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Crescent Resources
Meeting the Challenge

Our challenge in 2004 was to contribute $400 million in cash and $155 million in EBIT to Duke Energy. We hit those targets – and then some – thanks to continuing strong demand for investment-grade real estate. At the same time, we kept all of our platforms – commercial, residential and multi-family – growing and well-positioned for 2005 and beyond. We didn’t hold a liquidation sale to meet 2004’s financial goals. We executed our strategy, continued to invest in our base of assets and enhanced our development and land management practices, upholding our reputation as a “green” developer. Every segment of our business contributed to our success in 2004.

Major accomplishments:

• Crescent completed master planning for Potomac Yard, a 300-acre mixed-use site adjacent to Reagan National Airport, and sold most of the property to other developers in 2004. We retain ownership of two office buildings under construction, and the General Services Administration has leased 405,000 square feet of that space for the Environmental Protection Agency.

The Auberge Inn at Crescent’s Palmetto Bluff community in South Carolina opened in 2004, along with the Jack Nicklaus-designed May River golf course.

• In the residential market, Crescent reached its all-time record of more than $413 million in individual homesite sales.
• Property sales are brisk at Palmetto Bluff, an environmental preserve and residential community in South Carolina’s lowcountry. A portion of every real estate transaction funds the Palmetto Bluff Conservancy, a nonprofit organization dedicated to natural resource protection on the property.
• We sold nearly 3,000 acres of lakefront property and made a one-time multi-million-dollar gift to the state of North Carolina to expand Lake James State Park. The sale, which closed in January, is a key component in a master plan to drive economic growth in the Lake James region and preserve the lake environment for wildlife and recreation.
• We’re participating in the development of a major mixed-use development in Charlotte, N.C., that will include the new corporate headquarters for Piedmont Natural Gas.

Most segments of the real estate market held strong in 2004, and Crescent is well-positioned for the future regardless of market conditions. We are investing primarily in the Southeast and the Southwest – growing regions with diverse economies. Studies show that 85 percent of growth in the United States is occurring in the coastal states, plus Arizona and Nevada.

Within this geographic area, we offer a diversified mix of high-growth product types, including second homes and retirement homes for baby boomers. We’re broadening our reach into that market with more diverse real estate offerings, and branching out into residential condominiums, primarily in Florida. We’ll continue to adjust our portfolio to invest in both residential and commercial growth markets.

It should be noted that 2004 was a banner year, and it’s unrealistic to expect the same results on an annual basis. We can promise, however, to continue to capitalize on opportunities without taking undue risks, and to fulfill our commitments to Duke Energy and its investors.

— Art Fields, President and Chief Executive Officer, Crescent Resources

Profile: Crescent Resources manages land holdings and develops high-quality commercial, residential and multi-family real estate projects in nine states. Crescent Resources has received numerous awards for its environmentally sensitive property development strategies and partnerships with environmental and wildlife groups.

Operating Data

	2004		2003		2002		2001		2000
Crescent Resources
Residential lots sold	2,473		2,060		1,221		1,075		955
Commercial square footage sold, in millions	2.1		1.7		1.2		3.1		2.0
Multi-family units sold	273		950		—		—		—
Surplus (legacy) land sold, acres	9,087		5,088		10,982		11,402		8,562