<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SECURITY CAPITAL INDUSTRIAL TRUST
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
14100 EAST 35TH PLACE
AURORA, COLORADO 80011
----------------
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 25, 1996
To the shareholders:
The 1996 annual meeting of shareholders of Security Capital Industrial Trust
("SCI") will be held on Tuesday, June 25, 1996, at the 13th Floor Conference
Center, Bank of America Illinois, 231 South LaSalle Street, Chicago, Illinois,
at 10:30 a.m. (Chicago time) for the following purposes:
1. To elect one Class I Trustee to serve until the annual meeting of
shareholders in 1997, one Class II Trustee to serve until the annual
meeting of shareholders in 1998 and two Class III Trustees to serve until
the annual meeting of shareholders in 1999, and until their successors are
duly elected and qualify; and
2. To transact such other business as properly may come before the
meeting and any adjournment or postponement thereof.
Further information regarding the business to be transacted at the meeting
is given in the accompanying Proxy Statement.
Shareholders of record at the close of business on May 7, 1996 are entitled
to notice of, and to vote at, the meeting.
Please help SCI by promptly marking, dating, signing and returning the
enclosed proxy card in the envelope provided for your convenience. If you
attend the meeting and decide to vote in person, you may revoke your proxy.
Jeffrey A. Klopf
Secretary
May 13, 1996
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
14100 EAST 35TH PLACE
AURORA, COLORADO 80011
----------------
PROXY STATEMENT
FOR
1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 25, 1996
----------------
GENERAL INFORMATION
The Board of Trustees (the "Board") of Security Capital Industrial Trust
("SCI") is soliciting the accompanying proxy for use at the 1996 annual
meeting of shareholders to be held on Tuesday, June 25, 1996 and at any and
all adjournments or postponements thereof. Any shareholder giving a proxy has
the right to revoke it at any time before it is voted by giving written notice
to the Secretary of SCI, by delivering to the Secretary of SCI a duly executed
proxy bearing a later date, or by attending and voting in person at the
meeting. The designated proxy holders will vote Common Shares of Beneficial
Interest, $.01 par value per share (the "Common Shares"), represented by a
proxy which is received and not revoked. Where the shareholder specifies a
choice with respect to any matter to be acted upon and for which a ballot is
provided in the proxy, the Common Shares will be voted in accordance with his
or her specifications.
This Proxy Statement and the accompanying proxy card are first being mailed
to shareholders on or about May 13, 1996.
The cost of soliciting proxies will be borne by SCI. In addition to
solicitation by mail, and without additional compensation for such services,
proxies may be solicited personally, or by telephone or telegraph, by officers
or employees of Security Capital Industrial Incorporated, SCI's REIT manager
(the "REIT Manager" or "REIT Management"). See "Certain Relationships and
Transactions--REIT Management Agreement." SCI will also request banking
institutions, brokerage firms, custodians, trustees, nominees, fiduciaries and
other like parties to forward the solicitation material to the beneficial
owners of Common Shares held of record by such persons, and SCI will upon
request of such record holders reimburse forwarding charges and expenses.
SHARES OUTSTANDING AND VOTE REQUIRED
At the close of business on April 19, 1996, approximately 81,442,820 Common
Shares were outstanding. Each whole Common Share outstanding on May 7, 1996,
the record date for determination of shareholders entitled to notice of, and
to vote at, the meeting, is entitled to one vote, and each fractional Common
Share is entitled to its fraction of one vote. There is no right to cumulative
voting. A majority of the outstanding Common Shares represented in person or
by proxy will constitute a quorum at the meeting.
Assuming the existence of a quorum, the affirmative vote of a majority of
the Common Shares entitled to vote and represented in person or by proxy at
the meeting is required to approve the election of each nominee for Trustee.
Representatives of SCI's transfer agent will assist SCI in the tabulation of
the votes. Abstentions and broker non-votes are counted as Common Shares
represented at the meeting for purposes of determining a quorum. An abstention
has the effect of a vote "withheld" with respect to the election of Trustees.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding ownership of
Common Shares as of April 19, 1996 by (i) each person known to SCI to have
been the beneficial owner of more than five percent of the outstanding Common
Shares on such date, (ii) each Trustee of SCI and (iii) all Trustees and
executive officers of SCI as a group. Unless otherwise indicated in the
footnotes, all of such interests are owned directly and the indicated person
or entity has sole voting and dispositive power. The following table assumes
that, for the purpose of calculating the number and percent of Common Shares
owned by a person, Series B Cumulative Convertible Redeemable Preferred Shares
of Beneficial Interest of SCI and limited partnership interests in SCI Limited
Partnership--I, SCI Limited Partnership--II, SCI Limited Partnership--III and
SCI Limited Partnership--IV owned by such person (but not by any other person)
have been converted into or exchanged for Common Shares. Fractional Common
Shares have been rounded to the nearest whole Common Share in the table below
and elsewhere in this report.
<TABLE>
<CAPTION>
NUMBER OF
COMMON PERCENT
SHARES OF
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED SHARES
- ------------------------------------ ------------ -------
<S> <C> <C>
Security Capital Group Incorporated............... 39,352,484(1) 48.3%
125 Lincoln Avenue
Santa Fe, New Mexico 87501
William D. Sanders (Corporate Ownership)........ 39,352,484(2) 48.3%
7777 Market Center Avenue
El Paso, Texas 79912
William D. Sanders (Personal Ownership)......... 269,119(3) *
7777 Market Center Avenue
El Paso, Texas 79912
K. Dane Brooksher................................. 26,905 *
14100 East 35th Place
Aurora, Colorado 80011
Stephen L. Feinberg............................... 137,908(4)(5)(6) *
4855 North Mesa, Suite 120
El Paso, Texas 79912
Donald P. Jacobs.................................. 257(6) *
J.L. Kellogg Graduate School of Management
Northwestern University
2001 Sheridan Road
Evanston, Illinois 60208-2003
Irving F. Lyons, III.............................. 261,874(7) *
47775 Fremont Boulevard
Fremont, California 94538
William G. Myers.................................. 133,169(5)(6)(8) *
1114 State Street, Suite 232
Santa Barbara, California 93101
John E. Robson.................................... 19,829(5)(6)(9) *
555 California Street, Suite 2600
San Francisco, California 94104
Thomas G. Wattles................................. 26,047(10) *
125 Lincoln Avenue
Santa Fe, New Mexico 87501
All Trustees and Executive Officers of SCI as a
Group (17 persons)............................... 628,291 *
</TABLE>
2
<PAGE>
- --------
*Less than 1%
(1) These Common Shares are owned of record by SC Realty Incorporated, a
wholly owned subsidiary of Security Capital Group Incorporated ("SCG"),
and are pledged to secure SCG's $300 million revolving line of credit
facility with a syndicate of banks. As of May 9, 1996, there were $48
million of borrowings outstanding under the line of credit. The line of
credit is also secured by securities owned by SCG of Security Capital
Pacific Trust, a publicly-traded REIT, Security Capital Atlantic
Incorporated, a private REIT, and Security Capital U.S. Realty, an entity
based in Luxembourg which invests in real estate operating companies in
the United States. SCG estimates that the aggregate market value of the
pledged securities exceeded $1.9 billion as of May 9, 1996. SCG was in
compliance with all covenants under the line of credit at March 31, 1996.
(2) Mr. Sanders may be deemed to beneficially own these Common Shares, which
are owned by SCG, because Mr. Sanders shares voting and dispositive power
with respect to all Common Shares owned by SCG. SCG and Mr. Sanders
intend to play a major role in the direction of SCI for the purpose of
maximizing the value of SCI.
(3) 170,447 of these Common Shares (0.21% of all Common Shares) are owned by
Mr. Sanders directly. Mr. Sanders may be deemed to beneficially own
98,672 of these Common Shares (0.12% of all Common Shares) which are
owned by Mr. Sanders' children and by Sanders Partners Incorporated and
CAMPR Partners Limited, family entities with respect to which Mr. Sanders
shares voting and dispositive power.
(4) 50,000 of these Common Shares are owned by Dorsar Partners, L.P.; as a
result of his position with this entity, Mr. Feinberg may be deemed to
share voting and dispositive power with respect to Common Shares owned by
this entity. 6,000 of these Common Shares are owned by a trust for the
benefit of Mr. Feinberg; and an additional 6,000 of these Common Shares
are owned by a trust for the benefit of a relative of which Mr. Feinberg
is a trustee.
(5) Includes for Messrs. Feinberg, Myers and Robson beneficial ownership of
4,000, 2,000 and 4,000 Common Shares, respectively, that are issuable
upon exercise of Common Share options granted under the Outside Trustees
Plan (as defined below). See "Election of Trustees--Trustee
Compensation."
(6) Includes for each independent Trustee 257 Common Shares with respect to
Trustee retainer and meeting fees of $4,500 payable in Common Shares on
May 16, 1996, estimated based on the closing price of the Common Shares
on May 9, 1996 of $17 1/2 as reported in the New York Stock Exchange
Composite Tape by CompuServe.
(7) 4,718 of these Common Shares are owned by trusts for the benefit of Mr.
Lyons and other family members of which Mr. Lyons is a trustee and 209 of
these Common Shares are owned by Mr. Lyons' children. 256,530 of these
Common Shares are issuable upon exchange of units in SCI Limited
Partnership-I. Mr. Lyons is a partner of certain limited partners of such
partnership. By virtue of such position, Mr Lyons may be deemed to
beneficially own these Common Shares.
(8) 29,640 of these Common Shares are owned by Milagro de Ladera; as a result
of his position with this entity, Mr. Myers may be deemed to share voting
and dispositive power with respect to Common Shares owned by this entity.
100,000 of these Common Shares are owned by Mr. Myers' Profit Sharing
Plan.
(9) 13,939 of these Common Shares are owned by Mr. Robson's IRA.
(10) 7,424 of these Common Shares are owned by Mr. Wattles' IRA and 1,890 of
these Common Shares are owned by Mr. Wattles' children.
ELECTION OF TRUSTEES
NOMINEES
The Common Shares represented by the accompanying proxy will be voted to
elect the nominees named below: Mr. Lyons as a Class I Trustee, Mr. Jacobs as
a Class II Trustee and Messrs. Brooksher and Wattles as Class III Trustees.
Mr. Lyons, if elected, will serve as Trustee until the annual meeting of
shareholders in 1997,
3
<PAGE>
Mr. Jacobs, if elected, will serve as Trustee until the annual meeting of
shareholders in 1998 and Messrs. Brooksher and Wattles, if elected, will serve
as Trustees until the annual meeting of shareholders in 1999. Any vacancies
occurring during any calendar year will be filled by the remaining Trustees in
office. Any Trustee elected by the Trustees to fill a vacancy will hold office
until the next annual meeting of shareholders, at which time the shareholders
will elect a Trustee to fill the unexpired term of the class of Trustees in
which the vacancy occurred. Should any of the nominees named below become
unavailable for election, which is not anticipated, the Common Shares
represented by the accompanying proxy will be voted for the election of
another person recommended by the Board.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING LAST 5 YEARS
AND DIRECTORSHIPS OF PUBLICLY HELD TERM
TRUSTEE AGE COMPANIES EXPIRES
------- --- ---------------------------------------- -------
<C> <C> <S> <C>
Irving F. Lyons, III. 46 Managing Director of SCI and director and 1997
Managing Director of the REIT Manager
since December 1993; prior thereto,
Managing Partner of King & Lyons (a San
Francisco Bay Area industrial real estate
development and management company) since
its inception in 1979. Mr. Lyons has
served as a Trustee since March 1996.
Donald P. Jacobs..... 68 Mr. Jacobs has been a member of the J.L. 1998
Kellogg Graduate School of Management of
Northwestern University since 1957, and
Dean since 1975. Mr. Jacobs is Chairman of
the Public Review Board of Arthur Andersen
LLP and a director of Commonwealth Edison,
First National Bank of Chicago, Hartmarx
Corporation, Unocal Corporation, and
Whitman Industries. From 1990 to 1992, Mr.
Jacobs was Chairman of the Advisory
Committee of the Oversight Board of the
Resolution Trust Corporation for the third
region; from 1975 to 1979, Chairman of the
Board of AMTRAK; from 1970 to 1971, Co-
Staff Director of the Presidential
Commission on Financial Structure and
Regulation; from 1963 to 1964, Senior
Economist for the Banking and Currency
Committee of the U.S. House of
Representatives. Mr. Jacobs has served as
a Trustee since February 1996.
K. Dane Brooksher.... 57 Co-Chairman and Chief Operating Officer of 1999
SCI and the REIT Manager since November
1993, and director of the REIT Manager;
prior thereto, Area Managing Partner and
Chicago Office Managing Partner of KPMG
Peat Marwick (independent public
accountants), member of the Board of
Directors and Management Committee. Mr.
Brooksher has served as a Trustee since
October 1993.
Thomas G. Wattles.... 44 Director of SCI's predecessor since its 1999
formation in June 1991; Co-Chairman and
Chief Investment Officer of SCI and the
REIT Manager since November 1993, and
director of the REIT Manager; from January
1991 to December 1992, Managing Director
of Security Capital (Pacific)
Incorporated; from July 1989 to December
1990, Managing Partner of Stanwich
Advisors Incorporated (real estate
advisory and development services); from
July 1985 to June 1989, Senior Vice
President-Property Finance Group of
LaSalle Partners Limited (corporate real
estate services). Mr. Wattles has served
as a Trustee since January 1993.
</TABLE>
SCG has the right to nominate up to three Trustees, depending upon its level
of beneficial ownership of Common Shares. See "Certain Relationships and
Transactions--Investor Agreement." Trustees K. Dane Brooksher, Irving F.
Lyons, III and Thomas G. Wattles, due to their relationship with SCG, are
deemed to be the nominees of SCG. SCI's Amended and Restated Declaration of
Trust requires that a majority of the Trustees be independent Trustees.
4
<PAGE>
CONTINUING TRUSTEES
The following persons will continue to hold positions as Trustees as
described below:
STEPHEN L. FEINBERG--51--Mr. Feinberg has served as a Trustee since January
1993. Since 1970, he has been Chairman of the Board and Chief Executive
Officer of Dorsar Investment Co., a diversified holding company with interests
in real estate, manufacturing and venture capital. Mr. Feinberg is also a
director of Continental Transmission Corporation (private investment company)
and Feinberg Foundation, Inc. and a former director of Farrar, Strauss and
Giroux, Inc. (private publishing company). Mr. Feinberg is currently Chairman
of the Board of Visitors and Governors of St. John's College and a director of
other charitable organizations. Mr. Feinberg's term as Trustee expires in
1998.
JOHN E. ROBSON--64--Mr. Robson has served as a Trustee since April 1994.
Since October 1993, Mr. Robson has served as Senior Advisor of Robertson,
Stephens & Company, a San Francisco-based investment banking company. From
1989 to 1992, Mr. Robson served as Deputy Secretary of the United States
Treasury. From 1986 to 1989, Mr. Robson was Dean and Professor of Management,
Emory University School of Business Administration. From 1975 to 1985, he
served as President and Chief Executive Officer and as Executive Vice
President of G.D. Searle & Co. (pharmaceutical and consumer products). Mr.
Robson is currently a director of Northrop Grumman Corporation (aerospace),
Rolin Medical, Inc. (medical devices and services) and Rand McNally & Co.
(publishing) and a past director of AOA Corporation (insurance), Chiron
Corporation (biotechnology), Continental Airlines and Conrail (railroad),
among others. Mr. Robson's term as Trustee expires in 1997.
WILLIAM G. MYERS--68--Mr. Myers has served as a Trustee since January 1995.
He is also a Trustee of Security Capital Pacific Trust, a REIT affiliated with
SCG; Chief Executive Officer of Ojai Ranch and Investment Company, Inc., Santa
Barbara, California, which he founded in 1963 (agri-business and other
investments); director, Idetek, Inc., Sunnyvale, California (food diagnostic
start-up company). Mr. Myers' term as Trustee expires in 1997.
MEETINGS AND COMMITTEES
The Board held 9 meetings during 1995, including 5 telephonic meetings. The
Audit Committee of the Board, composed of Messrs. Feinberg, Myers and Robson,
is responsible for recommending to the Board the appointment of independent
auditors, reviewing all recommendations of the auditors with respect to
accounting methods and internal controls of SCI, reviewing and approving non-
audit services, and reviewing the scope of the audits conducted by the
auditors. The Audit Committee held 2 meetings during 1995. SCI has no standing
nominating or compensation committees.
In April 1994, the Board established an Investment Committee to approve
asset acquisitions and other SCI investment decisions between meetings of the
full Board. Any decisions made by the Investment Committee are reported to the
full Board at its next quarterly meeting. The Investment Committee is
comprised of Messrs. Feinberg, Myers and Wattles, and held 18 meetings during
1995.
During 1995, each Trustee attended at least 75 percent of the total number
of meetings of the Board and the committees on which he served.
TRUSTEE COMPENSATION
SCI pays an annual retainer of $14,000 to Trustees who are not officers of
SCI, the REIT Manager or its affiliates. These fees are paid to the Trustees
in Common Shares (quarterly on each dividend payment date) based on the then
current market price of the Common Shares pursuant to SCI's dividend
reinvestment and share purchase plan as described below. Such Trustees also
receive $1,000 for each meeting attended, which is also paid in Common Shares.
Members of the Investment Committee receive an additional annual retainer of
$4,000, which is also paid in Common Shares. SCI's dividend reinvestment and
share purchase plan commenced in April
5
<PAGE>
1995. Both the retainer and meeting fees payable to Trustees are paid directly
into such plan on behalf of the Trustees as optional cash payments, and the
Common Shares purchased remain in the plan. Common Shares purchased with the
retainer and committee fees may not be sold or otherwise transferred so long
as the Trustee remains a Trustee. The Board may grant an individual Trustee a
waiver of the requirement that Trustees' fees be used to purchase Common
Shares or that such Common Shares be held so long as the Trustee remains a
Trustee. Officers of SCI, the REIT Manager or its affiliates who are Trustees
are not paid any Trustee fees. Hence, Messrs. Brooksher, Lyons and Wattles are
not separately compensated for serving as Trustees. Trustees are reimbursed
for any out-of-town travel expenses incurred in connection with attendance at
Board meetings.
In addition, pursuant to the Outside Trustees Plan, each Trustee who is not
an employee of SCI, the REIT Manager or its affiliates on the date of each
annual meeting of shareholders is entitled to receive an option to purchase
2,000 Common Shares at a price per Common Share equal to the closing price on
the New York Stock Exchange on such date.
OUTSIDE TRUSTEES PLAN
At the 1994 annual meeting, shareholders approved the issuance of up to
100,000 Common Shares under SCI's Common Share Option Plan for Outside
Trustees (the "Outside Trustees Plan"). Options granted under the Outside
Trustees Plan are for a five-year term and are immediately exercisable in
whole or in part. The exercise price of options granted may not be less than
the fair market value of Common Shares on the date of grant. There are
currently 90,000 Common Shares available for future options under the Outside
Trustees Plan.
Options granted under the Outside Trustees Plan provide that the option
holder may, in the event of the acquisition of 50% or more of the outstanding
Common Shares as the result of any cash tender offer or exchange offer (other
than one made by SCI), exercise the options immediately or surrender the
options, or any unexercised portion thereof, to SCI and receive cash from SCI
equal to the difference between the exercise price of each option and the per
Common Share price of the tender offer or exchange offer, multiplied by the
number of Common Shares for which options are held.
SCI OFFICERS--EMPLOYEES OF THE REIT MANAGER
Since its predecessor's inception, all of the officers of SCI have been
officers and employees of the REIT Manager and have been compensated solely by
the REIT Manager for their services as employees of the REIT Manager,
including the services which such persons perform pursuant to the REIT
Management Agreement between the REIT Manager and SCI described below. All
executive functions of SCI are performed by the REIT Manager and SCI has no
employees. See "Certain Relationships and Transactions--REIT Management
Agreement."
6
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Common Shares against the cumulative
total return of the Standard & Poor's Composite--500 Stock Index and the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT") Equity
REIT Index for the period commencing March 31, 1994, the date that SCI's
initial public offering was completed, and ended December 31, 1995. The Common
Share price performance shown on the graph is not necessarily indicative of
future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN (1)
SCI COMMON SHARES, S&P COMPOSITE--500 STOCK INDEX &
NAREIT EQUITY REIT INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
1994(2) 1994 1995
--------- ------------ ------------
<S> <C> <C> <C>
SCI................................... $100.00 $122.99 $134.09
S&P 500............................... $100.00 $105.30 $144.83
NAREIT................................ $100.00 $ 99.78 $115.01
</TABLE>
- --------
(1) Assumes that the value of the investment in Common Shares and each index
was $100 on March 31, 1994 and that all dividends were reinvested.
(2) SCI's initial public offering was completed, and the Common Shares
commenced trading, on March 31, 1994.
7
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
REIT MANAGEMENT AGREEMENT
Effective December 1, 1991, SCI entered into an agreement (as amended and
restated, the "REIT Management Agreement") pursuant to which the REIT Manager
assumed the day-to-day management of SCI. The REIT Manager is owned by SCG,
which currently owns approximately 48.3% of the Common Shares. See "Principal
Shareholders." All officers of SCI are employees of the REIT Manager and SCI
has no employees. The REIT Manager provides both strategic and day-to-day
management, research, investment analysis, acquisition and due diligence,
development, marketing, asset management, capital markets, disposition of
assets, management information systems support and legal and accounting
services.
The REIT Management Agreement requires SCI to pay a base annual fee of
approximately 16% of cash flow as defined in the REIT Management Agreement.
Cash flow is calculated by reference to SCI's cash flow from operations, plus
(i) fees paid to the REIT Manager, (ii) extraordinary expenses incurred at the
request of the independent Trustees of SCI and (iii) 33% of any interest paid
by SCI on convertible subordinated debentures (of which there are currently
none); and, after deducting actual or assumed regularly scheduled principal
and interest payments for long-term debt and distributions actually paid with
respect to non-convertible preferred shares of beneficial interest, such as
SCI's Series A Cumulative Redeemable Preferred Shares of Beneficial Interest.
The REIT Management Agreement provides that the $200 million and $125 million
of senior notes issued by SCI in March 1995 and May 1995, respectively, will
be treated as having regularly scheduled principal and interest payments like
a 20-year level monthly payment, fully amortizing mortgage, and the assumed
principal and interest payments will be deducted from cash flow in determining
the fee for future periods. The REIT Management fee calculation includes a
portion of the interest on convertible debt because of the equity
characteristics represented by the conversion feature of such debt. SCI does
not currently plan to issue any convertible debt. Cash flow does not include
interest and dividend income from SCI Development Services Incorporated ("SCI
Development Services") (see "--Other Transactions With Affiliates"), realized
gains from dispositions of investments or income from cash equivalent
investments. The REIT Manager also receives a fee of 0.20% per year on the
average daily balance of cash equivalent investments.
Total real estate operating, general and administrative costs will increase
due to SCI's larger asset size following each equity offering, as well as
unforeseen changes which may occur. REIT Management fees paid by SCI will
increase if cash flow of SCI, as defined in the REIT Management Agreement,
increases, including such increases that may relate to increases in SCI's
assets. SCI does not expect its other operating costs and expenses to increase
except as a result of inflation, market conditions or other factors over which
the REIT Manager has no control. Operating costs for particular items,
however, may be increased if they are expected to result in greater decreases
in other expenses or increases in revenues from SCI assets.
SCI is obligated to reimburse the REIT Manager for all expenses incurred by
the REIT Manager on behalf of SCI relating to SCI's operations, primarily
including third party legal, accounting, property development and similar fees
paid on behalf of SCI, and travel expenses incurred in seeking financing,
property acquisitions, property sales, attending SCI Board and shareholder
meetings and similar activities on behalf of SCI. Under the REIT Management
Agreement, the REIT Manager or any of its affiliates are not precluded from
rendering services to other investors, including other REITs, even if such
investors compete with SCI. Since the REIT Manager is a wholly owned
subsidiary of SCI's largest shareholder, the REIT Manager has no intention of
rendering services to investors who compete with SCI.
The REIT Management Agreement is renewable by SCI annually, subject to a
determination by the independent Trustees that the REIT Manager's performance
has been satisfactory and that the compensation payable to the REIT Manager is
fair. Each of SCI and the REIT Manager may terminate the REIT Management
Agreement on 60 days' notice. Because of the year-to-year nature of the
agreement, its maximum effect on SCI's results of operations cannot be
predicted, other than that REIT Management fees will generally increase or
decrease in proportion to cash flow increases or decreases. For 1995, the REIT
Manager earned REIT management fees of $13,478,000 pursuant to the REIT
Management Agreement.
8
<PAGE>
INVESTOR AGREEMENT
SCI and SCG are parties to an Investor Agreement, dated as of November 18,
1993 (the "Investor Agreement"), which required SCG to invest a minimum of $75
million in Common Shares in SCI's December 1993 private rights offering to
shareholders, subject to certain conditions. The Investor Agreement, among
other things, requires SCI to obtain SCG's approval of (i) the annual
operating budget and substantial deviations therefrom, (ii) contracts for
investment management, property management or leasing services or that
contemplate annual payments in excess of $100,000 and (iii) acquisitions or
dispositions in a single transaction or a group of related transactions where
the purchase or sale price exceeds $5 million. The Investor Agreement also
provides that, so long as SCG beneficially owns at least 10% of the
outstanding Common Shares, SCI may not increase its Board to more than seven
members. SCG is entitled to designate one or more persons for nomination to
election as Trustees, and SCI is obligated to use its best efforts to cause
the election of such persons, as follows: (i) so long as SCG beneficially owns
at least 10% but less than 20% of the outstanding Common Shares, it is
entitled to designate two persons; and (ii) so long as SCG beneficially owns
at least 20% of the outstanding Common Shares, it is entitled to designate
three persons. The Investor Agreement also provides certain registration
rights to SCG in respect of Common Shares beneficially owned by SCG.
PARTNERSHIP AFFILIATIONS
As part of its acquisition program of industrial properties, SCI has
consummated three transactions pursuant to which it contributed cash, and
third party partnerships contributed a portfolio of properties, to SCI Limited
Partnership--I, SCI Limited Partnership--II, SCI Limited Partnership--III and
SCI Limited Partnership--IV. Irving F. Lyons, III, a Managing Director and
director of the REIT Manager and Managing Director and Trustee of SCI, is a
partner in SCI Limited Partnership--I. Mr. Lyons also owns minority interests
in a substantial amount of undeveloped industrial land near SCI's industrial
parks in the San Francisco Bay Area. SCI has purchase options and rights of
first refusal with respect to all sales of land and build-to-suit
opportunities involving this property. The SCI Limited Partnership-I
transaction and the prices for such options (which are fixed or determined
pursuant to formulas) were negotiated at arms' length prior to Mr. Lyons'
affiliation with SCI. Jeffrey H. Schwartz, a Managing Director and director of
the REIT Manager and Managing Director of SCI, has an ownership interest in
partnerships that are limited partners in SCI Limited Partnership--III and SCI
Limited Partnership--IV. The SCI Limited Partnership-III and SCI Limited
Partnership-IV transaction was negotiated at arms' length prior to Mr.
Schwartz's affiliation with SCI.
PROPERTY MANAGEMENT
Commencing in January 1994, SCI Client Services Incorporated ("Client
Services"), an affiliate of the REIT Manager, began providing property
management services for certain of SCI's properties. The agreement is subject
to termination by SCI or Client Services on 30 days' notice, is renewable
annually upon approval of SCI's independent Trustees, and contemplates a fee
to Client Services of not more than 3% per annum of property revenues, paid
monthly, plus leasing commissions consistent with industry practice, which
together were $4.7 million for 1995. The REIT Manager anticipates that Client
Services will manage additional SCI properties in the future. Any management
contracts executed with Client Services are expected to be at or below market
rates.
OTHER TRANSACTIONS WITH AFFILIATES
In previous offerings, SCG has purchased approximately $75 million of Common
Shares in 1993 at a price of $11.00 per Common Share, $98 million of Common
Shares in 1994 at a price of $11.50 per Common Share, $53 million of Common
Shares in 1994 at a price of $15.125 per Common Share, $150 million of Common
Shares in 1994 at a price of $15.25 per Common Share and $100 million of
Common Shares in 1995 at a price of $15.375 per Common Share. All such
purchases were made on the same terms and at the same times as made available
to other shareholders or investors.
9
<PAGE>
SCI leases space to related parties on market terms no less favorable to SCI
than those that could be obtained with unaffiliated third parties. These
transactions are summarized as follows:
<TABLE>
<CAPTION>
REIT CLIENT
SCG MANAGER SERVICES TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Rental revenue during the year ended
December 31, 1995....................... $415,264 $236,116 $169,075 $ 820,455
Square feet leased as of December 31,
1995.................................... 64,865 36,738 33,725 135,328
Annualized revenue for leases in effect
at December 31, 1995.................... $565,213 $278,049 $294,949 $1,138,211
</TABLE>
To better serve national companies which are valued SCI customers and enable
SCI to exclusively meet all of their distribution space needs, SCI Development
Services develops for these customers build-to-suit distribution space
facilities which do not meet SCI's strict investment criteria. SCI will not
own these buildings but owns a preferred stock interest representing 95% of
the net operating cash flow of SCI Development Services. SCG owned all of the
common stock of SCI Development Services during 1995. Effective as of January
1, 1996, SCG transferred such common stock to an unaffiliated trust. The
common stock is entitled to receive the remaining 5% of net operating cash
flow. Through its preferred stock ownership, SCI will realize substantially
all economic benefits of SCI Development Services' activities. Under a
separate agreement, the REIT Manager provides SCI Development Services with
day-to-day management for a fee based on 16% of SCI Development Services' pre-
tax cash flow, including gains and losses realized on property sales. The fee
incurred for 1995 was approximately $729,000. Dividends and interest paid by
SCI Development Services to SCI are excluded from SCI's cash flow for
determining the REIT Manager fee paid by SCI. During 1995, SCI earned $2.2
million in interest income and had $1.9 million in accrued interest receivable
from SCI Development Services, and made $31.1 million of mortgage loans to SCI
Development Services for development and acquisition of distribution
facilities. SCI expects to make similar loans to SCI Development Services in
1996, however, SCI is unable to quantify the amount of such loans.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires SCI's
trustees, officers, and beneficial owners of more than 10 percent of the
outstanding Common Shares, to file reports of ownership and changes in
ownership of the Common Shares with the Securities and Exchange Commission and
to send copies of such reports to SCI. Based solely upon a review of such
reports and amendments thereto furnished to SCI and upon written
representations of certain of such persons that they were not required to file
certain of such reports, SCI believes that no such person failed to file any
such report on a timely basis during 1995, except that William G. Myers filed
one late report during 1995 relating to one transaction and Kent W. Johnson
filed a late initial report upon becoming an executive officer of SCI in 1995.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Arthur Andersen LLP, certified public accountants,
who have served as auditors for SCI since 1991, to serve again as the auditors
of SCI's books and records for the coming year. A representative of Arthur
Andersen LLP is expected to be present at the annual meeting, and he will be
given an opportunity to make a statement if he desires to do so and will be
available to respond to appropriate questions.
ANNUAL REPORT
SCI's 1995 Annual Report, which includes financial statements, has
previously been mailed to shareholders or is being mailed to shareholders
together with this Proxy Statement. The Annual Report does not constitute a
part of the proxy solicitation material.
10
<PAGE>
SHAREHOLDER PROPOSALS
Any proposal by a shareholder of SCI intended to be presented at the 1997
annual meeting of shareholders must be received by SCI at its principal
executive offices not later than January 12, 1997, for inclusion in SCI's
proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
SCI is not aware of any business or matter other than those indicated above
which may properly be presented at the meeting. If, however, any other matter
properly comes before the meeting, the proxy holders will, in their
discretion, vote thereon in accordance with their best judgment.
By Order of the Board of Trustees,
Jeffrey A. Klopf
Secretary
May 13, 1996
11
<PAGE>
PROXY
SECURITY CAPITAL INDUSTRIAL TRUST
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 25, 1996
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints each of K. Dane Brooksher, Thomas G. Wattles
and Jeffrey A. Klopf, with full power of substitution, to represent the
undersigned at the annual meeting of shareholders of Security Capital Industrial
Trust to be held on June 25, 1996, and at any adjournments or postponements
thereof, and to vote at such meeting the Common Shares of Beneficial Interest
that the undersigned would be entitled to vote if present at such meeting, in
accordance with the following instructions. If no instructions are indicated,
the shares represented by this proxy will be voted for Item (1) on the reverse.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example.
1. The election of the following persons as Trustees:
Nominees: Irving F. Lyons, III as a Class I Trustee;
Donald P. Jacobs as a Class II Trustee; K. Dane
Brooksher and Thomas G. Wattles as Class III Trustees.
FOR [ ] WITHHELD [ ]
[ ]
--------------------------------------
For all nominees except as noted above
2. To vote upon any other matters that may properly
be presented at the meeting according to their best
judgment and in their discretion.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign this proxy exactly as your name appears on
the books of the Trust. Joint owners should each sign
personally. Trustees and other fiduciaries should indicate
the capacity in which they sign, and where more than one
name appears, a majority must sign. If a corporation, this
signature should be that of an authorized officer who
would state his or her title.
Name: Date:
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Signature: Date:
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