with a final payment of all accrued
and unpaid interest, plus the entire original principal balance, due on July 17,
2004, February 2, 2003, and June 12, 2003 and November 1, 2004. Mr. Frank's
loans are secured by 15,000 Common Shares, 2,800 Common Shares, 5,600 Common
Shares and 2,800 Common Shares, respectively, that Mr. Frank owns. Prior to
November 1, 2001, each loan bore interest at a fixed annual rate based on the
weighted average interest rate of the Company at the end of the quarter
preceding the quarter in which the loan was made, plus 50 basis points.
Effective as of November 1, 2001, each loan was amended to bear interest over
the remainder of its term at 2.7% per annum, the applicable Federal rate for
loans with remaining terms of three years or less, and Mr. Frank exercised his
option to reduce the remaining term of the loan scheduled to expire on November
26, 2004 to provide that the loan would expire on November 1, 2004). As of
December 31, 2001, no accrued interest was outstanding and unpaid on Mr. Frank's
loans.

Effective June 10, 1997, the Company loaned to Mr. Rowsey, an independent
trust manager of the Company, $419,997 on a recourse basis, pursuant to the 1994
Plan and the 1995 Plan. Mr. Rowsey used the proceeds of the loan, together with
$328.00 in cash, to acquire 30,000 Common Shares pursuant to the exercise of
30,000 Options that were granted to him on May 5, 1994 under the 1994 Plan, and
2,800 Common Shares pursuant to the exercise of 2,800 Options that were granted
to him on March 14, 1996 under the 1995 Plan. Mr. Rowsey paid the Company in
full for the principal balance and interest due on March 27, 2002 (an aggregate
amount of $437,384.06).

LOANS TO OFFICERS FOR EXERCISE OF OPTIONS AND PLAN UNIT OPTIONS. Effective
November 4, 1999, the Company loaned $26,272,631.46 to John C. Goff, on a
recourse basis, pursuant to the 1994 Plan, the 1995 Plan and the Unit Plan. Mr.
Goff used the proceeds of the loan, together with $4,452.04 in cash, to acquire
195,204 Common Shares pursuant to the exercise of 195,204 Options that were
granted to him on April 27, 1994 under the 1994 Plan, 250,000 Common Shares
pursuant to the exercise of 250,000 Options that were granted to him on June 12,
1995 under the 1995 Plan and 571,428 Operating Partnership Units pursuant to the
exercise of 571,428 Plan Unit Options that were granted to him on July 16, 1996
pursuant to the Unit Plan. The Board of Trust Managers has capped the amount
that Mr. Goff may borrow from the Company at $30,000,000.

Effective November 5, 1999, February 16, 2000, March 14, 2000, July 31,
2001 and January 31, 2002, the Company loaned to David M. Dean, $32,475.00,
$10,242.00, $97,065.00, $523,260.00 and $1,875,735.00, respectively, on a
recourse basis, pursuant to the 1994 Plan and the 1995 Plan. Mr. Dean used the
proceeds of the first loan, together with $25.00 in cash, to acquire 2,500
Common Shares pursuant to the exercise of 2,500 Options that were granted to him
on July 27, 1994 under the 1994 Plan. Mr. Dean used the proceeds of the second
loan, together with $8.00 in cash, to acquire 800 Common Shares pursuant to the
exercise of 800 Options that were granted to him on February 6, 1995 under the
1994 Plan. Mr. Dean used the proceeds of the third loan, together with $60.00 in
cash, to acquire 6,000 Common Shares pursuant to the exercise of 6,000 Options
that were granted to him on March 14, 1996 under the 1995 Plan. Mr. Dean used
the proceeds of the fourth loan, together with

$240.00 in cash, to acquire 24,000 Common Shares pursuant to the exercise of
24,000 Options that were granted to him on November 19, 1996 under the 1995
Plan. Mr. Dean used the proceeds of the fifth loan, together with $1,140.00 in
cash, to acquire 6,000 Common Shares pursuant to the exercise of 6,000 Options
that were granted to him on March 14, 1996 under the 1995 Plan, 12,000 Common
Shares pursuant to the exercise of 12,000 Options that were granted to him on
November 19, 1996 under the 1995 Plan and 96,000 Common Shares pursuant to the
exercise of 96,000 Options that were granted to him on November 5, 1999 under
the 1995 Plan.

Effective November 5, 1999, March 14, 2000 and January 31, 2002, the
Company loaned to Theresa E. Black, Mr. Dean's spouse, $87,358.50, $29,119.50
and $408,379.50, respectively, on a recourse basis, pursuant to the 1995 Plan.
Ms. Black used the proceeds of the first loan, together with $54.00 in cash, to
acquire 5,400 Common Shares pursuant to the exercise of 5,400 Options that were
granted to her on March 14, 1996 under the 1995 Plan. Ms. Black used the
proceeds of the second loan, together with $18.00 in cash, to acquire 1,800
Common Shares pursuant to the exercise of 1,800 Options that were granted to her
on March 14, 1996 under the 1995 Plan. Ms. Black used the proceeds of the third
loan, together with $258.00 in cash, to acquire 1,800 Common Shares pursuant to
the exercise of 1,800 Stock Options that were granted to her on March 14, 1996
under the 1995 Plan and 24,000 Common Shares pursuant to the exercise of 24,000
Options that were granted to her on November 5, 1999 under the 1995 Plan.

Effective November 5, 1999 and January 31, 2002, the Company loaned to
Jerry R. Crenshaw, Jr. $78,723.00 and $1,738,275.00, respectively, on a recourse
basis, pursuant to the 1994 Plan and the 1995 Plan. Mr. Crenshaw used the
proceeds of the first loan, together with $52.00 in cash, to acquire 1,600
Common Shares pursuant to the exercise of 1,600 Options that were granted to him
on February 6, 1995 under the 1994 Plan and 3,600 Common Shares pursuant to the
exercise of 3,600 Options that were granted to him on March 14, 1996 under the
1995 Plan. Mr. Crenshaw used the proceeds of the second loan, together with
$1,100.00 in cash, to acquire 110,000 Common Shares pursuant to the exercise of
110,000 Options that were granted to him on November 5, 1999 under the 1995
Plan.

Effective January 24, 2000, October 31, 2000 and July 31, 2001, the Company
loaned to John L. Zogg, Jr. $637,090.00, $206,993.00 and $1,539,897.50,
respectively, on a recourse basis, pursuant to the 1994 Plan and the 1995 Plan.
Mr. Zogg used the proceeds of the first loan, together with $410.00 in cash, to
acquire 1,000 Common Shares pursuant to the exercise of 1,000 Options that were
granted to him on April 27, 1994 under the 1994 Plan, 16,000 Common Shares
pursuant to the exercise of 16,000 Options that were granted to him on August 1,
1995 under the 1995 Plan and 24,000 Common Shares pursuant to the exercise of
24,000 Options that were granted to him on March 14, 1996 under the 1995 Plan.
On June 7, 2001, Mr. Zogg sold 100 such Common Shares and used all such proceeds
(in the amount of $1,618.75) to reduce the principal amount of the first loan to
$635,471.25. Mr. Zogg used the proceeds of the second loan, together with
$132.00 in cash, to acquire 1,200 Common Shares pursuant to the exercise of
1,200 Options that were granted to him on February 6, 1995 under the 1994 Plan,
4,000 Common Shares pursuant to the exercise of 4,000 Options that were granted
to him on August 1, 1995 under the 1995 Plan and 8,000 Common Shares pursuant to
the exercise of 8,000 Options that were granted to him on March 14, 1996 under
the 1995 Plan. Mr. Zogg used the proceeds of the third loan, together with
$790.00 in cash, to acquire 8,000 Common Shares pursuant to the exercise of
8,000 Options that were granted to him on March 14, 1996 under the 1995 Plan,
6,000 Common Shares pursuant to the exercise of 6,000 Options that were granted
to him on November 19, 1996 under the 1995 Plan, 40,000 Common Shares pursuant
to the exercise of 40,000 Options that were granted to him on October 19, 1998
under the 1995 Plan and 25,000 Common Shares pursuant to the exercise of 25,000
Options that were granted to him on November 5, 1999 under the 1995 Plan. On
July 1, 2001, Mr. Zogg paid the Company in full for the principal balance and
interest due on the October 31, 2000 loan (an aggregate of $215,711.70).

Effective April 17, 2001, the Company loaned to Dennis H. Alberts
$1,083,150.00, on a recourse basis, pursuant to the 1995 Plan. Mr. Alberts used
the proceeds of the loan, together with $600.00 in cash, to acquire 60,000
Common Shares pursuant to the exercise of 60,000 Options that were granted to
him on April 17, 2000 under the 1995 Plan.

Mr. Goff's loan is secured by 400,000 Common Shares, 300,000 shares of
restricted stock and 1,500,000 Unit Options that Mr. Goff owns. Mr. Goff has
assigned the dividends that he will receive on the 300,000 shares of restricted
stock to payment of future interest due on his loan. In addition, Mr. Goff is
required to use the net proceeds from the sale of any of the 300,000 shares of
restricted stock or the 1,500,000 Units underlying the 1,500,000 Unit Options to
pay down the amount of his loan. Mr. Dean's loans are secured by 2,500 Common
Shares, 800 Common Shares, 6,000 Common Shares, 24,000 Common Shares and 114,000
Common Shares, respectively, that Mr. Dean owns. Mr. Crenshaw's loans are
secured by 5,200 Common Shares and 110,000 Common Shares, respectively, that Mr.
Crenshaw owns. Ms. Black's loans are secured by 5,400 Common Shares, 1,800
Common Shares and 25,800 Common Shares, respectively, that Ms. Black owns. Mr.
Zogg's loans are secured by 40,900 Common Shares, 13,200 Common Shares and
79,000 Common Shares, respectively, that Mr. Zogg owns. All of the
above-referenced loans are full recourse.

Prior to November 1, 2001, each of the loans made to Mr. Goff, Mr. Dean,
Mr. Crenshaw, Ms. Black, Mr. Zogg and Mr. Alberts accrued interest at a fixed
annual rate based on the weighted average interest rate of the Company at the
end of the quarter preceding the quarter in which the loan was made, plus 50
basis points. Effective as of November 1, 2001, each loan was amended to bear
interest over the remainder of its term at 2.7% per annum, the applicable
Federal rate for loans with remaining terms of three years or less, and each
holder whose loan had a remaining term of more than three years exercised the
holder's option to reduce the remaining term of each such loan to reduce the
remaining term of the loan to three years. As of December 31, 2001, no accrued
interest was outstanding and unpaid on any of these loans.

Loans and Contributions to DBL Holdings, Inc. ("DBL")

As of April 15, 2002, the Company owned 97.44% of DBL, with the remaining
2.56% economic interest in DBL (including 100% of the voting interest in DBL)
held by John Goff. Originally, Mr. Goff contributed his voting interests in
Houston Area Development Corp. ("HADC") and Mira Vista Development Corp.
("MVDC"), two of the Company's residential development corporations, for his
interest in DBL.

DBL has two wholly owned subsidiaries, DBL-ABC, Inc. and DBL-CBO, Inc., the
assets of which are described in the following paragraphs, and DBL directly
holds 66% of the voting stock, representing a 4% economic interest, in MVDC and
HADC.

Since June 1999, the Company has contributed approximately $23.8 million to
DBL in the form of cash and loans. These funds were used by DBL to make an
equity contribution to DBL-ABC, which committed to purchase a limited
partnership interest representing a 12.5% interest in G2 Opportunity Fund, LP
("G2"). G2 was formed for the purpose of investing in commercial mortgage backed
securities and other commercial real estate investments and is managed and
controlled by an entity (the "G2 General Partner") that is owned equally by
Goff-Moore Strategic Partners, L.P. ("GMSP") and GMAC Commercial Mortgage
Corporation. The G2 General Partner is entitled to an annual asset management
fee. Additionally, the G2 General Partner has a 1% interest in profits and
losses of G2 and, after payment of specified amounts to partners, a 50% interest
in G2. The ownership structure of the entity that ultimately controls GMSP
consists of 50% ownership by Darla Moore, who is married to Richard Rainwater,
Chairman of the Board of Trust Managers of the Company, and 50% by John Goff,
Chief Executive Officer of the Company. In addition, Mr. Rainwater is a limited
partner of GMSP. At April 15, 2001, DBL had an approximately $14.1 million
investment in G2 and had repaid in full the loans from the Company.

On March 31, 1999, DBL-CBO acquired a $5.97 million aggregate principal
amount of Class C-1 Notes issued by Juniper CBO 1999-1 Ltd., a Cayman Islands
limited liability company (the "Juniper Notes"). DBL-CBO obtained the funds to
purchase the Juniper Notes by selling all of the equity interest in DBL-CBO (the
"Equity Interest") to DBL for $6.0 million. DBL, in turn, obtained the purchase
price for the Equity Interest pursuant to a $6.0 million loan agreement and
related term note from the Company that was secured by the Equity Interest. The
loan accrued interest at the rate of 12% per annum and was paid in full in March
2001.

Loans to Residential Development Corporations

HADC AND MVDC. As of March 31, 2002, the Company owned 94% of the
outstanding stock (all of which is nonvoting) of HADC and MVDC. Mr. Goff is a
director of both HADC and MVDC. In addition, DBL, in which Messrs. Rainwater and
Goff are investors, owned 4% of HADC and MVDC as of March 31, 2002.

Loans to HADC and MVDC. On May 5, 1994, the Company made a loan to each of
HADC and MVDC, with each loan in the original principal amount of $14.4 million
and bearing interest at a rate of 12.5% per annum. Originally, each of these
loans was scheduled to mature in May 2001. The HADC loan was amended January 16,
1997 to extend the maturity date to May 5, 2006. MVDC has repaid its loan in
full.

On January 16, 1997, the Company entered into a revolving development loan
agreement with HADC, pursuant to which the Company agreed to loan up to an
additional $5.0 million to HADC at an interest rate of 14% per annum. As of
December 31, 2001, this revolving loan was amended to reduce the principal
amount to $2.5 million and to reduce the interest rate to 12% per annum. The
maturity date of the revolving loan is January 27, 2003. As of March 31, 2002,
$250,063 was outstanding under this loan.

The aggregate outstanding balance of the loans to HADC as of March 31, 2002
was $11.9 million.

CRESCENT RESORT DEVELOPMENT, INC. ("CRD"). The Company owns 90% of the
outstanding stock (all of which is non-voting) of CRD, a Delaware corporation,
and COPI Colorado owns 10% of the outstanding stock (all of which is voting
stock) of CRD. On February 14, 2002, the Company acquired the 60% general
partner interest in COPI Colorado previously owned by COPI. As of December 31,
2001, the following credit facilities that the Company extended to CRD were
outstanding: (i) a $56.2 million line of credit that matures in August 2004 and
bears interest at the rate of 11.5% per annum, (ii) a $40 million line of credit
that matures in December 2006 and bears interest at the rate of 11.5% per annum
and (iii) a $72 million line of credit. The aggregate outstanding balance of
these facilities as of December 31, 2001 was $181 million, and they are
cross-defaulted and cross-collateralized with CRD's interests in the real estate
development companies and resort management company in which the loan proceeds
have been invested.

As of December 31, 2001, the Company had guaranteed approximately $1.3
million of mortgage loan indebtedness of a general partnership in which CRD's
wholly owned subsidiary holds a non-managing minority interest.

Transactions with COPI

MANAGEMENT AND GENERAL BUSINESS RELATIONSHIPS. In April 1997, the Company
established COPI to be the lessee and operator of certain assets to be acquired
by the Company and to perform the Intercompany Agreement, pursuant to which each
party agreed to provide the other with rights to participate in certain
transactions. The Company was not permitted to operate or lease these assets
under then-existing federal income tax laws applicable to REITs.

Messrs. Rainwater and Goff are, respectively, the Chairman of the Board and
the Vice Chairman of the Board of the Company and, until February 14, 2002, were
also, respectively, the Chairman of the Board and the Vice Chairman of the Board
of COPI. In addition, Mr. Goff serves as the Chief Executive Officer of the
Company and the General Partner and as the sole director of the General Partner
and, until February 14, 2002, also served as Chief Executive Officer of COPI.
Messrs. Frank and Rowsey are members of the Board of the Company and, until
their resignations on February 14, 2002, were members of the board of directors
of COPI. As of March 31, 2002, Messrs. Rainwater and Goff beneficially owned an
aggregate of approximately 18.4% of the outstanding common stock of COPI through
their aggregate ownership of 2,111,835 shares of COPI common stock, including
shares underlying vested options. In addition, Mr. Goff directly owns shares of
the common stock of COPI through his ownership interest in COPI Colorado, L.P.
("COPI Colorado"), as described below.

LOANS TO COPI AND COPI COLORADO.

COPI. In connection with the formation and capitalization of COPI, the
Company contributed $14.1 million to COPI and loaned approximately $35.9 million
to COPI pursuant to a five-year loan (the "COPI Term Loan"), which bears
interest at 12% per annum, is collateralized by a lien on certain assets that
COPI now owns or may acquire in the future and matures in May 2002. Also in
connection with COPI's formation, the Company established a $20.4 million line
of credit (the "Line of Credit"), which bears interest at 12% per annum. The
Line of Credit is cross-defaulted and cross-collateralized with the COPI Term
Loan and matures no later than June 2007. In March 1999, the Company loaned
approximately $19.5 million to COPI pursuant to a three-year loan, which bears
interest at 9% per annum and is collateralized by certain assets that COPI owned
at the time the loan was made, now owns or may acquire in the future ("1999 COPI
Term Loan"). As of December 31, 2001, the outstanding principal balance on the
COPI Term Loan was approximately $16.2 million, plus accrued interest of
approximately $1.6 million. As of December 31, 2001, the outstanding principal
balance on the Line of Credit was $20.2 million, plus accrued interest of
approximately $2.0 million. As of December 31, 2001, the outstanding principal
balance on the 1999 COPI Term Loan was $22.0 million, plus accrued interest of
$1.6 million.

COPI Colorado. As of December 31, 2001, the Company owned approximately 90%
of the outstanding stock (all of which is non-voting) of CRD. The voting stock
of CRD is owned by COPI Colorado in which, as of December 31, 2001, COPI owned a
60% general partner interest, and Mr. Goff owned a 20% limited partner interest.
As of December 31, 2001, COPI Colorado also owned 1,102,530 shares of COPI's
common stock. COPI funded its acquisition of the general partner interest with
proceeds of a $9.0 million loan from the Company (the "COPI Colorado Note").
This note bears interest at 12% per annum, with interest payable quarterly, and
matures in May 2002. The note is secured by COPI's general partner interest in
COPI Colorado and is cross-collateralized and cross-defaulted with COPI's other
borrowings from the Company. As of December 31, 2001, the note had an
outstanding principal balance of $10.6 million (due to the addition of accrued
interest to the original principal balance), plus accrued interest of $1.1
million.

Defaults under COPI and COPI Colorado Loans. As of February 12, 2001, the
Company notified COPI that $76.2 million of principal and accrued interest due
under the COPI Term Loan, the Line of Credit, the 1999 COPI Term Loan and the
COPI Colorado Note was past due. See " -- Reorganization Transactions" below for
a description of the transfers of specified COPI assets to the Company and the
resulting reduction in amounts due under these loans.

LOANS TO OTHER AFFILIATES OF COPI.

CR License and CRL Investments. As of December 31, 2001, the Company had a
28.5% interest in CR License, LLC, the entity which owns the right to the future
use of the "Canyon Ranch" name. The Company also had a 95% economic interest,
representing all of the non-voting common stock, in CRL Investments, Inc.
("CRL"), which has an approximately 65% economic interest in the Canyon Ranch
Spa Club in the Venetian Hotel in Las Vegas, Nevada.

The Company has provided CRL with a $7.0 million credit facility which
bears interest at 12% per annum and matures in August 2003. As of December 31,
2001, the total amount outstanding under the credit facility was $7.16 million.
The Company also committed to invest $8.0 million in equity in CRL. As of April
1, 2001, the Company had made equity contributions aggregating $7.16 million to
CRL.

CR Notes and Sonoma Note. In connection with the acquisition by COPI,
effective July 31, 1997, of the companies that leased certain Company-owned
hotel properties, COPI acquired 100% of an entity that had outstanding debt
under notes in the original principal amounts of approximately $2.4 million and
$650,000 (collectively, the "CR Notes") payable to the Company in connection
with the acquisition of Canyon Ranch-Tucson. The CR Notes bear interest at a
rate of 10.75% per annum, are secured by deeds of trust for certain real and
personal property and mature in August 2003. The aggregate outstanding balance
at December 31, 2001 on the CR Notes was approximately $951,000. In addition,
COPI acquired 100% of an entity that had outstanding debt under a promissory
note of approximately $190,964 (the "Sonoma Note") payable to the Company in

connection with the acquisition of Sonoma Mission Inn & Spa. The Sonoma Note
bears interest at a rate of 7.5% per annum and matures in November 2006. The
outstanding balance of the Sonoma Note at December 31, 2001 was approximately
$190,964.

LEASES OF HOTEL AND RESORT PROPERTIES TO COPI SUBSIDIARIES. As of December
31, 2001, the Company owned nine hotel and resort properties (collectively, the
"Hotel Properties"), eight of which the Company leased to subsidiaries of COPI
(the "Hotel Lessees") pursuant to eight separate leases (the "Hotel Leases").
Under the Hotel Leases, each having an initial term of 10 years, the Hotel
Lessees assumed the rights and obligations of the property owner under any
related management agreement with the hotel operators, as well as the obligation
to pay all property taxes and other costs related to the property. Each of the
Hotel Leases provides for the respective Hotel Lessee to pay (i) base rent, with
periodic rent increases, if applicable, (ii) percentage rent based on a
percentage of gross hotel receipts or gross room revenues, as applicable, above
a specified amount; and (iii) a percentage of gross food and beverage revenues
above a specified amount.

COPI executed a master guaranty and other guaranties pursuant to which COPI
unconditionally guarantees payment and performance under the Hotel Leases by the
Hotel Lessee solely from COPI's hotel and resort-related assets and income
streams.

During the year ended December 31, 2001, the Company received approximately
$19.1 million in cash rent payments under the Hotel Leases. Between January 1,
2002 and February 14, 2002, the Company received approximately $6.0 million in
rent under the Hotel Leases. On February 14, 2002, COPI transferred to the
Company, in lieu of foreclosure, all of COPI's assets associated with the Hotel
Properties, including the lessee interests in the Hotel Leases, in consideration
of the Company's agreement to cancel $23.6 million of rent due under the Hotel
Leases.

LEASE OF TEMPERATURE-CONTROLLED LOGISTICS PROPERTIES. As of March 31, 2002,
the Company held a 40% interest in a general partnership (the
"Temperature-Controlled Logistics Partnership"), which, through its ownership of
a corporation (the "Temperature-Controlled Logistics Corporation") owns 89
temperature-controlled logistics properties (the "Temperature-Controlled
Logistics Properties"). The business operations associated with the
Temperature-Controlled Logistics Properties are owned by AmeriCold Logistics,
LLC ("AmeriCold Logistics"), which is owned 60% by Vornado Operating, L.P. and
40% by a subsidiary of COPI. The Company has no interest in AmeriCold Logistics.

AmeriCold Logistics, as sole lessee of the Temperature-Controlled Logistics
Properties, leases the Temperature-Controlled Logistics Properties from the
Temperature-Controlled Logistics Corporation under three triple-net master
leases, as amended on January 23, 2002. On February 22, 2001, the
Temperature-Controlled Logistics Corporation and AmeriCold Logistics agreed to
restructure certain financial terms of the leases, including the adjustment of
the rental obligation for 2001 to $146 million, the adjustment of the rental
obligation for 2002 to $150 million (plus contingent rent in certain
circumstances), the increase of the Temperature-Controlled Logistics
Corporation's share of capital expenditures for the maintenance of the
properties from $5.0 million to $9.5 million (effective January 1, 2000) and the
extension of the date on which deferred rent was required to be paid to December
31, 2003.

As of December 31, 2001, the Company had loaned AmeriCold Logistics an
aggregate of approximately $12 million pursuant to three separate loans that
bear interest at rates ranging from 12% to 14% per annum. The loans, which
originally were scheduled to mature on December 31, 2002, have been extended and
are now scheduled to mature on December 31, 2004.

AmeriCold Logistics deferred $25.5 million of rent for the year ended
December 31, 2001, of which the Company's share was $10.2 million. In December
2001, the Temperature-Controlled Logistics Corporation waived its right to
collect $39.8 million of the total $49.9 million of deferred rent, of which the
Company's share was $15.9 million.

RESIDENTIAL DEVELOPMENT CORPORATIONS. As of December 31, 2001, the Company
owned 95% of the outstanding stock (all of which is non-voting) of two
residential development corporations, Desert Mountain Development Corporation
("DMDC") and The Woodlands Land Company, Inc. ("TWLC"), and COPI owned 5% of the
outstanding stock (all of which is voting) of these corporations. As of December
31, 2001, the Company owned approximately 90% of a third residential development
corporation, CRD (representing all of the non-voting stock), and COPI Colorado
owned the remaining 10% (representing all of the voting stock).

REORGANIZATION TRANSACTIONS. On January 1, 2001, the provisions of a new
federal law relating to REITs became effective. This legislation allows the
Company, through our subsidiaries, to operate or lease certain of our
investments that had been previously operated or leased by COPI.

On June 28, 2001, the Company and COPI entered into an asset and stock
purchase agreement in which the Company agreed to pay to COPI approximately
$78.4 million, payable in cancellation of certain debt and rent obligation and
cash, in exchange for (i) all of the assets related to COPI's hospitality
business, including lessee interests in the eight Hotel Properties leased to
subsidiaries of COPI, (ii) all of the voting equity owned by COPI and its
subsidiaries in three residential development corporations (CRD, DMDC and TWLC)
and (iii) all of the membership interests of CR License LLC owned by COPI. In
connection with that agreement, the Company agreed that it would not charge
interest on the loans to COPI from May 1, 2001 and that it would allow COPI to
defer all principal and interest payments due under the loans until December 31,
2001.

Also on June 28, 2001, the Company entered into an agreement to make a
$10.0 million investment in Crescent Machinery Company, a wholly owned
subsidiary of COPI ("Crescent Machinery"). This investment, together with $19.0
million of capital from a third-party investment firm, was expected to put
Crescent Machinery on solid financial footing.

In October 2001, management of COPI, the Company and the third-party
investor amended the terms of the original securities purchase agreement to
reflect changes in the market price of the COPI common stock since the date of
the original agreements.

The Company stopped recording rent from the leases of the Hotel Properties
on October 1, 2001, and recorded impairment and other adjustments related to
COPI in the fourth quarter of 2001, based on the estimated fair value of the
underlying collateral.

On January 22, 2002, the Company terminated the purchase agreement pursuant
to which the Company would have acquired the lessee interests in the eight Hotel
Properties leased to subsidiaries of COPI, the voting interests held by
subsidiaries of COPI in three of the residential development corporations in
which the Company also owns interests, and other assets.

On February 4, 2002, the Company terminated the agreement relating to its
planned investment in Crescent Machinery. On February 6, 2002, Crescent
Machinery Company filed for protection under the federal bankruptcy laws.

On February 12, 2002, the Company delivered default notices to COPI
relating to approximately $49.0 million of unpaid rent and approximately $76.2
million of principal and accrued interest due to the Company under the COPI Term
Loan, the Line of Credit, the 1999 COPI Term Loan and the COPI Colorado Note.

On February 14, 2002, the Company executed an agreement (the "Agreement")
with COPI, pursuant to which (i) COPI transferred to subsidiaries of the
Company, in lieu of foreclosure, COPI's lessee interests in the eight Hotel
Properties leased to subsidiaries of COPI and the voting interests in three of
the Company's residential development corporations and other assets and (ii) the
Company agreed to assist and provide funding to COPI for the implementation of a
prepackaged bankruptcy of COPI. As a result of the transfer, the Company reduced
COPI's rent obligations by $23.6 million, and its debt obligations by $40.1
million.

As part of the February 14 transactions, the Company acquired COPI's
general partner interest in COPI Colorado through a strict foreclosure.
Immediately prior to the Company's acquisition of the interest, COPI Colorado
distributed to its partners, pro rata in accordance with their relative
percentage interests in COPI Colorado, the 1,102,530 shares of COPI common stock
that it owned. The shares distributed to COPI were canceled.

In addition, the Company acquired, in a strict foreclosure on February 14,
2002, COPI's 1.5% interest in CR License, LLC and 5.0% interest, representing
all of the voting stock, in CRL.

Under the Agreement, the Company will provide approximately $14.0 million
to COPI in the form of cash and Common Shares of the Company to fund costs,
claims and expenses relating to the bankruptcy and related transactions, and to
provide for the distribution of the Company's Common Shares to the COPI
stockholders. The Company estimates that the value of the Common Shares that
will be issued to the COPI stockholders will be between approximately $5.0
million and $8.0 million. The Agreement provides that COPI and the Company will
seek to have a plan of reorganization for COPI, reflecting the terms of the
Agreement and a draft plan of reorganization, approved by the bankruptcy court.
The actual value of the Common Shares issued to the COPI stockholders will not
be determined until the confirmation of COPI's bankruptcy plan and could vary
substantially from the estimated amount. If the COPI bankruptcy plan is approved
by the required vote of the shares of COPI common stock, the stockholders of
COPI will receive Common Shares of the Company. As stockholders of COPI, Mr.
Rainwater and Mr. Goff will also receive Common Shares of the Company.

In addition, the Company has agreed to use commercially reasonable efforts
to assist COPI in arranging COPI's repayment of its $15.0 million obligation to
Bank of America, together with any accrued interest. COPI obtained the loan
primarily to participate in investments with the Company. At the time COPI
obtained the loan, Bank of America required, as a condition to making the loan,
that Richard E. Rainwater, the Chairman of the Board, and John C. Goff, the
Chief Executive Officer of the Company, enter into a support agreement with COPI
and Bank of America, pursuant to which they agreed to make additional equity
investments in COPI if COPI defaulted on payment obligations under its line of
credit with Bank of America and the net proceeds of an offering of COPI
securities were insufficient to allow COPI to pay Bank of America in full. The
Company believes, based on advice of counsel, that the support agreement should
be unenforceable in a COPI bankruptcy. Effective December 31, 2001, the parties
executed an amendment to the line of credit providing that any defaults existing
under the line of credit on or before March 8, 2002 are temporarily cured unless
and until a new default shall occur.

The Company holds a first lien security interest in COPI's entire
membership interest in AmeriCold Logistics. REIT rules prohibit the Company from
acquiring or owning the membership interest that COPI owns in AmeriCold
Logistics. Under the Agreement, the Company agreed to allow COPI to grant Bank
of America a first priority security interest in the membership interest and to
subordinate its own security interest to Bank of America. In addition, the
Company has agreed to form and capitalize a separate entity to be owned by the
Company's shareholders, and to cause the new entity to commit to acquire COPI's
entire membership interest in the tenant, for approximately $15.5 million. Under
the Agreement, COPI has agreed that it will use the proceeds of the sale of the
membership interest to repay Bank of America in full.

Pursuant to the COPI bankruptcy plan, the current and former directors and
officers of COPI and the current and former trust managers and officers of the
Company also have received a release from COPI of liability for any actions
taken prior to February 14, 2001, and, depending on various factors, will
receive certain liability releases from COPI and its stockholders.

Management Participation in Operating Partnership Debt Offering

On April 15, 2002, the Operating Partnership completed a private offering
of $375.0 million in senior, unsecured notes due 2009. The notes bear interest
at an annual rate of 9.25% and were issued at 100% of issue price. The notes are
callable after April 15, 2006. Richard E. Rainwater, Chairman of the Board of
Trust Managers, and certain of his immediate family members and affiliates,
purchased $50 million of these notes on the same terms as unaffiliated third
party investors. The Operating Partnership has agreed to register a similar
series

of notes with the Commission and to effect an exchange offer of the registered
notes for the privately placed notes and, in the case of Mr. Rainwater and his
family and affiliates, to register the notes for resale by them.

----------

Management believes that the foregoing transactions are on terms no less
favorable than those that could have been obtained in comparable transactions
with unaffiliated parties.

SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2003
ANNUAL MEETING OF SHAREHOLDERS

Shareholders who intend to submit proposals for consideration at the
Company's 2003 annual meeting of shareholders must submit such proposals to the
Company no later than January 18, 2003, in order to be considered for inclusion
in the proxy statement and form of proxy that the Board of Trust Managers will
distribute in connection with that meeting. Shareholder proposals should be
submitted to David M. Dean, Executive Vice President, Law and Administration,
and Secretary, at 777 Main Street, Suite 2100, Fort Worth, Texas 76102.

Under the Bylaws, a shareholder must comply with certain procedures to
nominate persons for election to the Board of Trust Managers or to propose other
business to be considered at an annual meeting of shareholders. These procedures
provide that shareholders desiring to make nominations for trust managers and/or
to bring a proper subject before a meeting must do so by notice timely delivered
to the Secretary of the Company. The Secretary of the Company generally must
receive notice of any such proposal not less than seventy days nor more than
ninety days prior to the anniversary of the preceding year's annual meeting of
shareholders. In the case of proposals for the 2003 annual meeting of
shareholders, the Secretary of the Company must receive notice of any such
proposal no earlier than March 27, 2003, and no later than April 16, 2003 (other
than proposals intended to be included in the proxy statement and form of proxy,
which, as noted above, the Company must receive by January 18, 2003). Generally,
such shareholder notice must set forth (i) as to each nominee for trust manager,
all information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of trust managers under the proxy rules of
the Commission; (ii) as to any other business, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in that business of such
shareholder; and (iii) as to the shareholder, (a) the name and address of the
shareholder, (b) the class or series and number of shares of beneficial interest
of the Company that the shareholder owns beneficially and of record, and (c) the
date(s) upon which the shareholder acquired ownership of such shares. The
chairman of the annual meeting shall have the power to declare that any proposal
not meeting these and any other applicable requirements that the Bylaws impose
shall be disregarded. A copy of the Bylaws may be obtained, without charge, upon
written request to David M. Dean, Executive Vice President, Law and
Administration, and Secretary, at 777 Main Street, Suite 2100, Fort Worth, Texas
76102.

In addition, the form of proxy that the Board of Trust Managers will
solicit in connection with the Company's 2003 annual meeting of shareholders
will confer discretionary authority to vote on any proposal, unless the
Secretary of the Company receives notice of that proposal no earlier than March
27, 2003, and no later than April 16, 2003, and the notice complies with the
other requirements described in the preceding paragraph.

[FRONT]

PROXY

CRESCENT REAL ESTATE EQUITIES COMPANY

PROXY FOR ANNUAL MEETING OF SHAREHOLDERS

JUNE 10, 2002

THIS PROXY IS SOLICITED BY THE BOARD OF TRUST MANAGERS

THE UNDERSIGNED HEREBY APPOINTS JOHN C. GOFF AND DAVID M. DEAN, AND EACH OF
THEM, AS PROXIES, WITH FULL POWER OF SUBSTITUTION IN EACH, TO VOTE ALL COMMON
SHARES OF BENEFICIAL INTEREST OF CRESCENT REAL ESTATE EQUITIES COMPANY (THE
"COMPANY") WHICH THE UNDERSIGNED IS ENTITLED TO VOTE, AT THE ANNUAL MEETING OF
SHAREHOLDERS OF THE COMPANY TO BE HELD ON JUNE 10, 2002, AT 10:00 A.M., CENTRAL
DAYLIGHT SAVINGS TIME, AND ANY ADJOURNMENT THEREOF, ON ALL MATTERS SET FORTH ON
THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, DATED MAY 16, 2002, A COPY OF
WHICH HAS BEEN RECEIVED BY THE UNDERSIGNED, AS FOLLOWS ON THE REVERSE SIDE.

SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE

--------------------------------------------------------------------------------
[BACK]
Please mark
votes as in
X this example
----------

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
"FOR" ITEM 1 AND "AGAINST" ITEM 2.

1. To elect John C. Goff, Paul E. Rowsey, III and Robert W. Stallings
as Trust Managers to serve three-year terms.

GRANT [ ] WITHHOLD [ ]
AUTHORITY AUTHORITY
FOR FOR
NOMINEE NOMINEE

--------------------------------------------------------------------------------
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided above.

FOR AGAINST ABSTAIN

2. To approve the shareholder [ ] [ ] [ ]
proposal to declassify the
Board of Trust Managers for
purposes of elections.

OTHER MATTERS: The proxies will have discretion to vote upon such other matters
as may come before the Meeting in such manner as they determine to be in the
best interest of the Company.

IMPORTANT: Please mark the Proxy, date it, sign it exactly as your name(s)
appear(s) and return it in the enclosed postage paid envelope. Joint owners
should each sign personally. Trustees and others signing in a representative or
fiduciary capacity should indicate their full titles in such capacity:

Signature: Date:
----------------- --------

MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]