UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSION Contents

~~Washington,~~UNITED ~~D.C.~~STATES ~~20549~~SECURITIES AND EXCHANGE COMMISSION

~~FORM~~Washington, ~~8-K~~D.C. 20549

~~CURRENT~~FORM ~~REPORT~~8-K ~~Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

~~Date~~CURRENT ofREPORT Pursuant ~~Report~~to Section 13 or 15(~~Date~~d) of ~~earliest~~the Securities ~~event~~Exchange ~~reported):~~Act ~~May 22,~~of ~~2007~~1934

~~Crescent~~Date ~~Real~~of ~~Estate~~Report ~~Equities~~(Date ~~Company~~ of earliest event reported): May 24, 2007

~~(Exact~~Crescent ~~name~~Real ofEstate ~~registrant~~Equities ~~as specified in its charter)~~Company

~~Texas~~ (~~State~~Exact orname ~~other jurisdiction~~ of ~~organization)~~registrant ~~1-13038~~as ~~(Commission~~specified ~~File~~in ~~Number)~~its ~~52-1862813 (IRS Employer Identification No.~~charter)

777 Main Street, Suite 2100 Fort Worth, Texas 76102 (817) 321-2100


Texas	1-13038	52-1862813
(State or other jurisdiction	(Commission	(IRS Employer
of organization)	File Number)	Identification No.)

~~(Address,~~777 ~~including~~Main ~~zip code~~Street, ~~and~~Suite 2100 Fort ~~telephone number~~Worth, ~~including~~Texas ~~area code, of registrant’s principal executive offices~~76102 (817) 321-2100

(~~Former~~Address, ~~name~~including orzip ~~former~~code, ~~address~~and telephone number, ifincluding ~~changed~~area ~~since~~code, ~~last~~of ~~report~~registrant’s principal executive offices)

~~Check~~(Former ~~the~~name ~~appropriate~~or ~~box~~former ~~below~~address, if ~~the~~changed ~~Form~~since ~~8-K~~last ~~filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:~~ report)

oCheck ~~Written communications pursuant to Rule 425 under~~ the ~~Securities~~appropriate ~~Act~~box ~~(17~~below ~~CFR~~if ~~230.425) þ Soliciting material pursuant to Rule 14a-12 under~~ the ~~Exchange~~Form ~~Act (17 CFR 230.14a~~8-~~12)~~K ofiling ~~Pre-commencement~~is ~~communications~~intended ~~pursuant~~ to ~~Rule~~simultaneously ~~14d-2(b)~~satisfy ~~under~~ the filing ~~Exchange~~obligation ~~Act~~of ~~(17~~the ~~CFR~~registrant ~~230.14d-2(b))~~under oany ~~Pre-commencement~~of ~~communications pursuant to Rule 13e-4(c) under~~ the ~~Securities~~following ~~Act (17 CFR 230.13e-4(c))~~provisions:

~~Item 5~~o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.02425) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 230.14a-12) ~~Departure~~o ofPre-commencement ~~Directors~~communications orpursuant ~~Certain~~to ~~Officers;~~Rule ~~Election~~14d-2(b) ofunder ~~Directors;~~the ~~Appointment~~Exchange ~~of Certain~~Act ~~Officers;~~(17 ~~Compensatory~~CFR ~~Arrangements~~230.14d-2(b)) ofo ~~Certain~~Pre-commencement ~~Officers~~communications pursuant to Rule 13e-4(c) under the Securities Act (17 CFR 230. 13e-4(c))

~~Waivers/Forfeitures~~TABLE ofOF Restricted Stock Awards. John C. Goff, the Chief Executive Officer and Vice Chairman of the Board of Trust Managers (the “Board”) Crescent Real Estate Equities Company (the “Company”), and Dennis H. Alberts, the Company’s President and Chief Operating Officer, had each previously received grants of restricted units in Crescent Real Estate Equities Limited Partnership (the “Operating Partnership”) pursuant to grant agreements under the 2005 Crescent Real Estate Equities Limited Partnership Long-Term Incentive Plan (the “2005 Plan”). The restricted units awarded under the grant agreements vest in five equal proportions to the extent that the 40-day average of the last sale price of the Company’s stock price exceeds designated hurdles. As of May 21, 2007, 20% of the restricted units granted to each of Mr. Goff and Mr. Alberts had vested. The grant agreements also provide that under certain circumstances, including the prospective mergers of the Company and Operating Partnership with affiliates of Morgan Stanley that were announced on May 22, 2007 (collectively, the “Transaction”), any portion of the restricted units that has not already vested shall become fully vested (the “Acceleration Provision”). On May 21, 2007, Messrs. Goff and Alberts waived the vesting of and agreed to forfeit the portions of their respective restricted stock awards that were designated for vesting when the stock price targets of $25.50 and $27.00 were hit and that, as a result of the Acceleration Provision, would have vested in connection with the Transaction (the “Forfeitures”). Except as described in the following sentence, the Forfeitures are applicable to the Transaction or any transaction the Board determines to accept in lieu of the Transaction. In the event that the Transaction or a competing transaction would result in the common shareholders of the Company receiving per share merger consideration in excess of $25.50 or $27.00, however, the Forfeitures will not be applicable to the units that would otherwise have vested if the 40-day average of the last sale price of the Company’s common shares had reached the amount of the per share merger consideration. Pursuant to the Forfeitures, Mr. Goff forfeited 120,000 restricted units (240,000 Company common share equivalents), and Mr. Alberts forfeited 80,000 restricted units (160,000 Company common share equivalents), in each case along with their accrued distributions. CONTENTS

~~The~~Item grant agreements under each of the 2004 Crescent Real Estate Equities Limited Partnership Long-Term Incentive Plan (the “2004 Plan”) and the 2005 Plan provide that, in the event of a transaction such as the Transaction, any portion of the restricted units granted thereunder that have not already vested shall become fully vested upon the execution of the definitive agreement for the transaction2. ~~On May 21, 2007, each current officer of the Company together with Mr~~01. ~~Crenshaw~~ ~~agreed~~Completion ~~that the accelerated vesting~~ of ~~their~~Acquisition ~~restricted~~or ~~units~~Disposition ~~under the 2004 Plan and the 2005 Plan in connection with the Transaction would not occur until the later~~ of ~~entry~~Assets ~~into~~Item ~~the merger agreement for the Transaction; when the shareholders of the Company approve the merger agreement; or immediately before the merger agreement closes~~9. ~~Jane E~~01. ~~Mody, the Company’s Managing Director and Chief~~ Financial ~~Officer,~~Statements ~~John L Zogg, Jr., the Company’s Managing Director, Asset Management,~~ and ~~Messrs. Goff,~~Exhibits ~~Crenshaw and Alberts each entered into these agreements.~~ SIGNATURE

SeveranceTable Plan. The Company has established a Change in Control Separation Pay Plan effective as of May 22, 2007 (the “Severance Plan”) to provide, under certain circumstances, severance to participants who are corporate level employees and whose employment with the Company or any affiliate of the Company (collectively, the “Company Group”) ends after a change in control of the Company which results from the Transaction (or another transaction that the Company terminates the agreement with affiliates of Morgan Stanley to enter into). Contents

~~All employees of the Company Group who are employed on May~~Item 22, 2007 at the Company Group’s headquarters in Fort Worth, Texas, or at one of its regional offices in Dallas or Houston (“Corporate Employees”), are eligible to participate in the Severance Plan (other than (i) persons categorized as interns, temporary employees or independent contractors, (ii) persons who already have agreements that provide for severance payments upon a change of control of the Company, (iii) persons who were on or before the effective date of the Severance Plan provided with notice of elimination of their position with the Company Group, and (iv) employees whose responsibilities for the Company Group relate to the operation of a particular property, as opposed to a region or corporation headquarters (the persons described by (iv) are “Property Employees”))2.01. ACompletion ~~Corporate Employee’s participation in the Severance Plan ends on the earlier~~ of ~~(a) the~~Acquisition ~~date on which the Severance Plan terminates,~~ or ~~(b) the~~Disposition ~~later~~ of (i) the date on which the Corporate Employee ceases to be an employee of the Company Group, or (ii) the date on which the Corporate Employee’s benefit payment is made pursuant to the Severance PlanAssets.

~~Severance~~On ~~benefits~~March 5, ~~for~~2007, ~~Property~~Crescent ~~Employees~~Real ~~are~~Estate ~~governed~~Equities byLimited Partnership, a Delaware limited partnership (the ~~Company~~“Partnership”), and certain of its subsidiaries and affiliates (the “Sellers” and, collectively with the Partnership, “Crescent”), and Walton TCC Hotel Investors V, L.L.C., a Delaware limited liability company (the “Purchaser”), had entered into a series of Purchase and Sale Agreements which were amended on March 23, 2007 effective as of March 5, 2007 (collectively, as so amended, the “Original Purchase Agreement”) pursuant to which, among other things, (a) the Sellers agreed to sell to the Purchaser all of the Sellers’s ~~property-level~~rights, title and interest in the ~~severance~~Fairmont ~~arrangement~~Sonoma Mission Inn & Spa®, the Sonoma Golf Club, the Ventana Inn & Spa®, the Park Hyatt Beaver Creek Resort & Spa, the Omni Austin hotel and the Austin Centre office building adjacent to the hotel, the Denver Marriott hotel and the Renaissance Houston hotel (collectively, the “Properties”) and (b) the Partnership agreed to guaranty certain obligations of the Sellers under the Original Purchase Agreement. The Original Purchase Agreement was terminated by the Purchaser on April 2, 2007 at the end of its due diligence period, and on April 6, 2007, the Sellers and the Purchaser reinstated and amended the Original Purchase Agreement (as so amended, the “Purchase Agreement”).

AOn ~~participant~~May 24, in2007, the ~~Severance~~Sellers ~~Plan~~closed isthe ~~eligible~~sale ~~for~~of the ~~benefits~~Ventana ~~described~~Inn ~~below~~& ifSpa®, ~~within~~the 12Park Hyatt Beaver ~~months~~Creek ~~after~~Resort ~~completion~~& ofSpa, athe ~~change~~Omni inAustin ~~control~~hotel and the Austin Centre office building adjacent to the hotel, ~~such~~the ~~participant~~Denver ~~executes~~Marriott ahotel ~~waiver~~and the Renaissance Houston hotel contemplated by the Purchase Agreement. The Sellers expect to close the sale of the Fairmont Sonoma Mission Inn & Spa® and ~~release~~the Sonoma Golf Club during the second quarter of 2007. Although there are no assurances that the sale ~~claims,~~of the Fairmont Sonoma Mission Inn & Spa® and ~~terminates~~the ~~from~~Sonoma ~~employment~~Golf inClub will be consummated, the ~~following~~pro forma ~~manner:~~financial information provided under Item 9.01 below assumes the sale of these properties.

• The Intotal gross purchase price for the ~~case~~Properties ofunder athe ~~Vice~~Purchase ~~President~~Agreement, orwhich ~~above~~was determined through arm’s length negotiations between the parties, ~~(i)~~was approximately $620 million, of which the ~~Corporate~~Sellers ~~Employee~~have ~~terminates~~received ~~his~~$445 million. ~~employment~~The ~~for~~remaining ~~Good~~$175 million ~~Reason~~will ~~(as~~be ~~defined~~received inupon closing of the ~~Severance~~sale ~~Plan),~~of ~~other~~the ~~than~~Fairmont atSonoma aMission ~~time~~Inn ~~when~~& aSpa® ~~basis~~and ~~for~~the ~~termination~~Sonoma byGolf Club. Crescent’s share of the ~~Company~~gross ~~Group~~purchase ~~for~~price ~~Cause~~of ~~(as~~the ~~defined~~Properties, determined after taking into account the interests of its partners in the ~~Severance~~sales ~~Plan)~~and ~~exists~~incentive payments due as a result of the sales, oris approximately $580 million (~~ii)~~approximately $425 million excluding the ~~Company~~Fairmont ~~Group~~Sonoma ~~terminates~~Mission ~~such~~Inn ~~Corporate~~& Spa® ~~Employee’s~~and ~~employment~~the ~~without~~Sonoma ~~Cause,~~Golf orClub).

• Neither InCrescent Real Estate Equities Company, the ~~case~~sole shareholder of anthe ~~Corporate~~general ~~Employee~~partner atand the majority limited partner of the ~~Director~~Partnership ~~level~~(the or“Company”), ~~below~~nor the Partnership, nor any of the ~~Company~~Sellers ~~Group~~or ~~terminates~~any affiliate of the ~~Corporate~~foregoing, ~~Employee’s~~has ~~employment~~a ~~without~~material ~~Cause~~relationship with Purchaser, other than pursuant to the Purchase Agreement.

~~Generally,~~Item 9.01. aFinancial ~~participant~~Statements inand ~~the Severance Plan entitled to benefits will receive the~~Exhibits. ~~following:~~

• A severance payment in a lump sum within 30 days of the later of termination of such participant’s employment or the date on which the participant’s general wavier and release of claims becomes irrevocable. The severance payment consists of: (ib) The ~~seven~~following ~~months~~pro offorma ~~base~~financial ~~salary~~statements ~~for~~are ~~Corporate~~filed ~~Employees~~as atpart ~~the Director level or below, (ii) 12 months~~ of ~~base~~this ~~salary~~Current ~~for~~Report ~~Senior~~on Form Vice Presidents and Managing Directors, (iii) 12 months of base salary plus 100% of the 2006 bonus for Vice Presidents, and (iv) 18 months of base salary and 150% of the average of the bonus paid for each of the three preceding years for the CEO or COO;8-K.

•Pro ~~For~~Forma aConsolidated ~~participant~~Balance ~~who~~Sheet ~~elects~~as ~~COBRA~~of ~~coverage~~March 31, ~~coverage~~2007 ~~for medical~~ and ~~dental~~notes insurance at active employee rates. This coverage at active employee rates lasts for a period of 12 months following termination of employment for Corporate Employees at the Vice President level or above, and for a period of seven months following termination of employment for Corporate Employees at the Director level or below; andthereto

•Pro ~~Outplacement~~Forma ~~assistance.~~Consolidated Statement of Operations for the three months ended March 31, 2007 and notes thereto

~~The~~Pro ~~timing~~Forma ofConsolidated ~~such~~Statement ~~payments~~of ~~may~~Operations befor ~~adjusted by~~ the ~~Company~~year ~~for~~ended ~~various tax reasons~~December 31, ~~and~~2006 ~~the~~and ~~payments~~notes ~~may be reduced by any payments due to a participant under the WARN Act or similar law.~~thereto

TheTable Board may amend the Severance Plan as it deems necessary or advisable until a change in control occurs. The Severance Plan terminates on December 31, 2007 if no change in control of the Company occurs before then. If a change in control is completed on or before December 31, 2007, then the Severance Plan may not be amended after the change in control in a manner adverse to a participant without the consent of such participant. Contents

~~The Severance Plan is administered by an Administrator that may be appointed or removed at the~~SIGNATURE Board’s discretion. The Administrator is charged with the duties of controlling and managing the operation and administration of the Severance Plan, and is authorized to make all determinations concerning the Severance Plan.

~~Item~~ Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the ~~8.01~~registrant ~~Other~~has ~~Events~~duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

The foregoing description of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Severance Plan. In connection with the proposed merger, the Company also will file a proxy statement with the SEC and, upon SEC clearance, will mail the proxy to shareholders. Shareholders of Crescent are urged to read the proxy statement regarding the proposed merger when it becomes available, because it will contain important information. Shareholders will be able to obtain a copy of the proxy statement as well as other filings containing information about Crescent, when available, without charge, at the SEC’s Internet site (http://www.sec.gov). In addition, copies of the proxy statement can be obtained, when available, without charge, by directing a request to Crescent via the telephone numbers listed below.


	CRESCENT REAL ESTATE EQUITIES COMPANY
Date: May 31, 2007	By:	/s/ Jane E. Mody
		Jane E. Mody
		Managing Director and Chief Financial Officer

JaneTable E.of Mody, Managing Director and Chief Financial Officer, Crescent (817) 321-1086 Jeremy C. Sweek, Investor & Media Relations Senior Manager, Crescent (817) 321-1464 Alyson D’Ambrisi, Media Relations, Morgan Stanley +44 207 425 2431 Contents

~~FORWARD-LOOKING~~INDEX TO FINANCIAL STATEMENTS

This report may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this report that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of


Pro Forma Consolidated Balance Sheet as of March 31, 2007 and notes thereto		F-3

Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2007 and notes thereto		F-5

Pro Forma Consolidated Statement of Operations for the year ended December 31, 2006 and notes thereto		F-7

~~the Company, which may cause the Company’s actual results to differ materially from those implied or expressed by the forward~~F-~~looking statements. The Company assumes no duty whatsoever to~~1 ~~update these forward-looking statements or to conform them to future events or developments.~~

SIGNATURE Table of Contents

~~Pursuant~~Pro toForma ~~the~~Financial ~~requirements of the Securities Exchange Act of 1934, as amended, the~~Information ~~registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.~~

	CRESCENT REAL ESTATE EQUITIES COMPANY
Date: May 29, 2007	By:	/s/ Jane E. Mody
		Jane E. Mody
		Managing Director and Chief Financial Officer

The following unaudited pro forma consolidated financial statements are based upon the Company’s consolidated historical financial statements and give effect to the following transactions (the “Transactions”):

	•		The sale of the Ventana Inn & Spa ^®, the Park Hyatt Beaver Creek Resort and Spa, the Omni Austin hotel, the Austin Centre office building, the Denver Marriott hotel and the Renaissance Houston hotel , which was completed on May 24, 2007;

	•		The sale of the Fairmont Sonoma Mission Inn & Spa^® and the Sonoma Golf Club which is expected to be completed during the second quarter of 2007; and

	•		The assumed application of the net cash proceeds received from the sale of the Properties.

The unaudited pro forma consolidated balance sheet as of March 31, 2007 is presented as if the Transactions had been completed on March 31, 2007. The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2007 and the year ended December 31, 2006 are presented as if the Transactions had occurred as of January 1, 2006.

In management’s opinion, all adjustments necessary to reflect the Transactions have been made, are based on available information and are based on certain assumptions that the Company believes are reasonable. The unaudited pro forma consolidated balance sheet and statements of operations are not necessarily indicative of what actual results of operations of the Company would have been for the periods presented, nor does it purport to predict the Company’s results of operations for future periods.

The unaudited pro forma condensed consolidated balance sheet, statements of operations and notes thereto have been derived from, and should be read in conjunction with, the Company’s historical consolidated financial statements, including the accompanying notes. Those financial statements are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and the Company’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2007.

F-2

CRESCENT REAL ESTATE EQUITIES COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2007
(dollars in thousands)


	(A)
	Crescent
	Real Estate			Pro Forma
	Equities Company			Adjustments			Consolidated
ASSETS:
Investments in real estate:
Land	$	108,431		$	—		$	108,431
Buildings and improvements, net of accumulated depreciation		1,072,795			—			1,072,795
Furniture, fixtures and equipment, net of accumulated depreciation		14,155			—			14,155
Land held for investment or development		136,804			—			136,804
Properties held for disposition, net		1,896,635			(383,070	) (B)		1,513,565

Net investment in real estate	$	3,228,820		$	(383,070	)	$	2,845,750

Cash and cash equivalents	$	33,372		$	—		$	33,372
Restricted cash and cash equivalents		87,002			—			87,002
Defeasance investments		109,244			—			109,244
Accounts receivable, net		20,025			(1,118	) (B)		18,907
Deferred rent receivable		47,870			—			47,870
Investments in unconsolidated companies		257,500			—			257,500
Notes receivable, net		157,696			—			157,696
Other assets, net		126,732			(1,921	) (C)		124,811

Total assets	$	4,068,261		$	(386,109	)	$	3,682,152


LIABILITIES:
Borrowings under Credit Facility	$	188,500		$	(147,077	) (C)	$	41,423
Notes payable		1,816,833			(373,630	) (C)		1,443,203
Junior subordinated notes		77,321			—			77,321
Accounts payable, accrued expenses and other liabilities		184,859			(7,845	) (B) (C)		177,014
Liabilities related to properties held for disposition		610,994			(109,854	) (B)		501,140
Tax liability-current and deferred, net		7,382			9,046	(D)		16,428

Total liabilities	$	2,885,889		$	(629,360	)	$	2,256,529


MINORITY INTERESTS:
Operating partnership	$	62,789		$	39,622	(E)	$	102,411
Consolidated real estate partnerships		50,002			(4,388	)(B)		45,614

Total minority interests	$	112,791		$	35,234		$	148,025


SHAREHOLDERS’ EQUITY:
Preferred shares, $0.01 par value, authorized 100,000,000 shares:
Series A Convertible Cumulative Preferred Shares, liquidation preference of $25.00 per share, 14,200,000 shares issued and outstanding	$	319,166		$	—		$	319,166
Series B Cumulative Redeemable Preferred Shares, liquidation preference of $25.00 per share, 3,400,000 shares issued and outstanding		81,923			—			81,923
Common shares, $0.01 par value, authorized 250,000,000 shares, 127,933,228 shares issued and 102,812,311 shares outstanding		1,279			—			1,279
Additional paid-in capital		2,295,992			—			2,295,992
Accumulated deficit		(1,168,529	)		208,017	(F)		(960,512	)
Accumulated other comprehensive (loss) income		(118	)		—			(118	)

	$	1,529,713		$	208,017		$	1,737,730
Less — shares held in treasury, at cost, 25,120,917 common shares		(460,132	)		—			(460,132	)

Total shareholders’ equity	$	1,069,581		$	208,017		$	1,277,598


Total liabilities and shareholders’ equity	$	4,068,261		$	(386,109	)	$	3,682,152

See accompanying notes to Pro Forma Consolidated Balance Sheet

F-3

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands)

The following describes the pro forma adjustments to the Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2007 as if the Transactions described in the first paragraph of “Pro Forma Financial Information” were completed on March 31, 2007.

A.		Reflects Crescent Real Estate Equities Company unaudited consolidated historical Balance Sheet as of March 31, 2007.

B.		Reflects adjustments to remove the historical balance sheets of The Properties as outlined in the table below.


	Resort/Hotel		Sonoma		Austin Centre
	Properties		Golf Club		Office Property
Properties held for disposition, net	$	300,631	$	47,262	$	35,177
Accounts receivable, net		1,118		—		—


Total assets	$	301,749	$	47,262	$	35,177


Accounts payable, accrued expenses and other liabilities	$	6,554	$	510	$	—
Liabilities related to properties held for disposition		75,259		34,590		5
Consolidated real estate partnerships		4,388		—		—


Total liabilities	$	86,201	$	35,100	$	5

Assumes that certain property specific debt was assumed and the net cash proceeds of $523.8 million were used to pay down certain debt instruments as outlined in the table below.


	Cash Payout/			Cash Payout			Cash Payout			Write-off
	Assumption			Accrued			Extinguishment			Deferred
	of Principal			Interest			of Debt			Financing costs
Debt assumption:
Bank of America Note I (i)
(secured by Fairmont Sonoma Mission Inn)	$	55,000	(i)	$	—		$	—		$	581	(i)


Debt pay downs:
Prudential Note
(secured by 707 17th Street/Denver Marriott)		36,799		—		(ii)	385		(iii)		149
AEGON Partnership Note
(secured by Greenway Plaza/ Renaissance Houston)		11,831		—		(ii)	717		(iii)		18
The 2007 Notes		250,000			781			1,226			132
KeyBank II
(secured by distributions from Funding III, II & V)		75,000		—		(ii)		—			150
Credit Facility		147,077		—		(ii)		—			1,472


	$	520,707		$	781		$	2,328		$	1,921


(i)		Pro forma adjustments for the Bank of America note are included in the adjustments discussed in Note (B).

(ii)		Interest on these debt instruments is paid monthly, therefore, interest is not considered in the pro forma adjustment.

(iii)		Represents prepayment penalties for early retirement of debt.

D.		Reflects estimated taxes payable as a result of the Transactions.

E.		Reflects the Operating Partnership’s unitholder minority interest, which is approximately 16%, of the amounts described in footnote (F).

F.		Reflects, before minority interests and taxes, the gain on the Transactions of $260.9 million offset by debt pre-payment penalty and write off of deferred financing costs of $3.9 million. Adjustment is recorded net of minority interests and taxes.

F-4

CRESCENT REAL ESTATE EQUITIES COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007
(dollars in thousands, except share data)


	(A)
	Crescent
	Real Estate			Pro Forma
	Equities Company			Adjustments			Consolidated
REVENUE:
Office Property	$	77,428		$	—		$	77,428
Other Property		1,689			—			1,689

Total Property revenue	$	79,117		$	—		$	79,117


EXPENSE:
Office Property real estate taxes	$	7,226		$	—		$	7,226
Office Property operating expenses		30,993			—			30,993
Other Property expenses		2,223			—			2,223

Total Property expense	$	40,442		$	—		$	40,442


Income from Property Operations	$	38,675		$	—		$	38,675


OTHER INCOME (EXPENSE):
Interest and other income	$	7,289		$	—		$	7,289
Corporate general and administrative		(10,322	)		—			(10,322	)
Severance and other related costs		(2,980	)		—			(2,980	)
Interest expense		(31,201	)		9,380	(C)		(21,821	)
Amortization of deferred financing costs		(1,787	)		663	(C)		(1,124	)
Extinguishment of debt		(453	)		—			(453	)
Depreciation and amortization		(21,587	)		—			(21,587	)
Impairment charges		(1,935	)		—			(1,935	)
Other expenses		(2,408	)		—			(2,408	)
Equity in net income (loss) of unconsolidated companies:					—			—
Office Properties		2,230			—			2,230
Resort Residential Development Properties		(7	)		—			(7	)
Resort/Hotel Properties		(599	)		—			(599	)
Temperature-Controlled Logistics Properties		(2,671	)		—			(2,671	)
Other		316			—			316


Total other income (expense)	$	(66,115	)	$	10,043		$	(56,072	)


LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES	$	(27,440	)	$	10,043		$	(17,397	)
Minority interests		5,767			(1,607	) (D)		4,160
Income tax expense		(1,049	)		—			(1,049	)


LOSS BEFORE DISCONTINUED OPERATIONS	$	(22,722	)	$	8,436		$	(14,286	)
Income from discontinued operations, net of minority interests and taxes		15,748			(5,387	) (B)		10,361


NET LOSS	$	(6,974	)	$	3,049		$	(3,925	) (E)


BASIC EARNINGS PER SHARE DATA:
Loss before discontinued operations	$	(0.22	)				$	(0.14	)
Income from discontinued operations, net of minority interests and taxes		0.15						0.10


Net loss — basic	$	(0.07	)				$	(0.04	)


DILUTED EARNINGS PER SHARE DATA:
Loss before discontinued operations	$	(0.22	)				$	(0.14	)
Income from discontinued operations, net of minority interests and taxes		0.15						0.10


Net loss — diluted	$	(0.07	)				$	(0.04	)


WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC		102,738,586						102,738,586


WEIGHTED AVERAGE SHARES OUTSTANDING — DILUTED		102,738,586						102,738,586

See accompanying notes to Pro Forma Consolidated Statement of Operations

F-5

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands)

The following describes the pro forma adjustments to the Unaudited Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2007 as if the Transactions described in the first paragraph of “Pro Forma Financial Information” were completed on January 1, 2006.

A.		Reflects Crescent Real Estate Equities Company unaudited consolidated historical Statement of Operations for the three months ended March 31, 2007.

B.		Reflects adjustments to remove the revenue and expenses for The Properties for the three months ended March 31, 2007 as outlined in the table below.


	Resort/Hotel		Sonoma			Austin Centre
	Properties		Golf Club			Office Property
Income from discontinued operations, net of minority interests and taxes	$	5,209	$	(40	)	$	218

Net decrease in interest costs assuming that certain property specific debt was assumed and that the net cash proceeds of $523.8 million were used to pay down certain debt instruments as outlined in Note (C) of the Notes to Unaudited Pro Forma Consolidated Balance Sheet.


				Amortization
	Interest			of Deferred
	Expense			Financing
Debt assumption:
Bank of America Note I (i)
(secured by Fairmont Sonoma Mission Inn)	$	742	(i)	$	38	(i)


Debt pay downs:
Prudential Note
(secured by 707 17th Street/Denver Marriott)		480			12
AEGON Partnership Note
(secured by Greenway Plaza/Renaissance Houston)		222			2
The 2007 Notes		4,734			79
KeyBank II
(secured by distributions from Funding III, II & V)		1,373			147
Credit Facility		2,571			423


	$	9,380		$	663


(i)		Pro forma adjustments for the Bank of America note are included in the adjustments discussed in Note (B).

D.		Reflects the Operating Partnership’s unitholder minority interest, which is approximately 16%, of the adjustments.

E.		Does not reflect the non-recurring gain on the sale of The Properties or the non-recurring debt pre-payment penalties of $1.9 million or write off of deferred financing costs of $1.9 million associated with the debt pay downs as outlined in Note (C) of the Notes to Unaudited Pro Forma Consolidated Balance Sheet. The estimated gain net of estimated selling costs and before minority interests and taxes would have been approximately $260.9 million had the Transactions taken place as of March 31, 2007.


Purchase price	$	620,000
Assumption of debt		(55,000	)
Settlement costs, partner’s interests and incentive payments		(41,184	)
Net book value of the Properties		(262,882	)


Gain	$	260,934

F-6

CRESCENT REAL ESTATE EQUITIES COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2006
(dollars in thousands, except share data)


	(A)
	Crescent
	Real Estate			Pro Forma
	Equities Company			Adjustments			Consolidated
REVENUE:
Office Property	$	414,343		$	(5,945	) (B)	$	408,398
Resort Residential Development Property		372,148			(4,845	) (B)		367,303
Resort/Hotel Property		142,205			(142,205	) (B)		—

Total Property revenue	$	928,696		$	(152,995	)	$	775,701


EXPENSE:
Office Property real estate taxes	$	41,674		$	(1,443	) (B)	$	40,231
Office Property operating expenses		164,965			(2,773	) (B)		162,192
Resort Residential Development Property expense		342,994			(5,076	) (B)		337,918
Resort/Hotel Property expense		108,391			(106,437	) (B)		1,954

Total Property expense	$	658,024		$	(115,729	)	$	542,295


Income from Property Operations	$	270,672		$	(37,266	)	$	233,406


OTHER INCOME (EXPENSE):
Income from sale of investment in unconsolidated company	$	47,709		$	—		$	47,709
Interest and other income		47,428			(90	) (B)		47,338
Corporate general and administrative		(44,918	)		—			(44,918	)
Interest expense		(134,273	)		36,177	(B) (C)		(98,096	)
Amortization of deferred financing costs		(7,605	)		2,215	(B) (C)		(5,390	)
Depreciation and amortization		(147,407	)		20,964	(B)		(126,443	)
Other expenses		(12,997	)		—			(12,997	)
Equity in net income (loss) of unconsolidated companies:					—			—
Office Properties		9,231			—			9,231
Resort Residential Development Properties		(355	)		—			(355	)
Resort/Hotel Properties		(5,109	)		—			(5,109	)
Temperature-Controlled Logistics Properties		(15,669	)		—			(15,669	)
Other		12,157			—			12,157


Total other income (expense)	$	(251,808	)	$	59,266		$	(192,542	)


INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES	$	18,864		$	22,000		$	40,864
Minority interests		(2,661	)		(3,259	) (B) (D)		(5,920	)
Income tax (expense) benefit		3,475			(2,776	) (B)		699


INCOME BEFORE DISCONTINUED OPERATIONS	$	19,678		$	15,965		$	35,643


BASIC EARNINGS PER SHARE DATA:
Income before discontinued operations	$	0.19					$	0.35

DILUTED EARNINGS PER SHARE DATA:
Income before discontinued operations	$	0.19					$	0.35


WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC		102,054,659						102,054,659


WEIGHTED AVERAGE SHARES OUTSTANDING — DILUTED		102,054,659						102,054,659

See accompanying notes to Pro Forma Consolidated Statement of Operations

F-7

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands)

The following describes the pro forma adjustments to the Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2006 as if the Transactions described in the first paragraph of “Pro Forma Financial Information” were completed on January 1, 2006.

A.		Reflects Crescent Real Estate Equities Company unaudited consolidated historical Statement of Operations for the year ended December 31, 2006.

B.		Reflects adjustments to remove the revenue and expenses for The Properties for the year ended December 31, 2007 as outlined in the table below.


	Resort/Hotel			Sonoma			Austin Centre
	Properties			Golf Club			Office Property
Property revenue	$	142,205		$	4,845		$	5,945
Property real estate taxes		—			—			(1,443	)
Property expense		(106,437	)		(5,076	)		(2,773	)
Interest and other income		90			—			—
Interest expense		(2,489	)		(167	)		—
Amortization of deferred financing		(144	)		—			—
Depreciation and amortization		(17,543	)		(1,026	)		(2,395	)
Minority interests		126			—			—
Income tax benefit		2,294			482			—


Income before discontinued operations	$	18,102		$	(942	)	$	(666	)


				Amortization
	Interest			of Deferred
	Expense			Financing
Debt assumption:
Bank of America Note I (i)
(secured by Fairmont Sonoma Mission Inn)	$	2,854	(i)	$	144	(i)


Debt pay downs:
Prudential Note
(secured by 707 17th Street/Denver Marriott)		1,921			48
AEGON Partnership Note
(secured by Greenway Plaza/Renaissance Houston)		902			7
The 2007 Notes		18,917			317
KeyBank II
(secured by distributions from Funding III,II & V)		1,846			291
Credit Facility		9,935			1,408


	$	33,521		$	2,071


(i)		Pro forma adjustments for the Bank of America note are included in the adjustments discussed in Note (B).

Reflects the Operating Partnership’s unitholder minority interest, which is approximately 16%, of the adjustments.

F-8

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