<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) August 19, 1996
-----------------------------
SECURITY CAPITAL INDUSTRIAL TRUST
(Exact Name of Registrant as Specified in its Charter)
Maryland
--------------------------------------
(State or Other Jurisdiction of Incorporation)
01-12846 74-2604728
---------------------------- -----------------------------
14100 East 35th Place, Aurora, Colorado 80011
- -------------------------------------------------------------------------------
(303) 375-9292
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS
Acquisitions:
- -------------
The following acquisitions of light industrial and bulk distribution facility
properties in Security Capital Industrial Trust's target markets were completed
by SCI from unrelated parties since the filing of SCI's Form 8-K dated January
15, 1996. SCI acquired these properties because SCI and its REIT Manager,
Security Capital Industrial Incorporated, believe that these properties
represent excellent opportunities for long-term above average growth in rental
income and cash flow and SCI could acquire them at significant discounts to
replacement cost.
On January 9, 1996, SCI acquired 1837 Air Lane Drive located in Nashville,
Tennessee, from a real estate investment fund. The property was built in 1983,
consists of 42,500 square feet of rentable space, and is classified as light
industrial. The purchase price was approximately $1.1 million and the property
was 100% leased to four tenants at the date of purchase.
SCI acquired the Sunbelt Warehousing property in Memphis, Tennessee from a
partnership on January 10, 1996. Sunbelt Warehousing is classified as bulk
distribution, consists of four buildings and 151,860 rentable square feet on
6.84 acres of land. The buildings were constructed from 1977 to 1983. SCI
purchased the property for approximately $3.3 million. At the date of purchase,
the facilities were 80% leased to five tenants.
SCI acquired the Fleet Industrial Park property on February 1, 1996 from a
state government employees retirement system. Fleet is a 488,011 square foot
bulk distribution center consisting of eight buildings on 28.56 acres of land.
The buildings were constructed from 1971 through 1978 and are located in
Springfield (Alexandria), Virginia, in SCI's Washington D.C./Baltimore target
market. SCI purchased the property for approximately $21.3 million. At the date
of purchase, the property was 80% leased to twenty-five tenants.
SCI acquired the Springdale Commerce Center in Cincinnati, Ohio on February 5,
1996 from an individual. Springdale Commerce Center is a combination of light
industrial and bulk distribution facilities consisting of three buildings
totalling 154,517 square feet. The buildings were constructed in 1973. SCI
purchased the property for approximately $2.8 million. At the date of purchase,
the bulk and industrial facilities were 100% leased to twelve tenants.
SCI acquired the I-635/44th Street Business Center property in Kansas City,
Kansas on February 9, 1996 from a corporation. The property is a 48,707 square
foot light industrial facility and was constructed in 1979. SCI purchased the
property for approximately $1.0 million. At the date of purchase, the property
was 100% leased to five tenants.
On February 14, 1996, SCI acquired the 151 Regal Row property in Dallas, Texas
from an investment fund. The property was built in 1974, consists of 217,289
square feet, and is classified as bulk distribution. The purchase price was
approximately $3.8 million and the property was 90% leased to seventeen tenants
at the date of purchase.
<PAGE>
On February 23, 1996 and March 1, 1996, SCI acquired the properties included
in the Indcon Portfolio I from a limited partnership. The portfolio is
comprised of six buildings in Atlanta, Georgia totalling 708,423 square feet;
four buildings in Memphis, Tennessee totalling 542,695 square feet; one building
in Dallas, Texas totalling 200,100 square feet; and three buildings in San
Antonio, Texas totalling 316,817 square feet. The buildings were constructed
from 1967 through 1979. SCI purchased the properties in Atlanta, Memphis and
San Antonio on February 23, 1996 for approximately $25.6 million. The Dallas
building was purchased for approximately $3.2 million on March 1, 1996. At the
date of the purchases, the Memphis, Dallas, and San Antonio properties were 100%
leased to twenty-two tenants and the Atlanta property was 99.6% leased to
fourteen tenants.
On February 23, 1996 and April 29, 1996, SCI acquired the properties included
in the Indcon Portfolio II from a limited partnership. The portfolio is
comprised of eleven buildings in Atlanta, Georgia totalling 722,394 square feet
and one building in Dallas, Texas consisting of 224,713 square feet. The
buildings were constructed from 1957 through 1980. SCI purchased eleven
buildings on February 23, 1996 for approximately $9.9 million. SCI purchased
one building in Atlanta on April 29, 1996 for approximately $1.8 million. At
the date of the purchases, the Atlanta properties were 98.6% leased to twenty-
one tenants and the Dallas property was 100% leased to two tenants.
SCI acquired the property known as 301 N. 3rd Avenue on March 15, 1996 from an
individual. The property is a 249,925 square foot bulk distribution facility,
was constructed in 1966 and is located in Des Plaines, Illinois, in a submarket
of Chicago. SCI purchased the property for approximately $6.2 million. At the
date of purchase, the property was 100% leased to two tenants.
On April 19, 1996, SCI acquired the Tri State O'Hare property in Northlake,
Illinois, a submarket of Chicago, from an insurance company. The property was
built in 1980, consists of 82,380 square feet and is classified as bulk
distribution. The purchase price was approximately $2.5 million and the property
was 100% leased at the date of purchase.
SCI acquired the 911 W. Irving Park Road property in Chicago, Illinois from a
partnership on April 25, 1996. The facility is classified as bulk distribution,
consists of 58,513 square feet and was constructed in 1974. SCI purchased the
property for approximately $2.1 million. At the date of purchase, the property
was 100% leased to one tenant.
SCI acquired the Park Fletcher Building #11 property on April 26, 1996 from an
insurance company. The facility is 92,000 square feet and is located in
Indianapolis, Indiana in close proximity with the existing SCI distribution
centers in the Park Fletcher submarket. SCI purchased the property for
approximately $2.8 million. At the date of purchase, the property was 78%
leased.
SCI acquired the property known as Memphis Airways on April 29, 1996 from a
bank as trustee for an individual. The property is a 203,328 square foot bulk
distribution facility constructed in 1968 and located in Memphis, Tennessee.
SCI purchased the property for approximately $3.2 million. At the date of
purchase there were no signed leases.
<PAGE>
On May 21, 1996, SCI acquired the Specialty Brands property in Sparks, Nevada,
a submarket of Reno, from a corporation. The property was built in 1977,
consists of 129,600 square feet, and is classified as bulk distribution. The
purchase price was approximately $2.9 million. At the date of purchase there
were no signed leases.
On May 21, 1996 and August 13, 1996, SCI acquired properties known as the
Ashley Capital Portfolio located in submarkets of Chicago, in Schaumburg and
Bridgeview, Illinois, respectively. Both purchases were from a limited liability
company. The combined portfolio consists of five buildings, totalling 717,205
square feet. SCI paid approximately $8.3 million for 304,800 square feet in
Schaumburg and approximately $8.7 million for 412,405 square feet in Bridgeview.
The buildings were 79% leased at the time of the initial purchase and are
currently 100% leased.
SCI acquired the Ashley Capital Portfolio located in Milwaukee, Wisconsin from
a limited partnership on May 21, 1996. The facility is classified as bulk
distribution, and consists of 360,000 square feet of rentable space. SCI paid
approximately $8.9 million for the property which was 100% leased to two tenants
at the time of purchase.
SCI acquired the properties included in the National Pension Properties II
portfolio in the Trinity Mills and Lone Star submarkets of Dallas, Texas from an
insurance company on May 23, 1996. The portfolio, classified as bulk
distribution, is comprised of three buildings totalling 407,919 square feet in
the Trinity Mills submarket and two buildings totalling 305,690 square feet in
the Lone Star submarket. The combined purchase price was approximately $16.9
million. On the date of purchase, the Trinity Mills and Lone Star facilities
were 100% and 93% leased to seven and six tenants, respectively.
SCI acquired the property known as 2501 Camp Avenue on May 30, 1996 from a
bank. The property is a 40,000 square foot bulk distribution facility, was
constructed in 1981, and is located in Carrollton, Texas, a submarket of Dallas.
SCI purchased the property for approximately $913,000. At the date of purchase,
the property was 100% leased to one tenant.
On June 11, 1996, SCI acquired the Macon Bedford Distribution Center property
located in North Kansas City, Missouri from a nonprofit organization. The
facility is classified as bulk distribution and consists of 99,012 square feet
of rentable space. SCI purchased the property for approximately $2.0 million.
The building was 100% leased at the date of purchase to two tenants.
SCI acquired the Walnut Creek Distribution Center in Austin, Texas from a
corporation on June 14, 1996. The facility is classified as bulk distribution,
and consists of two buildings totalling 96,000 square feet of rentable space.
SCI paid approximately $3.2 million for the property which was 93% leased to
nine tenants at the date of purchase.
SCI acquired the 300 King Street property in Chicago, Illinois from a
partnership on June 20, 1996. The facility is classified as light industrial,
consists of 44,150 rentable square feet, and was constructed in 1986. SCI
purchased the property for approximately $1.4 million. At the time of purchase,
the property was 100% leased to two tenants.
<PAGE>
On June 21, 1996, SCI acquired the Rittiman East Portfolio located in San
Antonio, Texas from an insurance company. The facility is classified as bulk
distribution and consists of three buildings totalling 281,600 square feet of
rentable space. SCI purchased the property for approximately $6.5 million. The
buildings were 100% leased to five tenants at the date of purchase.
SCI acquired the De Soto Business Park in Baltimore, Maryland on July 2, 1996
from a limited partnership. The portfolio is comprised of five buildings
totalling 523,800 square feet on 28.02 acres. The buildings were constructed
from 1974 through 1978. SCI purchased the property for approximately $11.8
million. At the date of purchase, the facilities were 88% leased to twenty-
seven tenants.
SCI acquired the NCR Facility in Ogden, Utah, a submarket of Salt Lake City,
on July 11, 1996 from a corporation. The facility is classified as bulk
distribution/light industrial and consists of 100,000 square feet. The purchase
price was approximately $3.1 million and the property was 100% leased to one
tenant at the date of purchase.
On July 30, 1996, SCI acquired the ACS Facility in Secaucus, New Jersey from
an investment company. The property was built in 1960, consists of
approximately 530,000 square feet of rentable space, and is classified as bulk
distribution/light industrial. The purchase price was approximately $16.1
million and the property was 100% leased to one tenant at the date of purchase.
On August 14, 1996, SCI acquired the Roberts Road/Zane Trail property from a
corporate trust fund. The property is located in Columbus, Ohio, is classified
as bulk distribution, and consists of two buildings constructed in 1977 and
1979, totalling 197,500 square feet. SCI purchased the property for
approximately $4.5 million. At the date of acquisition, the buildings were 80%
leased to four tenants.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements:
Combined Statement of Revenue and Certain Expenses for Group E
Properties and Notes thereto with Independent Public Accountants'
Report thereon dated January 11, 1996, (Incorporated by reference
to SCI's Form 8-K dated January 15, 1996)
Combined Statement of Revenue and Certain Expenses for Group F
Properties and Notes thereto with Independent Public Accountants'
Report thereon dated August 15, 1996
(b) Pro Forma Financial Information:
Security Capital Industrial Trust Pro Forma Condensed
Consolidated Financial Statements:
Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1996 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the
six months ended June 30, 1996 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1995 (unaudited)
(c) Exhibits:
Exhibit 10 - Seventh Amended and Restated REIT Management
Agreement dated June 30, 1996 by and between Security Capital
Industrial Trust and Security Capital Industrial Incorporated
Exhibit 23 - Consent of Independent Public Accountants
<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
Date: August 19, 1996 By: /s/ Edward F. Long
-------------------------------- --------------------------------
Edward F. Long, Vice President
and Controller
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Trustees and Shareholders of
Security Capital Industrial Trust:
We have audited the accompanying combined statement of revenue and certain
expenses of SECURITY CAPITAL INDUSTRIAL TRUST GROUP F PROPERTIES (described in
Note 1) for the year ended December 31, 1995. This financial statement is the
responsibility of Group F Properties' management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenue and certain expenses was
prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission for inclusion in the Form 8-K of Security
Capital Industrial Trust and is not intended to be a complete presentation of
the Group F Properties' combined revenue and certain expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the combined revenue and certain expenses of the Security
Capital Industrial Trust Group F Properties for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 15, 1996
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
---------------------------------
GROUP F PROPERTIES
------------------
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
--------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
(IN THOUSANDS)
<TABLE>
<CAPTION>
REVENUE:
<S> <C>
Minimum rents $ 11,430
Expense reimbursements 1,726
--------
Total revenue 13,156
CERTAIN EXPENSES:
Real estate taxes 2,484
Property operating expenses 618
Insurance 263
Management fees 553
--------
Total certain expenses 3,918
--------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 9,238
========
</TABLE>
See accompanying notes to combined statement of revenue and certain expenses.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
---------------------------------
GROUP F PROPERTIES
------------------
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
1. BASIS OF PRESENTATION:
---------------------
The combined statement of revenue and certain expenses for the year ended
December 31, 1995, relates to the operations of the following properties ("Group
F") which were acquired from unaffiliated parties by Security Capital Industrial
Trust ("SCI") between January 1, 1996 and August 15, 1996.
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
DATE PROPERTY NAME LOCATION COST
-------------- ------------- ---------- -----------
<S> <C> <C> <C>
(in thousands)
Various Indcon Portfolio I and II Various $ 40,480
4/26/96 Park Fletcher Building #11 Indianapolis, IN 2,814
5/23/96 National Pension Properties II Dallas, TX 16,923
Various Ashley Capital Portfolio Various 25,798
7/30/96 ACS Facility Secaucus, NJ 16,062
---------
$ 102,077
=========
</TABLE>
The Group F Properties have aggregate net leasable area of 5.1 million
square feet and are 95.3% leased as of December 31, 1995.
The accompanying financial statement excludes certain expenses, such as
interest, depreciation and amortization, professional fees and other costs not
directly related to the future operations of the Group F Properties, that may
not be comparable to the expenses expected to be incurred by SCI in the proposed
future operations of the Group F Properties. Management is not aware of any
material factors relating to these properties which would cause the reported
financial information not to be necessarily indicative of future operating
results.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
---------------------------------
GROUP F PROPERTIES
------------------
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
-----------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------
2. RELATED-PARTY TRANSACTIONS:
--------------------------
Included in management fees are approximately $449,000 paid to affiliates
of the prior owners under property management contracts.
3. FUTURE MINIMUM RENTS RECEIVABLE:
-------------------------------
All of the Group F Properties are leased to tenants under agreements which
are classified as operating leases. The leases generally provide for payment of
utilities, property taxes and insurance by the tenant. As of December 31, 1995,
minimum lease payments receivable on noncancelable leases with lease periods
greater than one year are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $ 11,694
1997 8,900
1998 6,837
1999 4,435
2000 2,834
Thereafter 3,214
--------
$ 37,914
========
</TABLE>
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed consolidated financial statements for
Security Capital Industrial Trust ("SCI") reflect the acquisition by SCI, of
certain properties acquired between January 1, 1995 and August 15, 1996. The pro
forma condensed consolidated financial statements have been prepared based upon
certain pro forma adjustments to the historical financial statements of SCI.
The accompanying pro forma condensed consolidated balance sheet as of June
30, 1996 has been prepared as if the properties acquired subsequent to June 30,
1996 had been acquired as of that date.
The accompanying pro forma condensed consolidated statements of operations
for the year ended December 31, 1995 and for the six months ended June 30, 1996,
have been prepared as if the acquisition of the properties acquired between
January 1, 1995 and August 15, 1996, had occurred on January 1, 1995.
The pro forma condensed consolidated financial statements do not purport to
be indicative of the results which would actually have been obtained had the
transactions described above been completed on the dates indicated or which may
be obtained in the future.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------
ASSETS HISTORICAL ACQUISITIONS PRO FORMA
------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Real estate $ 2,155,832 $ 44,188 (a) $ 2,200,020
Less accumulated depreciation 80,671 - 80,671
------------- ------------ -----------
Net real estate investments 2,075,161 44,188 2,119,349
Cash and cash equivalents 9,042 (9,042) (b) -
Accounts receivable and other assets 51,992 - 51,992
------------- ------------ -----------
Total assets $ 2,136,195 $ 35,146 $ 2,171,341
============= ============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Line of credit $ 13,300 $ 28,973 (c) $ 42,273
Mortgage notes and assessment bonds 137,682 6,173 (d) 143,855
Long-term debt 524,151 - 524,151
Accounts payable and other liabilities 71,470 - 71,470
------------- ------------ -----------
Total liabilities 746,603 35,146 781,749
Minority interest 57,905 - 57,905
Shareholders' equity:
Series A Preferred Shares; 5,400,000 shares
issued and outstanding; stated liquidation
preference of $25 per share 135,000 - 135,000
Series B Preferred Shares; 8,050,000 shares
issued and outstanding; stated liquidation
preference of $25 per share 201,250 - 201,250
Common shares of beneficial interest, $.01
par value; 81,447,929 shares issued and
outstanding 814 - 814
Additional paid-in capital 1,050,271 - 1,050,271
Distributions in excess of net earnings (55,648) - (55,648)
------------- ------------ -----------
Total shareholders' equity 1,331,687 - 1,331,687
------------- ------------ -----------
Total liabilities and shareholders'
equity $ 2,136,195 $ 35,146 $ 2,171,341
============= ============ ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------------------------------
HISTORICAL
------------------------ PRO FORMA
SCI ACQUISITIONS (e) ADJUSTMENTS PRO FORMA
---------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Income:
Rental income $ 104,423 $ 6,503 $ - $ 110,926
Interest and other income 1,687 - - 1,687
---------- ------------ ----------- ---------
Total income 106,110 6,503 - 112,613
---------- ------------ ----------- ---------
Expenses:
Rental expenses, net of recoveries 13,392 821 (44) (f) 14,169
Depreciation and amortization 27,215 - 1,609 (g) 28,824
Mortgage interest 5,800 - 100 (h) 5,900
General and administrative 552 - - 552
REIT management fee 9,674 - 6 (i) 9,680
Interest on general debt 11,559 - 4,510 (j) 16,069
Other 1,200 - - 1,200
---------- ------------ ----------- ---------
Total expenses 69,392 821 6,181 76,394
---------- ------------ ----------- ---------
NET EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 36,718 5,682 (6,181) 36,219
Minority interest share in net earnings 1,640 - - 1,640
---------- ------------ ----------- ---------
NET EARNINGS EXCLUDING LOSS ON
DISPOSITION OF REAL ESTATE 35,078 5,682 (6,181) 34,579
Less preferred share dividends 11,368 - - 11,368
---------- ------------ ----------- ---------
NET EARNINGS ATTRIBUTABLE TO
COMMON SHARES EXCLUDING
LOSS ON DISPOSITION OF REAL
ESTATE $ 23,710 $ 5,682 $ (6,181) $ 23,211
========== ============ =========== =========
Weighted average common shares outstanding (l) 81,436 81,436
========== =========
Net earnings per common share excluding loss
on disposition of real estate $ 0.29 $ 0.29
========== =========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------
HISTORICAL
---------------------- PRO FORMA
SCI ACQUISITIONS (m) ADJUSTMENTS PRO FORMA
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Income:
Rental income $153,879 $45,615 $ - $199,494
Interest and other income 4,624 - - 4,624
-------- ------- -------- --------
Total income 158,503 45,615 - 204,118
-------- ------- -------- --------
Expenses:
Rental expenses, net of recoveries 18,460 7,910 (623) (f) 25,747
Depreciation and amortization 39,767 - 10,951 (g) 50,718
Mortgage interest 12,476 - (470) (h) 12,006
General and administrative 839 - - 839
REIT management fee 14,207 - 2,566 (i) 16,773
Interest on general debt 19,529 - 10,369 (j) 29,898
Other 2,234 - - 2,234
-------- ------- -------- --------
Total expenses 107,512 7,910 22,793 138,215
-------- ------- -------- --------
NET EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 50,991 37,705 (22,793) 65,903
Minority interest share in net earnings 3,331 - - 3,331
-------- ------- -------- --------
NET EARNINGS EXCLUDING GAIN ON
DISPOSITION OF REAL ESTATE 47,660 37,705 (22,793) 62,572
Less preferred share dividends 6,698 - 5,992 (k) 12,690
-------- ------- -------- --------
NET EARNINGS ATTRIBUTABLE TO
COMMON SHARES EXCLUDING
GAIN ON DISPOSITION OF REAL
ESTATE $ 40,962 $37,705 $(28,785) $ 49,882
======== ======= ======== ========
Weighted average common shares outstanding (l) 68,924 81,436
======== ========
Net earnings per common share excluding
gain on disposition of real estate $ 0.59 $ 0.61
======== ========
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
(a) Represents acquisitions of industrial properties subsequent to June 30,
1996 as follows:
<TABLE>
<CAPTION>
ACQUISITION AMOUNT
NAME DATE (IN THOUSANDS)
- ---- ------------- --------------
<S> <C> <C>
De Soto Business Park July 2, 1996 $ 11,830
NCR Facility July 11, 1996 3,088
ACS Facility July 30, 1996 16,062
Ashley Capital - Bridgeview August 13, 1996 8,680
Roberts Road/Zane Trail August 14, 1996 4,528
-------------
$ 44,188
=============
</TABLE>
(b) Reflects the application of cash on hand utilized to fund pro forma
acquisitions of properties.
(c) Reflects draw on line of credit to finance acquisitions of operating
properties subsequent to June 30, 1996.
(d) Reflects debt assumed on an acquired property.
(e) Reflects historical revenues and certain expenses of the properties
acquired by SCI after January 1, 1996 and prior to June 30, 1996 and on the
properties listed in footnote (a) above. The total historical acquisition
adjustment reflects the period from January 1, 1996 to the earlier of the
respective dates of acquisition or June 30, 1996, as applicable (results of
operation after the date of acquisition are included in SCI's historical
operating results). Historical acquisition revenues and certain expenses
exclude amounts which would not be comparable to the proposed future
operations of the properties such as certain interest expense, interest
income, income taxes and depreciation.
(f) Reflects the difference between historical property management fee expense
and SCI's management fee expense.
(g) Reflects depreciation expense for the acquired properties which is based on
SCI's purchase cost assuming asset lives of 30 years. Depreciation is
computed using a straight-line method.
(h) Reflects estimated interest expense on mortgage notes payable as if assumed
by SCI on January 1, 1995. Mortgages assumed from sellers in conjunction
with the acquisition of specific properties bear interest at fixed rates
ranging from 7% to 10.625%. Any mortgages assumed from sellers that were
subsequently paid off by SCI prior to June 30, 1996, have been excluded,
and the related mortgage interest expense from the date of acquisition to
the pay off date reversed out.
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
(i) Reflects the adjustment to REIT management fee expense related to the
change in cash flow (as defined in the REIT Management Agreement) resulting
from acquisition of industrial properties.
(j) Represents additional interest expense on long-term debt securities assumed
to have been issued to finance the acquisitions of the pro forma operating
properties as described in footnotes (e) and (m) as if the issuance of the
long-term debt securities occurred on January 1st of the periods presented
using the effective interest rate from SCI's May 17, 1996, debt offering of
8.406%.
(k) Represents an adjustment to the cash distribution to Series A preferred
shareholders at the rate of 9.4% on the $135 million of Series A Preferred
Shares that were issued June 21, 1995. The dividend adjustment assumes the
shares were issued on January 1, 1995.
(l) The number of shares used in the calculation of the pro forma per common
share data was based on the weighted average number of common shares
outstanding during the period adjusted to give effect to common shares
assumed to have been issued on January 1, 1995 required to complete the
property acquisitions which were assumed to have been financed with equity
proceeds.
(m) Reflects historical revenues and certain expenses on the properties
acquired by SCI after January 1, 1995 and prior to June 30, 1996 and on the
properties listed in footnote (a) above. The total historical acquisition
adjustment reflects the period from January 1, 1995 to the earlier of the
respective dates of acquisition or December 31, 1995, as applicable
(results of operation after the date of acquisition are included in SCI's
historical operating results). Historical acquisition revenues and certain
expenses exclude amounts which would not be comparable to the proposed
future operations of the properties such as certain interest expense,
interest income, income taxes and depreciation.
<PAGE>
SEVENTH AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT
------------------------------------------------------
THIS SEVENTH AMENDED AND RESTATED REIT MANAGEMENT AGREEMENT (this
"Agreement") is made and entered into as of the 30th day of June, 1996, by and
between Security Capital Industrial Trust, a Maryland real estate investment
trust (the "Trust"), and Security Capital Industrial Incorporated, a Delaware
corporation (the "REIT Manager").
W I T N E S S E T H:
-------------------
WHEREAS, the Trust is organized under the laws of the State of Maryland
pursuant to a Declaration of Trust dated as of June 15, 1993, as amended and
restated as of December 15, 1993, as amended (the "Declaration of Trust"), and
currently qualifies as a "real estate investment trust" as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), to make investments of
the type permitted for qualified real estate investment trusts under the Code
and not inconsistent with the Declaration of Trust and the By-Laws of the Trust
(the "By-Laws");
WHEREAS, the Trust, desiring to avail itself of the experience, sources of
information, advice, assistance and certain facilities of, or available to, the
REIT Manager and to have the REIT Manager undertake the duties and
responsibilities hereinafter set forth, on behalf of and subject to the
supervision of the Board of Trustees of the Trust (the "Board"), entered into a
Sixth Amended and Restated REIT Management Agreement dated as of June 30, 1995,
as amended (the "Prior Agreement"), with the REIT Manager and the term of the
Prior Agreement expires on the date hereof; and
WHEREAS, the REIT Manager and the Trust desire to amend and restate the
Prior Agreement to extend the term for an additional year and to clarify certain
ambiguities and to more fully give effect to the intentions of the parties
thereto;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Trust and the REIT Manager agree that the Prior
Agreement is hereby amended and restated in its entirety as follows:
I. DEFINITIONS
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1.1 DEFINITIONS. As used in this Agreement, the following capitalized
terms shall have the meanings set forth below.
(a) "Affiliate" means as to any person, (i) any other person directly or
indirectly controlling, controlled by or under common control with such person,
(ii) any other person that owns beneficially, directly or indirectly, 10% or
more of the outstanding capital stock, shares or equity interests of such
person, or (iii) any officer, director, employee, general partner or
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trustee of such person or of any other person controlling, controlled by or
under common control with such person (excluding trustees or directors and
persons serving in similar capacities who are not otherwise an Affiliate of such
person).
(b) "Average Invested Assets" for any period shall mean the average of the
aggregate book value of the assets of the Trust invested, directly or
indirectly, in equity interests in and loans secured by real estate, before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
(c) "Board" shall have the meaning set forth in the recitals hereto.
(d) "By-Laws" shall have the meaning set forth in the recitals hereto.
(e) "Cash Equivalent Investments" means assets of the Trust that consist of
cash, interest-bearing deposits in banks, repurchase agreements with banks and
readily-marketable securities.
(f) "Cash Flow" for any period means the sum of (i) Funds Available from
Operations for such period (after deducting all income from Cash Equivalent
Investments), plus (ii) the REIT Management Fees payable pursuant to Section 3.1
hereof, plus (iii) any expenses incurred by the Trust that are unusual in light
of the Trust's historical experience prior to the incurrence thereof and are
incurred at the request of a majority of the Independent Trustees, plus (iv) 33%
of the interest paid during such period on any subordinated debentures that are
(x) issued after the execution of this Agreement and (y) convertible into shares
of beneficial interest of the Trust, provided, however, that this definition
shall be equitably adjusted by mutual agreement in the event of a
recapitalization or other event which results in a reclassification of the
equity securities of the Trust.
(g) "Cause" means either (i) an act of fraud, embezzlement or theft
constituting a felony or an act intentionally against the interests of the Trust
which causes it material injury, (ii) a final determination by a court of
competent jurisdiction that the REIT Manager has committed a material breach of
this Agreement, (iii) a petition shall have been filed against the REIT Manager
for an involuntary proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and such petition shall not have
been dismissed within 60 days of filing; or a court having jurisdiction shall
have appointed a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the REIT Manager for any substantial portion
of its property, or ordered the winding up or liquidation of its affairs; or
(iv) the REIT Manager shall have commenced a voluntary proceeding under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have made any general assignment for the benefit of creditors,
or shall have failed generally to pay its debts as they become due.
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(h) "Code" shall have the meaning set forth in the recitals hereto.
(i) "Declaration of Trust" shall have the meaning set forth in the recitals
hereto.
(j) "Exchange Act" shall have the meaning set forth in Section 2.13 hereof.
(k) "Funds Available from Operations" for any period means the dollar
amount equal to the sum of (i) net earnings of the Trust for such period
excluding interest income and/or dividends received from SCI Development
Services Incorporated, determined in accordance with generally accepted
accounting principles, plus (ii) interest actually paid on the Trust's senior
unsecured long term debt instruments, plus (iii) non-cash items deducted in
calculating net earnings for such period (including but not limited to
depreciation) which are generally added to net earnings in determining funds
from operations for distribution to shareholders pursuant to prevailing practice
among publicly-held real estate investments trusts, minus (iv) regularly
scheduled principal payments (excluding prepayments or balloon payments) on
mortgage indebtedness which has a commercially reasonable amortization schedule,
minus (v) an assumed amount of payments of principal and interest which would
have been paid by the Trust during such periods under senior unsecured long term
debt instruments of the Trust, if payments were equal to payments on a 20-year
fully amortizing mortgage of equal principal amount and effective interest rate
with a payment schedule requiring equal annual payments of combined principal
and interest (but not costs of issuance), minus (vi) distributions actually paid
with respect to any non-convertible preferred shares of beneficial interest of
the Trust. For calculations under clause (v) of the preceding sentence, all
tranches of long term debt issued simultaneously shall be viewed collectively
and shall be treated as one mortgage financing with an interest rate equal to
the Trust's weighted average effective interest rate for such tranches after
giving effect to any interest rate protection or similar agreements. For
example, the attached Exhibit A shows the assumed effective interest rate and
monthly payment schedules on the $200 million of senior notes issued by the
Trust in March 1995, which will be deducted in calculating Funds Available from
Operations. Funds Available from Operations will not be increased or decreased
by virtue of any of the following: realized gains or losses, capital
expenditures or principal payments, except for principal payments under the
Trust's long term debt instruments as contemplated by clauses (iv) and (v) of
the foregoing sentence. Funds Available from Operations will not include any
earnings or expenses paid by SCI Limited Partnership-I, SCI Limited Partnership-
II, SCI Limited Partnership-III or SCI Limited Partnership-IV (or any other
partnership in which the Trust has an investment), which have been used in the
calculation of the management fee payable to the REIT Manager under the
partnership management agreement with such partnership.
(l) "Indemnified Party" shall have the meaning set forth in Section 6.2(a)
hereof.
(m) "Independent Trustee" means a Trustee who (i) is not affiliated,
directly or indirectly, with the REIT Manager, whether by ownership of,
ownership interest in, employment by, any material business or professional
relationship with, or service as an officer or director
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of, the REIT Manager or a business entity that is an Affiliate of the REIT
Manager, (ii) is not serving as a trustee or director for more than three real
estate investment trusts organized by a Sponsor of the Trust and (iii) performs
no other services for the Trust, except as Trustee. An indirect relationship
shall include circumstances in which a member of the immediate family of a
Trustee has one of the foregoing relationships with the REIT Manager or the
Trust.
(n) "Investment Policies" at any time shall have the meaning given thereto
either in (i) the Declaration of Trust or By-Laws as then in effect or (ii) a
written statement adopted by the Board and delivered to the REIT Manager by the
Trust.
(o) "Net Income" for any period means total revenues (excluding gains or
losses from the sale of Trust assets) applicable to such period, less the
expenses applicable to such period other than additions to reserves for
depreciation or bad debts or other similar non-cash reserves.
(p) "REIT Management Fee" shall have the meaning set forth in Section 3.1
hereof.
(q) "Renewal Term" shall have the meaning set forth in Section 4.2 hereof.
(r) "Sponsor" means any person directly or indirectly instrumental in
organizing, wholly or in part, a real estate investment trust, or any person who
will manage or participate in the management of a real estate investment trust,
and any Affiliate of any such person, but excluding (i) any person whose only
relationship with such real estate investment trust is that of an independent
property manager whose only compensation is for property management services and
(ii) independent third parties such as attorneys, accountants and underwriters
whose only compensation is for professional services.
(s) "Total Operating Expenses" for any period means all operating and
general and administrative expenses of the Trust as determined under generally
accepted accounting principles but excluding (i) the expenses of raising capital
and financing, including, without limitation, financing for Trust Properties,
including related investment banking and legal fees, (ii) interest payments on
all debt of the Trust, (iii) taxes, (iv) non-cash expenditures and (v) the costs
related directly to Trust Property acquisition, development, operation and
disposition. The exclusion for costs related directly to Trust Property
acquisition, development, operation and disposition permits exclusion of
expenses incurred with respect to specific individual Trust Properties but does
not permit the exclusion of operating, general and administrative expenses for
the Trust's operations in general.
(t) "Trust Property" means any real property or interest therein and
associated personal property owned by the Trust.
(u) "Trustees" means the Trustees holding office under the Declaration of
Trust at any particular time.
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1.2 ACCOUNTING PRINCIPLES. Except as otherwise provided herein, all
accounting and financial terms used herein shall be determined in accordance
with generally accepted accounting principles.
II. DUTIES OF THE REIT MANAGER
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2.1 GENERAL. The REIT Manager shall use its best efforts to perform each
of the duties set forth in this Agreement and shall have the authority to take
all actions and to execute all documents and instruments that it deems necessary
or advisable in connection with the management and operations of the Trust and
the fulfillment of its duties as set forth herein, subject in each matter to the
supervision of the Board and to the Investment Policies of the Trust, and with
respect to the acquisition, development, financing and disposition of real
property, to the prior approval of the Board.
2.2 ANNUAL STRATEGIC PLAN. The REIT Manager will prepare annually a
strategic plan that incorporates a specific business strategy, an annual
operating budget, investment and disposition objectives and capitalization and
funding strategies. This plan will be presented in the fourth quarter of the
year prior to the year for which such plan applies to the Board for its review
and approval. Consistent with the annual strategic plan, and subject to
supervision by the Board, the REIT Manager will provide acquisition, development
and disposition services including the following:
(a) Investigation and selection of possible acquisitions and
developments, property analysis, market and economic surveys, on-site
physical inspections, review and projection of income and operating
expenses and, when desired, supervising and negotiating the arrangement of
financing;
(b) Conducting negotiations with real estate brokers, owners of
property and their agents, investment bankers and owners of privately and
publicly held real estate companies;
(c) Engaging and supervising, on behalf of the Trust, independent
contractors which provide real estate brokerage, investment banking (as to
which an Affiliate of the REIT Manager may be used if there is no charge to
the Trust for its services, other than the REIT Management Fee) and leasing
services, mortgage brokerage and other financial services and such other
services as may be required relating to the Trust Properties, provided,
however, that the REIT Manager shall not share in any brokerage, investment
banking or similar fees paid to any person engaged by the REIT Manager to
perform such services for the Trust; and
(d) Negotiating on behalf of the Trust for the sale, exchange or other
disposition of any Trust Properties.
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2.3 ASSET MANAGEMENT. The REIT Manager may retain third-party property
managers and leasing agents for administration, leasing and management of Trust
Properties. Subject to the approval of a majority of the Board, including a
majority of the Independent Trustees, the REIT Manager may provide property
management and/or leasing services for Trust Properties through an Affiliate of
the REIT Manager on terms and conditions no less favorable to the Trust than
those available from qualified unaffiliated third parties; provided, however,
that such services may not be provided through an Affiliate of the REIT Manager
if doing so would jeopardize the Trust's qualification as a real estate
investment trust under Sections 856 through 860 of the Code. The Trust and the
REIT Manager will negotiate in good faith the terms of any future management
agreements between the Trust and Affiliates of the REIT Manager which are
permitted pursuant to this Section 2.3.
2.4 GENERAL ADMINISTRATIVE DUTIES. The REIT Manager shall perform, or
supervise the performance of, the necessary administrative functions in the day-
to-day management of the Trust and its operations, including, without
limitation, internal and external financial reporting, property accounting,
shareholder relations, supervision of stock registrar and transfer services, and
other necessary services, all in a manner consistent with the Trust's current
practice, subject to changes approved by a majority of the Board.
2.5 REAL ESTATE INVESTMENT ADVICE. The REIT Manager shall advise the Trust
with respect to policy decisions to be made by the Board, shall investigate and
evaluate investment opportunities consistent with the real estate investment
policies and the objectives of the Trust and recommend them to the Board, and
shall provide research, economic and statistical data in connection with the
Trust's real estate investments and policies.
2.6 SHORT-TERM INVESTMENTS. The REIT Manager may invest and reinvest any
monies and securities of the Trust in short-term investments pending investment
in Trust Properties. Unless a specific new policy is developed by the REIT
Manager and approved by the Board, the REIT Manager may invest and reinvest any
monies and securities of the Trust, pending investment in Trust Properties, in
accordance with current practice and past policies developed by the REIT Manager
and approved by the Board.
2.7 AGENCY. The REIT Manager shall act as agent of the Trust in making,
acquiring, financing and disposing of investments, disbursing and collecting the
Trust's funds, paying the debts and fulfilling the obligations of the Trust,
supervising the performance of the managers of the Trust Properties and
handling, prosecuting and settling any claims of or against the Trust, the
Board, holders of the Trust's securities or the Trust's representatives or
properties.
2.8 RETENTION OF SERVICES. The REIT Manager shall retain for and on behalf
of the Trust such services of accountants, legal counsel, appraisers, insurers,
brokers, transfer agents, registrars, developers, banks and other lenders and
others as the REIT Manager deems necessary or advisable in connection with the
management and operations of the Trust and the fulfillment of the REIT Manager's
duties as set forth herein.
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2.9 OFFICE AND PERSONNEL. The REIT Manager shall maintain on behalf of the
Trust such office space, equipment and personnel, including officers and
employees of the REIT Manager or its Affiliates, as it deems necessary or
advisable in connection with the management and operations of the Trust and the
fulfillment of the REIT Manager's duties as set forth herein.
2.10 BANK ACCOUNTS. The REIT Manager may establish one or more bank
accounts in the name of the Trust or in its own name and may deposit into and
disburse from such accounts any monies on behalf of the Trust, provided that no
funds in any such account shall be commingled with funds of the REIT Manager,
and the REIT Manager shall as requested by the Board render appropriate
accountings to the Board of such deposits and disbursements.
2.11 BOOKS AND RECORDS. The REIT Manager shall maintain all accounting and
reporting systems, books and records of the Trust, including books of account
and records relating to services performed by the REIT Manager, in form and
quality at least equivalent to the Trust's current practice, and shall make such
books and records accessible for inspection by the Board at any time during
ordinary business hours.
2.12 APPRAISALS AND REPORTING. As frequently as may be required by the
Board or as the REIT Manager may deem necessary or advisable, the REIT Manager
shall prepare, or cause to be prepared, with respect to each of the Trust
Properties (i) an appraisal prepared by an independent real estate appraiser,
(ii) reports and information on Trust operations and asset performance at least
equivalent, with respect to quality and clarity of information, to the Trust's
current practice and (iii) other information reasonably requested by the Board.
2.13 REPORTS, ETC. The REIT Manager shall prepare, or cause to be
prepared, all reports of the Trust required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and other communications to the holders
of the Trust's securities, including, without limitation, proxy solicitation
materials, and all tax returns and any other reports or other materials required
to be filed with any governmental body or agency, and shall prepare, or cause to
be prepared, all materials and data necessary to complete such reports and other
materials including, without limitation, an annual audit of the Trust's books of
account by a nationally recognized independent accounting firm.
2.14 FINANCING AND SECURITIES ISSUANCES. The REIT Manager shall provide
services to the Trust in connection with negotiations by the Trust with
investment banking firms, securities brokers or dealers and other institutions
or investors in connection with the sale of securities of the Trust and the
securing of loans for the Trust, provided, however, that the REIT Manager shall
not share in any fees paid by the Trust to third parties for such services.
2.15 ADDITIONAL SERVICES. The REIT Manager shall perform such additional
services as from time to time may be requested by the Board and agreed to by the
REIT Manager, provided, however, that nothing herein shall require the REIT
Manager to agree to any such request or to perform any additional services to
which it has not previously agreed.
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2.16 REIT QUALIFICATION, ETC. In the performance of its duties and
responsibilities hereunder, the REIT Manager shall refrain from any action (i)
which, in its judgment or in the judgment of the Board of which the REIT Manager
has written notice, would adversely affect the qualification of the Trust as a
real estate investment trust under the Code, (ii) which would violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the Trust or its securities, the violation of which could have a material
adverse effect on the Trust or (iii) which would otherwise not be permitted by
the Declaration of Trust.
2.17 MORTGAGES AND INSURANCE. The REIT Manager shall use its best efforts
to (i) ascertain that any mortgage securing any investment of the Trust shall be
a valid lien upon the mortgaged property according to its terms, for which the
REIT Manager may rely on mortgagee's policies of title insurance issued by
reputable title insurance companies, and that any insurance or guaranty issued
by any person upon which the Board relies is valid and in full force and effect
and enforceable according to its terms, (ii) cause each Trust Property to be
duly insured, to the extent coverage is available on commercially reasonable
terms, against loss or damage by fire, with extended coverage, and against such
other insurable hazards and risks as is customary and appropriate in the
circumstances, provided, however, that if the REIT Manager determines that a
type of insurance coverage currently maintained by the Trust is available, but
no longer on commercially reasonable terms, the REIT Manager shall so advise the
Board and act in accordance with the Board's instructions and (iii) carry out
the policies from time to time specified in writing by the Board with regard to
the protection of Trust Properties. The REIT Manager shall be entitled to
reasonably rely on qualified experts in performing its duties under this Section
2.17.
2.18 FIDELITY BOND. The REIT Manager shall maintain a fidelity bond with a
responsible surety company in an amount approved by the Board covering all
officers and employees of the REIT Manager handling funds of the Trust and any
investment documents or papers, which bonds shall protect against all losses of
any such property from acts of such officers and employees through theft,
embezzlement, fraud and dishonesty.
2.19 LIABILITY LIMITATION. The REIT Manager shall cause to be included in
any document or agreement prepared for the benefit of, or executed by the REIT
Manager on behalf of, the Trust under which substantial obligations are assumed
on behalf of the Trust clear and complete provisions pursuant to Article 4,
Section 11 of the Declaration of Trust to the effect that the Trustees and the
shareholders of the Trust shall not be personally liable thereunder and that all
parties concerned shall look solely to the property of the Trust for the
satisfaction of any claim against the Trust under any such document or
agreement.
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III. COMPENSATION
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3.1 REIT MANAGEMENT FEE.
(a) The Trust shall pay the REIT Manager an annual REIT Management Fee
equal to the sum of (i) 16% of annual Cash Flow and (ii) the product of 0.20%
per annum multiplied by the average daily balance of the Trust's Cash Equivalent
Investments, measured at the end of each month. All payments of the REIT
Management Fee shall be subject to annual adjustment at year end as provided in
Section 3.5 hereof. The REIT Management Fee shall be payable monthly in arrears
in such amounts indicated by the annual operating budget approved by a majority
of the Board, as revised no more than quarterly to reflect known material
changes.
(b) Within 50 days following the end of each calendar quarter and within
100 calendar days after the end of each calendar year of the Trust (following
the receipt by the Trust of an auditor's report, prepared by a nationally
recognized independent accounting firm, with respect to the Trust's financial
statements for such year), the REIT Manager shall deliver to the Trust a
statement, certified by an officer of the REIT Manager, setting forth the
following: (i) the amount of the estimated REIT Management Fee actually paid by
the Trust for all months during such quarter or year, as the case may be, (ii)
the amount of the REIT Management Fee that should have been paid for such
quarter or year, as the case may be, and (iii) the amount, if any, of accrued
and unpaid REIT Management Fees. If the annual or quarterly statement, as the
case may be, indicates an overpayment by the Trust of the REIT Management Fee,
such overpayment shall be offset against the next ensuing estimated REIT
Management Fee to become due hereunder, or, if at any time no further REIT
Management Fee can become due, the balance of any overpayment shall be paid
without interest by the REIT Manager within 15 calendar days after demand
therefor by the Trust, such repayment to be due and payable whether or not this
Agreement is still in full force and effect. If the annual or quarterly
statement, as the case may be, indicates an underpayment by the Trust of the
REIT Management Fee with respect to the quarter or year covered thereby, the
Trust, within 15 calendar days after receipt of the statement, shall pay to the
REIT Manager the amount of such underpayment. The REIT Management Fee for any
year shall not be recalculated on the basis of any post-year-end adjustments to
the Trust's taxable income arising, directly or indirectly, from an audit by the
Internal Revenue Service.
3.2 PAYMENT FOR ADDITIONAL SERVICES. If the Board shall request the REIT
Manager to render services to the Trust other than those required to be rendered
by the REIT Manager hereunder, such additional services, if performed, shall be
compensated separately on terms to be agreed upon from time to time between the
REIT Manager and the Trust, which terms shall not be less favorable to the Trust
than either (a) the terms under which the REIT Manager is then performing
similar services for other persons, taking into account the full range of
services and prices therefor provided by the REIT Manager to such other persons
or (b) the terms under which qualified unaffiliated persons are then performing
such services for comparable
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organizations, provided that no separate fee shall be charged to the Trust for
any investment banking services provided by any Affiliate of the REIT Manager.
3.3 EXPENSES OF THE REIT MANAGER. Without regard to the amount of
compensation received hereunder by the REIT Manager, the REIT Manager shall bear
the following expenses:
(a) wages, salaries and other compensation of the REIT Manager's
officers and employees, including so-called fringe benefits such as life,
disability, medical and health insurance, pension plans, social security
taxes and workers' compensation insurance;
(b) rent and other overhead expenses of the REIT Manager; and
(c) travel and mailing costs pertaining to the REIT Manager's
performance of its duties hereunder, except for expenses described in
Section 3.4(a) below.
3.4 REIMBURSABLE EXPENSES. The REIT Manager shall pay, or cause to be paid
out of the assets of the Trust, the following operating expenses of the Trust
and, if the REIT Manager advances money for such expenses, it shall be entitled
to reimbursement by the Trust therefor:
(a) travel and other out-of-pocket expenses incurred by directors,
officers and employees of the REIT Manager in connection with (i) seeking
financing (including debt and equity) for the Trust, (ii) evaluating,
investigating, negotiating or closing the acquisition, financing,
refinancing or disposition of a Trust Property after the Board has approved
the market in which such property is located for investment or (iii)
attending Board, Board committee or shareholder meetings of the Trust;
(b) costs of third-party legal, accounting, tax and similar services
rendered for the Trust;
(c) all other costs and expenses relating to the Trust's operations,
including, without limitation, the costs and expenses of acquiring, owning,
managing, protecting, maintaining and disposing of the Trust's investments,
including travel, appraisal, reporting, audit and legal fees;
(d) all insurance costs incurred in connection with the operation of
the Trust;
(e) expenses connected with payments of interest or distributions in
cash or any other form made or caused to be made by the Board to or on
account of holders of securities of the Trust, including, without
limitation, expenses incurred in connection with any dividend reinvestment
plan;
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(f) expenses connected with communications to holders of securities
of the Trust and the investment community in general (including meetings
between Affiliates of the REIT Manager and investors or analysts) and the
other bookkeeping and clerical work necessary in maintaining relations with
holders of securities and in complying with the continuous reporting and
other requirements of governmental bodies or agencies, including the cost
of printing and mailing certificates for securities and proxy solicitation
materials and reports to holders of the Trust's securities;
(g) transfer agent and registrar's fees and charges; and
(h) expenses relating to any office or office facilities maintained
for the Trust or the Trust Properties separate from the office or offices
of the REIT Manager.
3.5 REFUND. With respect to any fiscal year in which a majority of the
Independent Trustees do not find such excess justified, the Board may require
the REIT Manager either (a) to refund to the Trust, to the extent of any fees
received by the REIT Manager during such fiscal year, the amount, if any, by
which the Total Operating Expenses of the Trust for such fiscal year exceeded
the greater of (i) 2% of the sum for such fiscal year of the Average Invested
Assets of the Trust or (ii) 25% of the Net Income of the Trust for such fiscal
year or (b) to reduce its fees by the amount of such excess during the balance
of the fiscal year next following the fiscal year with respect to which such
refund is to be made.
3.6 RESTRICTIONS.
(a) The REIT Manager shall not recommend or consummate any transaction
which would involve the acquisition by the Trust of property in which the REIT
Manager or any Affiliate thereof has an ownership interest, including any
transaction prohibited by Article 1, Section 5(g) of the Declaration of Trust,
and neither the REIT Manager nor any Affiliate thereof shall purchase or
otherwise acquire from the Trust any Trust Property; provided, however, that the
REIT Manager may recommend and consummate transactions which involve the
acquisition or disposition by the Trust of property from or to SCI Development
Services Incorporated ("SCI Development Services") or in which SCI Development
Services has an ownership interest, provided that the Trust owns a substantial
majority of the economic interest in SCI Development Services and that a
majority of the Board (including a majority of the Independent Trustees) not
otherwise interested in such transaction approve the transaction as being fair,
competitive and commercially reasonable and no less favorable to the Trust than
acquisitions or dispositions between unaffiliated parties under similar
circumstances.
(b) Other than advances of expenses pursuant to Section 3.4 hereof, the
Trust shall not make loans to, or borrow money from, the REIT Manager or any
Affiliate thereof, unless a majority of the Board (including a majority of the
Independent Trustees) not otherwise interested in such transaction approve the
transaction as being fair, competitive and commercially
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reasonable and no less favorable to the Trust than loans between unaffiliated
lenders and borrowers under the same circumstances.
(c) The Trust shall not invest in joint ventures with the REIT Manager, or
any Affiliate thereof, unless a majority of the Board (including a majority of
the Independent Trustees) not otherwise interested in such transaction approve
the transaction as being fair and reasonable to the Trust and on substantially
the same terms and conditions as those received by the other joint venturers.
(d) All other material transactions between the Trust and the REIT
Manager, or any Affiliate thereof, shall require approval by a majority of the
Board (including a majority of the Independent Trustees) not otherwise
interested in such transactions as being fair and reasonable to the Trust and on
terms and conditions no less favorable to the Trust than those available from
unaffiliated third parties.
IV. TERMINATION; TERM
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4.1 TERMINATION. Notwithstanding any other provision to the contrary, this
Agreement (i) may be terminated without Cause by the Trust upon 60 calendar
days' written notice to the REIT Manager, or by the REIT Manager upon 60
calendar days' written notice to the Trust, and (ii) may be terminated by the
Trust for Cause immediately upon providing written notice to the REIT Manager.
Any determination by the Trust to terminate this Agreement shall be made by the
vote of a majority of the Independent Trustees or the holders of a majority of
outstanding Trust voting shares. The REIT Manager shall immediately notify the
Trust of the occurrence of any event described in Sections 1.1(g)(iii) or (iv).
In the event of termination of this Agreement, the REIT Manager will cooperate
with the Trust and take all reasonable steps requested to assist the Board in
making an orderly transition of the REIT management function.
4.2 RENEWAL TERMS. This Agreement shall continue in force for an initial
term beginning on the date hereof and ending on June 30, 1997, and shall be
renewable by the Trust annually, subject to a determination by a majority of the
Independent Trustees that the REIT Manager's performance hereunder has been
satisfactory and that the compensation payable to the REIT Manager hereunder is
fair. Absent written notice of non-renewal as provided in this Section 4.2, this
Agreement shall be automatically renewed for successive one-year terms ("Renewal
Terms") upon the expiration of the initial term and each Renewal Term. Notice of
non-renewal, if given, shall be given in writing by the Trust to the REIT
Manager not less than 60 calendar days before the expiration of the initial term
of this Agreement or 60 calendar days before the expiration of any Renewal Term
thereof.
4.3 COMPENSATION ON TERMINATION OR NON-RENEWAL. Until liquidation of the
Trust, in the event the Trust terminates or fails to renew this Agreement on
terms as favorable as those contained in this Agreement or hereafter in a
renewal agreement, in either case other than for
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Cause, the Trust shall pay the REIT Manager all fees then accrued and unpaid as
of the year or portion thereof in which the termination occurred.
V. ACTION UPON TERMINATION OR CANCELLATION
---------------------------------------
5.1 ACCOUNTING. The REIT Manager shall immediately upon termination of
this Agreement:
(a) pay over to the Trust all monies collected and held for the
account of the Trust pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is then
entitled;
(b) deliver to the Trust a full accounting, including a statement
showing all payments collected by it and a statement of all monies held by
it, covering the period following the date of the last accounting furnished
to the Trust;
(c) refund to the Trust any amounts due pursuant to Section 3.5
hereof;
(d) deliver to the Trust all property and documents of the Trust then
in the custody of the REIT Manager; and
(e) cooperate with the Trust and take all reasonable steps requested
to assist the Board in making an orderly transition of the REIT management
function.
VI. LIABILITY AND INDEMNIFICATION OF REIT MANAGER
---------------------------------------------
6.1 LIMITATION ON LIABILITY. The REIT Manager shall have no responsibility
other than to render the services and take the actions described herein in good
faith and with the exercise of due care and shall not be responsible for any
action of the Board in following or declining to follow any advice or
recommendation of the REIT Manager. The REIT Manager, except by reason of its
own gross negligence, bad faith or willful misconduct, shall not be liable for
any action taken, omitted or suffered to be taken by it in good faith and
believed by it to be authorized or within its discretion or rights or powers
conferred upon it by this Agreement or in reasonable reliance upon the written
opinion of counsel of recognized expertise.
6.2 INDEMNIFICATION.
(a) The Trust shall reimburse, indemnify and hold harmless the REIT
Manager and its directors, officers, shareholders, agents and employees and each
other person or entity, if any, controlling the REIT Manager (an "Indemnified
Party"), to the full extent lawful, from and against any and all losses, claims,
damages or liabilities of any nature whatsoever with respect to or arising from
any acts or omissions of the REIT Manager (including ordinary negligence)
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in its capacity as such, except with respect to losses, claims, damages or
liabilities with respect to or arising out of the REIT Manager's gross
negligence, bad faith or willful misconduct.
(b) Notwithstanding the indemnification provisions in Section 6.2(a)
above, indemnification will not be allowed for any liability imposed by
judgment, and costs associated therewith, including attorneys' fees, arising
from or out of a violation of state or federal securities laws associated with
the offer and sale of Trust securities. Indemnification will be allowed for
settlement and related expenses of lawsuits alleging securities law violations,
and for expenses incurred in successfully defending such lawsuits, provided that
a court either (i) approves the settlement and finds that indemnification of the
settlement and related costs should be made or (ii) approves indemnification of
litigation costs if a successful defense is made. If indemnification is
unavailable as a result of this Section 6.2(b), the Trust shall contribute to
the aggregate losses, claims, damages or liabilities to which the REIT Manager
or its officers, directors, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the Trust and the party seeking contribution and the relative faults
of the Trust and the party seeking contribution, as well as any other relevant
equitable considerations.
(c) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, such Indemnified Party shall, if a claim in respect
thereof is to be made against the Trust, notify the Trust in writing of the
commencement thereof; but the omission so to notify the Trust shall not relieve
it from any liability that it may have to any Indemnified Party pursuant to
Section 6.2(a) hereof, unless the failure to so notify would itself constitute
gross negligence, bad faith or willful misconduct. In case any such action shall
be brought against an Indemnified Party and it shall notify the Trust of the
commencement thereof, the Trust shall be entitled to participate therein and, to
the extent that it shall wish to assume the defense thereof, with counsel
satisfactory to such Indemnified Party and, after notice from the Trust to such
Indemnified Party of its election so to assume the defense thereof, the Trust
shall not be liable to such Indemnified Party under Section 6.2(a) hereof for
any legal expenses of other counsel or any of the expenses, in each case
subsequently incurred by such Indemnified Party, unless (i) the Trust and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the Trust and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate in the reasonable opinion of
the Indemnified Party, due to actual or potential differing interests between
them.
(d) The obligations of the Trust under this Section 6.2 shall be in
addition to any liability which the Trust otherwise may have.
6.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF TRUST.
(a) The Trust represents and warrants as of the date hereof that:
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(i) this Agreement has been duly authorized, executed and delivered
on behalf of the Trust;
(ii) the Trust is fully authorized under the applicable laws
governing the Trust to enter into all of the types of investments and co-
investments described in the Investment Policies;
(iii) the execution and performance of this Agreement by the Trust
will not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation
of, any agreement or instrument to which the Trust is subject;
(iv) the terms of this Agreement are in conformity with the
applicable laws governing the Trust; and
(v) the assets of the Trust do not constitute "plan assets" within
the meaning of the Department of Labor plan asset regulation published at
29 C.F.R. (S) 2510.3-101.
(b) The Trust shall promptly advise the REIT Manager in writing of any
agreements or changes in any agreements, instruments, governing law, regulations
or interpretations thereof affecting the investments of the Trust or the duties,
responsibilities, liabilities or obligations of the REIT Manager, and any change
or any contemplated change with respect to any of the foregoing or the operation
or administration of the Trust that could cause the assets of the Trust to
constitute "plan assets" as defined in paragraph 6.3(a)(v) above.
VII. MISCELLANEOUS PROVISIONS
------------------------
7.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. Any modification
or amendment of this Agreement shall be in writing executed by each of the
parties.
7.2 ASSIGNMENT. This Agreement may not be assigned by either party except
in the event of an assignment to a successor organization that takes over the
property and carries on the affairs of the assignor, provided that following any
such assignment by the REIT Manager, the persons who controlled the operations
of the REIT Manager immediately prior thereto shall control the operations of
the successor organization, including the performance of its duties under this
Agreement. Any such assignment of this Agreement shall bind the assignee
hereunder in the same manner as the assignor is bound hereunder. Notwithstanding
the foregoing, without the Trust's consent, the REIT Manager may assign all or
any part of the compensation due it hereunder.
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7.3 NO PARTNERSHIP OR JOINT VENTURE. The Trust and the REIT Manager are
not, and shall not be deemed to be, partners or joint venturers with each other.
7.4 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
that term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
7.5 POLICY AND FINANCIAL INFORMATION. The Trustees shall keep the REIT
Manager informed in writing concerning the investment and financing policies of
the Trust and shall promptly notify the REIT Manager of any intention to make
any new investments, to sell or dispose of any existing investments or to enter
into any agreement or understanding with any third party. The Trust shall
furnish the REIT Manager a certified copy of all financial statements, a signed
copy of each report prepared by independent public accountants, a certified copy
of each amendment or supplement to the Declaration of Trust, the By-Laws and the
Investment Policies and such other information with regard to the Trust's
affairs as the REIT Manager from time to time reasonably may request.
7.6 NOTICES. Any notices and other communications to be given by any party
hereunder shall be in writing delivered at the address of the respective party
set forth on the signature page hereof, or at such other address as a party
shall have specified to the other party in writing as the address for notices
hereunder. Any such notice or other communication shall be deemed to have been
given when personally delivered or one business day after being forwarded by
overnight courier or five days after being sent by registered or certified
United States mail, postage prepaid.
7.7 HEADINGS. The section headings used herein have been inserted for
convenience of reference only and shall not be considered in interpreting this
Agreement.
7.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without giving effect to the
principles of conflict of laws thereof.
7.9 BOARD ACTION. Whenever action on the part of the Trust or the Board is
contemplated in this REIT Management Agreement, unless otherwise indicated
herein, action by a majority of the Trustees, including a majority of the
Independent Trustees, shall constitute the action provided for herein.
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7.10 OTHER ACTIVITIES.
(a) Nothing in this Agreement shall prevent the REIT Manager or any
Affiliate thereof from rendering advice to other investors (including other real
estate investment trusts), even if such investors are in competition with the
Trust or any of the Trust's real estate investments or from managing other
investments, including investors and investments advised, sponsored or organized
by the REIT Manager. The REIT Manager also may render such services to joint
ventures and partnerships in which the Trust is a co-venturer or partner and to
the other entities in such joint ventures and partnerships. In addition, nothing
in this Agreement shall limit the right of the REIT Manager or any of its
subsidiaries or Affiliates to engage in any other business or to render services
of any kind (including business activities competitive with those of the Trust)
to any corporation, partnership or other entity. The REIT Manager will inform
the Trustees of any other advisory contracts or investments (other than
purchases of marketable securities or securities which are registered pursuant
to Section 12 of the Exchange Act) by the REIT Manager or its Affiliates. When
informing the Trustees of any advisory contracts, the REIT Manager need not
identify the advised entities by name, but shall provide the Board with
sufficient information to permit the Board to evaluate the services performed or
to be performed by the REIT Manager under such contract. Nothing in this
Agreement shall prevent the Trustees from considering the REIT Manager's
activities for itself and for other entities in evaluating the REIT Manager's
performance for purposes of deciding whether or not to renew this Agreement. The
Trust will maintain the confidentiality of all information provided to the Trust
pursuant to this paragraph, subject to disclosure only if required by applicable
law or compelled by appropriate legal process.
(b) The REIT Manager and its Affiliates, directors, officers, employees,
shareholders and subsidiaries shall be free of any obligation to provide the
Trust with the right of first refusal to acquire or invest in any investment
opportunity that may come to any of them in any capacity, whether or not such
investment opportunities are of a character which is within the investment
policies of the Trust. Directors, officers, employees and agents of the REIT
Manager or any of its Affiliates may serve as Trustees, officers, employees,
agents, nominees or signatories of the Trust. When executing documents or
otherwise acting in such capacities for the Trust, such persons shall use their
respective titles for the Trust. Such persons shall receive from the Trust no
compensation for their services to the Trust in any such capacities.
7.11 INDEPENDENT TRUSTEES' APPROVAL. Notwithstanding anything to the
contrary in this Agreement, a majority of the Independent Trustees must approve
the Trust's annual strategic plan and operating budget; all property
acquisitions, developments, dispositions and unbudgeted (non-emergency) capital
expenditures in excess of $50,000; and all Trust financing, including the
issuance of public and private debt or equity securities. In addition, to the
extent that the Declaration of Trust requires approval of the majority of
Independent Trustees with respect to any matter pertaining to this Agreement,
such matter shall be submitted for such approval and shall not be pursued until
such approval is received.
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7.12 LIMITATION OF LIABILITY OF TRUST. ANY OBLIGATION OR LIABILITY
WHATSOEVER OF THE TRUST WHICH MAY ARISE AT ANY TIME UNDER THIS AGREEMENT OR ANY
OBLIGATION OR LIABILITY WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER
INSTRUMENT, TRANSACTION OR UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED,
IF AT ALL, OUT OF THE TRUST'S PROPERTIES ONLY. NO SUCH OBLIGATION OR LIABILITY
SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF
BE HAD TO, THE PRIVATE PROPERTY OF ANY OF ITS TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES OR AGENTS, REGARDLESS OF WHETHER SUCH OBLIGATION OR LIABILITY IS IN
THE NATURE OF CONTRACT, TORT OR OTHERWISE.
7.13 DECLARATION OF TRUST GOVERNS. To the extent that any provision in
this Agreement is inconsistent with or contradicts a provision in the
Declaration of Trust, as the same may be amended and supplemented from time to
time, the Declaration of Trust shall govern and such provision of this Agreement
shall be deemed to have been reformed to be consistent with the Declaration of
Trust.
7.14 AUTHORITY TO ACT. The Trust shall furnish to the REIT Manager from
time to time, upon request of the REIT Manager, certified copies of appointments
or designations setting forth the names, titles and authorities of the
individuals who are authorized to act on behalf of the Trust with respect to the
Trust's investments, together with specimen signatures of those individuals who
are authorized to act on its behalf with respect to this Agreement. The REIT
Manager shall furnish to the Trust from time to time, upon request of the Trust,
certificates setting forth the names, titles and authorities of the persons
authorized to act on its behalf and provide specimen signatures of those
individuals who are authorized to act on its behalf with respect to this
Agreement.
7.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by each of the parties hereto on separate counterparts; all
such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Trust and the REIT Manager have executed this
Agreement as of the day and year first above written.
Address for Notice: SECURITY CAPITAL INDUSTRIAL TRUST
14100 E. 35th Place
Aurora, Colorado 80011
By: /s/ Thomas G. Wattles
-----------------------------
Thomas G. Wattles
Co-Chairman
Address for Notice: SECURITY CAPITAL INDUSTRIAL
14100 E. 35th Place INCORPORATED
Aurora, Colorado 80011
By: /s/ Jeffrey A. Klopf
----------------------------
Jeffrey A. Klopf
Senior Vice President and Secretary
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Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference into the Trust's previously filed Registration Statement File Nos.
33-91366, 33-92490, 33-99548 and 333-4961 of our report dated August 15, 1996
(Group F Properties), included in this Form 8-K. It should be noted that we
have not audited any financial statements of these combined properties
subsequent to December 31, 1995, or performed any audit procedures subsequent to
the date of our report.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 19, 1996
