Crescent: Rainwater's REIT

02/21/2003 12:00 am EST

Focus:

Martin Pring

Publisher, Intermarket Review

"Our indicators are pointing to a deflationary period, so it is appropriate to make some allocation to bonds," says Martin Pring, editor of Weekly Intermarket Update. "Unfortunately, sentiment in bond is excessively bullish which means that upside is limited. For this reason, we are recommending short-term bond funds as well as good quality preferred and high yield bond funds." Also for income, Pring--along with analyst Joe Turner --suggest this REIT.

"Our stock pick this month is Crescent Real Estate Equities Co. (CEI NYSE), a real estate investment trust, which owns and operates a portfolio of mainly office properties in the Southwest, primarily in Texas and Colorado. CEI's business objective is the maximization of total return for shareholders and to be the premier real estate investment company in their markets. It is based in Fort Worth and owns and manages a portfolio of 73 premier office buildings totaling 28.5 million square feet. CEI is one of the largest publicly held real estate investment trusts in the nation.Here are our key reasons for adding CEI to portfolios:

1. Value Investment: The recession and bear market in common stocks have affected most all stocks, and especially REITs. This price weakness in REITs is due to war uncertainties and the softness in office rental markets throughout the nation. These concerns will pass in time, but in the meantime have opportunity to invest in a fine company at a significant bargain.

2. Quality: Both properties and management have a common denominator--quality. CEI's office buildings are generally located downtown and are Class A. Class A buildings are those that have the most desirable locations and have the highest rent and occupancy rates within their markets. Management is led by Richard Rainwater. Rainwater is considered the guiding financial mind behind transforming the investment portfolio of the Texas Bass family from millions into billions. Rainwater is the consummate value investor. It is comforting to know that he has recently increased his personal interest of CEI stock to 14%. Rainwater has purchased $36 million of stock in the past five months. This is quite a vote of confidence by one of America's top investors.

3. Income: Crescent's current dividend is $1.50, generating a 10% yield for today's investor. We believe this payment level is secure, assuming the economy picks up and office rental markets firm up later this year.

"Crescent is loaded with talented management, valuable assets, and attractive dividend yield. This is a great combination that will reward the patient conservative investor. Investors are aligning their interests with management that has an established track record of maximizing asset value."

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