<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
----------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ---------
Commission File Number 01-12846
SECURITY CAPITAL INDUSTRIAL TRUST
(Exact name of registrant as specified in its charter)
Maryland 74-2604728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 East 35th Place, Aurora, Colorado 80011
(Address of principal executive offices) (Zip Code)
(303) 375-9292
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing for the past 90 days. Yes No X
----- -----
The number of shares outstanding of the Registrant's common stock as of
July 18, 1996 was:
Shares of Beneficial Interest, $.01 par value - 81,447,929 shares
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<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
INDEX
<TABLE>
<CAPTION>
Page
Number(s)
---------
<S> <C>
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - June 30, 1996
and December 31, 1995.............................. 3
Consolidated Statements of Operations - Three
and Six Months Ended June 30, 1996 and 1995........ 4
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1996 and 1995................ 5
Notes to Consolidated Financial Statements............ 6-10
Report of Independent Public Accountants.............. 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 12-16
PART II. Other Information
Item 4. Submission of Matters to a Vote of Securities
Holders............................................ 17
Item 5. Other Information..................................... 17
Item 6. Exhibits and Reports on Form 8-K...................... 17
</TABLE>
2
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
------------- -------------
ASSETS
----------
<S> <C> <C>
REAL ESTATE............................................................. $ 2,155,832 $ 1,827,670
Less accumulated depreciation...................................... 80,671 56,406
------------- -------------
2,075,161 1,771,264
CASH AND CASH EQUIVALENTS............................................... 9,042 22,235
ACCOUNTS RECEIVABLE..................................................... 5,374 5,764
OTHER ASSETS............................................................ 46,618 34,709
------------- -------------
Total assets.............................................. $ 2,136,195 $ 1,833,972
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Line of credit..................................................... $ 13,300 $ 81,000
Long-term debt..................................................... 524,151 324,527
Mortgage notes payable............................................. 87,606 96,013
Securitized debt................................................... 37,638 38,090
Assessment bonds payable........................................... 12,438 11,173
Accounts payable and accrued expenses.............................. 31,350 32,826
Construction payable............................................... 25,164 20,437
Distributions payable.............................................. - 20,558
Other liabilities.................................................. 14,956 14,416
------------- ------------
Total liabilities 746,603 639,040
------------- ------------
COMMITMENTS AND CONTINGENCIES...........................................
MINORITY INTEREST....................................................... 57,905 58,741
SHAREHOLDERS' EQUITY:
Series A Preferred Shares; $0.01 par value; 5,400,000 shares issued
and outstanding at June 30, 1996 and December 31, 1995; stated
liquidation preference of $25 per share.......................... 135,000 135,000
Series B Preferred Shares; $0.01 par value; 8,050,000 shares issued
and outstanding at June 30, 1996; stated liquidation preference
of $25 per share................................................. 201,250 -
Common shares of beneficial interest, $0.01 par value; 81,447,929
shares issued and outstanding at June 30, 1996 and 81,416,451
shares at December 31, 1995...................................... 814 814
Additional paid-in capital.............................................. 1,050,271 1,059,142
Distributions in excess of net earnings................................. (55,648) (58,765)
------------- -------------
Total shareholders' equity................................ 1,331,687 1,136,191
------------- -------------
Total liabilities and shareholders' equity................ $ 2,136,195 $ 1,833,972
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
1996 1995 1996 1995
--------- -------- -------- -------
<S> <C> <C> <C> <C>
INCOME:
Rental income.................................................... $54,361 $ 35,340 $104,423 $68,241
Other real estate income......................................... 1,037 285 1,180 285
Interest income.................................................. 350 222 507 334
------- -------- -------- -------
Total income............................................ 55,748 35,847 106,110 68,860
------- -------- -------- -------
EXPENSES:
Rental expenses, net of recoveries of $7,964 and $4,540 for the
three month periods in 1996 and 1995, respectively, and
$14,725 and $9,138 for the six month periods in 1996 and
1995, respectively 7,247 4,295 13,392 7,537
Depreciation and amortization.................................... 14,126 8,973 27,215 17,415
Interest expense................................................. 8,851 8,488 17,359 15,249
REIT management fee.............................................. 5,033 3,103 9,674 6,495
General and administrative....................................... 303 257 552 533
Other............................................................ 732 359 1,200 731
------- -------- -------- -------
Total expenses.......................................... 36,292 25,475 69,392 47,960
------- -------- -------- -------
NET EARNINGS BEFORE MINORITY INTEREST AND LOSS ON DISPOSITION OF
REAL ESTATE...................................................... 19,456 10,372 36,718 20,900
Minority interest share in net earnings............................... 884 874 1,640 1,739
------- -------- -------- -------
NET EARNINGS BEFORE LOSS ON DISPOSITION OF REAL ESTATE................ 18,572 9,498 35,078 19,161
Loss on disposition of real estate.................................... - - 29 -
------- -------- -------- -------
NET EARNINGS.......................................................... 18,572 9,498 35,049 19,161
Less preferred share dividends........................................ 6,695 353 11,368 353
------- -------- -------- -------
NET EARNINGS ATTRIBUTABLE TO COMMON SHARES............................ $11,877 $ 9,145 $ 23,681 $18,808
======= ======== ======== =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............................ 81,445 64,588 81,436 64,587
======= ======== ======== =======
PER SHARE NET EARNINGS ATTRIBUTABLE TO COMMON SHARES.................. $ 0.15 $ 0.14 $ 0.29 $ 0.29
======= ======== ======== =======
DISTRIBUTIONS PER COMMON SHARE........................................ $0.2525 $0.23375 $ 0.5050 $0.4675
======= ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings................................................................... $ 35,049 $ 19,161
Minority interest.............................................................. 1,640 1,739
Adjustments to reconcile net earnings to cash flows provided by operating
activities:
Depreciation and amortization................................................ 27,215 17,415
Loss on disposition of real estate........................................... 29 -
Rent leveling................................................................ (2,518) (2,076)
Amortization of deferred financing costs..................................... 1,303 815
Increase in accounts receivable and other assets............................... (4,522) (3,559)
Increase (decrease) in accounts payable, accrued expenses and other
liabilities.................................................................. (936) 8,411
--------- --------
Net cash provided by operating activities............................. 57,260 41,906
--------- --------
INVESTING ACTIVITIES:
Real estate investments........................................................ (317,244) (263,204)
Tenant improvements and lease commissions...................................... (7,208) (3,308)
Recurring capital expenditures................................................. (556) (143)
Proceeds from disposition of real estate....................................... 1,092 -
--------- --------
Net cash used in investing activities................................. (323,916) (266,655)
--------- --------
FINANCING ACTIVITIES:
Proceeds from sale of preferred shares, net of expenses........................ 191,992 130,414
Proceeds from dividend reinvestment and share purchase plan and from
exercised warrants........................................................... 387 19
Proceeds from long-term debt offerings......................................... 199,632 324,455
Distributions paid to common shareholders...................................... (41,122) (30,194)
Distributions paid to minority interest holders................................ (2,631) (2,667)
Preferred share dividends...................................................... (11,368) (353)
Proceeds from line of credit................................................... 211,000 135,800
Payments on line of credit..................................................... (278,700) (295,800)
Regularly scheduled principal payments on mortgage notes payable............... (1,960) (1,661)
Debt issuance costs............................................................ (5,363) (5,668)
Balloon principal payments made upon maturity.................................. (8,404) (1,721)
--------- --------
Net cash provided by financing activities............................. 253,463 252,624
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ (13,193) 27,875
CASH AND CASH EQUIVALENTS, beginning of period...................................... 22,235 21,270
--------- --------
CASH AND CASH EQUIVALENTS, end of period............................................ $ 9,042 $ 49,145
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with real estate acquired:
Assumption of existing mortgage notes payable or assessment bonds
payable.................................................................... $ 2,770 $ 11,550
In conjunction with the tax free exchange of real estate:
Disposition proceeds applied towards real estate purchase.................... - 1,885
--------- --------
Total................................................................. $ 2,770 $ 13,435
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. GENERAL:
The consolidated financial statements of Security Capital Industrial Trust
("SCI") as of June 30, 1996 are unaudited, and pursuant to the rules of the
Securities and Exchange Commission, certain information and footnote disclosures
normally included in financial statements have been omitted. The consolidated
financial statements for 1995 have been restated to conform to the 1996
presentation. While management of SCI believes that the disclosures presented
are adequate, these interim consolidated financial statements should be read in
conjunction with SCI's December 31, 1995 consolidated financial statements.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of SCI's consolidated financial
position and results of operations for the interim periods. The results of
operations for the three and six month periods ended June 30, 1996 and 1995 are
not necessarily indicative of the results to be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. RECENT ACCOUNTING PRONOUNCEMENT:
Effective January 1, 1996, SCI adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which had no material impact on its
consolidated financial statements. SFAS No. 121 establishes accounting standards
for the review of long-lived assets to be held and used, for impairment whenever
the carrying amount of an asset may not be recoverable, and requires that
certain long-lived assets to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell.
3. REAL ESTATE:
The following summarizes real estate investments as of June 30, 1996 and
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- -------------
<S> <C> <C>
Land held for development.................... $ 74,545 $ 60,363
Land under development....................... 68,285 56,944
Improved land................................ 299,132 242,015
Buildings and improvements................... 1,633,800 1,380,389
Construction in progress..................... 67,058 80,958
Capitalized preacquisition costs............. 13,012 7,001
----------- ------------
Total real estate................... 2,155,832 1,827,670
Less accumulated depreciation................ 80,671 56,406
----------- -----------
Net real estate..................... $ 2,075,161 $ 1,771,264
=========== ===========
</TABLE>
Capitalized preacquisition costs include $8,146,000 and $2,137,000 of funds
on deposit with title companies as of June 30, 1996 and December 31, 1995,
respectively, for property acquisitions.
6
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
4. BORROWINGS:
Line of Credit
On June 1, 1995, SCI increased its line of credit agented by NationsBank
of Texas, N.A. ("NationsBank") to $350 million. The line of credit, as amended
and restated effective May 2, 1996, bears interest at SCI's option at either (a)
the greater of the federal funds rate plus 0.5% and prime, or (b) LIBOR plus
1.25%, based upon SCI's current senior debt ratings, and is scheduled to mature
in May 1998. This line of credit may be extended annually for an additional year
with the approval of NationsBank and the other participating lenders. All debt
incurrences are subject to a covenant that SCI maintain a debt to tangible net
worth ratio of not greater than 1 to 1. Additionally, SCI is required to
maintain an adjusted net worth (as defined) of at least $1.0 billion, to
maintain interest payment coverage of not less than 2 to 1, and to maintain a
fixed charge coverage ratio (as defined) of not less than 1.4 to 1. As of June
30, 1996, SCI was in compliance with all covenants, and as of July 18, 1996,
$25.3 million of borrowings were outstanding.
Long-Term Debt
On May 17, 1996, SCI issued $50 million of Senior Notes due 2002 (the
"2002 Notes"), $100 million of Senior Notes due 2008 (the "2008 Notes"), and $50
million of Senior Notes due 2016 (the "2016 Notes" and together with the 2002
Notes and the 2008 Notes, the "May 1996 Notes"). The 2002 Notes bear interest at
7.25% per annum and require annual principal payments of $12.5 million,
commencing May 15, 1999. The 2008 Notes bear interest at 7.95% per annum and
require annual principal payments of $25 million, commencing May 15, 2005. The
2016 Notes bear interest at 8.65% per annum and require aggregate annual
principal payments of $5 million, commencing 2010 through 2013, $7.5 million in
2014, $10 million in 2015, and $12.5 million in 2016. Collectively, the May 1996
Notes originally had an average life to maturity of 10.8 years and an average
effective interest cost inclusive of offering discounts, issuance costs, and
interest rate protection agreements of 8.41% per annum.
On May 16, 1995, SCI issued $75 million of Senior Notes due 2009 (the
"May 2009 Notes"), $17.5 million of Senior Notes due 2001 (the "2001 Notes"),
$17.5 million of Senior Notes due 2000 (the "2000 Notes"), and $15 million of
Senior Notes due 1998 (the "1998 Notes"), together with the May 2009 Notes, the
2001 Notes and the 2000 Notes collectively referred to as the "May 1995 Notes").
The May 2009 Notes bear interest at 7.875% per annum, and require annual
principal payments of $9.375 million, commencing May 15, 2002. The 2001 Notes,
2000 Notes and 1998 Notes bear interest at 7.30%, 7.25% and 7.125% per annum,
respectively, with the principal payable at maturity. Collectively, the May 1995
Notes originally had an average life to maturity of 8.2 years and an average
effective interest cost, inclusive of offering discounts and issuance costs of
7.92% per annum.
On March 2, 1995, SCI issued $150 million of Senior Notes due 2009 (the
"March 2009 Notes") and $50 million of Senior Notes due 2015 (the "2015 Notes",
together with the March 2009 Notes collectively referred to as the "March
Notes"). The March 2009 Notes bear interest at 8.72% per annum and require
annual principal payments of $18.75 million, commencing March 1, 2002. The 2015
Notes bear interest at 9.34% per annum and require aggregate annual principal
payments of $5 million in 2010, $6.25 million in 2011, $7.5 million in 2012,
$8.75 million in 2013, $10 million in 2014 and $12.5 million in 2015.
Collectively, the March Notes originally had an average life to maturity of
12.38 years and an average effective interest cost, inclusive of offering
discounts and issuance costs of 9.04% per annum.
7
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
4. BORROWINGS: (CONTINUED)
All of the foregoing notes are redeemable at any time at the option of
SCI, in whole or in part, at a redemption price equal to the sum of the
principal amount of the notes being redeemed plus accrued interest thereon to
the redemption date plus an adjustment, if any, based on the yield to maturity
relative to market yields available at redemption. Such notes are governed by
the terms and provisions of an indenture agreement (the "Indenture") between SCI
and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40%, and (iii) SCI's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5:1. In addition, SCI may not at any time own Total
Unencumbered Assets, as defined in the Indenture, equal to less than 150% of the
aggregate outstanding principal amount of SCI's unsecured debt. At June 30,
1996, SCI was in compliance with all debt covenants.
Mortgage Notes Payable, Assessment Bonds Payable and Securitized Debt
Mortgage notes payable are secured by real estate with an aggregate
undepreciated cost of $158.0 million at June 30, 1996. Assessment bonds payable
are secured by real estate with an aggregate undepreciated cost of $200.0
million at June 30, 1996. Securitized debt is collateralized by real estate with
an aggregate undepreciated cost of $69.0 million at June 30, 1996.
Approximate principal payments due on mortgage notes payable, assessment
bonds payable and securitized debt during each of the years in the five-year
period ending December 31, 2001, and thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Remainder of 1996.............. $ 5,685
1997........................... 13,303
1998........................... 5,233
1999........................... 13,688
2000........................... 4,769
2001........................... 11,416
2002 and thereafter............ 83,588
---------
Total $ 137,682
=========
</TABLE>
For the six month periods ended June 30, 1996 and 1995, interest expense
was $17,359,000 and $15,249,000 respectively, which was net of capitalized
interest of $6,898,000 and $3,115,000, respectively. The total interest paid in
cash was $22,999,027 and $11,471,000 for the six month periods ended June 30,
1996 and 1995, respectively.
5. MINORITY INTEREST:
Minority interest represents limited partners' interests in five real
estate partnerships controlled by SCI (Red Mountain Joint Venture, SCI Limited
Partnership-I, SCI Limited Partnership-II, SCI Limited Partnership-III, and SCI
Limited Partnership-IV). As of June 30, 1996, a total of 5,194,258 limited
partnership units were held by minority interest limited partners in the various
real estate partnerships. Limited partners are entitled to exchange each
partnership unit for one common share of SCI.
8
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
5. MINORITY INTEREST: (CONTINUED)
In October 1994, SCI IV, Inc., a wholly-owned subsidiary of SCI, made a
$27.5 million cash contribution to SCI Limited Partnership-IV, a Delaware
limited partnership (Partnership-IV), in exchange for a 96.4% general
partnership interest in Partnership-IV, and third party investors that were not
affiliated with SCI contributed an aggregate of $1.0 million in assets to
Partnership-IV in exchange for limited partner interests totalling 3.6% in
Partnership-IV. SCI IV, Inc., as general partner, manages the activities of
Partnership-IV and has fiduciary responsibilities to Partnership-IV and its
other partners.
Both Partnership-IV and SCI IV, Inc. are legal entities that are
separate and distinct from SCI, its affiliates and each other, and each has
separate assets, liabilities, business functions and operations. The assets
owned by Partnership-IV consist of income producing, improved real property
located in Florida, Ohio, Oklahoma and Michigan. The sole assets owned by SCI
IV, Inc. are its general partner advances to and interest in Partnership-IV. SCI
and its affiliates had no borrowings from SCI IV, Inc. at June 30, 1996.
Partnership-IV had $780,000 of borrowings from SCI IV, Inc. at June 30, 1996.
SCI IV, Inc. had $780,000 of borrowings from SCI and its affiliates at June 30,
1996. For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of each of Partnership-IV and SCI IV, Inc. are
included in SCI's consolidated financial statements and the third party
investors' interests in Partnership-IV are reflected as minority interest.
Limited partners are entitled to exchange each partnership unit for one common
share of beneficial interest in SCI and are entitled to receive preferential
cumulative quarterly distributions per unit equal to the quarterly distribution
in respect of common shares. At June 30, 1996, there were 68,612 limited
partnership units outstanding in Partnership-IV.
6. SHAREHOLDERS' EQUITY:
In February 1996, SCI issued a total of 8,050,000 Series B Cumulative
Convertible Redeemable Preferred Shares, (the "Series B Preferred Shares"). The
Series B Preferred Shares have a liquidation preference of $25 per share for an
aggregate liquidation preference of $201,250,000 plus any accrued and unpaid
dividends. Holders of the Series B Preferred Shares are only entitled to limited
voting rights under certain conditions. The Series B Preferred Shares are
convertible at any time, unless previously redeemed, at the option of the
holders thereof into SCI common shares at a conversion price of $19.50 per share
(equivalent to a conversion rate of 1.282 common shares for each Series B
Preferred Share), subject to adjustment in certain circumstances. Holders of the
Series B Preferred Shares are entitled to receive, when, as and if declared by
the Board of Trustees, out of funds legally available for the payment of
distributions, cumulative preferential cash distributions in an amount per share
equal to the greater of 7% of the liquidation preference per annum (equivalent
to $1.75 per share) or the distribution on the common shares, or portion
thereof, into which a Series B Preferred Share is convertible. Distributions on
the Series B Preferred Shares are cumulative from the date of original issue and
payable quarterly in arrears on the last day of March, June, September and
December of each year. The Series B Preferred Shares are redeemable at the
option of SCI on or after February 21, 2001. The Series B Preferred Shares rank
on a parity with the Series A Cumulative Redeemable Preferred Shares ("Series A
Preferred Shares") with respect to payment of distributions and amounts upon
liquidation.
On May 16, 1996, SCI paid a distribution of $0.2525 per common share to
common shareholders of record as of May 7, 1996. On June 28, 1996 SCI paid a
quarterly dividend of $0.5875 per Series A Preferred Share to Series A preferred
shareholders of record on June 14,1996. On June 28, 1996, SCI paid a quarterly
dividend of $0.62708 per Series B Preferred Share to Series B preferred
shareholders of record as of June 14, 1996. This dividend was payable for the
period from the original issue date of February 21, 1996, through June 30, 1996.
9
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
7. EARNINGS PER SHARE:
Earnings per share is computed based on the weighted average number of
common shares outstanding during the period. Exercise of outstanding warrants
and options to acquire 29,764 SCI common shares would not have a material
dilutive effect on earnings per share. The conversion of limited partnership
units into 5,194,258 SCI common shares is not assumed since the effect would not
be dilutive.
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Security Capital Industrial Trust
We have reviewed the accompanying consolidated balance sheet of Security
Capital Industrial Trust and subsidiaries as of June 30, 1996, and the related
consolidated statements of operations for the three and six months ended June
30, 1996 and 1995, and the consolidated statements of cash flows for the six
months ended June 30, 1996 and 1995. These financial statements are the
responsibility of the Trust's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above in order for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Security Capital
Industrial Trust and subsidiaries as of December 31, 1995, and in our report
dated March 1, 1996, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 1995, is fairly stated in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 18, 1996
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
SCI's operating results depend primarily upon net operating income from
distribution properties, which is substantially influenced by (i) the demand for
and supply of distribution properties in SCI's target market cities, (ii) the
pace and economic returns at which SCI can acquire and develop additional
distribution properties, and (iii) the extent to which SCI can sustain improved
market performance as measured by lease rates and occupancy. SCI's target market
cities and submarkets have benefitted substantially in recent periods from
demographic trends (including population and job growth) which influence the
demand for distribution properties. REIT management believes SCI's ability to
compete is significantly enhanced relative to other companies because of the
REIT Manager's depth of management, including the SCI National Operating System,
which includes acquisition and development personnel, and presence in local
markets. The REIT Manager is Security Capital Industrial Incorporated, a
subsidiary of Security Capital Group Incorporated, SCI's largest shareholder. As
a result of acquisitions and developments for the last six months of 1995 and
the first six months of 1996, SCI's rentable square footage increased by 21.5
million square feet or 44.2% to 70.1 million square feet as of June 30, 1996
from 48.6 million square feet as of June 30, 1995. As of June 30, 1996, the
portfolio was 94.82% leased. REIT management expects that SCI's ability to
acquire and develop distribution properties at favorable economic returns will
continue through the remainder of 1996. Over the longer term, SCI expects
masterplanned, full service distribution park developments to constitute an
increasing percentage of SCI's growth. Additionally, SCI Development Services
(see Other Real Estate Income) is expected to contribute an increasing level of
income in subsequent periods. As of June 30, 1996, 2.3 million square feet of
SCI's 10.2 million square feet under development consisted of build-to-suits
under development representing a total expected investment of $80.7 million.
SCI frequently acquires properties which are underleased and develops
properties which are not fully leased at the start of construction, which
reduces SCI's overall occupancy rate below its stabilized level but provides
opportunities to increase revenues. The term "stabilized" means that capital
improvements, repositioning, new management and new marketing programs (or
development and marketing, in the case of newly developed properties) have been
completed and in effect for a sufficient period of time (but in no case longer
than 12 months for properties acquired by SCI and 18 months after shell
completion for properties developed by SCI) to achieve stabilized occupancy
(typically 93%, but ranging from 90% to 95%, depending on the submarket and
product type) at market rents. SCI has been successful in increasing occupancies
on acquired and developed properties during their initial months of operations
resulting in an occupancy rate of 96.49% for stabilized properties owned as of
June 30, 1996. The average increase in rental rates for new and renewed leases
on previously leased space during the first six months of 1996 was 13.3%. As
leases are renewed or new leases are acquired, SCI expects most lease rates on
renewals or new leases to increase in the remainder of 1996. These factors
should improve SCI's results of operations.
Capital and credit market conditions which affect SCI's costs of equity and
debt capital may influence future growth in operating results. No assurance can
be given that expected trends for the remainder of 1996 in leasing rates,
occupancy rates and economic returns on acquired and developed properties will
be realized.
RESULTS OF OPERATIONS
Interim Period Comparisons
Net earnings attributable to common shares increased by $4.9 million or
26.1% to $23.7 million for the first six months of 1996 from $18.8 million for
the same period in 1995.
Net earnings are expected to increase in subsequent periods due to the
acquisition and development of additional operating properties and the continued
increase in the stabilized portfolio rental rates.
Historically, the primary components of revenue and earnings growth have
been SCI's acquisition and development activity. SCI has acquired and developed
$1.9 billion of operating properties from its inception through June 30, 1996.
Projected 1996 property level earnings before interest, taxes, depreciation and
amortization ("EBITDA") for these properties is 10.32% of SCI's aggregate costs.
Aggregate cost for the properties includes the purchase price, closing costs and
budgeted capital improvements and marketing costs prior to stabilization (and
all development costs, in the case of developed properties). Projected EBITDA is
based on current lease rates for stabilized properties and current market rates
for properties being stabilized and anticipated operating expenses. No assurance
can be given that
12
<PAGE>
projected levels of EBITDA will be achieved by these properties nor that future
acquisitions and developments will achieve the same level of EBITDA relative to
SCI's investment basis.
Rental Revenues
Rental revenues for the first six months of 1996 increased by $36.2 million
or 53.1% to $104.4 million, as compared to $68.2 million for the same period in
1995. Of this increase, $19.1 million was generated by the 180 properties
acquired in 1995, $8.2 million was generated by the 48 developments completed in
1995, $4.9 million was generated by the 70 properties acquired in 1996, and $2.7
million was generated by the 41 developments completed in 1996. The remaining
$1.3 million increase was attributable to revenue increases in the 521
properties owned at January 1, 1995.
Other Real Estate Income
Other real estate income consists of gains on disposition of property and
fees and other income from build-to-suit customers generated primarily by SCI
Development Services Incorporated ("SCI Development Services"). SCI Development
Services is expected to generate recurring income in subsequent periods. SCI
owns a preferred stock interest representing 95% of the net operating cash flow
of SCI Development Services. SCI Development Services develops build-to-suit
distribution space facilities or works on a fee basis for customers whose space
needs do not meet SCI's strict investment criteria for long-term ownership.
Through its preferred stock ownership, SCI will realize substantially all
economic benefits of SCI Development Services activities. The activities of SCI
Development Services are consolidated with SCI. SCI Development Services pays
federal and state taxes at the applicable corporate rate.
Interest Income
Interest income for the first six months of 1996 increased $173,000 from
the same period in 1995. The increase in interest income was a result of higher
average balances in interest bearing accounts and higher interest rates in the
first six months of 1996 compared to the same period in 1995.
Rental Expenses
Rental expenses, net of recoveries, increased by $5.9 million or 78.7% to
$13.4 million for the first six months of 1996 from $7.5 million for the same
period in 1995. The increase in rental expenses is primarily attributable to
acquisitions and developments for the last six months of 1995 and the first six
months of 1996, which increased SCI's rentable square footage by 21.5 million
square feet to 70.1 million square feet.
Interest Expense
Interest expense increased by $2.2 million or 14.5% to $17.4 million for
the first six months of 1996 from $15.2 million for the same period in 1995.
Total interest capitalized increased by $3.8 million or 122.6% to $6.9 million
for the first six months of 1996 from $3.1 million for the same period in 1995.
The increase in interest expense was principally caused by the 1995 issuance of
$325 million in Senior Notes and the issuance of $200 million in Senior Notes on
May 17, 1996 (See "--Liquidity and Capital Resources"). The capitalized interest
increase is attributable to increased development activity in the first six
months of 1996 as compared to the first six months of 1995.
REIT Management Fee
The REIT management fee paid by SCI is based on SCI's cash flow (as defined
in the REIT Management Agreement between SCI and its REIT manager) before the
REIT management fee and therefore increased for the first six months of 1996 as
compared to the same period in 1995 because cash flow increased substantially.
Other Expenses
Other expenses increased by $469,000 or 64.2% to $1.2 million for the first
six months of 1996 from $731,000 for the same period in 1995. Other expenses
consist of land holding costs and acquisition and build-to-suit pursuit cost
write-offs. Land holding costs were $820,000 for the first six months of 1996
compared to $487,000 for the same period in 1995, and acquisition and build-to-
suit pursuit cost write-offs were $380,000 for the first six months of 1996
13
<PAGE>
compared to $244,000 for the same period in 1995. The increase in land holding
costs is principally the result of the increase in the average balance in land
holdings.
Preferred Share Dividends
In June 1995, SCI issued $135 million of Series A Preferred Shares that are
entitled to receive an annual dividend of $2.35 per share (9.4% annual dividend
rate), which amounted to $6.3 million for the first six months of 1996 compared
to $353,000 for the period from the June 21, 1995 issue date through June 30,
1995. In February 1996, SCI issued $201.3 million of Series B Preferred Shares
that are entitled to receive an annual dividend of $1.75 per share (7% annual
dividend rate) which amounted to $5.0 million for the period from the February
21, 1996 issue date through June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased from $41.9 million in the
first six months of 1995 to approximately $57.3 million in the first six months
of 1996. Cash used in investing activities increased from approximately $266.7
million in the first six months of 1995 to approximately $323.9 million in the
first six months of 1996. Cash provided by financing activities was
approximately $253.5 million in the first six months of 1996 compared to
approximately $252.6 million in the first six months of 1995. Cash provided by
financing activities for the first six months of 1996 consisted primarily of
$192 million of net proceeds from the sale of the Series B Preferred Shares,
$199.6 million net proceeds from the May debt offering and a net repayment on
the line of credit of $67.7 million. Cash provided by financing activities in
the first six months of 1995 consisted primarily of $130.4 million net proceeds
from the sale of the Series A Preferred Shares, $324.5 million of net proceeds
from the March and May long-term debt offerings and a $160 million net repayment
on the line of credit. Additionally, distributions paid to common and preferred
shareholders used $21.9 million more cash in the first six months of 1996 as
compared to the first six months of 1995.
On May 17, 1996, SCI issued $50 million of Senior Notes due 2002 (the "2002
Notes"), $100 million of Senior Notes due 2008 (the "2008 Notes"), and $50
million of Senior Notes due 2016 (the "2016 Notes" and together with the 2002
Notes and the 2008 Notes, the "May 1996 Notes"). The 2002 Notes bear interest at
7.25% per annum and require annual principal payments of $12.5 million,
commencing May 15, 1999. The 2008 Notes bear interest at 7.95% per annum and
require annual principal payments of $25 million, commencing May 15, 2005. The
2016 Notes bear interest at 8.65% per annum and require aggregate annual
principal payments of $5 million, commencing 2010 through 2013, $7.5 million in
2014, $10 million in 2015, and $12.5 million in 2016. In order to lock in
interest rates for the May 1996 Notes, SCI entered into an interest rate
protection agreement in the form of a Forward Treasury Lock Agreement with an
investment banker on May 9, 1996. The agreement included a determination date of
May 15, 1996 and a settlement date of May 16, 1996. The notional amount was $50
million with a reference price of 97.203%. On May 14, 1996, the Forward Treasury
Lock Agreement was unwound at a price of 99.375% and SCI paid $1.086 million in
settlement. Additionally, SCI paid $837,000 to terminate an Interest Rate Swap
Agreement entered into with an investment banker on May 9, 1996. The agreement
included an effective date of May 15, 1996 and a termination date of May 15,
2006. The notional amount of the Interest Rate Swap Agreement was $50 million.
Collectively, the May 1996 Notes originally had an average life to maturity of
10.8 years and an average effective interest cost, inclusive of offering
discounts, issuance costs and the interest rate protection agreements of 8.41%
per annum.
In February 1996, SCI issued a total of 8,050,000 Series B Preferred
Shares. The Series B Preferred Shares have a liquidation preference of $25 per
share for an aggregate liquidation preference of $201,250,000 plus any accrued
and unpaid dividends. Holders of the Series B Preferred Shares are only entitled
to limited voting rights under certain conditions. The Series B Preferred Shares
are convertible at any time, unless previously redeemed, at the option of the
holders thereof into SCI common shares at a conversion price of $19.50 per
common share (equivalent to a conversion rate of 1.282 common shares for each
Series B Preferred Share), subject to adjustment in certain circumstances.
Holders of the Series B Preferred Shares are entitled to receive, when, as and
if declared by the Board of Trustees, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions in an
amount per share equal to the greater of 7% of the liquidation preference per
annum (equivalent to $1.75 per share) or the distributions on the common shares,
or portion thereof, into which a Series B Preferred Share is convertible.
Distributions on the Series B Preferred Shares are cumulative from the date of
original issue and are payable quarterly in arrears on the last day of March,
June, September and December of each year. The Series B Preferred Shares are
redeemable at the option of SCI on or after February 21, 2001. The Series B
Preferred Shares rank on a parity with the Series A Preferred Shares with
respect to payment of distributions and amounts upon liquidation.
14
<PAGE>
On September 29, and October 3, 1995, SCI completed a $250.0 million public
offering and issued a total of 16,260,163 common shares at a price of $15.375
per common share in conjunction with a rights offering.
On June 21, 1995, SCI issued 5,400,000 Series A Preferred Shares. The
Series A Preferred Shares have a liquidation preference of $25 per share for an
aggregate liquidation preference of $135 million plus any accrued but unpaid
dividends. The net proceeds (after underwriting commission and other offering
costs) of the Series A Preferred Shares issued were $130.4 million. Holders of
the Series A Preferred Shares are entitled only to limited voting rights under
certain conditions. Holders of the Series A Preferred Shares are entitled to
receive, when, as and if declared by the Board of Trustees, out of funds legally
available for the payment of distributions, cumulative preferential cash
distributions at the rate of 9.4% of the liquidation preference per annum
(equivalent to $2.35 per share). The Series A Preferred Shares are redeemable at
the option of SCI on or after June 21, 2000. The redemption price (other than
the portion thereof consisting of accrued and unpaid distributions) is payable
solely out of the sale proceeds of other capital shares of SCI, which may
include shares of other series of preferred shares.
On May 16, 1995, SCI issued $75 million of Senior Notes due 2009 (the "May
2009 Notes"), $17.5 million of Senior Notes due 2001 (the "2001 Notes"), $17.5
million of Senior Notes due 2000 (the "2000 Notes") and $15 million of Senior
Notes due 1998 (the "1998 Notes," together with the May 2009 Notes, the 2001
Notes and the 2000 Notes, collectively referred to herein as the "May 1995
Notes"). The May 2009 Notes bear interest at 7.875% per annum and require annual
principal payments of $9.375 million, commencing May 15, 2002. The 2001 Notes,
2000 Notes and 1998 Notes bear interest at 7.30%, 7.25% and 7.125% per annum,
respectively, with the principal payable at maturity. Collectively, the May 1995
Notes originally had an average life to maturity of 8.2 years and an average
effective interest cost, inclusive of offering discount and issuance costs of
7.92% per annum.
On March 2, 1995, SCI issued $150 million of Senior Notes due 2009 (the
"March 2009 Notes") and $50 million of Senior Notes due 2015 (the "2015 Notes,"
together with the March 2009 Notes, collectively referred to as the "March
Notes"). The March 2009 Notes bear interest at 8.72% per annum and require
annual principal payments of $18.75 million, commencing March 1, 2002. The 2015
Notes bear interest at 9.34% per annum and require aggregate annual principal
payments of $5 million in 2010, $6.25 million in 2011, $7.5 million in 2012,
$8.75 million in 2013, $10 million in 2014 and $12.5 million in 2015.
Collectively, the March Notes originally had an average life to maturity of
12.38 years and an average effective interest cost, inclusive of offering
discount and issuance costs of 9.04% per annum.
All of the foregoing notes (the May 1996 Notes, the May 1995 Notes, and the
March Notes) are redeemable at any time at the option of SCI, in whole or in
part, at a redemption price equal to the sum of the principal amount of the
notes being redeemed plus accrued interest thereon to the redemption date plus
an adjustment, if any, based on the yield to maturity relative to market yields
available at redemption. Such notes are governed by the terms and provisions of
an Indenture agreement (the "Indenture") between SCI and State Street Bank and
Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40%, and (iii) SCI's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5:1. In addition, SCI may not at any time own Total
Unencumbered Assets, as defined in the Indenture, equal to less than 150% of the
aggregate outstanding principal amount of SCI's unsecured debt. At June 30,
1996, SCI was in compliance with all debt covenants.
On June 1, 1995, SCI increased its line of credit agented by NationsBank to
$350 million. The line of credit, as amended and restated effective May 2, 1996,
bears interest at SCI's option at either (a) the greater of the federal funds
rate plus 0.5% and prime, or (b) LIBOR plus 1.25%, based upon SCI's current
senior debt ratings, and is scheduled to mature in May 1998. This line may be
extended annually for an additional year with the approval of NationsBank and
the other participating lenders. All debt incurrences are subject to a covenant
that SCI maintain a debt to tangible net worth ratio of not greater than 1 to 1.
Additionally, SCI is required to maintain an adjusted net worth (as defined) of
at least $1.0 billion, to maintain interest payment coverage of not less than 2
to 1, and to maintain a fixed charge coverage ratio (as defined) of not less
than 1.4 to 1. As of June 30, 1996, SCI was in compliance with all covenants,
and as of August 5, 1996, $56.3 million of borrowings were outstanding.
From inception through June 30, 1996, SCI had invested $1.9 billion for the
acquisition and development of 860 distribution properties. These acquisitions
and developments were financed with cash on hand, the issuance of limited
partnership units, the assumption of existing mortgage debt and borrowings under
SCI's line of credit which were repaid with the proceeds from SCI's equity and
debt offerings.
15
<PAGE>
On June 30, 1996, SCI had $371.1 million of budgeted development cost for
developments in process, of which $237.8 million was unfunded. In addition, at
June 30, 1996, SCI had letters of intent or contingent contracts, subject to
SCI's final due diligence, for the acquisition of 5.4 million square feet in
various target market cities with an acquisition cost of $153.8 million. The
foregoing transactions are subject to a number of conditions, and SCI cannot
predict with certainty that any of them will be consummated.
SCI expects to finance construction, development and acquisitions primarily
with cash on hand, borrowings under its line of credit and cash from future
securities offerings. When issuing debt, SCI intends primarily to arrange fully
amortizing, fixed rate, 10 year to 20 year debt to finance additional
acquisitions and developments. To a lesser extent, under certain circumstances,
SCI may arrange for debt with different maturities in order to optimize its debt
maturity schedule.
The REIT manager considers SCI's liquidity and ability to generate cash
from operations and financing to be adequate and expects it to continue to be
adequate to meet SCI's acquisition, development, operating, debt service, and
shareholder distribution requirements.
SCI's current distribution policy is to pay quarterly distributions to
shareholders based upon what REIT management considers to be a reasonable
percentage of cash flow. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, quarterly distributions will consistently be higher than quarterly
earnings.
Pursuant to the terms of the Series A Preferred Shares and the Series B
Preferred Shares, SCI is restricted from declaring or paying any distribution
with respect to the common shares unless all cumulative distributions with
respect to the Series A Preferred Shares and the Series B Preferred Shares have
been paid and sufficient funds have been set aside for distributions that have
been declared for the then current distribution period with respect to the
Series A Preferred Shares and the Series B Preferred Shares. The Series A
Preferred Share and Series B Preferred Share dividends do not reduce the amount
SCI has budgeted for common share distributions, but do increase the percentage
of the common share distribution that constitutes a non-taxable return of
capital.
Funds from Operations
Funds from Operations attributable to common shares increased $14.6 million
or 38.4% from $38.0 million for the first six months of 1995 to $52.6 million
for the same period in 1996. SCI believes that Funds from Operations is helpful
in understanding a property portfolio in that such calculation reflects cash
flow from operating activities and the properties' ability to support interest
payments and general operating expenses before the impact of certain activities,
such as changes in accounts receivable and accounts payable. Funds from
Operations should not be considered as an alternative to net earnings or any
other generally accepted accounting principle ("GAAP") measurement of
performance as an indicator of SCI's operating performance or as an alternative
to cash flows from operating, investing or financing activities as a measure of
liquidity.
Funds from Operations represent SCI's net earnings (computed in accordance
with GAAP) before minority interest and before gains/losses on disposition of
depreciated property, plus depreciation and amortization. In January 1995, SCI
changed to a more conservative policy of expensing loan cost amortization in
determining Funds from Operations.
STATEMENTS OF FUNDS FROM OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -------------------------
1996 1995 1996 1995
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net earnings attributable to common shares $ 11,877 $ 9,145 $ 23,681 $ 18,808
Add:
Depreciation and amortization 14,126 8,973 27,215 17,415
Minority interest 884 874 1,640 1,739
Loss on disposition of depreciated real estate - - 29 -
--------- -------- -------- ---------
Funds from operations attributable to common shares $ 26,887 $ 18,992 $ 52,565 $ 37,962
========= ======== ======== ========
</TABLE>
16
<PAGE>
PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Annual Meeting of Shareholders held on June 25, 1996, shareholders
elected the following Trustees to office: 74,009,162 shares were voted for the
election of Irving F. Lyons, III as a Class I Trustee, 118,059 shares withheld;
74,008,862 shares were voted for the election of Donald P. Jacobs as a Class II
Trustee, 118,359 shares withheld; and 74,009,162 shares were voted for the
election of K. Dane Brooksher and Thomas G. Wattles as Class III Trustees,
118,059 shares withheld. Trustees continuing in office are Stephen L. Feinberg,
John E. Robson and William G. Myers.
ITEM 5. OTHER INFORMATION
On December 22, 1995, Security Capital Industrial Trust filed a shelf
registration statement with the Securities and Exchange Commission regarding the
offering from time to time of $600 million in one or more series of its debt
securities, preferred shares of beneficial interest and common shares of
beneficial interest, and had $90 million remaining available under its previous
shelf registration statement. After the February 1996 Series B Preferred Share
offering and the May 1996 debt offering, SCI has $288.75 million in securities
remaining available to be issued under its shelf registration statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) EXHIBITS DOCUMENT DESCRIPTION PAGE NUMBER
-------- -------------------------------- -----------
<S> <C> <C> <C>
(See Index to
Exhibits, which is
incorporated
herein by
reference.)
4.1 7.25% Note due May 15, 2002
4.2 7.95% Note due May 15, 2008
4.3 8.65% Note due May 15, 2016
12 Statement re: Computation of Ratio
of Earnings to Fixed Charges
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
DATE ITEM REPORTED FINANCIAL STATEMENTS
---- ------------- --------------------
May 14, 1996 5 No
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SECURITY CAPITAL INDUSTRIAL TRUST
/s/ EDWARD F. LONG
-----------------------------------
Edward F. Long, Vice President
(Duly Authorized Officer) and
Controller (Principal Financial
and Accounting Officer)
Date: August 5, 1996
18
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DOCUMENT DESCRIPTION
- ---------- --------------------
<S> <C>
4.1 7.25% Note due May 15, 2002
4.2 7.95% Note due May 15, 2008
4.3 8.65% Note due May 15, 2016
12 Statement re: Computation of
Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
19
<PAGE>
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $50,000,000
CUSIP No.: 814138 AG 8
SECURITY CAPITAL INDUSTRIAL TRUST
7.25% NOTE DUE 2002
SECURITY CAPITAL INDUSTRIAL TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of FIFTY
MILLION DOLLARS on May 15, 2002 (less all previously paid installments of
principal which are due and payable as set forth below, commencing on May 15,
1999) and to pay interest on the outstanding principal amount thereon from May
17, 1996, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually in arrears on May 15 and November
15 in each year, commencing on November 15, 1996, at the rate of 7.25% per
annum, until the entire principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
which shall be the May 1 or November 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not more than 15 days and not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the
<PAGE>
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of, Make-Whole Amount, if
any, on, and interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of March 1, 1995
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $50,000,000.
Installments of principal of $250 will be paid on each $1,000 original
principal amount of Securities of this series annually on each May 15,
commencing on May 15, 1999 to the Person in whose name this Security is
registered in the Security Register on the preceding May 1 (whether or not a
Business Day).
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, at a redemption price equal to the sum of (i) the
principal amount of the Securities being redeemed plus accrued interest thereon
to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to
such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Security, the
-2-
<PAGE>
excess, if any, of (i) the aggregate present value as of the date of such
redemption or accelerated payment of each dollar of principal being redeemed or
paid and the amount of interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been payable in respect of
such dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semiannual basis, such principal and interest at
the Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made) from
the respective dates on which such principal and interest would have been
payable if such redemption or accelerated payment had not been made, over (ii)
the aggregate principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may
-3-
<PAGE>
be declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in and subject to the provisions of the Indenture, unless the
principal of all of the Securities of this series at the time Outstanding shall
already have become due and payable, the Holder of this Security shall not have
the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any interest on or after the respective due dates
expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and
-4-
<PAGE>
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
-5-
<PAGE>
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL INDUSTRIAL TRUST
By:
-----------------------
Name:
Title:
Attest
By:_________________________
Name:
Title:
Dated: May __, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:
------------------------
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
========================================
========================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Industrial Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.2
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $100,000,000
CUSIP No.: 814138 AH 6
SECURITY CAPITAL INDUSTRIAL TRUST
7.95% NOTE DUE 2008
SECURITY CAPITAL INDUSTRIAL TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of ONE HUNDRED
MILLION DOLLARS on May 15, 2008 (less all previously paid installments of
principal which are due and payable as set forth below, commencing on May 15,
2005) and to pay interest on the outstanding principal amount thereon from May
17, 1996, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually in arrears on May 15 and November
15 in each year, commencing on November 15, 1996, at the rate of 7.95% per
annum, until the entire principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
which shall be the May 1 or November 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not more than 15 days and not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the
<PAGE>
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of, Make-Whole Amount, if
any, on, and interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of March 1, 1995 (herein called the
"Indenture"), between the Company and State Street Bank and Trust Company
(herein called the "Trustee," which term includes any successor trustee under
the Indenture with respect to the series of which this Security is a part), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $100,000,000.
Installments of principal of $250 will be paid on each $1,000 original
principal amount of Securities of this series annually on each May 15,
commencing on May 15, 2005 to the Person in whose name this Security is
registered in the Security Register on the preceding May 1 (whether or not a
Business Day).
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, at a redemption price equal to the sum of (i) the
principal amount of the Securities being redeemed plus accrued interest thereon
to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to
such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Security, the
-2-
<PAGE>
excess, if any, of (i) the aggregate present value as of the date of such
redemption or accelerated payment of each dollar of principal being redeemed or
paid and the amount of interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been payable in respect of
such dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semiannual basis, such principal and interest at
the Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made) from
the respective dates on which such principal and interest would have been
payable if such redemption or accelerated payment had not been made, over (ii)
the aggregate principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall occur
and be continuing, the principal of, and the Make-Whole Amount, if any, on, the
Securities of this series may
-3-
<PAGE>
be declared due and payable in the manner and with the effect provided in the
Indenture.
As provided in and subject to the provisions of the Indenture, unless the
principal of all of the Securities of this series at the time Outstanding shall
already have become due and payable, the Holder of this Security shall not have
the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any interest on or after the respective due dates
expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, Make-Whole Amount, if any,
on, and
-4-
<PAGE>
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained in
the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
-5-
<PAGE>
All terms used in this Security which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused "CUSIP" numbers to be printed
on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL INDUSTRIAL TRUST
By:_______________________
Name:
Title:
Attest
By:_________________________
Name:
Title:
Dated: May ___, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:________________________
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=======================================
=======================================
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Industrial Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 4.3
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $50,000,000
CUSIP No.: 814138 AJ 2
SECURITY CAPITAL INDUSTRIAL TRUST
8.65% NOTE DUE 2016
SECURITY CAPITAL INDUSTRIAL TRUST, a real estate investment trust organized
and existing under the laws of the State of Maryland (hereinafter called the
"Company," which term shall include any successor under the Indenture
hereinafter referred to), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, upon presentation, the principal sum of FIFTY
MILLION DOLLARS on May 15, 2016 (less all previously paid installments of
principal which are due and payable as set forth below, commencing on May 15,
2010) and to pay interest on the outstanding principal amount thereon from May
17, 1996, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually in arrears on May 15 and November
15 in each year, commencing on November 15, 1996, at the rate of 8.65% per
annum, until the entire principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for on any
Interest Payment Date will, as provided in the Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
which shall be the May 1 or November 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not more than 15 days and not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the
<PAGE>
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of, Make-Whole Amount, if
any, on, and interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of securities
of the Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of March 1, 1995 (herein called the
"Indenture"), between the Company and State Street Bank and Trust Company
(herein called the "Trustee," which term includes any successor trustee under
the Indenture with respect to the series of which this Security is a part), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $50,000,000.
Installments of principal on each $1,000 original principal amount of
Securities of this series will be paid annually on each May 15, commencing on
May 15, 2010 to the Person in whose name this Security is registered in the
Security Register on the preceding May 1 (whether or not a Business Day) in the
following amounts: $100 in 2010, $100 in 2011, $100 in 2012, $100 in 2013, $150
in 2014, $200 in 2015 and $250 in 2016.
Securities of this series may be redeemed at any time at the option of the
Company, in whole or in part, at a redemption price equal to the sum of (i) the
principal amount of the Securities being redeemed plus accrued interest thereon
to the Redemption Date and (ii) the Make-Whole Amount, if any, with respect to
such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
-2-
<PAGE>
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Security, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semiannual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the
Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
-3-
<PAGE>
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless the
principal of all of the Securities of this series at the time Outstanding shall
already have become due and payable, the Holder of this Security shall not have
the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any interest on or after the respective due dates
expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the
-4-
<PAGE>
obligation of the Company, which is absolute and unconditional, to pay the
principal of, Make-Whole Amount, if any, on, and interest on this Security at
the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any Place of Payment where the principal of, Make-Whole
Amount, if any, on, and interest on this Security are payable duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture or in this Security, or because of any indebtedness evidenced
thereby, shall be had against any promoter, as such, or against any past,
present or future shareholder, officer or trustee, as such, of the Company or of
any successor, either directly or through the Company or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
-5-
<PAGE>
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
-6-
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL INDUSTRIAL TRUST
By:_______________________
Name:
Title:
Attest
By:_________________________
Name:
Title:
Dated: May ___, 1996
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:________________________
Authorized Officer
-7-
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=====================================
=====================================
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the within Security of Security Capital Industrial Trust and hereby does
irrevocably constitute and appoint
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
-8-
<PAGE>
EXHIBIT 12
SECURITY CAPITAL INDUSTRIAL TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, PERIOD ENDED DECEMBER 31,
------------------ ---------------------------------------
1996 1995 1995 1994 1993 1992 1991(a)
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings (Loss) from Operations $35,078 $19,161 $47,660 $25,066 $4,412 $(187) $ (127)
Add:
Interest Expense 17,359 15,249 32,005 7,568 321 504 29
------- ------- ------- ------- ------ ----- -------
Earnings as Adjusted $52,437 $34,410 $79,665 $32,634 $4,733 $ 317 $ (98)
======= ======= ======= ======= ====== ===== =======
Fixed Charges:
Interest Expense $17,359 $15,249 $32,005 $ 7,568 $ 321 $ 504 $ 29
Capitalized Interest 6,898 3,115 8,599 2,208 98 124 68
------- ------- ------- ------- ------ ----- -------
Total Fixed Charges $24,257 $18,364 $40,604 $ 9,776 $ 419 $ 628 $ 97
======= ======= ======= ======= ====== ===== =======
Ratio of Earnings (Loss to
Fixed Charges 2.2 1.9 2.0 3.3 11.3 (b) (b)
======= ======= ======= ======= ====== ===== =======
___________________________________________________________________________________________________
</TABLE>
(a) For the period from June 14, 1991 (the date of SCI's inception) to
December 31, 1991.
(b) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover fixed charges for the periods ended
December 31, 1991 and December 31, 1992 by $195,000 and $311,000,
respectively.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Form 10-Q for the six months ended June 30, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,042
<SECURITIES> 0
<RECEIVABLES> 5,374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,155,832
<DEPRECIATION> 80,671
<TOTAL-ASSETS> 2,136,195
<CURRENT-LIABILITIES> 0
<BONDS> 661,833
<COMMON> 814
0
336,250
<OTHER-SE> 994,623
<TOTAL-LIABILITY-AND-EQUITY> 2,136,195
<SALES> 104,423
<TOTAL-REVENUES> 106,110
<CGS> 0
<TOTAL-COSTS> 13,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,359
<INCOME-PRETAX> 23,681
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,681
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0
</TABLE>
