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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996.
OR
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
COMMISSION FILE NUMBER 1-12846
SECURITY CAPITAL INDUSTRIAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-2604728
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
14100 EAST 35TH PLACE
AURORA, COLORADO 80011
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(303) 375-9292
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
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Common Shares of Beneficial Interest, New York Stock Exchange
par value $0.01 per share
Series A Cumulative Redeemable New York Stock Exchange
Preferred Shares of Beneficial Interest,
par value $0.01 per share
Series B Cumulative Convertible Redeemable New York Stock Exchange
Preferred Shares of Beneficial Interest,
par value $0.01 per share
Preferred Share Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
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<S> <C>
Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest,
par value $0.01 per share
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Based on the closing price of the registrant's shares on February 21, 1997,
the aggregate market value of the voting shares held by non-affiliates of the
registrant was $1,197,963,789.
At February 21, 1997, there were outstanding approximately 97,706,709 common
shares of beneficial interest of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 1997 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
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PART I
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1. Business........................................................... 1
Security Capital Industrial Trust.................................. 1
SCI Growth and Operating Strategy.................................. 2
SCI National Operating System(TM).................................. 3
Investment Strategy................................................ 6
Customers.......................................................... 8
Leases............................................................. 10
SCI Client Services Incorporated................................... 10
Capital Markets.................................................... 10
The REIT Manager................................................... 12
Officers of SCI and Directors and Officers of the REIT Manager and
Relevant Affiliates................................................ 14
Employees ......................................................... 24
Competition........................................................ 24
Environmental Matters.............................................. 24
Insurance Coverage................................................. 25
Executive Officers................................................. 25
2. Properties......................................................... 25
The Partnerships................................................... 35
3. Legal Proceedings.................................................. 38
4. Submission of Matters to a Vote of Security Holders................ 38
PART II
5. Market for the Registrant's Common Equity and Related Stockholder
Matters............................................................ 39
Dividend Reinvestment and Share Purchase Plan...................... 40
6. Selected Financial Data............................................ 41
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 42
Overview........................................................... 42
Results of Operations.............................................. 43
Environmental Matters.............................................. 46
Liquidity and Capital Resources.................................... 46
Funds from Operations.............................................. 51
REIT Management Agreement.......................................... 51
8. Financial Statements and Supplementary Data........................ 52
Changes in and Disagreements with Accountants on Accounting and
9. Financial Disclosure Matters....................................... 52
PART III
10. Directors and Executive Officers of the Registrant................. 53
11. Executive Compensation............................................. 53
12. Security Ownership of Certain Beneficial Owners and Management..... 53
13. Certain Relationships and Related Transactions..................... 53
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 53
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PART I
ITEM 1. BUSINESS
SECURITY CAPITAL INDUSTRIAL TRUST
Security Capital Industrial Trust ("SCI") is the largest publicly held owner
and operator of distribution properties in the United States based on equity
market capitalization. SCI is a national operating company focused exclusively
on meeting the distribution space needs of national, regional and local
industrial real estate users through the SCI National Operating System(TM). SCI
distinguishes itself from its competition by being the only entity that
combines all of the following:
1. A national operating strategy targeting Fortune 1000 key users of
distribution space;
2. A disciplined investment strategy based on proprietary research that
identifies high growth markets with sustainable demand for SCI's low-finish
distribution space product;
3. An organizational structure and service delivery system built around
the customer; SCI believes its service approach is unique to the real
estate industry as it combines national scope and expertise with strong
local presence; and
4. Over 280 professionals in 29 offices which SCI believes comprise the
deepest and most experienced management team in industrial real estate.
The cornerstone of SCI's operating strategy is the SCI National Operating
System(TM) comprised of the Market Services Group, the National Services Group
and the National Development Group that utilizes SCI's national network of
distribution space to provide an exceptional level of customer service
including development on a national, regional and local basis.
SCI engages in the acquisition, development, marketing, operation and long-
term ownership of distribution facilities, and the development of master-
planned distribution parks and build-to-suit facilities for its customers.
Through its REIT Management Agreement with Security Capital Industrial
Incorporated (the "REIT Manager" or "REIT Management"), SCI has access to the
services provided by the REIT Manager and its specialized service affiliates
which provide SCI with access to the same resources as a fully integrated
operating company. SCI, through the REIT Manager, has a significant level of
expertise in market research; building and land acquisition and due diligence;
master-planned distribution park design and building construction; marketing;
asset and leasing management; capital markets and financial operations. SCI
deploys capital in markets with excellent long-term growth prospects or markets
that are key distribution locations where SCI can achieve a strong market
position through the acquisition and development of generic, flexible
facilities designed for distribution but which can be used for light
manufacturing.
SCI's highlights include:
. As of December 31, 1996, SCI was servicing over 2,400 customers including
296 national customers of which 191 were multiple market customers.
. As of December 31, 1996, SCI's portfolio contained 80.6 million square
feet in 942 buildings and had an additional 5.9 million square feet under
development in 47 buildings for a total of 86.5 million square feet in
989 buildings. The total aggregate cost of the 86.5 million square feet
(including properties under development at total budgeted cost) is $2.6
billion (an average of $30.06 per square foot).
. As of December 31, 1996, SCI's stabilized portfolio of 71.1 million
square feet was 96.84% leased (96.27% occupied), and the total operating
portfolio of 80.6 million square feet, which includes 9.5 million pre-
stabilized square feet, was 93.35% leased (91.21% occupied).
. During 1996, a total of 23.1 million square feet was leased in 1,055
transactions through the operation of the SCI National Operating
System(TM). During 1996, rental rates on new and renewed leases on
previously leased space for the operating portfolio increased an average
of 13.0%.
. In 1996, SCI acquired 11.7 million square feet of distribution space in
111 buildings for a total expected investment cost of $319.1 million in
38 transactions, an average of $27.27 per square foot.
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. During 1996, SCI commenced development of 8.2 million square feet of
distribution space in 25 target market cities, with a total expected
investment of $298.3 million. As of December 31, 1996, SCI had 5.9
million square feet of distribution space under development in 20 target
market cities.
. Inventory building starts totalled 6.2 million square feet of the 8.2
million square feet of development starts during 1996. Build-to-suit
starts totalled 2.0 million square feet during 1996. In addition, as of
December 31, 1996, SCI was in active negotiations for 3.7 million square
feet of additional build-to-suit projects. As of December 31, 1996,
completed buildings totalling 17.1 million square feet were 83.46% leased
and 86.65% leased or committed.
. As of December 31, 1996, SCI owned 1,273 acres of development land, which
forms the basis for the master-planned distribution park development
program in 60 parks, and also had fixed price options and rights of first
refusal to acquire 515.2 acres and 36.9 acres, respectively, which in the
aggregate will permit the development of approximately 31.7 million
square feet of additional distribution space in 29 target market cities.
Also, as of December 31, 1996, SCI had an additional 415.8 acres under
letter of intent or contingent contract, subject to the completion of due
diligence, which, if acquired, would permit the development of
approximately 6.7 million square feet of additional distribution space.
. Security Capital Group Incorporated ("Security Capital Group"), SCI's
largest shareholder, which owned 44.1% of SCI's Common Shares of
Beneficial Interest, par value $0.01 per share (the "Common Shares"), as
of February 26, 1997, owns the REIT Manager and has provided common
equity investment capital to SCI at the same times and on the same terms
made available to public investors and other shareholders.
. SCI's pro forma percentage of total debt to total book capitalization
(including accumulated depreciation) as of December 31, 1996 was 29.3%
after giving effect to SCI's February 7, 1997 Common Share offering (net
proceeds of $80.4 million), and the February 4, 1997 sale of $100 million
of Medium-Term Notes, Series A, due 2015 (the "Series A 2015 Notes") (net
proceeds of $99.1 million) and the use of the proceeds therefrom,
providing significant capacity to prudently add fully amortizing, long-
term, fixed rate, unsecured debt consistent with SCI's balance sheet
strategy. At February 26, 1997, SCI had no outstanding borrowings under
its $350 million unsecured line of credit facility.
On January 22, 1997, SCI announced that it received a proposal from Security
Capital Group to exchange the REIT Manager and SCI Client Services Incorporated
("Client Services"), the REIT Manager's property management affiliate, for
Common Shares. As a result of the transaction, SCI would become an internally
managed REIT, and Security Capital Group would remain SCI's largest
shareholder. SCI's Board of Trustees (the "Board") has formed a special
committee comprised of independent Trustees to review the proposed transaction.
The proposed transaction is subject to approval by the special committee and
the full Board. If the Board approves the proposed transaction, a proxy
statement, subject to review by the Securities and Exchange Commission, will be
mailed to SCI's shareholders prior to a shareholder vote on the proposed
transaction.
SCI's executive offices are located at 14100 East 35th Place, Aurora,
Colorado 80011 and its telephone number is (303) 375-9292. SCI's predecessor
was formed in June 1991 as a Delaware corporation, and SCI was re-formed as a
Maryland real estate investment trust ("REIT") in January 1993.
SCI GROWTH AND OPERATING STRATEGY
Based on thorough research, SCI was created in June 1991 to take advantage of
two strategic opportunities: first, the opportunity to build a national
distribution asset base at prices significantly below replacement cost and a
land inventory at attractive prices that would facilitate the development of
master-planned distribution parks; and second, to create, for the first time, a
national operating company which would differentiate itself from its
competition through its ability to address and service a corporate customer's
distribution space requirements on a national, regional and local basis. SCI's
objective is to achieve long-term sustainable growth in cash flow through:
first, focusing its investments in markets with excellent long-term growth
prospects and markets where SCI can achieve a strong market position through
the acquisition and development of generic, flexible facilities
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designed for distribution uses; second, the SCI National Operating System(TM);
and third, ownership or control of a significant inventory of land to enable
SCI to take advantage of market opportunities and accommodate expansion or
build-to-suit requirements of customers through development of new facilities.
SCI's operating strategy is to achieve significant market presence in each
target market city and selected submarkets in those cities through acquisitions
and master-planned distribution park development. SCI defines market presence
not only in terms of square feet of buildings and acres of development land
owned, but also by the extent of SCI's relationships with customers having
current and expected future space needs in such markets.
SCI's growth and operating strategy is designed not only to meet the needs of
today's distribution space users, which means providing functional, cost-
effective facilities and a comprehensive level of service, but also to shape
the future trends of the industry through innovation, service and product
leadership consistent with SCI's long-term investment horizon.
The SCI National Operating System(TM) is designed to provide substantial
benefits to existing and prospective SCI customers, including:
Relocation Capability. User requirements can change frequently, and SCI's
presence in 36 target market cities and ownership structure of its facilities
permit SCI to accommodate the needs of its customers by moving an existing
customer within a market or between markets both regionally and nationally.
Expansion Capability. SCI, through its development program, land inventory
and existing facilities, works with existing customers who have expansion
requirements to meet their growing business needs. Expansion may result in
relocating a customer to larger SCI spaces in a given market or in developing a
build-to-suit facility for such customer.
Nationally Coordinated Program. SCI provides a single point of contact for
multi-location national users through National Services Group professionals who
are charged with building long-term customer relationships and ensuring that
all SCI services and products are consistent in quality throughout the United
States. SCI's experience to date suggests that many major corporate customers
prefer working with one firm to meet their national distribution space needs.
Development/Build-to-Suit Expertise. SCI's team of development professionals
are focused exclusively on building facilities for SCI customers that
incorporate the latest technology with respect to building design and building
systems. SCI has developed national standards and procedures that it strictly
adheres to in the development of all its facilities throughout the United
States.
SCI NATIONAL OPERATING SYSTEM(TM)
The SCI National Operating System(TM) provides an exceptional level of
customer service including development on a national, regional and local basis
through its 184 professionals, and is a key component of SCI's growth and
operating strategy. The SCI National Operating System(TM) is comprised of the
three groups described below: the Market Services Group, the National Services
Group and the National Development Group.
Market Services Group. This group is comprised of 21 Market Officers, four
regional directors and 102 property management and leasing professionals.
Market Officers have extensive experience (with an average of over 14 years) in
providing service to distribution space users and are responsible for
understanding the needs of existing and prospective customers in their
respective markets. To meet such needs, Market Officers utilize their extensive
knowledge of local market conditions, including the cost and availability of
alternative space, and are supported by property management and leasing
professionals. Additionally, Market Officers have access to information
regarding existing SCI customers who are expanding or relocating to various
markets. A key role of the Market Officers is assisting the National Services
Group in identifying SCI customers with national, multi-market requirements.
SCI believes that the Market Officers' access to national SCI resources
provides significant stature and profile and improves their ability to serve
customers in the local market.
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On a regular basis, the Market Officer communicates with senior management in
charge of that Market Officer's region for guidance on lease terms, as well as
for national and local marketing assistance, and is able to take advantage of
SCI's fully integrated national development and service capabilities. Market
Officers do not develop projects or borrow or commit capital; they focus
strictly on creating and maintaining relationships with distribution space
users and industrial brokers, marketing SCI's products and identifying
potential build-to-suit, acquisition and leasing opportunities in their target
market cities.
National Services Group. The National Services Group, comprised of ten
professionals, is dedicated to providing service to the top 1,000 users of
distribution space and is focused on making SCI the preferred provider of
distribution space to Fortune 1000 companies. The National Services Group is
headquartered in Denver and has regional offices in Atlanta, Chicago, Dallas,
the Los Angeles metropolitan area and the New York metropolitan area. A key
function of this group is identifying companies whose reconfiguration and
expansion of their distribution networks will create multimarket and/or build-
to-suit opportunities and coordinating SCI services to those companies with the
respective Market Officers and the National Development Group. National
Services Group professionals build long-term relationships with SCI national
customers and provide a single point of contact to simplify and streamline the
execution of such customers' national distribution space plans. An ancillary
benefit is research insight into national distribution and logistics trends
gained through continuous interaction with National Services Group clients.
National Development Group. The National Development Group, comprised of 47
professionals, focuses substantial research and development efforts on creating
industry-leading master-planned distribution parks, inventory buildings and
build-to-suit facilities to serve SCI's customers. In addition, SCI will
develop build-to-suit facilities on a fee basis in non-target markets (in which
SCI would not intend to own long-term) in order to better serve both existing
and prospective customers. See "--Investment Strategy--Investment in Generic
Distribution Product."
The National Development Group is comprised principally of architects,
engineers and construction professionals who oversee every aspect of the land
planning and building design processes. This group also monitors the
construction process and oversees the performance of third-party general
contractors. The group's build-to-suit specialists and project managers (with
an average experience level of 16 years) operate regionally to better serve
their markets. The project managers supervise each project with continual
oversight from national headquarters, pursuant to uniform standards, procedures
and specifications which have been carefully designed to achieve consistent
quality.
SCI believes the depth and breadth of the National Development Group enhances
the effectiveness of the National Services Group and gives the Market Officers
a distinct competitive advantage for inventory and build-to-suit opportunities
in their respective markets.
FOCUS ON RESEARCH-BASED GROWTH-ORIENTED MARKETS
Based on its research, the REIT Manager has focused SCI on selected
distribution markets, where supply and demand factors have permitted high
occupancies at increasing rental rates. The research indicates that demand for
distribution and light manufacturing space in SCI's target market cities should
be stable to strong in the near to medium term which should have a positive
effect on leasing rates and cash flow growth. SCI believes that the primary
factors influencing future supply and demand for distribution real estate in
SCI's target market cities will be continued job and population growth, related
regional and local company growth, reconfiguration of distribution networks,
outsourcing of distribution functions and quality and cost of labor. In
addition, SCI believes that short construction cycles targeted for SCI's
distribution facilities, together with fragmented ownership and
undercapitalization of local developers also contribute to the attractive
supply and demand fundamentals in SCI's target markets.
SCI focuses on three types of industrial investment markets:
Export/Import Growth Markets. The dollar volume of U.S. exports increased
from $250.2 billion in 1987 to $609.0 billion for the twelve month period ended
November 30, 1996, an increase of 143.4%, as reported by the U.S. Census
Bureau, Foreign Trade Division. The dollar volume of U.S. imports increased
from $477.4 billion in 1989 to $791.6 billion for the twelve month period ended
November 30, 1996, as reported by the U.S. Census Bureau, Foreign Trade
Division.
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SCI intends to capitalize on this trend by targeting key ports (air, sea and
land) which are well positioned to benefit from continued combined growth in
trade with the Pacific Rim, Mexico and Europe. The total dollar volume of
exports from the states of SCI's target market to these three international
trade areas grew substantially between 1987 and November 30, 1996, as reported
by the U.S. Census Bureau, Foreign Trade Division. SCI believes that the growth
in exports and imports represents favorable growth prospects for related
distribution space.
Low Cost Manufacturing Markets. SCI has targeted markets that possess long-
term cost and quality of labor advantages for domestic and foreign
manufacturers. One important influence on certain of SCI's target market cities
with close proximity to Mexico is the impact of the maquiladora (U.S./Mexico
twin plant) program, which encourages companies to manufacture and assemble
products close to the Mexican border. After paying a nominal value added tax,
companies participating in this program ship finished products into the United
States or to foreign countries for distribution or further processing. Export
and import trade between the U.S. and Mexico, led by the success of the
maquiladora program, exceeded $127.2 billion for the twelve month period ended
November 30, 1996, as reported by the U.S. Census Bureau, and should continue
to be positively affected by the North American Free Trade Agreement. Mexico
ranked as the third largest trading partner with the U.S. for the twelve month
period ended November 30, 1996. SCI believes that the prospects for low cost
manufacturing growth in these target markets are excellent.
Growth Distribution Markets. The distribution markets that SCI targets must
have access to transportation networks, including interstate highways, rail
service, air cargo, internodal facilities and port terminals. They must also
offer cost advantages in terms of transportation rates, rental costs and state
income and inventory taxes. Finally, there must be strong overnight truck
delivery area demographics centered on population growth within a 500 mile
radius. For example, approximately 40 million people live within a 500 mile
radius of Reno. This region's population is projected to increase by 6.0% from
1996 to 2001, according to Urban Decision Systems, providing growth
opportunities for distribution activities.
Future Expansion to Other High-Growth Markets. SCI is currently evaluating
specific customer driven opportunities to expand its geographic scope beyond
the 36 target market cities in which it operated as of December 31, 1996. Any
new markets would have to satisfy SCI's investment criteria for future growth
and also serve its focused existing and prospective national customers. SCI is
also evaluating alternatives to increase the services it provides to its
customers.
MARKET PRESENCE
In each target market city (or in selected submarkets in cities such as
Dallas and Atlanta) in which SCI invests, SCI intends to become one of the
major distribution space owners and operators within a four to seven year
period. SCI believes that significant market presence will provide the
following benefits:
Value Enhancement. The significant local owners and developers in a given
market can usually generate above-market performance as measured by lease rates
and occupancy because of their ability to reduce turnover through meeting their
customers' needs to either expand or contract, by relocating them within an
existing inventory of distribution space or by developing new facilities for
them. SCI believes that providing this flexibility permits it to realize higher
effective lease rates and lower levels of ongoing tenant improvement
investment. Effective implementation of this strategy requires a critical mass
of customers and space and ongoing communication between customers and the
Market Officers. SCI believes it has achieved this critical mass in the
following 26 target market cities: Atlanta, Austin, Birmingham, Charlotte,
Chattanooga, Cincinnati, Columbus, Dallas/Fort Worth, Denver, East Bay Area
(San Francisco), El Paso, Houston, Indianapolis, Kansas City, Las Vegas,
Memphis, Nashville, Orlando, Phoenix, Portland, Reno, Salt Lake City, San
Antonio, South Bay Area (San Francisco), Tampa and Washington, D.C./Baltimore,
and believes that it is close to achieving critical mass in two additional
target market cities.
Maximum Market Exposure. Size and market presence provide visibility and
access to and knowledge of potential leasing and build-to-suit transactions.
The industrial brokerage community and corporate users are often
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motivated to develop a relationship with the significant owners and developers
in a particular market in order to achieve their respective business
objectives. The opportunity to compete for the majority of customers' space
requirements in each target submarket is a crucial factor in achieving SCI's
operating objectives.
INVESTMENT STRATEGY
SCI's investment strategy is to build a national distribution space network
in its target markets at prices significantly below replacement cost and to
build an inventory of land at attractive prices to support its master-planned
distribution park development program. SCI's investment activities focus on
developing and acquiring generic distribution facilities with prospects for
long-term cash flow growth.
INVESTMENT ANALYSIS
Prospective property investments are analyzed pursuant to several
underwriting criteria, including purchase price, replacement cost, competition
and other market factors, and prospects for long-term growth in cash flow.
SCI's development or acquisition decision is based upon the expected
contribution of the property to long-term cash flow growth. The expected cash
flow contribution is based on an estimate of lease revenues assuming a
stabilized vacancy factor which is generally 7%, less expenses not reimbursable
by customers incurred in operating the property. Future estimates of residual
value and, generally, the effects of debt financing are not considered in the
calculation.
For operating properties which SCI has acquired, stabilized operations
generally have been achieved six to 12 months after acquisition. The
underwriting criteria for development projects allows 12 months from shell
completion for achievement of stabilization; however, on average stabilization
has been achieved in less than 12 months. In 1996, for all development projects
that reached stabilization, the average time from shell completion to
stabilization was 4.15 months. "Stabilized" means that capital improvements,
repositioning, new management and new marketing programs (or development and
marketing, in the case of newly developed properties) have been completed and
in effect for a sufficient period of time (but in no case longer than 12
months) to achieve stabilized occupancy (typically 93%, but ranging from 90% to
95%, depending on the submarket and product type) at market rents. SCI has been
successful in increasing overall occupancies on acquired and developed
properties during their initial months of operations resulting in an occupancy
rate of 96.27% for stabilized properties owned as of December 31, 1996.
The economic contribution of properties cannot be predicted with certainty,
and no assurance can be given that acquired or developed properties will
contribute to increased cash flow, nor that acquisitions and developments will
be available on favorable terms in the future.
INVESTMENT IN GENERIC DISTRIBUTION PRODUCT
SCI has a strong bias toward product which is generic, meaning not highly
specialized, and therefore appealing to a broad base of potential customers and
easily modified for use by different customers at reasonable costs. SCI
believes generic product will generate superior cash flow with low ongoing
capital needs. In addition, SCI believes REIT Management has developed an
industry-leading product design. This product incorporates design guidelines
and construction standards that make usage more convenient for the customers
and also minimizes ongoing maintenance requirements and costs. Over the long
term, SCI expects these characteristics to enhance cash flow.
Development of Master-Planned Distribution Parks. SCI's development
activities concentrate on the development of industry-leading, master-planned,
full service distribution parks in target market cities that demonstrate both
strong demographic growth and excellent industrial real estate fundamentals,
and in which SCI can achieve a significant market presence. SCI also develops
facilities for major corporations and strong regional companies within the
distribution parks, and occasionally on a stand-alone basis, that are designed
as generic distribution buildings. The 47 professionals comprising the National
Development Group focus on creating industry-leading, master-planned
distribution parks. These professionals have extensive experience in
development and construction of such facilities.
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SCI is taking advantage of opportunities to purchase land at attractive
prices in order to provide a land inventory to meet the expansion and
relocation needs of SCI's existing customer base and to further penetrate its
target markets. At December 31, 1996, SCI owned 1,273 acres of development land
in 29 target market cities and had fixed price options and rights of first
refusal to acquire 515.2 acres and 36.9 acres, respectively, which in the
aggregate will permit the development of approximately 31.7 million square feet
of additional distribution space. As of December 31, 1996, SCI had 415.8 acres
under letter of intent or contingent contract, subject to completion of due
diligence, which will permit the development of approximately 6.7 million
square feet of additional distribution space. Master-planned park development
is a key component of SCI's objective of achieving long-term sustainable growth
in cash flow. Since inception, SCI has commenced development of 60 master-
planned parks in 28 target market cities.
SCI's parks provide extensive customer services and typically range in size
from 25 to 150 acres in order to create strong identity and to permit economies
of scale with respect to providing customer services. SCI's master-planned
distribution parks include controls, covenants and regulations intended to
maintain and enhance the long-term desirability of the parks and thereby
attract and retain high quality distribution and light manufacturing customers.
Each park's services personnel coordinate a variety of services such as snow
removal, customer move-ins, landscaping maintenance and air conditioning
repairs.
Inventory Building Program. In SCI's master-planned distribution parks, SCI
commences development of an inventory building when it perceives an emerging
demand in a specific submarket from both existing SCI customers who are
expanding and potential new customers whose leases for their current space are
approaching expiration. By having an appropriate supply of distribution space,
SCI can meet the expansion needs of existing customers and can accommodate new
customers. From inception through December 31, 1996, SCI completed or commenced
development of 16.2 million square feet of inventory buildings with a total
expected investment cost of $557.3 million in 28 target market cities.
Build-to-Suit Program. The build-to-suit program enhances SCI's ability to
meet customers' needs by providing flexible expansion or relocation space.
SCI's build-to-suit program is targeted to distribution customers whose
facility requirements are generic, not special purpose, so as to facilitate the
property's future marketability and functionality. From inception through
December 31, 1996, SCI completed or commenced development of build-to-suit
facilities totalling 7.4 million square feet with a total expected investment
of $250.2 million, including 655,000 square feet that were disposed of in 1995
and 1996. In addition, as of December 31, 1996, SCI was in active negotiations
for 3.7 million square feet of additional build-to-suit projects.
Acquisition of Distribution Space. SCI's acquisition activities focus on
distribution space because of the expected predictability and stability of its
cash flow. Distribution space provides more predictable cash flow because it
requires minimal levels of capital investment in specialized tenant
improvements. Additionally, the initial investment in tenant improvements can
often be utilized by subsequent customers without major renovation or
alteration. In general, only cosmetic repair and replacement is required to re-
tenant vacant spaces. Service center space (see "--Product Classification"
below) is acquired on a more limited basis.
The Acquisitions and Due Diligence Group, comprised of 11 professionals, is
responsible for property and land acquisitions and related due diligence
nationally. SCI's disciplined strategy for distribution space acquisitions has
three principal components.
The first component is market coverage. In addition to the professionals in
the Acquisitions and Due Diligence Group, the 21 local Market Officers also
assist in identifying opportunities in their respective markets. This staffing
commitment permits in-depth acquisitions coverage of SCI's target markets and
thorough due diligence conducted in accordance with uniform procedures.
The second component is the attainment of critical mass within each target
market through acquisitions of distribution space and customers in targeted
submarkets and then opportunistically adding additional assets as attractive
opportunities arise. SCI believes it has achieved critical mass in 26 target
market cities and that it is close to achieving critical mass in two additional
target market cities.
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<PAGE>
The third component of SCI's acquisition strategy is the concentration on
transactions under $5 million. SCI's commitment to identifying and completing
multiple transactions under $5 million results in reduced competition from
institutional buyers due to their size or occupancy level. The local presence
of the Market Services Group also enables the Acquisitions and Due Diligence
Group to pursue under-leased properties which can benefit from intensive local
management and marketing. Between January 1, 1993 and December 31, 1996, SCI
completed 136 acquisitions of $5 million or less.
PRODUCT CLASSIFICATION
The industrial real estate on which SCI focuses is typically used for
storage, packaging, assembly, distribution and light manufacturing of consumer
and industrial products. SCI divides industrial properties into two categories:
distribution (which can also accommodate light manufacturing and assembly
customers), and service center. SCI's objective is to focus its acquisition and
distribution park development activities primarily on generic distribution
facilities with an average office finish level of less than 10%. Due to
typically increased costs of retrofitting customer spaces, service center
product will be acquired only on a very limited basis as part of portfolio
acquisitions in which the majority of product being acquired is bulk
distribution. As of December 31, 1996, the buildings in SCI's operating
portfolio of 80.6 million square feet contained 10.7% office finish.
Distribution. SCI's distribution space is adaptable for both bulk
distribution and light manufacturing uses. SCI's operating portfolio included
97.53% of distribution product at December 31, 1996 by square feet. The
following characteristics define the bulk distribution facilities which SCI
owns and intends to acquire or develop in the future:
<TABLE>
<CAPTION>
TYPICAL RANGE
------------------------ -------------------------
<S> <C> <C>
Clear Height............ 22 ft.-24 ft. 18 ft.-30 ft.
Building Depth.......... 180 ft.-240 ft. 140 ft.-300 ft.
Loading................. Dock Dock or Dock and Grade
Parking Ratio........... 0.9 spaces/1,000 sq. ft. 0.5 spaces/1,000 sq. ft.-
2.0 spaces/1,000 sq. ft.
Average Square Footage
Per Customer........... 25,345 sq. ft. 4,500-200,000 sq. ft.
Site Coverage........... 45% 30-50%
</TABLE>
Service Center. Under SCI's definition, service centers are multi-customer
buildings that have a higher percentage of office space than distribution
properties and only have grade-level loading as opposed to truck dock loading.
Service center product constituted 2.47% of the square feet in SCI's operating
portfolio as of December 31, 1996.
CUSTOMERS
CUSTOMER BASE OBJECTIVE
SCI's objective is to develop a customer base in each target market city
which is diverse in terms of industry concentration and represents a broad
spectrum of national, regional and local distribution space users who have
potential for growth in demand for space.
SCI had 2,899 customer leases in 73.5 million square feet of occupied space
and 296 national customers of which 191 were multiple market customers at
December 31, 1996. These leases, representing a mix of local, regional and
national customers, can be summarized as follows:
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF TOTAL
SQUARE FOOTAGE LEASED OF LEASES SQUARE FOOTAGE
--------------------- --------- -------------------
<S> <C> <C>
0-10,000.................................... 1,284 8.77%
10,001-25,000............................... 830 18.47
25,001-50,000............................... 424 20.28
50,001-100,000.............................. 234 22.98
100,001 and above........................... 127 29.50
----- ------
Total................................... 2,899 100.00%
===== ======
</TABLE>
8
<PAGE>
SCI believes that having a large number of customers with generic space
requirements in each submarket will provide the opportunity to maximize cash
flow through intensively managing its customer base. At the same time,
exposure to overall occupancy declines is reduced by achieving a broad
spectrum of customers in each submarket. SCI's largest customer accounted for
less than 1.5% of SCI's 1996 rental income (on an annualized basis), and the
annualized base rent for SCI's 20 largest customers accounted for less than
12.9% of SCI's 1996 rental income (on an annualized basis).
As of December 31, 1996, SCI's 296 national customers leased 35.1% of SCI's
operating portfolio of 80.6 million square feet, as compared to 230 national
customers that leased 30.9% of SCI's operating portfolio of 58.5 million
square feet at December 31, 1995.
DIVERSIFIED CUSTOMER LEASE EXPIRATIONS AND RENEWALS
Between December 31, 1996 and December 31, 1997, approximately 23.2% of the
leased square feet in SCI's portfolio will expire, creating opportunities for
SCI to increase rents upon renewal or replacement of these leases. The
following table shows for SCI's properties as of December 31, 1996 (i) the
aggregate number of leases expiring, (ii) the square footage subject to such
leases, (iii) the percentage of total square footage represented by such
leases, (iv) the annual base rentals represented by such leases and (v) the
percentage of annual base rentals represented by such leases:
<TABLE>
<CAPTION>
NUMBER OF SQUARE PERCENTAGE ANNUAL BASE PERCENTAGE OF
LEASES FOOTAGE OF TOTAL RENT ANNUAL BASE
EXPIRING(1) EXPIRING SQUARE FOOTAGE EXPIRING(2) RENT EXPIRING(2)
----------- ---------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
December 31, 1996....... 138 2,130,094(3) 2.90% $ 7,532,340 2.77%
1997.................... 703 14,898,118 20.28 47,689,920 17.54
1998.................... 632 12,623,157 17.18 44,092,188 16.22
1999.................... 602 12,104,157 16.47 43,438,104 15.98
2000.................... 326 8,999,734 12.25 36,059,760 13.26
2001.................... 318 9,760,483 13.28 39,984,972 14.71
2002.................... 50 2,733,053 3.72 11,660,952 4.29
2003.................... 41 3,740,080 5.09 15,008,772 5.52
2004.................... 22 1,380,342 1.88 4,366,272 1.61
2005.................... 29 1,693,689 2.31 7,587,228 2.79
2006.................... 31 2,639,198 3.59 10,669,848 3.92
Thereafter.............. 7 771,748 1.05 3,812,448 1.39
----- ---------- ------ ------------ ------
Total............... 2,899 73,473,853 100.00% $271,902,804 100.00%
===== ========== ====== ============ ======
</TABLE>
- --------
(1) Assumes customers do not exercise renewal options.
(2) Excludes all expenses and common area maintenance charges paid or
reimbursable by customers.
(3) Includes 880,429 square feet of space leased on a month-to-month basis as
of December 31, 1996.
CUSTOMER OCCUPANCY
The following table shows the number of operating properties owned by SCI on
each date reflected, the total square footage of such properties and the
historical percentage physical occupancy of such properties on such date. As
previously indicated, SCI commenced operations in June 1991, has acquired
operating properties from unaffiliated third parties and does not possess what
SCI would deem as reliable occupancy rates of properties prior to their
acquisition by SCI.
<TABLE>
<CAPTION>
OPERATING PORTFOLIO STABILIZED PORTFOLIO
------------------------------- --------------------
NUMBER OF SQUARE SQUARE
DATE PROPERTIES FOOTAGE OCCUPANCY FOOTAGE OCCUPANCY
---- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1996... 942 80,556,110 91.21% 71,106,728 96.27%
December 31, 1995... 751 58,493,330 93.48% 49,296,615 96.74%
December 31, 1994... 526 39,053,995 92.40% 34,347,251 96.64%
December 31, 1993... 164 11,393,881 91.22% 8,385,646 99.90%
December 31, 1992... 17 1,911,204 91.18% 1,649,195 100.00%
December 31, 1991... 3 406,000 100.00% 406,000 100.00%
</TABLE>
9
<PAGE>
Operating properties at December 31, 1996 include recently completed
development properties in initial lease-up (3.7 million square feet completed
in the fourth quarter of 1996) which impacts the overall occupancy percentage
at December 31, 1996.
Based on information compiled by the CB Commercial Property Information
Management System, occupancy rates for industrial properties that can
accommodate a customer requiring 100,000 or more square feet in major U.S.
cities were relatively stable from 1986 through the end of 1996. Properties
covered include both vacant and occupied available space in existing and
under-construction buildings within six months of completion. SCI has not
independently verified the information.
LEASES
Net leases, modified gross leases and gross leases as of December 31, 1996
represented 50.9%, 46.7% and 2.4%, respectively, of the total square footage
under lease by SCI's customers. Under net leases, real estate taxes, insurance
costs and operating expenses are passed through to customers. Under modified
gross leases, real estate taxes and insurance costs in excess of the amounts
of such items for the initial year of the lease and operating expenses are
passed through to customers. Under gross leases, the landlord pays all real
estate taxes, insurance costs and operating expenses.
SCI CLIENT SERVICES INCORPORATED
SCI believes that a successful REIT must have active and effective local
management to increase cash flow and to enhance long-term economic performance
of its properties. In order to provide a higher level of service to its
customers, Client Services, an affiliate of the REIT Manager and a component
of the Market Services Group, began providing property management services for
certain of SCI's properties in January 1994. Client Services seeks to provide
premier customer service and attention to customer needs. Client Services
develops and implements proprietary operating, recruiting and training systems
to achieve consistent levels of performance and professionalism in all target
market cities managed by Client Services. This group has substantially
improved the occupancy and rental income for under-leased properties acquired
by SCI.
As of December 31, 1996, Client Services provided property management
services in 28 target market cities and was actively managing 72.5 million
square feet (90.0%) of SCI's operating portfolio of 80.6 million square feet.
SCI anticipates that Client Services will manage properties in additional
target market cities in the future. Rates for services performed by Client
Services are subject to annual approval by SCI's independent Trustees and are
at or below market rates.
CAPITAL MARKETS
SCI believes that a successful REIT must have the ability to access the
equity and debt markets efficiently and expeditiously. SCI's capital markets
ability permits it to capitalize on the acquisition and development
opportunities which it believes exist in its target market cities. In order to
more efficiently raise capital and enhance relationships with major
institutional sources of capital, the REIT Manager's owner, Security Capital
Group, which is also SCI's largest shareholder, owns Security Capital Markets
Group Incorporated ("Capital Markets Group"), a registered broker-dealer
affiliate. Capital Markets Group's services are included in the REIT Manager's
fee and do not result in a separate charge to SCI. Capital Markets Group has
assisted in or arranged securities offerings for SCI, including:
. In August 1992, SCI received a commitment for a $40 million investment
from Security Capital Group at a price of $10.00 per Common Share;
. In March 1993, SCI received commitments for $200 million of net proceeds,
at a commission cost of less than 0.01% (paid to an unaffiliated third
party), from a private offering of Common Shares to shareholders and
institutions at a price of $11.00 per share;
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<PAGE>
. In December 1993, SCI received commitments for $157.5 million of net
proceeds, with no commission cost, from a private offering of Common
Shares to shareholders, employees and accredited investors at a price of
$11.50 per share;
. In March 1994, SCI completed its $37.5 million initial public offering of
Common Shares at a price of $11.50 per share, with no commission cost,
and began trading on the New York Stock Exchange ("NYSE");
. In June 1994, SCI completed a $100 million public offering of Common
Shares to shareholders and third parties at a price of $15.125 per share,
with no commission cost;
. In October and November 1994, SCI raised $266.9 million of net proceeds
from a public offering of Common Shares at a price of $15.25 per share,
with an average commission cost of 2.39%;
. In March 1995, SCI raised $198.0 million of net proceeds from an
underwritten public offering of fully amortizing, long-term senior
unsecured debt securities;
. In May 1995, SCI raised $123.5 million of net proceeds from an
underwritten public offering of fully amortizing, long-term senior
unsecured debt securities;
. In June 1995, SCI raised $130.4 million of net proceeds from an
underwritten public offering of Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $0.01 per share (the "Series A
Preferred Shares"), with an average commission cost of 3.15%;
. In September and October 1995, SCI completed a $250.0 million public
offering of Common Shares to shareholders and third parties at a price of
$15.375 per share, with no commission cost;
. In February 1996, SCI raised $192.3 million of net proceeds from an
underwritten public offering of Series B Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per
share (the "Series B Preferred Shares"), with an average commission cost
of 4.25%;
. In May 1996, SCI raised $197.8 million of net proceeds from an
underwritten public offering of fully amortizing, long-term senior
unsecured debt securities;
. In September and October 1996, SCI completed a $175.6 million public
offering of Common Shares to shareholders and third parties at a price of
$17.25 per common share, with no commission cost;
. In October 1996, SCI completed a $35.1 million public offering of Common
Shares to third parties at a price of $17.25 per common share, with no
commission cost;
. In November 1996, SCI raised $97.1 million of net proceeds from an
underwritten public offering of Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest, par value $0.01 per share (the "Series C
Preferred Shares"), with an average commission cost of 2.50%;
. On February 4, 1997, SCI raised $99.1 million of net proceeds from an
underwritten public offering of the Series A 2015 Notes under its medium-
term note program established in November 1996; and
. On February 7, 1997, SCI raised $80.4 million of net proceeds from an
underwritten public offering of Common Shares, with an average commission
cost of 5.25%. (See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources").
For the public offerings of Common Shares (including the initial public
offering), SCI's underwriting commissions (all of which were paid to
unaffiliated underwriters) have been $11.0 million, representing 1.15% of
gross proceeds of $957.8 million.
In May 1993, the REIT Manager arranged a three-year, $35 million revolving
credit facility for SCI, at an interest rate of prime or, at SCI's option,
LIBOR plus 2%. In November 1993, the REIT Manager arranged an increase in this
line of credit to $115 million. In May 1994, the REIT Manager arranged an
increase in this line of credit to $225 million and an extension of the
maturity to May 1996. In June 1995, the REIT Manager arranged with NationsBank
of Texas N.A. ("NationsBank") to increase SCI's revolving line of credit to
$350
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<PAGE>
million and to convert the line of credit to an unsecured line. The line of
credit, as amended and restated May 2, 1996, bears interest at SCI's option at
either (a) the greater of the federal funds rate plus 0.5% and prime, or (b)
LIBOR plus 1.25%, based upon SCI's current debt ratings, and is scheduled to
mature in May 1998. This line may be extended annually for an additional year
with the approval of NationsBank and the other participating lenders (the
"Bank Group").
If the Bank Group elects not to extend the revolving line of credit, at
SCI's election, the facility will either a) convert to a three year term note,
or b) continue on a revolving basis with a remaining one year maturity. SCI's
increased borrowing capacity enables it to acquire distribution properties
prior to equity and long-term debt offerings and to eliminate or minimize the
amount of cash it must invest in short term investments at low yields. SCI
currently intends to limit long-term debt to approximately 45% of total book
capitalization (including accumulated depreciation) (26.9% at December 31,
1996 on an historical basis and 29.3% at December 31, 1996 on a pro forma
basis, giving effect to the February 7, 1997 Common Share offering (net
proceeds of $80.4 million) and the February 4, 1997 issuance of the $100
million Series A 2015 Notes and the use of the proceeds therefrom). In
addition, SCI intends to limit the ratio of total debt to total book
capitalization (including accumulated depreciation) to 50% ( 28.5% at December
31, 1996 on an historical basis and 29.3% at December 31, 1996 on a pro forma
basis, giving effect to the February 7, 1997 Common Share offering and the
February 4, 1997 issuance of the Series A 2015 Notes). SCI believes its
current balance sheet provides considerable flexibility to prudently leverage
over the long-term. SCI's strategy has been to achieve a substantial equity
base and thereafter incur fully amortizing, fixed rate 10 year to 20 year
debt. (See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources").
THE REIT MANAGER
The REIT Manager provides SCI with 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, all
of which are included in the REIT Management fee. Hence, SCI depends upon the
quality of the management provided by the REIT Manager. SCI currently has no
employees. SCI believes that its relationship with the REIT Manager provides
SCI with access to high quality and depth of management personnel and
resources, savings from a dedicated capital markets group, and access to
centralized research, information systems, accounting and legal support.
Security Capital Group, the owner of the REIT Manager, has a substantial
shareholder interest in SCI, creating commonality of interest with SCI's
shareholders, and the REIT Management Agreement requires approval of the
independent Trustees for transactions between SCI and the REIT Manager and its
affiliates. Furthermore, the REIT Manager provides all of its services for one
fee, and an affiliate provides property management services at or below market
rates in a competitive environment. The REIT Manager does not receive
additional fees for investment banking, financing or similar services. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--REIT Management Agreement."
Security Capital Group has proposed that SCI become an internally managed
REIT. The Board is currently reviewing the proposal. See "--Security Capital
Industrial Trust."
SCI believes that the quality of management should be assessed in light of
the following factors:
Management Depth/Succession. SCI believes that management should have
several senior executives with the leadership, operational, investment and
financial skills and experience to oversee the entire operations of the REIT.
SCI believes that several of its senior officers could serve as the principal
executive officer and continue SCI's performance. See "--Officers of SCI and
Directors and Officers of the REIT Manager and Relevant Affiliates."
Strategic Vision. SCI believes that management should have the strategic
vision to determine an investment focus which provides favorable initial
yields and long-term growth prospects. The REIT Manager has
12
<PAGE>
demonstrated its strategic vision by focusing SCI on building a national
distribution and light manufacturing asset base at prices significantly below
replacement cost and a land inventory at attractive prices. In addition, the
REIT Manager differentiated SCI from its competition by positioning SCI,
through the SCI National Operating System(TM), as the first national operating
company that was able to address and service a corporate customer's
distribution space requirements on a national, regional and local basis. The
REIT Manager also focused SCI on selected distribution markets where
demographic and supply factors have permitted high occupancies at increasing
rents, conditions which are consistent with the long-term demographic forecast
for SCI's target market cities. See "--SCI Growth and Operating Strategy" and
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Research Capability. SCI believes that management should have the means for
researching markets to determine appropriate investment opportunities. SCI
divides its target market cities into numerous submarkets for analysis
purposes. The REIT Manager and its affiliate, Security Capital Investment
Research Incorporated ("Security Capital Investment Research"), devote
substantial time to research, on a submarket-by-submarket basis, under the
supervision of the Managing Directors of the REIT Manager; hence, the REIT
Manager's research has supplemented SCI's strategic focus and investment
program.
Investment Committee Process. SCI believes that investment committees should
provide discipline and guidance to the investment activities of the REIT in
order to achieve its investment goals. The members of the REIT Manager's
investment committee have a combined 164 years of experience in the real
estate industry. See "--Officers of SCI and Directors and Officers of the REIT
Manager and Relevant Affiliates." The investment committee receives detailed
written analyses and research, in a standardized format, from the REIT
Manager's acquisition personnel and evaluates all prospective investments
pursuant to uniform underwriting criteria prior to submission of investment
recommendations to the investment committee of the Board. The quality of the
REIT Manager's investment committee process is evident from the ability of SCI
to achieve its investment goals, generally realizing its projected initial
returns and growth from distribution property investments.
Acquisitions Capability/Due Diligence Process. SCI believes that management
should include experienced senior personnel dedicated to acquiring investments
and performing intelligent and thorough due diligence. The REIT Manager
employs 11 full time acquisition and due diligence professionals and has
developed uniform systems and procedures for due diligence. As described under
"--Investment Strategy--Investment in Generic Distribution Product," the REIT
Manager's acquisition and due diligence group has screened and selected a
large volume of successful investments.
Development Capability. SCI believes that by internally developing projects,
management can capture for the REIT the value which normally escapes through
sales premiums paid to successful developers. The REIT Manager's 47
development professionals have substantial development experience, as
described in "--Officers of SCI and Directors and Officers of the REIT Manager
and Relevant Affiliates." As of December 31, 1996, the REIT Manager had 5.9
million square feet of distribution space under development for SCI, with a
total budgeted cost of $220.9 million. REIT Management has engaged in
substantial development on behalf of SCI at attractive yields which have
exceeded projections and believes that development will provide growth when
the market for acquisitions becomes less favorable. The REIT Manager has
commenced development on behalf of SCI of 60 master-planned parks in 28 target
market cities. As importantly, as of December 31, 1996, SCI owned 1,273 acres
of additional land and had fixed price options and rights of first refusal to
acquire 515.2 acres and 36.9 acres, respectively, which in the aggregate will
permit the development of approximately 31.7 million square feet of additional
distribution space in 29 target market cities. Also, as of December 31, 1996,
SCI had an additional 415.8 acres under letter of intent or contingent
contract, subject to completion of due diligence, which will permit the
development of approximately 6.7 million square feet of additional
distribution space. See "--Investment Strategy--Investment in Generic
Distribution Product."
Operating Capability. SCI believes that management can substantially improve
Funds from Operations (as hereinafter defined) by actively and effectively
managing assets. The REIT Manager conceived of and developed the SCI National
Operating System(TM) to effectively operate SCI's business and provide
customers with an
13
<PAGE>
exceptional level of coordinated, comprehensive services. In addition, Client
Services provides a high level of property management services to customers.
Through the SCI National Operating System(TM), the REIT Manager and its
affiliates control and effectively administer the management of SCI's
distribution portfolio.
Capital Markets Capability. SCI believes that management must be able
effectively to raise equity and debt capital in order for the REIT to achieve
superior growth through investment. As set forth under "--Capital Markets,"
REIT Management has successfully assisted in or arranged funding for SCI's
investment program, including SCI's initial public offering in March 1994
which was arranged at no commission cost to SCI, following which SCI commenced
trading on the NYSE.
Communications/Shareholder Relations Capability. SCI believes that a REIT's
success in capital markets and asset acquisition activities can be enhanced by
management's ability to effectively communicate the REIT's strategy and
performance to investors, sellers of property and the financial media. The
REIT Manager provides at its expense full time personnel who prepare
informational materials for and conduct periodic meetings with the investment
community and analysts.
SCI believes that successfully combining the foregoing attributes
significantly enhances a REIT's ability to increase cash flow and its market
valuation. SCI's cash flow from operating activities and market valuation have
increased under the REIT Manager's administration.
REIT Manager Compensation
The REIT Management fee paid by SCI is based on SCI's cash flow (as defined
in the REIT Management Agreement, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--REIT Management
Agreement") before the REIT Management fee and therefore increased in 1996 as
compared to 1995 because cash flow increased substantially. As SCI arranges
amortizing, fixed rate, long-term unsecured debt and nonconvertible preferred
share financing as more fully described in "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" below, the REIT Management fee will effectively decline in
proportion to SCI's Funds from Operations because regularly scheduled
principal payments or their imputed equivalent, as defined in such agreement,
associated with the long-term debt and distributions actually paid with
respect to any nonconvertible preferred shares are deducted from the cash flow
amount on which the REIT Management fee is based.
OFFICERS OF SCI AND DIRECTORS AND OFFICERS OF THE REIT MANAGER AND RELEVANT
AFFILIATES
Directors and Senior Officers of the REIT Manager
Members of the REIT Manager's investment committee are designated by an
asterisk (*).
*K. DANE BROOKSHER--58--Mr. Brooksher was elected as a Trustee in October of
1993 and as Co-Chairman and Chief Operating Officer of SCI and the REIT
Manager in November 1993, and is a Director of the REIT Manager. Prior
thereto, Mr. Brooksher was Area Managing Partner and Chicago Office Managing
Partner of KPMG Peat Marwick, independent public accountants, where he served
on the Board of Directors and Management Committee and as International
Development Partner for Belgium and the Netherlands. Mr. Brooksher's term as
Trustee expires in 1999.
*THOMAS G. WATTLES--45--Mr. Wattles was elected as a Trustee in January
1993; he was a Director of SCI's predecessor since its formation in June 1991
and has been Co-Chairman and Chief Investment Officer of SCI and the REIT
Manager since November 1993, Managing Director of SCI and the REIT Manager
from January 1993 to November 1993, and Director of the REIT Manager since
June 1991. From January 1991 to December 1992, Mr. Wattles served as Managing
Director of Security Capital Pacific Incorporated, the REIT Manager for
Security Capital Pacific Trust; from July 1989 to December 1990, Managing
Partner of Stanwich Advisors Incorporated (real estate advisory and
development services); and from July 1985 to June 1989, Senior Vice
President--Property Finance Group of LaSalle Partners Limited (corporate real
estate services). Mr. Wattles' term as Trustee expires in 1999.
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<PAGE>
*IRVING F. LYONS, III--47--Mr. Lyons was elected as a Trustee in March 1996
and as Managing Director of SCI and the REIT Manager in December 1993, where
he has responsibility for the Pacific region of the United States, and is a
Director of the REIT Manager. Prior thereto, Mr. Lyons was the Managing
Partner of King & Lyons (a San Francisco Bay Area industrial real estate
development and management company) since its inception in 1979, where he was
responsible for supervising development, asset management and day-to-day
activities. Mr. Lyons has been involved in the development of over 3.5 million
square feet of industrial space in the San Francisco Bay Area. Prior to
forming King & Lyons, Mr. Lyons spent five years as a Vice President of Wells
Fargo Mortgage Company. Mr. Lyons' term as Trustee expires in 1997.
*JEFFREY H. SCHWARTZ--37--Director of the REIT Manager; Managing Director of
the REIT Manager since October 1994, where he has overall responsibility for
national development activities, and Managing Director of SCI; prior thereto,
Mr. Schwartz was a founder and managing partner of The Krauss/Schwartz
Company, one of the largest industrial real estate developers in Florida; from
April 1986 to October 1988, Mr. Schwartz was a Partner at Anderson Properties
in Atlanta, Georgia.
*ROBERT J. WATSON--47--Director of the REIT Manager; Managing Director of
SCI since January 1993 and of the REIT Manager since November 1992, where he
is Managing Director and Chief Operating Officer of Client Services; from
April 1991 to November 1992, private consultant in the real estate industry;
from June 1977 to April 1991, Area and then Regional Partner for Trammell Crow
Commercial Company, a real estate development and management company, in
Denver, Colorado and a member of that firm's Management Board. As Regional
Partner, Mr. Watson was responsible for Trammell Crow Commercial Company's
commercial/industrial development, leasing and management activities in both
the inter-mountain and the southwestern United States. In his position prior
to affiliation with the REIT Manager, Mr. Watson was responsible for over $1
billion in assets and developed over 3.5 million square feet of industrial and
other commercial space.
Other Officers
ROBERT O. ALTER--37--Vice President of the REIT Manager since August 1995,
where he has responsibility for coordinating build-to-suits in the Southeast
region, and Vice President of SCI; from August 1992 to August 1995, Managing
Director of Faison in Tampa, Florida; from May 1989 to August 1992, Director
with Oxford Properties Florida, Inc., also in Tampa.
ARIEL AMIR--37--Vice President of Security Capital Group since June 1994;
from September 1985 to April 1994, an attorney with the law firm of Weil,
Gotshal & Manges, New York, New York, where he practiced securities and
corporate law. Mr. Amir provides securities offerings and corporate
acquisition services to SCI.
GARY E. ANDERSON--31--Vice President of the REIT Manager since September
1996, where he has been responsible for research on special investment
opportunities since August 1995, and Vice President of SCI; from August 1994
to August 1995, Mr. Anderson was a member of the Management Development
Program; in June 1994, Mr. Anderson received his M.B.A. from the Anderson
Graduate School of Management at UCLA; from October 1988 to June 1992, Project
Manager with Spancrete of California, a construction company in Irwindale,
California.
*NED K. ANDERSON--49--Senior Vice President of the REIT Manager since
December 1993, where he has Market Officer responsibilities for the San
Francisco Bay Area, and Senior Vice President of SCI; since 1985, he was a
partner at King & Lyons, where he directed the development, leasing and
management of the 250 acre Bayside Business Park in Fremont, where King &
Lyons developed approximately 1.5 million square feet of buildings, which are
occupied by approximately 130 tenants. He also helped oversee King & Lyons
East Bay properties, which total 2.5 million square feet of buildings; prior
thereto, Mr. Anderson was a Vice President of Wells Fargo Realty Finance.
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GREGORY J. ARNOLD--41--Vice President of the REIT Manager since January 1996
where he is a member of the National Services Group and Vice President of SCI;
from January 1995 to September 1995, Project Executive and General Manager for
ROI Realty Services, Inc.; from November 1985 to January 1995, Equity Vice
President and Senior Leasing Specialist at LaSalle Partners in Washington,
D.C., where he was responsible for management and leasing of a 170,000 square
feet office building and redeveloping a Class C property through renovation,
marketing, communication and a tenant retention program.
CLAUDE A. BILLINGS--56--Vice President of the REIT Manager since January
1994, where he is a member of the National Services Group, and Vice President
of SCI; from March 1991 to February 1994, Senior Vice President and Regional
Manager of the Staubach Company, a Dallas, Texas corporate real estate service
firm; from March 1989 to March 1991, Vice President of the Leasing and Equity
Departments for Walker & Dunlop, Inc.; prior thereto, Vice President of the
Investment Properties Division of J.E. Robert Companies; for five years during
the mid-1980s, Mr. Billings was a Vice President with LaSalle Partners
Limited, where he acquired, financed and marketed income-producing real estate
assets.
DARCY B. BORIS--34--Vice President of Security Capital Investment Research
since June 1995, and an associate from December 1994 to June 1995, where she
conducts strategic market analysis for SCI and affiliated companies; from
August 1993 to November 1994, Ms. Boris worked for Capital Markets Group; in
May 1993, she obtained her M.B.A. from the University of California at
Berkeley; from January 1987 to September 1991, she was with Marcus & Millichap
Incorporated, as Project Manager for Summerhill Development Company, the
multifamily development subsidiary of Marcus & Millichap Incorporated, where
she managed the development of multifamily housing, and prior thereto, she was
an analyst for its property investment subsidiary.
ERIC D. BROWN--36--Vice President of the REIT Manager since December 1996,
where he is the Regional Property Manager for the Central region, and Vice
President of SCI; Mr. Brown has been Vice President of Client Services since
January 1995 where he has had property management responsibilities for Austin,
Brownsville, El Paso and San Antonio, Texas since May 1994; prior thereto from
May 1993 to April 1994, Vice President and partner of Crow-Barshop Properties,
Inc., a property management, development and brokerage firm in San Antonio,
Texas, where he was responsible for property management and daily operations
of the firm; from January 1991 to April 1993, Director of Asset Management for
Crow-Barshop Properties, Inc.
MARK R. CASHMAN--36--Vice President of the REIT Manager since November 1995,
where he has Market Officer responsibilities for Dallas, Texas, and Vice
President of SCI; prior thereto, Vice President of Security Capital Pacific
Trust since January 1995, where he was a member of the asset management group;
from September 1992 to January 1995, First Vice President/Portfolio Manager
with First Nationwide Financial Corporation in Los Angeles, California, where
he was responsible for the property management department holdings throughout
the western United States; from May 1990 to September 1992, Vice
President/Senior Asset Manager with American Real Estate Group in Irvine,
California.
LISA M. CERNY--33--Vice President of the REIT Manager since June 1995, where
she is controller for the National Development Group, and Vice President of
SCI; prior thereto, Ms. Cerny provided accounting services for the National
Development Group from October 1993; from January 1988 to June 1993, Director
of Corporate Services and Portfolio Manager with The Koll Company in Newport
Beach, California, where she managed corporate financial services. Ms. Cerny
is a Certified Public Accountant.
MARK J. CHAPMAN--39--Vice President of Security Capital Investment Research
since November 1995, where he is director of the group and conducts strategic
market analyses for affiliates of the firm; from November 1994 to November
1995, Mr. Chapman was a Vice President of Security Capital Pacific Trust with
asset management responsibilities in five major markets; from July 1989 to
November 1994, Vice President with Copley Real Estate Advisors, Inc., where he
directed asset management for Copley assets in its New England, mid-Atlantic
and Texas regions, valued in excess of $1.5 billion.
JAMES D. COCHRAN--36--Vice President of the REIT Manager since March 1994,
where he has Market Officer responsibilities for Denver, Colorado and Kansas
City, Kansas, and Vice President of SCI; from August
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1988 to March 1994, Vice President for TCW Realty Advisors, where he was
responsible for industrial acquisitions in southern California; from September
1984 to August 1987, Associate with Economics Research Associates, where he
performed market and financial feasibility studies for a wide variety of land
use development projects.
PAUL C. CONGLETON--42--Vice President of the REIT Manager since January 1995,
where he has Market Officer responsibilities for Houston and Austin, Texas, and
Vice President of SCI; from October 1990 to December 1994, Principal with
Overland Company, a property management, development and investment services
firm in Tucson, Arizona; from March 1985 to October 1990, Partner with Trammell
Crow Company in Tucson, Arizona.
R. STAN CONWAY, JR.--33--Vice President of the REIT Manager since November
1994, where he has Market Officer responsibilities for Atlanta, Georgia, and
Vice President of SCI; from October 1989 to October 1994, Vice President of
Marketing for Bullock, Terrell and Mannelly; from April 1987 to October 1989,
Vice President of Industrial Sales for Royal LePage.
MICHAEL S. CURLESS--33--Vice President of the REIT Manager since August 1995,
where he has Market Officer responsibilities for Indianapolis, and Vice
President of SCI; from June 1989 to August 1995, Marketing Director with
Trammell Crow Company, where he was responsible for the development and
marketing of industrial projects; from July 1986 to July 1987, Financial
Analyst with General Electric.
DAVID B. DANIEL--30--Vice President of the REIT Manager since June 1996 where
he has been a member of the due diligence team since April 1995, and Vice
President of SCI; prior thereto, a member of due diligence since April 1995;
from February 1994 to April 1995; Senior Underwriter with Remsen Partners Ltd.
in New York, New York, where he was involved in all phases of a loan
origination and securitization program; from May 1992 to February 1994,
Associate Consultant with Kenneth Leventhal & Co. in Houston, Texas and New
York, where he performed due diligence and evaluation on a variety of real
estate transactions.
MARK H. DEGNER--35--Vice President of the REIT Manager since April 1994,
where he is responsible for portfolio acquisitions and dispositions, and Vice
President of SCI; from October 1988 to April 1994, Manager for the Hahn Company
in San Diego, California, where he was Manager of Development and Acquisitions,
Corporate Development and, most recently, Dispositions.
WILLIAM H. EAGER--55--Vice President of the REIT Manager since June 1996
where he is a member of the National Services Group and Vice President of SCI;
from June 1976 to June 1996, Mr. Eager was a First Vice President of CB
Commercial where he was involved in over $350 million of industrial real estate
transactions; prior thereto, Mr. Eager was an account executive and assistant
to the president of Leo Burnett Advertising from September 1968 to June 1976,
where he was active in developing marketing and advertising strategies.
FRANK H. FALLON--35--Vice President of the REIT Manager since January 1995,
where he has Market Officer responsibilities in Memphis, Nashville and
Chattanooga, Tennessee, and Vice President of SCI; prior to joining SCI, Mr.
Fallon was with Trammell Crow Company from March 1987 to December 1994, where
he was responsible for leasing, management, acquisition and disposition of
industrial properties in the Dallas/Fort Worth, Texas area.
GABE L. FINKE--31--Vice President of the REIT Manager since September 1996,
where he has been a member of the land acquisitions group since September 1995,
and Vice President of SCI; prior thereto, Mr. Finke was a member of the
Management Development Program from July 1994 to August 1995; in May of 1994
Mr. Finke received his M.B.A. from the Harvard Graduate School of Business
Administration.
KURT R. FULLER--38--Vice President of the REIT Manager since October 1994,
where he has Project Manager responsibilities for tenant improvement
construction in the San Francisco Bay Area, Reno, Portland, Seattle and Salt
Lake City, and Vice President of SCI; from February 1989 to October 1994,
Project Manager/Estimator for Wentz Builders, Inc. in San Carlos, California,
where he was responsible for managing tenant improvement and special projects.
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THOMAS P. GARRIGAN--47--Vice President of the REIT Manager since March 1995,
where he is a member of the National Services Group, and Vice President of SCI;
from June 1993 to February 1995, he was Senior Vice President of Security
Capital Group and its affiliates, where he oversaw accounting operations; from
July 1981 to June 1993, Audit Partner with KPMG Peat Marwick in Midland and El
Paso, Texas; from July 1971 to July 1981, on the professional staff of KPMG
Peat Marwick.
JOHN R. HANSON--46--Vice President of the REIT Manager since May 1995, where
he has Project Manager responsibilities for the Pacific region, and Vice
President of SCI; from July 1994 to May 1995, Vice President of Jack & Cohen
Builders, Inc. in Palo Alto, California, where he was responsible for a wide
variety of construction projects; from January 1991 to July 1994, Project
Director of Jack & Cohen; prior thereto, Project Manager of L.E. Wentz Company
in San Carlos, California from April 1987 to January 1991.
LARRY H. HARMSEN--36--Vice President of the REIT Manager since February 1995,
where he has Market Officer responsibilities for San Diego and Orange County,
California, and Vice President of SCI; from January 1988 to February 1995, Vice
President/Managing General Partner with Lincoln Property Company in Southern
California, where he was responsible for all aspects of asset and property
management for a portfolio of office and industrial space containing over 2.5
million square feet; from July 1985 to January 1988, Development/Marketing
Manager with Lincoln Property N.C., Inc.
DONALD L. HARRIER--37--Vice President of the REIT Manager since May 1994,
where he has Project Manager responsibilities for the Pacific region, and Vice
President of SCI; from May 1993 to May 1994, Senior Partner with Donald L.
Harrier, AIA, Architecture; from August 1986 to May 1993, Project Director with
DES Architects & Engineers in Redwood City and Fremont, California, where he
was involved in project management, architecture and marketing.
JAMES JACHETTA--43--Vice President of the REIT Manager since December 1996,
where he has project manager responsibilities for the Pacific region, and Vice
President of SCI; prior thereto, from October 1995 to October 1996, Mr.
Jachetta was a project manager consultant to SCI; from May 1992 to September
1995, mortgage broker with Southern Cal Financial Group in Newport Beach,
California; May 1986 to April 1992, Senior Project Manager of The O'Donnell
Group, a commercial developer in Irvine, California.
*M. MARC JASON--35--Vice President of the REIT Manager since December 1993,
where he is responsible for acquisition due diligence, and Vice President of
SCI; from January 1993 to December 1993, President of Aslan Communications, a
regional telecommunications company; from December 1986 to December 1992,
employed with Trammell Crow Company, most recently as Senior Vice President and
Finance Manager, where he managed the finance and accounting departments for
the company's $1 billion southern California asset base; prior thereto, an
accountant with Price Waterhouse.
KENT W. JOHNSON--43--Senior Vice President of the REIT Manager since July
1995, where he heads the National Services Group, and Senior Vice President of
SCI; from March 1994 to June 1995, National Director for Sequent Computer
Systems, where he was recognized as World-Wide Manager of the Year; from
January 1977 to March 1994, with IBM in various positions, including National
Account Director and Branch Manager.
M. GORDON KEISER--52--Senior Vice President of the REIT Manager since October
1995, where he is Chief Financial Officer and is responsible for accounting,
financial reporting and coordination of financing, and Senior Vice President of
SCI; from August 1988 to October 1995, Senior Vice President of JMB Realty
Corporation, where he was responsible for corporate finance and capital markets
financing. Previously, he was with KPMG Peat Marwick. Mr. Keiser is a Certified
Public Accountant.
DOUGLAS A. KIERSEY, JR.--36--Vice President of the REIT Manager since May
1994, where he has Market Officer responsibilities for Seattle, Washington and
Portland, Oregon, and Vice President of SCI; from September 1983 to May 1994, a
member of the Industrial/Technology Group at Cushman & Wakefield of Oregon,
Inc., where he specialized in the sale and leasing of industrial properties.
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JEFFREY A. KLOPF--48--Senior Vice President and Secretary of SCI, the REIT
Manager and Security Capital Group since January 1996; from 1988 to December
1995, Partner with Mayer, Brown & Platt, where he practiced corporate and
securities law. Mr. Klopf provides securities offering and corporate
acquisitions services to SCI and its affiliates and oversees the provision of
legal services to SCI and its affiliates.
ROBERT A. KRITT--35--Vice President of the REIT Manager since November 1991,
where he has responsibility for coordinating build-to-suits in the Mid-Atlantic
region, and Vice President of SCI; from January 1991 to December 1992, Vice
President of Security Capital Pacific Incorporated, the REIT Manager for
Security Capital Pacific Trust, where he was responsible for acquisition due
diligence; from 1986 to December 1990, Vice President of Sanders Partners
Incorporated, Chicago, Illinois (multibusiness holding company); prior thereto,
senior tax consultant with Arthur Andersen LLP.
EDWARD F. LONG--40--Vice President and Controller of SCI and the REIT Manager
since January 1996, where he supervises accounting and financial reporting;
from June 1995 to January 1996, Controller for SCI Client Services; from
December 1990 to June 1995, Director of Financial Services for Coopers &
Lybrand in Central Florida and the Carolinas; from November 1984 to December
1990, Chief Financial Officer for a group of privately owned real estate
investment companies. Mr. Long is a Certified Public Accountant.
A. JOHN LOW--43--Vice President of the REIT Manager since December 1996 where
he has Project Manager responsibilities for the Pacific region, and Vice
President of SCI; from July 1994 to October 1996, Director of Architecture,
Design and Construction for Waban, Inc., a national chain of home improvement
centers in Irvine, California, where he was responsible for development and
construction of warehouses; from March 1994 to July 1994, Portfolio Manager for
Insignia O'Donnell Properties, Inc., a development and management company in
Irvine, California; from March 1990 to March 1994, Director of Real Estate for
Catellus Development Corporation in Anaheim, California, where he had marketing
responsibilities for the Southern California region.
DONALD W. MADSEN--53--Senior Vice President of the REIT Manager since July
1993, where he supervises development services related to construction
management and build-to-suit facilities, and Senior Vice President of SCI; from
July 1992 to June 1993, Vice President, Business Development for Windward,
Ltd., a Dallas, Texas-based design/build general construction company; from
December 1990 to July 1992, Managing Director, and from December 1978 to
December 1990, Partner of Construction Management, Dallas Industrial Division
of Trammell Crow Company; prior thereto, Mr. Madsen was an industrial architect
with Trammell Crow Company. In his prior positions, Mr. Madsen supervised the
development of over 38 million square feet of industrial space.
DAVID W. MAJORS--52--Vice President of the REIT Manager since December 1996,
where he has Market Officer responsibilities for Albuquerque, New Mexico and El
Paso, Texas, and Vice President of SCI; from September 1988 to September 1996,
President and Chief Operating Officer of Remington Capital Group in Dallas,
Texas where he was responsible for all aspects of development of build-to-suit
industrial, office and retail facilities.
BRIAN N. MARSH--32--Vice President of the REIT Manager since January 1995,
where he has Market Officer responsibilities for Columbus, Ohio, and Vice
President of SCI; from June 1990 to January 1995, with Pizzuti Realty Inc., in
Columbus, Ohio, where he was responsible for master planning, development and
marketing of a 400-acre-plus, mixed-use development; prior thereto, Marketing
Associate with Wears Kahn McMenamy in Columbus, Ohio.
J. THOMAS MERCER--37--Vice President of the REIT Manager since January 1995,
where he is responsible for coordinating build-to-suits nationwide, and Vice
President of SCI; from September 1987 to January 1995, Senior Marketing
Representative with Friendswood Development Company in Houston, Texas, where he
completed over $15 million in land transactions; prior thereto, Industrial
Leasing Specialist with The Horne Company in Houston, Texas, where he leased
more than 500,000 square feet of industrial space.
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*STEVEN K. MEYER--48--Senior Vice President of the REIT Manager since
December 1995, where he has responsibility for the Central region of the
United States, and Senior Vice President of SCI; prior thereto, Vice President
of the REIT Manager since September 1994; from 1990 to July 1994, Executive
Vice President with Trammell Crow Company, where he directed leasing and
development activities for the Industrial Division; from 1983 to 1990, Project
Partner with Trammell Crow, where he developed and/or acquired 77 projects
totalling over 7 million square feet; prior thereto, Mr. Meyer was a Leasing
Agent with Trammell Crow.
JOSEPH H. MIKES--36--Vice President of the REIT Manager since August 1995,
where he has Market Officer responsibilities for the Chicago area, and Vice
President of SCI; from March 1988 to August 1995, Senior Director of Opus
North Corporation, where he managed office and industrial real estate
activities; from April 1984 to March 1988, Director of Real Estate for Opus in
Florida.
RON W. MILLS--38--Vice President of the REIT Manager since April 1993, where
he has been a member of the National Services Group since July 1996, and Vice
President of SCI; prior thereto, Mr. Mills had Market Officer responsibilities
for San Antonio, Austin and Rio Grande Valley, Texas; from February 1991 to
May 1992, Vice President of Commercial Operations for SCG Realty Services
Incorporated, a regional real estate services organization; prior thereto,
Vice President of Asset Management and Property Management for Operations for
USAA Real Estate Company.
RICK D. MIRANDA--43--Vice President of the REIT Manager since December 1996
where he has Project Manager responsibilities for the Pacific region, and Vice
President of SCI; from April 1996 to September 1996, President of Realty
Development Management Services, Inc. in Newport Beach, California, where he
was responsible for all aspects of development and construction of office and
industrial facilities; from May 1995 to March 1996, Vice President with Arnel
Development Company in Costa Mesa, California, where he was responsible for
the design and construction of a retail center; from August 1987 to February
1995, Vice President with Bramalea U.S. Properties in Oakland, California,
where he was responsible for development, design and construction management
for the Pacific region.
R.A.D. MORTON, III--39--Vice President of the REIT Manager since July 1993,
where he has Market Officer responsibilities for El Paso, San Antonio and Rio
Grande Valley, Texas and Vice President of SCI; from January 1991 to July
1993, President of The Morton Group, which specialized in corporate industrial
real estate services, asset management and development services; from June
1988 to January 1991, Principal with Trammell Crow Company in its El Paso
Commercial Division, where he was responsible for industrial development.
DAVID S. MORZE--36--Vice President of the REIT Manager since March 1995,
where he has Market Officer responsibilities for Reno, Nevada and Salt Lake
City, Utah, and Vice President of SCI; from May 1993 to March 1995, Director
of Marketing for Northern California for SARES*REGIS; from January 1993 to May
1993, Real Estate Consultant to The Moreno Bavarian Corporation in Portola
Valley, California; from September 1983 to January 1993, Partner with Cabot &
Forbes in Northern California, where he developed and acquired over $140
million of office, research and development and industrial projects.
DONALD E. MYERS--53--Vice President of the REIT Manager since March 1993,
where he is responsible for asset management of SCI's portfolio, and Vice
President of SCI; from July 1988 to March 1993, a Senior Vice President of
Dreyfus Realty Advisors, where he was responsible for asset management; from
March 1984 to June 1988, Senior Vice President with Realco International, a
private real estate investment and development company; and from July 1978 to
February 1984, Vice President of LaSalle Partners Limited in its Land Group,
where he provided acquisition and disposition services for clients of the
firm.
MICHAEL NACHAMKIN--43--Vice President of the REIT Manager since March 1996,
where he has Market Officer responsibilities for New Jersey/I-95 Corridor and
Vice President of SCI; from 1984 to February 1996, Director of Investment
Sales, Leasing, Land, Tenant Representation and Marketing at Cushman &
Wakefield of New Jersey; prior thereto, a salesperson with Coldwell Banker
Real Estate Services from 1983 to 1984.
AUGUST J. NAPOLITANO--49--Vice President of the REIT Manager since May 1995,
where he is a member of the National Services Group, and Vice President of
SCI; from November 1992 to December 1994,
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Director/Branch Manager of Cushman & Wakefield in Orange County, California,
where he managed all aspects of the Newport Beach and Anaheim Commercial
brokerage offices; from January 1981 to November 1992, Senior Vice
President/Broker with CB Commercial, also in Orange County.
EDWARD S. NEKRITZ--31--Vice President of the REIT Manager since September
1995, where he is responsible for coordinating the national leasing program,
overseeing environmental issues and providing asset management and legal
services, and Vice President of SCI; from October 1990 to September 1995,
attorney with Mayer, Brown & Platt, where he specialized in commercial real
estate transactions, including acquisitions and dispositions, leasing,
development and zoning.
PETER J. NIELSEN--50--Vice President of the REIT Manager since March 1994,
where he has Project Manager responsibility for build-to-suit projects, and
Vice President of SCI; from November 1984 to February 1994, Vice President of
Project Development for Dueck Group of Companies, a development firm in Denver,
Colorado; and from November 1980 to November 1984, Design-Build Project Manager
for Voth Brothers Construction, a contractor/development company in Abbotsford,
British Columbia. Mr. Nielsen has supervised the development of over 4 million
square feet of industrial and commercial space.
WILLIAM D. PETSAS--39--Vice President of the REIT Manager since July 1994,
where he has Market Officer responsibilities for Phoenix, Arizona, and Vice
President of SCI; from June 1993 to June 1994, Mr. Petsas was a consultant to
SCI in the area of due diligence and acquisitions; from May 1992 to May 1993,
Mr. Petsas was a director of business development for residential properties in
the Southwest for Trammell Crow Company; from June 1986 to April 1992, Mr.
Petsas was with the Industrial Division of Trammell Crow Company in Phoenix,
Arizona, where he was a marketing principal beginning in 1989.
*WALTER C. RAKOWICH--39--Senior Vice President of the REIT Manager since
November 1994, where he has responsibility for the Mid-Atlantic region of the
United States, and Senior Vice President of SCI; from July 1994 to November
1994, Vice President of the REIT Manager; from October 1993 to June 1994, Mr.
Rakowich was a consultant to SCI in the area of due diligence and acquisitions;
from 1985 to September 1993, Mr. Rakowich was with Trammell Crow Company, where
he was involved in the acquisition, development, financing, marketing,
management and disposition of property and was a Senior Vice President and
Principal beginning in 1992.
THOMAS M. RAY--34--Vice President of the REIT Manager since March 1996 where
he is responsible for coordinating build-to-suits in the Pacific region, and
Vice President of SCI; prior thereto, a member of the build-to-suit group since
September 1995; from October 1994 to September 1995, Mr. Ray supervised land
acquisitions in due diligence; from August 1994 to October 1994, a member of
the land acquisitions due diligence group; from March 1994 to August 1994, a
member of the management Development Program where he assisted with multifamily
portfolio acquisitions; from February 1991 to August 1992, General Counsel with
Richardson International Corp. in Fort Collins, Colorado.
BETTY J. REMSTEDT--51--Vice President of the REIT Manager since December
1993, where she provides accounting, financial analysis and budgeting services
for the REIT Manager with respect to SCI's Pacific region properties, and Vice
President of SCI; from December 1988 to December 1993, Chief Financial Officer
of King & Lyons; prior thereto, Controller at Barratt Southern California,
Inc., a real estate development company in San Jose, California.
*JOHN W. SEIPLE--38--Senior Vice President of the REIT Manager since November
1994, where he has responsibility for the Southeast region of the United
States, and Senior Vice President of SCI; from October 1993 to November 1994,
Vice President of the REIT Manager; from January 1992 to June 1993, Senior Vice
President, and from June 1988 to December 1991, Partner, with Trammell Crow
Dallas Industrial, Inc., a subsidiary of Trammell Crow Company, where he was
responsible for leasing, development, acquisition, financing, tenant build-out
and property management of 7.5 million square feet of industrial properties;
from June 1987 to May 1988, Marketing Principal, and from May 1985 to May 1987,
Leasing Agent with Trammell Crow Company.
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STEVEN O. SPAULDING--55--Vice President of the REIT Manager since May 1993,
where he has Market Officer responsibilities for Las Vegas, Nevada, and Vice
President of SCI; from June 1992 to May 1993, Area Manager with Dermody
Properties in Las Vegas, where he was responsible for its management portfolio
and new development activities; from November 1991 to June 1992, independent
consultant; from 1987 to November 1991, Managing Partner of St. Louis division,
and from 1983 to 1987, Industrial Partner of Trammell Crow Company in St.
Louis.
RICHARD H. STRADER--37--Vice President of the REIT Manager since June 1994,
where he has Market Officer responsibilities for Charlotte, Raleigh-Durham and
Winston-Salem, North Carolina, and Vice President of SCI; from October 1987 to
May 1994, Mr. Strader was with the Dallas Industrial Division of Trammell Crow
Company, where he was the Managing Director of the Central and Southwest Dallas
Industrial office since 1990.
CHARLES E. SULLIVAN--39--Vice President of the REIT Manager since October
1994, where he has Market Officer responsibilities for Miami, Orlando and
Tampa, Florida, and Vice President of SCI; from July 1989 to October 1994,
Senior Industrial Broker with Cushman & Wakefield.
STANLEY G. THOMAS--51--Vice President of the REIT Manager since April 1995,
where he has Project Manager responsibilities for the Central Region, and Vice
President of SCI; from January 1990 to March 1995, Project Manager for Cushman
& Wakefield Development Consulting Group in Dallas, Texas, where he was
responsible for the total design and construction process for projects
including build-to-suits and tenant fit-up, ranging from 25,000 to 200,000
square feet; from April 1987 to December 1989, Senior Project Manager with
Neiman Marcus' Planning, Architecture, Construction & Facilities Management
Group in Dallas, Texas; prior thereto, managing principal of Pickle & Thomas,
Inc., Architecture/Interiors.
JEFFREY M. TODD--39--Vice President of the REIT Manager since January 1995,
where he has Project Manager responsibilities for build-to-suit projects, and
Vice President of SCI; from November 1994 to January 1995, Project Manager for
Smallwood, Reynolds, Stewart, Stewart & Associates, Inc., where he was
responsible for managing industrial architecture; from June 1984 to November
1994, Project Architect for Wakefield/Beasley & Associates.
JAMES E. TROUT--33--Vice President of the REIT Manager since June 1995, where
he has Project Manager responsibilities for the Central Region, and Vice
President of SCI; prior thereto, Mr. Trout was a member of the National
Development Group from June 1993; from February 1992 to May 1993, Real Estate
Consultant with Douglas A. Edwards, Incorporated in New York, New York; from
June 1991 to January 1992, Assistant to President of Solow Realty and
Development in New York, New York; prior thereto, Management Associate with
Citicorp in New York, New York.
MARY JANE VIETZE--43--Vice President of the REIT Manager since April 1996,
where she is responsible for accounting and financial reporting and Vice
President of SCI; prior thereto, a member of the accounting group since
September 1993; from July 1990 to September 1993, Senior Accountant for Price
Waterhouse; from October 1983 to July 1990, Controller for a group of privately
owned real estate investment companies. Ms. Vietze is a Certified Public
Accountant.
EDWIN D. WAGERS--53--Vice President of the REIT Manager since January 1995,
where he has Project Manager responsibilities for the Mid-Atlantic region of
the United States, and Vice President of SCI; from April 1991 to December 1994,
Chief Operating Officer of National Real Estate Development at Muirfield
Village Development in Columbus, Ohio; from August 1988 to April 1991, Senior
Vice President of Galbreath Huff Companies in Columbus, Ohio; from May 1977 to
August 1988, Senior Vice President of the Midwest Division with Vantage
Companies.
DAVID L. WELCH--35--Vice President of the REIT Manager since February 1995,
where he has Market Officer responsibilities for Washington, D.C. and
Baltimore, Maryland, and Vice President of SCI; from September 1992 to January
1995, Associate Senior Vice President with Carey Winston Co. in Washington,
D.C., where he managed the leasing and marketing program for over 1.5 million
square feet of industrial space in
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Northern Virginia; from May 1984 to September 1992, Vice President with CB
Commercial, where he specialized in industrial leasing, land and building sales
in Northern Virginia.
JAMES E. WHITE--40--Vice President of the REIT Manager since July 1995, where
he has Market Officer responsibilities for Cincinnati, Ohio and Louisville,
Kentucky, and Vice President of SCI; from July 1994 to July 1995, Senior
Regional Director with First Industrial Realty Trust, Inc. in Southfield,
Michigan; prior thereto, Chief Financial Officer with Damone/Andrew Enterprises
in Troy, Michigan from August 1989 to July 1994.
JAMES P. WILSON--52--Vice President of the REIT Manager since October 1994,
where he has Project Manager responsibilities for the Southeast region, and
Vice President of SCI; from March 1988 to October 1994, Vice President of
Development and Construction for The Krauss/Schwartz Company; from April 1986
to March 1988, Vice President of Development and Construction for The Hogan
Group, a real estate development and property management company.
Shareholder Relations and Capital Markets
The following persons provide shareholder relations and capital markets
services to SCI:
K. SCOTT CANON--34--President of Capital Markets Group since January 1996,
where he provides capital markets services for affiliates of Security Capital
Group; prior thereto, Vice President of Capital Markets Group since August 1993
and a member of Capital Markets Group since March 1992; from September 1991 to
March 1992, a personal account director for Chase Manhattan Investment
Services; from August 1987 to September 1991, a member of private client
services for Goldman, Sachs & Co. Mr. Canon is registered with the National
Association of Securities Dealers, Inc.
ROBERT H. FIPPINGER--53--Vice President of Capital Markets Group since June
1995, where he directs corporate communications services for affiliates of
Security Capital Group; prior thereto, Mr. Fippinger headed corporate
communications for the firm from October 1994; from November 1991 to October
1994, with Grubb & Ellis in San Francisco, California, where he represented
corporate clients and provided tenant advisory services; from October 1989 to
October 1991, Executive Director with Techmart in Santa Clara, California,
where he was responsible for management, marketing, operations, leasing and
program development of commercial properties.
GERARD DE GUNZBURG--49--Senior Vice President of Capital Markets Group since
January 1997 and Vice President from January 1993 to December 1996 in its New
York office, where he provides capital markets services for affiliates of
Security Capital Group; from June 1988 to December 1992, a consultant to
American and European companies; prior thereto, Director and Partner of Lincoln
Property Company, Europe, where he arranged real estate financing from 1976 to
1988. Mr. de Gunzburg is registered with the National Association of Securities
Dealers, Inc.
ALISON C. HEFELE--37--Vice President of Capital Markets Group since February
1994, where she provides capital markets services for affiliates of Security
Capital Group; from January 1990 to February 1994, Vice President with
Prudential Real Estate Investors (strategic planning and business development
for institutional real estate investment management services); from September
1985 to January 1990, a management consultant with McKinsey & Company; prior
thereto, a financial analyst with Morgan Stanley Realty Inc. Ms. Hefele is
registered with the National Association of Securities Dealers, Inc.
GARRETT C. HOUSE--31--Vice President of Capital Markets Group since September
1996, where he provides capital markets services for affiliates of Security
Capital Group; from May 1994 to August 1996 he assisted with financing
activities of affiliates of Security Capital Group and, prior thereto, Mr.
House was a member of the Management Development Program from May 1993 to May
1994; in May 1993, Mr. House obtained his M.B.A from Harvard Graduate School of
Business Administration; from July 1989 to July 1991, Project Manager for
Nansay Corporation in Los Angeles, California; from July 1987 to July 1989,
Analyst with Merrill Lynch Capital Markets in New York.
23
<PAGE>
BRADFORD W. HOWE--32--Vice President of Capital Markets Group since January
1996, where he provides capital markets services for affiliates of Security
Capital Group and where he has been an associate from December 1994 to January
1996; from March 1993 to December 1994, Assistant Vice President in the real
estate investment banking group of Kidder Peabody & Co., Incorporated; from
June 1992 to March 1993, Mr. Howe was a real estate consultant at Coopers &
Lybrand. Mr. Howe is registered with the National Association of Securities
Dealers, Inc.
JAMES H. POLK, III--54--Managing Director of Capital Markets Group since
August 1992, where he provides capital markets services for affiliates of
Security Capital Group; Trustee of Security Capital Pacific Trust. Mr. Polk
has been affiliated with the REIT Manager since March 1991; prior thereto, he
was President and Chief Executive Officer of Security Capital Pacific Trust
for sixteen years. Mr. Polk is registered with the National Association of
Securities Dealers, Inc. and is a past President and Trustee of the National
Association of Real Estate Investment Trusts, Inc.
DONALD E. SUTER--40--Senior Vice President of Capital Markets Group since
September 1996, where he provides capital markets services for affiliates of
Security Capital Group; from October 1995 to April 1996, President and Chief
Operating Officer for Cullinan Properties Limited in Peoria, Illinois; from
July 1984 to October 1995 Mr. Suter was with LaSalle Partners in Chicago,
Illinois where his last position held was Senior Vice President, Corporate
Finance Group.
EMPLOYEES
SCI currently has no employees. The REIT Manager, whose sole activity is
advising SCI, together with Client Services, manages the day-to-day operations
of SCI. The REIT Manager and its affiliates have assembled a team of over 280
professionals, collectively possessing extensive experience in industrial real
estate. The majority of these persons are employed directly by and focus
entirely on the services provided by the REIT Manager and Client Services,
with the balance providing centralized research, senior investment committee,
capital markets, legal and accounting services.
COMPETITION
In general, there are numerous other industrial properties located in close
proximity to each of SCI's properties. The amount of rentable space available
in any target market city could have a material effect on SCI's capacity to
rent space and on the rents charged. In addition, in many of SCI's submarkets,
institutional investors and owners and developers of industrial facilities
compete for the acquisition, development and leasing of industrial space. Many
of these persons have substantial resources and experience.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic
substances at, on, under or in its property. The costs of removal or
remediation of such substances could be substantial. Such laws often impose
such liability without regard to whether the owner or operator knew of, or was
responsible for, the release or presence of such hazardous substances. The
presence of such substances may adversely affect the owner's ability to sell
such real estate or to borrow using such real estate as collateral. SCI has
not been notified by any governmental authority of any non-compliance,
liability or other claim in connection with any of the properties owned or
being acquired at December 31, 1996, and SCI is not aware of any environmental
condition with respect to any of its properties that is likely to be material.
SCI has subjected each of its properties to a Phase I environmental assessment
(which does not involve invasive procedures such as soil sampling or ground
water analysis) by independent consultants. While some of these assessments
have led to further investigation and sampling, none of the environmental
assessments has revealed, nor is SCI aware of, any environmental liability
(including asbestos-related liability) that the REIT Manager believes would
have a material adverse effect on SCI's business, financial condition or
results of operations. No assurance can be given, however, that these
assessments and investigations reveal all potential environmental liabilities,
that no prior owner or operator created any material environmental condition
not known to SCI or the independent consultants or that future uses or
conditions (including, without limitation, customer actions or changes in
applicable environmental laws and regulations) will not result in unreimbursed
costs relating to environmental liabilities.
24
<PAGE>
INSURANCE COVERAGE
SCI currently carries comprehensive liability, fire, flood, earthquake,
extended coverage and rental loss insurance with respect to the properties
with policy specifications and insured limits customarily carried for similar
properties; however, an uninsured loss could result in loss of capital
investment and anticipated profits.
EXECUTIVE OFFICERS
All executive functions of SCI are performed by the REIT Manager. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--REIT Management Agreement." The executive officers of the REIT
Manager are:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
K. Dane Brooksher............ 58 Co-Chairman and Chief Operating Officer
Thomas G. Wattles............ 45 Co-Chairman and Chief Investment Officer
Irving F. Lyons, III......... 47 Managing Director
Jeffrey H. Schwartz.......... 37 Managing Director
Robert J. Watson............. 47 Managing Director
Ned K. Anderson.............. 49 Senior Vice President
Kent W. Johnson.............. 43 Senior Vice President
M. Gordon Keiser............. 52 Senior Vice President
Jeffrey A. Klopf............. 48 Senior Vice President and Secretary
Donald W. Madsen............. 53 Senior Vice President
Steven K. Meyer.............. 48 Senior Vice President
Walter C. Rakowich........... 39 Senior Vice President
John W. Seiple............... 38 Senior Vice President
</TABLE>
See "--The REIT Manager--Officers of SCI and Directors and Officers of the
REIT Manager and Relevant Affiliates" for descriptions of the REIT Manager's
executive officers.
ITEM 2. PROPERTIES
The following tables set forth certain information as of December 31, 1996
with respect to SCI's properties owned as of December 31, 1996. No individual
property, or group of properties operated as a single business unit, amounts
to 10% or more of SCI's consolidated total assets at December 31, 1996 nor
does the gross revenue from any such properties amount to 10% or more of SCI's
consolidated gross revenues for the fiscal year ended December 31, 1996.
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE OF PROPERTIES
<TABLE>
<CAPTION>
RENTABLE
PERCENTAGE SQUARE ACCUMULATED LONG-TERM
YEAR ACQUIRED NO. OF OCCUPANCY FOOTAGE SCI INVESTMENT DEPRECIATION MORTGAGE
OR COMPLETED BLDGS. (1) (2) (1) (1) DEBT
------------- ------ ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
OWNED
AT DECEMBER 31, 1996
Atlanta, Georgia(3)
Central/Atlanta........ 1996 4 100.00% 347,560 $ 3,281,344 $ -- None
Chattahoochee.......... 1996 4 80.12% 201,223 3,011,471 -- None
I-20/West/Fulton....... 1994, 1995, 1996 36 89.04% 3,408,749 71,226,232 3,307,508 None
I-85/Airport........... 1994, 1995, 1996 16 83.80% 882,142 33,141,381 1,630,927 $ 1,857,136
I-85/Northeast......... 1994, 1995, 1996 38 87.38% 3,001,318 81,282,227 3,349,515 None
--- ------- ---------- -------------- ------------ ------------
98 88.07% 7,840,992 191,942,655 8,287,950 1,857,136
--- ------- ---------- -------------- ------------ ------------
Austin, Texas
I-35/Central........... 1994, 1995, 1996 12 77.34% 648,939 22,835,073 670,915 None
I-35/North/Mopac(4).... 1993, 1994, 1995, 1996 11 75.99% 781,104 30,113,937 1,656,403 None
I-35/South............. 1994, 1995, 1996 12 78.59% 725,874 22,618,284 1,220,624 None
--- ------- ---------- -------------- ------------ ------------
35 77.27% 2,155,917 75,567,294 3,547,942 None
--- ------- ---------- -------------- ------------ ------------
</TABLE>
(See notes following table)
25
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
PERCENTAGE SQUARE ACCUMULATED LONG-TERM
YEAR ACQUIRED NO. OF OCCUPANCY FOOTAGE SCI INVESTMENT DEPRECIATION MORTGAGE
OR COMPLETED BLDGS. (1) (2) (1) (1) DEBT
------------- ------ ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Birmingham, Alabama
I-459/South/Perimeter.. 1994 2 100.00% 606,850 $ 17,005,120 $ 1,284,623 None
I-65/Oxmoor............ 1994 4 85.66% 528,428 16,137,660 1,215,454 $ 7,163,242
--- ------- ---------- -------------- ------------ ------------
6 93.33% 1,135,278 33,142,780 2,500,077 7,163,242
--- ------- ---------- -------------- ------------ ------------
Charlotte, North
Carolina
I-77/Southwest(4)...... 1994 13 91.14% 1,334,182 33,068,909 2,397,294 1,521,832
I-85/Northeast......... 1994, 1995, 1996 6 76.75% 593,720 16,514,948 488,970 None
I-85/Northwest......... 1994 2 100.00% 404,351 6,889,541 527,353 None
--- ------- ---------- -------------- ------------ ------------
21 89.01% 2,332,253 56,473,398 3,413,617 1,521,832
--- ------- ---------- -------------- ------------ ------------
Chattanooga, Tennessee
Amnicola Highway....... 1994 4 100.00% 1,075,872 13,901,151 888,768 None
I-24/Tiftonia.......... 1995 1 100.00% 72,000 1,157,660 50,649 None
--- ------- ---------- -------------- ------------ ------------
5 100.00% 1,147,872 15,058,811 939,417 None
--- ------- ---------- -------------- ------------ ------------
Chicago, Illinois(3)
Army Trail
Corridor/Chicago...... 1996 1 100.00% 177,615 7,547,799 -- None
I-90/O'Hare............ 1995, 1996 18 99.84% 2,064,372 61,594,581 1,139,458 None
South Cook County...... 1996 5 100.00% 541,090 12,231,707 117,347 None
--- ------- ---------- -------------- ------------ ------------
24 99.88% 2,783,077 81,374,087 1,256,805 None
--- ------- ---------- -------------- ------------ ------------
Cincinnati, Ohio
I-71/I-275............. 1995 1 100.00% 60,000 1,429,958 43,996 None
I-74/West(5)........... 1994 1 100.00% 232,880 3,297,449 200,786 1,790,618(6)
I-75/South-N. Kentucky. 1996 2 76.83% 492,507 11,606,459 169,274 None
I-75/North/Cincinnati.. 1994, 1995, 1996 25 91.97% 1,905,024 40,729,996 2,121,116 None
--- ------- ---------- -------------- ------------ ------------
29 90.07% 2,690,411 57,063,862 2,535,172 1,790,618
--- ------- ---------- -------------- ------------ ------------
Columbus, Ohio
I-270/East............. 1994 5 88.38% 566,345 11,789,398 665,768 None
I-270/Southeast........ 1994 1 100.00% 121,200 1,791,157 120,409 None
I-270/West............. 1995, 1996 6 100.00% 833,248 17,858,220 727,857 None
I-270/Southwest........ 1996 3 61.96% 879,978 20,474,904 320,250 None
--- ------- ---------- -------------- ------------ ------------
15 83.32% 2,400,771 51,913,679 1,834,284 None
--- ------- ---------- -------------- ------------ ------------
Dallas/Fort Worth, Texas
I-30/Great
Southwest(4).......... 1994, 1995, 1996 10 79.09% 832,358 18,517,006 658,291 None
I-35/Stemmons
Corridor(4)........... 1994, 1995, 1996 16 97.97% 808,059 15,746,226 634,966 None
I-35 South/Fort Worth.. 1996 1 100.00% 74,500 2,555,050 7,782 None
I-635/Northgate(4)..... 1994, 1996 5 100.00% 531,149 10,811,857 700,213 None
I-635/Valwood.......... 1995, 1996 18 84.80% 1,462,030 40,077,401 475,109 None
I-635/DFW/Airport...... 1996 1 100.00% 100,000 4,120,088 19,296 None
I-820/North Fort Worth. 1994, 1995, 1996 4 100.00% 372,883 7,184,623 396,305 None
Redbird/Loop 12........ 1994, 1996 4 100.00% 604,776 11,509,989 219,360 None
--- ------- ---------- -------------- ------------ ------------
59 91.38% 4,785,755 110,522,240 3,111,322 None
--- ------- ---------- -------------- ------------ ------------
Denver, Colorado
I-70/Central........... 1993 1 100.00% 73,000 1,515,388 147,610 None
I-70/Northeast(4)...... 1992, 1993, 1994, 21 95.35% 2,504,255 55,675,336 5,055,892 None
1995, 1996
--- ------- ---------- -------------- ------------ ------------
22 95.48% 2,577,255 57,190,724 5,203,502 None
--- ------- ---------- -------------- ------------ ------------
East Bay (San
Francisco), California
Hayward/San
Leandro(4)(7)......... 1993, 1994 38 93.64% 2,877,727 102,235,897 8,545,858 16,271,203(8)
Tracy.................. 1993 2 100.00% 159,000 5,780,995 491,826 None
--- ------- ---------- -------------- ------------ ------------
40 93.97% 3,036,727 108,016,892 9,037,684 16,271,203
--- ------- ---------- -------------- ------------ ------------
</TABLE>
(See notes following table)
26
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
PERCENTAGE SQUARE ACCUMULATED LONG-TERM
YEAR ACQUIRED NO. OF OCCUPANCY FOOTAGE SCI INVESTMENT DEPRECIATION MORTGAGE
OR COMPLETED BLDGS. (1) (2) (1) (1) DEBT
------------- ------ ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
El Paso, Texas
I-10/East/Vista Del 1991, 1993, 1994, 17 91.08% 2,046,202 $ 51,303,853 $ 3,159,631 $ 6,902,299(9)
Sol (4).............. 1995, 1996
I-10/Lower Valley..... 1994 1 100.00% 108,125 2,273,261 145,004 None
I-10/Northwest........ 1992, 1993, 1994 4 93.42% 360,000 8,531,334 819,252 None
--- ------- ---------- -------------- ------------ ------------
22 91.80% 2,514,327 62,108,448 4,123,887 6,902,299
--- ------- ---------- -------------- ------------ ------------
Fort Lauderdale/Miami,
Florida
Airport West.......... 1995 1 100.00% 124,000 5,144,224 128,553 None
I-95/Hollywood(10).... 1995 1 100.00% 207,150 7,854,019 370,404 None
I-95/North(5)......... 1994 1 100.00% 93,475 4,745,559 291,610 2,565,445(6)
--- ------- ---------- -------------- ------------ ------------
3 100.00% 424,625 17,743,802 790,567 2,565,445
--- ------- ---------- -------------- ------------ ------------
Houston, Texas
I-10/Central Business
District............. 1995 1 85.65% 168,869 3,289,245 168,353 None
I-10/West/Post Oak.... 1993, 1994, 1996 24 92.13% 1,500,873 39,876,610 3,193,770 None
I-610/East/Hobby...... 1994 8 89.41% 515,328 9,425,137 663,853 None
I-610/North........... 1993, 1994, 1995 19 97.88% 1,441,356 36,681,127 1,897,146 None
Northwest /U.S. 290... 1993, 1994, 1995, 1996 16 78.63% 1,486,535 36,572,050 1,859,456 None
--- ------- ---------- -------------- ------------ ------------
68 89.34% 5,112,961 125,844,169 7,782,578 None
--- ------- ---------- -------------- ------------ ------------
Indianapolis, Indiana
I-465/Northwest....... 1994, 1995 29 90.82% 2,567,175 75,463,730 2,757,170 None
I-69/Northeast........ 1995 1 71.78% 276,000 6,770,842 107,383 None
I-70/East............. 1995 5 99.08% 382,400 6,678,300 236,400 None
I-70/West............. 1994, 1995, 1996 12 96.77% 750,481 23,269,743 711,223 None
--- ------- ---------- -------------- ------------ ------------
47 91.42% 3,976,056 112,182,615 3,812,176 None
--- ------- ---------- -------------- ------------ ------------
Kansas City, Kansas/Missouri
I-35/Overland Park.... 1994 3 100.00% 90,163 3,644,156 254,436 None
I-35/South Corridor... 1994 1 100.00% 99,197 2,256,909 139,076 None
I-35/Wyandotte........ 1994, 1996 2 100.00% 154,992 3,665,623 192,837 None
I-70/Riverside........ 1994, 1996 20 93.32% 1,056,184 36,870,385 2,162,558 17,996,239
--- ------- ---------- -------------- ------------ ------------
26 94.96% 1,400,536 46,437,073 2,748,907 17,996,239
--- ------- ---------- -------------- ------------ ------------
Las Vegas, Nevada
Airport/Southwest..... 1996 5 100.00% 399,157 20,479,978 397,057 9,115,515
I-15/North............ 1994, 1995, 1996 5 79.15% 644,678 17,271,398 537,053 259,321
--- ------- ---------- -------------- ------------ ------------
10 87.12% 1,043,835 37,751,376 934,110 9,374,836
--- ------- ---------- -------------- ------------ ------------
Los Angeles/Orange
County, California
I-5/Mid-Counties...... 1995 5 100.00% 551,311 20,034,826 719,230 None
I-5/North-Central
Orange County........ 1996 2 100.00% 1,182,051 38,811,825 119,331 None
I-5/South Orange
County............... 1996 2 100.00% 139,968 5,905,615 66,335 None
Irvine/Orange County
Airport.............. 1994 1 100.00% 100,000 4,341,162 246,149 None
--- ------- ---------- -------------- ------------ ------------
10 100.00% 1,973,330 69,093,428 1,151,045 None
--- ------- ---------- -------------- ------------ ------------
Louisville, Kentucky
I-264/Riverport....... 1995, 1996 2 100.00% 623,900 10,727,002 172,510 None
--- ------- ---------- -------------- ------------ ------------
2 100.00% 623,900 10,727,002 172,510 None
--- ------- ---------- -------------- ------------ ------------
Memphis, Tennessee
I-240/Southeast....... 1994, 1995, 1996 26 94.04% 2,805,776 50,691,604 2,192,799 420,870
--- ------- ---------- -------------- ------------ ------------
26 94.04% 2,805,776 50,691,604 2,192,799 420,870
--- ------- ---------- -------------- ------------ ------------
</TABLE>
(See notes following table)
27
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
PERCENTAGE SQUARE ACCUMULATED LONG-TERM
YEAR ACQUIRED NO. OF OCCUPANCY FOOTAGE SCI INVESTMENT DEPRECIATION MORTGAGE
OR COMPLETED BLDGS. (1) (2) (1) (1) DEBT
------------- ------ ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nashville, Tennessee
I-24/Southeast.......... 1994, 1995, 1996 20 88.69% 1,937,467 $ 38,622,026 $ 2,040,378 None
I-40/Southeast.......... 1995, 1996 3 100.00% 154,500 4,588,863 199,889 None
--- ------- ---------- -------------- ------------ ------------
23 89.53% 2,091,967 43,210,889 2,240,267 None
--- ------- ---------- -------------- ------------ ------------
New Jersey/I-95 Corridor
Meadowlands............. 1996 1 100.00% 530,000 16,307,909 190,825 None
Route 287/Exit 10 I-95.. 1996 5 100.00% 1,210,472 31,719,050 -- None
--- ------- ---------- -------------- ------------ ------------
6 100.00% 1,740,472 48,026,959 190,825 None
--- ------- ---------- -------------- ------------ ------------
Oklahoma City, Oklahoma
I-40/Southwest.......... 1993, 1994 10 93.41% 818,600 14,033,418 1,143,146 None
--- ------- ---------- -------------- ------------ ------------
10 93.41% 818,600 14,033,418 1,143,146 None
--- ------- ---------- -------------- ------------ ------------
Orlando, Florida
East
Orlando/Titusville(10). 1994 1 0.00% 51,383 1,947,397 118,163 $ 4,942,376(11)
I-4/33rd Street(5)(10).. 1994, 1995, 1996 9 100.00% 489,891 13,724,910 531,002 933,626(6)(11)
Orlando Central Park.... 1994 2 100.00% 321,794 6,038,923 363,305 None
--- ------- ---------- -------------- ------------ ------------
12 94.05% 863,068 21,711,230 1,012,470 5,876,002
--- ------- ---------- -------------- ------------ ------------
Phoenix, Arizona
I-10/Central............ 1993, 1994, 1995 4 81.97% 341,407 7,596,707 595,599 None
I-10/West............... 1993, 1994 11 99.67% 602,329 12,085,250 994,078 None
Tempe................... 1992, 1996 7 80.02% 647,607 19,384,060 939,869 None
--- ------- ---------- -------------- ------------ ------------
22 87.88% 1,591,343 39,066,017 2,529,546 None
--- ------- ---------- -------------- ------------ ------------
Portland, Oregon
I-5/Columbia Corridor... 1993, 1994, 1995, 1996 12 96.99% 732,423 22,725,091 1,200,441 119,093
I-5/Wilsonville......... 1995, 1996 6 86.76% 379,000 13,995,462 301,277 161,072
--- ------- ---------- -------------- ------------ ------------
18 93.50% 1,111,423 36,720,553 1,501,718 280,165
--- ------- ---------- -------------- ------------ ------------
Reno, Nevada
I-80/Sparks............. 1993, 1994, 1995, 1996 15 84.22% 1,225,586 34,725,767 2,238,830 None
US 395/Reno North....... 1996 2 46.88% 473,816 13,213,621 -- None
--- ------- ---------- -------------- ------------ ------------
17 73.81% 1,699,402 47,939,388 2,238,830 None
--- ------- ---------- -------------- ------------ ------------
Rio Grande Valley, Texas
I-77/Lower Valley....... 1995 13 96.61% 773,346 19,744,926 823,760 3,367,675
--- ------- ---------- -------------- ------------ ------------
13 96.61% 773,346 19,744,926 823,760 3,367,675
--- ------- ---------- -------------- ------------ ------------
Salt Lake City, Utah
I-15/Clearfield......... 1995, 1996 3 100.00% 932,708 19,953,876 470,840 None
I-215/Central........... 1995 2 89.30% 299,000 8,859,636 280,888 None
I-80/North.............. 1994, 1995, 1996 2 68.50% 361,960 11,648,878 288,882 None
--- ------- ---------- -------------- ------------ ------------
7 90.84% 1,593,668 40,462,390 1,040,610 None
--- ------- ---------- -------------- ------------ ------------
San Antonio, Texas
I-10/Central Business
District............... 1992, 1994 2 83.22% 147,751 3,529,689 347,903 1,186,370
I-35/Central............ 1992, 1993, 1994, 1995 22 99.45% 1,993,610 43,495,672 3,743,179 None
I-35/North.............. 1993, 1994, 1995, 1996 19 82.93% 1,121,437 30,820,573 1,768,174 1,885,565
I-37/Central............ 1994, 1995 11 98.19% 411,264 14,304,976 401,796 None
I-410 East/San Antonio.. 1996 6 96.53% 598,417 11,826,764 210,474 None
--- ------- ---------- -------------- ------------ ------------
60 94.02% 4,272,479 103,977,674 6,471,526 3,071,935
--- ------- ---------- -------------- ------------ ------------
San Diego, California
I-805/Miramar........... 1996 1 100.00% 200,000 7,184,378 -- None
Rancho Bernardo/I-15.... 1996 2 52.58% 144,875 6,079,390 1,748 None
--- ------- ---------- -------------- ------------ ------------
3 80.08% 344,875 13,263,768 1,748 None
--- ------- ---------- -------------- ------------ ------------
</TABLE>
(See notes following table)
28
<PAGE>
<TABLE>
<CAPTION>
RENTABLE
PERCENTAGE SQUARE ACCUMULATED LONG-TERM
YEAR ACQUIRED NO. OF OCCUPANCY FOOTAGE SCI INVESTMENT DEPRECIATION MORTGAGE
OR COMPLETED BLDGS. (1) (2) (1) (1) DEBT
------------- ------ ---------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Seattle, Washington
I-405/Kent Valley..... 1994, 1995 5 96.81% 543,196 $ 20,933,493 $ 690,670 $ 62,803
I-5/Tacoma............ 1996 3 0.00% 339,382 11,877,762 -- None
--- ------- ---------- -------------- ------------ ------------
8 59.58% 882,578 32,811,255 690,670 62,803
--- ------- ---------- -------------- ------------ ------------
South Bay (San Francis-
co), California
Fremont/Newark(7)..... 1993, 1994, 1995, 1996 61 98.01% 2,520,608 169,679,244 11,431,225 22,500,974(8)
I-880/North San Jose.. 1994 5 100.00% 507,310 19,508,268 1,628,328 None
--- ------- ---------- -------------- ------------ ------------
66 98.35% 3,027,918 189,187,512 13,059,553 22,500,974
--- ------- ---------- -------------- ------------ ------------
Tampa, Florida(3)
Airport/Tampa
West(5)(10).......... 1994, 1995, 1996 24 82.13% 898,490 36,461,774 1,945,113 12,290,289(6)(11)
I-4/Lakeland.......... 1994 1 100.00% 247,018 6,791,284 498,444 None
I-75/Tampa
East(5)(10).......... 1994, 1995, 1996 28 97.90% 1,719,448 57,997,532 3,207,229 16,148,609(6)
Pinellas/St. Peters-
burg................. 1994 6 100.00% 103,632 2,701,741 155,206 982,562
--- ------- ---------- -------------- ------------ ------------
59 93.38% 2,968,588 103,952,331 5,805,992 29,421,460
--- ------- ---------- -------------- ------------ ------------
Tulsa, Oklahoma
I-44/Broken Arrow Ex-
pressway(5).......... 1993, 1994 10 99.99% 573,333 12,317,989 901,149 688,088(6)
--- ------- ---------- -------------- ------------ ------------
10 99.99% 573,333 12,317,989 901,149 688,088
--- ------- ---------- -------------- ------------ ------------
Washington,
D.C./Baltimore
I-395/Alexandria...... 1996 12 95.96% 812,027 35,373,769 1,132,106 None
I-66/Dulles........... 1996 5 100.00% 615,560 21,122,996 469,619 None
I-695/Southwest....... 1995, 1996 6 69.18% 620,075 15,432,896 226,612 6,053,432
I-95/Landover......... 1994 5 91.78% 384,349 16,465,138 930,032 None
I-
95/Northeast/Beltsville. 1994 3 84.30% 248,118 11,218,388 618,358 None
--- ------- ---------- -------------- ------------ ------------
31 89.01% 2,680,129 99,613,187 3,376,727 6,053,432
--- ------- ---------- -------------- ------------ ------------
Other Loca-
tions(5)(10)(12)
Other................. 1991, 1994, 1996 9 93.69% 761,267 19,819,814 742,336 828,103(6)
--- ------- ---------- -------------- ------------ ------------
9 93.69% 761,267 19,819,814 742,336 828,103
--- ------- ---------- -------------- ------------ ------------
TOTAL OPERATING
PROPERTIES OWNED AT
DECEMBER 31, 1996.. 942 91.21% 80,556,110 $2,256,705,239 $109,147,224 $138,014,357
=== ======= ========== ============== ============ ============
</TABLE>
(See notes following table)
29
<PAGE>
<TABLE>
<CAPTION>
RENTABLE BUDGETED
YEAR OF SQUARE DEVELOPMENT ACCUMULATED LONG-TERM
EXPECTED NO. OF FOOTAGE COST DEPRECIATION MORTGAGE
COMPLETION BLDGS. (2) (13) (1) DEBT
---------- ------ --------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PROPERTIES UNDER DEVELOP-
MENT
AT DECEMBER 31, 1996
(14)
Atlanta Georgia
I-85/Northeast.......... 1997 2 296,000 $ 9,148,601 N/A None
Charlotte, North Carolina
I-85/Northeast.......... 1997 2 191,000 6,136,984 N/A None
Chicago, Illinois
Army Trail
Corridor/Chicago....... 1997 2 271,390 10,803,814 N/A None
I-90/O'Hare............. 1997 2 236,699 14,143,818 N/A None
Cincinnati, Ohio
I-75/North/Cincinnati... 1997 1 91,800 3,512,710 N/A $ 869,375
Dallas/Fort Worth, Texas
I-30/Great Southwest.... 1997 1 229,400 6,785,885 N/A None
I-635/Valwood........... 1997 3 159,485 5,973,494 N/A None
East Bay (San Francisco),
California
Tracy................... 1997 2 180,600 5,849,318 N/A None
Houston, Texas
Northwest/U.S. 290...... 1997 2 390,400 11,408,806 N/A None
Indianapolis, Indiana
I-70
Southwest/Indianapolis. 1997 1 180,000 5,338,237 N/A None
Kansas City,
Kansas/Missouri
I-70/Riverside.......... 1997 2 136,694 5,818,899 N/A None
Las Vegas, Nevada
I-15/North.............. 1997 2 199,583 7,202,090 N/A None
I-515/Henderson......... 1997 2 205,378 7,459,542 N/A None
Los Angeles/Orange Coun-
ty, California
I-5/Mid-Counties........ 1997 1 72,079 2,794,599 N/A None
I-5/South Orange County. 1997 4 526,850 24,196,296 N/A None
Nashville, Tennessee
I-24/Southeast.......... 1997 1 162,000 4,628,338 N/A None
Orlando, Florida
Orlando Central Park.... 1997 1 141,620 4,421,014 N/A None
Portland, Oregon
I-5/Columbia Corridor... 1997 2 218,400 8,243,432 N/A 249,787
Sunset Corridor......... 1997 5 312,200 15,579,615 N/A None
Rio Grande Valley, Texas
I-77/Lower Valley....... 1997 1 144,000 4,199,512 N/A None
Salt Lake City, Utah
I-215/Central........... 1997 1 385,769 15,445,556 N/A None
San Antonio, Texas
I-35/North.............. 1997 1 244,800 6,596,954 N/A None
Seattle, Washington
I-405/Kent Valley....... 1997 1 152,727 6,706,927 N/A 131,428
Tampa, Florida
I-75/Tampa East......... 1997 1 150,400 4,726,822 N/A None
Washington,
D.C./Baltimore
I-395/Alexandria........ 1997 1 152,135 6,327,795 N/A None
I-66/Dulles............. 1997 1 159,655 6,429,620 N/A None
I-95/Corridor........... 1997 2 307,194 11,067,505 N/A None
--- --------- ------------ ----------
TOTAL PROPERTIES UNDER
DEVELOPMENT
AT DECEMBER 31, 1996
(14)................. 47 5,898,258 $220,946,183 $1,250,590
=== ========= ============ ==========
</TABLE>
(See notes following table)
30
<PAGE>
<TABLE>
<CAPTION>
SCI ACCUMULATED LONG-TERM
ACREAGE INVESTMENT DEPRECIATION MORTGAGE
YEAR ACQUIRED (2) (1) (1) DEBT
------------- ------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
LAND HELD FOR DEVELOPMENT
AT DECEMBER 31, 1996
Atlanta, Georgia
I-20/West/Fulton........... 1994 49.6 $2,247,448 N/A None
I-85/Airport............... 1996 24.7 1,805,112 N/A None
I-85/Northeast............. 1995 7.1 785,912 N/A None
Austin, Texas
I-35/Central............... 1994, 1996 21.5 1,061,140 N/A None
I-35/North/Mopac........... 1994 20.4 1,311,509 N/A None
I-35/South................. 1996 4.2 588,259 N/A None
Charlotte, North Carolina
I-85/Northeast............. 1994, 1995, 1996 23.7 1,599,051 N/A None
Chicago, Illinois
Army Trail
Corridor/Chicago.......... 1996 12.1 1,596,852 N/A None
I-90/O'Hare................ 1996 7.7 2,871,385 N/A None
Cincinnati, Ohio
I-75/North/Cincinnati...... 1996 36.5 2,250,018 N/A $377,615
Columbus, Ohio
I-270/Southeast............ 1994, 1995, 1996 37.3 1,228,646 N/A None
I-270/West................. 1996 13.8 581,619 N/A None
Dallas/Fort Worth, Texas
I-30/Great Southwest....... 1996 16.3 1,538,724 N/A None
I-635/Valwood.............. 1995, 1996 19.5 1,534,213 N/A None
I-635/DFW/Airport.......... 1996 4.8 415,061 N/A None
Denver, Colorado
I-70/ Northeast............ 1994 12.3 1,145,319 N/A None
East Bay (San Francisco),
California
Tracy...................... 1996 12.6 1,517,032 N/A None
El Paso, Texas
I-10/East/Vista Del Sol.... 1993 65.2 3,588,265 N/A None
I-10/Northwest............. 1991, 1992 156.3 6,307,932 N/A None
Fort Lauderdale/Miami, Flor-
ida
I-95/Hollywood............. 1996 50.2 8,419,054 N/A None
Houston, Texas
Northwest/U.S. 290......... 1993 46.6 2,062,410 N/A None
Indianapolis, Indiana
I-69/Northeast............. 1994 6.1 491,036 N/A None
I-
70/Southwest/Indianapolis. 1996 46.0 2,622,641 N/A None
Las Vegas, Nevada
I-15/North................. 1993, 1995 36.8 3,020,239 N/A 293,677
I-515/Henderson............ 1995, 1996 26.2 2,962,252 N/A None
Los Angeles/Orange County,
California
I-5/South Orange County.... 1995, 1996 52.0 11,524,032 N/A None
Louisville, Kentucky
I-264/Riverport............ 1996 15.3 586,359 N/A None
Nashville, Tennessee
I-24/Southeast............. 1996 33.7 865,713 N/A None
Orlando, Florida
Orlando Central Park....... 1996 51.8 4,037,206 N/A None
Phoenix, Arizona
Tempe...................... 1992, 1996 20.6 2,575,507 N/A None
Portland, Oregon
Sunset Corridor............ 1996 21.3 2,234,695 N/A None
Reno, Nevada
US 395/Reno North.......... 1995 17.8 2,210,466 N/A None
Rio Grande Valley, Texas
I-77/Lower Valley.......... 1995 14.8 438,913 N/A None
</TABLE>
(See notes following table)
31
<PAGE>
<TABLE>
<CAPTION>
BUDGETED ACCUMULATED LONG-TERM
ACREAGE DEVELOPMENT SCI INVESTMENT DEPRECIATION MORTGAGE
YEAR ACQUIRED (2) COST (13) (1) (1) DEBT
------------- ------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Salt Lake City, Utah
I-215/Central........... 1996 30.9 N/A $ 2,771,875 N/A None
I-80/North.............. 1994, 1995 27.3 N/A 1,819,648 N/A None
San Antonio, Texas
I-35/Central............ 1994 10.0 N/A 976,583 N/A None
I-35/North.............. 1996 30.7 N/A 2,790,054 N/A None
I-410 East/San Antonio.. 1996 16.6 N/A 1,303,133 N/A None
San Diego, California
Rancho Bernardo/I-15.... 1995 9.2 N/A 1,939,253 N/A None
Seattle, Washington
I-405/Kent Valley....... 1994 6.2 N/A 1,247,937 N/A $ 15,804
South Bay (San Francis-
co), California
Fremont/Newark.......... 1996 27.2 N/A 6,033,914 N/A None
Tampa, Florida
I-75/Tampa East......... 1995 74.3 N/A 5,324,040 N/A None
Washington, DC/Baltimore
I-395/Alexandria........ 1994 12.6 N/A 1,295,901 N/A None
I-95/Corridor........... 1996 43.4 N/A 5,789,959 N/A None
------- -------------- ------------
TOTAL LAND HELD FOR
DEVELOPMENT
AT DECEMBER 31, 1996. 1,273.2 $ 109,316,317 $ 687,096
======= ============== ============
LAND SUBJECT TO FIXED
PRICE OPTIONS OR
RIGHTS OF FIRST REFUSAL
AT DECEMBER 31, 1996
OPTIONS
- -------
Chicago, Illinois
South Cook County....... 4.0 N/A N/A N/A None
Cincinnati, Ohio
I-75/South-N. Kentucky.. 20.5 N/A N/A N/A None
Columbus, Ohio
I-270/Southeast......... 39.4 N/A N/A N/A None
East Bay (San Francisco),
California
Tracy................... 333.2 N/A N/A N/A None
El Paso, Texas
I-10/East/Vista Del Sol. 44.5 N/A N/A N/A None
Las Vegas, Nevada
I-15/North.............. 26.4 N/A N/A N/A None
Louisville, Kentucky
I-264/Riverport......... 22.4 N/A N/A N/A None
South Bay (San Francis-
co), California
Fremont/Newark.......... 23.0 N/A N/A N/A None
Tampa, Florida...........
I-75/Tampa East ........ 1.8 N/A N/A N/A None
-------
TOTAL OPTIONS AT DE-
CEMBER 31, 1996...... 515.2
=======
RIGHTS OF FIRST REFUSAL
- -----------------------
Indianapolis, Indiana
I-70
Southwest/Indianapolis. 15.1 N/A N/A N/A None
South Bay (San Francis-
co), California
Fremont/Newark.......... 21.8 N/A N/A N/A None
-------
TOTAL RIGHTS OF FIRST
REFUSAL
AT DECEMBER 31, 1996. 36.9
=======
TOTAL OPTIONS AND
RIGHTS OF FIRST
REFUSAL AT DECEMBER
31, 1996............. 552.1
=======
GRAND TOTAL AT DECEM-
BER 31, 1996......... $220,946,183 $2,366,021,556 $109,147,224 $139,952,043
============ ============== ============ ============
</TABLE>
(See notes following table)
32
<PAGE>
- --------
n/aNot Applicable
(1) Percentage Occupancy is as of December 31, 1996 for operating properties
owned at December 31, 1996. Operating properties at December 31, 1996
includes recently completed development properties in initial lease-up
(3.7 million square feet completed in the fourth quarter of 1996) which
impacts the overall occupancy percentage at December 31, 1996. SCI
Investment is as of December 31, 1996 for operating properties owned and
land held for development at December 31, 1996. Depreciation is determined
using the straight-line method over 30 years for buildings acquired, over
40 years for buildings developed and over 10 years for tenant
improvements.
(2) Square footage is shown for operating properties and properties under
development; acreage is shown for land held for future development and
land subject to fixed price options and rights of first refusal.
(3) In January 1997, SCI sold five buildings: a 177,615 square foot building
in Chicago with a historical cost of $7.6 million, a 14,985 square foot
building in Tampa with a historical cost of $474,000 and three buildings
in Atlanta totalling 81,223 square feet with historical costs totalling
$1.5 million.
(4) In the Austin, Charlotte, Dallas, Denver, East-Bay (San Francisco) and El
Paso markets, an aggregate of 1,603,295 square feet are owned through SCI
limited Partnership-II, of which SCI is general partner and owns 97.4%.
The square footage and investment included in the table represent 100% of
the property owned by the partnership.
(5) In the Cincinnati, Fort Lauderdale/Miami, Orlando, Tampa, Tulsa markets
and two other locations, 1,988,639 square feet are owned through SCI
Limited Partnership-IV, of which SCI IV, Inc., a wholly owned subsidiary
of SCI, is the general partner and owns 96.4%. The square footage and
investment included in the table represent 100% of the property owned by
the partnership.
(6) Includes 1,988,639 square feet owned by SCI Limited Partnership-IV pledged
to secure four long-term mortgage notes totalling $36,024,577 as of
December 31, 1996.
(7) In the East Bay (San Francisco) and South Bay (San Francisco) markets,
3,890,745 square feet are owned through SCI Limited Partnership-I, of
which SCI is the general partner and owns 68.7%. The square footage and
investment included in the table represent 100% of the property owned by
the partnership.
(8) Includes 1,205,420 square feet owned by SCI Limited Partnership-I pledged
to secure four long-term mortgage notes totalling $27,894,694 as of
December 31, 1996.
(9) Includes 144,000 square feet owned by SCI Limited Partnership-II pledged
to secure long-term mortgage notes totalling $2,664,229 as of December 31,
1996.
(10) In Fort Lauderdale/Miami, Orlando, Tampa, San Antonio and one other
location, 1,182,971 square feet are owned through SCI Limited
Partnership-III, including 80,000 square feet owned in co-tenancy with an
unrelated third party. SCI is the general partner of SCI Limited
Partnership-III and owns 75.6%. The square footage and investment
included in the table represent 100% of the property owned by the
partnership.
(11) Includes 272,864 square feet (of which 80,000 square feet are owned in
co-tenancy) owned by SCI Limited Partnership-III pledged to secure four
long-term mortgage notes totalling $5,145,140 as of December 31, 1996.
(12) Includes 136,000 square feet in which SCI has a 70.0% joint venture
interest. The square footage and investment included in the table
represent 100% of the property owned by the partnership.
(13) Represents the total budgeted development costs for properties under
development, which includes the cost of land, fees, permits, payments to
contractors, architectural and engineering fees and interest and property
taxes to be capitalized during construction, rather than costs incurred
to date.
(14) Includes 1,380,489 square feet in the design and permitting stage.
33
<PAGE>
Geographic Distribution
Substantially all of SCI's properties are located in 36 target market
cities. The table below demonstrates the geographic distribution of SCI's
equity real estate investments as of December 31, 1996 and 1995. This chart
does not include land held for future development, which was less than 5% of
assets, based on cost at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------- -------------------------------
NUMBER OF PERCENTAGE OF ASSETS NUMBER OF PERCENTAGE OF ASSETS
PROPERTIES BASED ON COST(1) PROPERTIES BASED ON COST(1)
---------- -------------------- ---------- --------------------
<S> <C> <C> <C> <C>
Atlanta, Georgia........ 100 8.08% 79 8.50%
Austin, Texas........... 35 3.05 28 3.22
Birmingham, Alabama..... 6 1.34 6 1.73
Charlotte, North Caroli-
na..................... 23 2.53 21 2.97
Chattanooga, Tennessee.. 5 0.61 5 0.78
Chicago, Illinois....... 28 4.29 4 0.79
Cincinnati, Ohio........ 30 2.44 25 2.57
Columbus, Ohio.......... 15 2.10 12 2.16
Dallas/Fort Worth, Tex-
as..................... 63 4.98 45 3.69
Denver, Colorado........ 22 2.31 21 2.64
East Bay (San Francis-
co), California........ 42 4.60 40 5.58
El Paso, Texas.......... 22 2.51 23 3.35
Fort Lauderdale/Miami,
Florida................ 3 0.72 3 0.89
Houston, Texas.......... 70 5.54 66 6.24
Indianapolis, Indiana... 48 4.74 46 5.51
Kansas City,
Kansas/Missouri........ 28 2.11 24 2.21
Las Vegas, Nevada....... 14 2.12 8 1.51
Los Angeles/Orange Coun-
ty, California......... 15 3.88 10 3.86
Louisville, Kentucky.... 2 0.43 1 0.21
Memphis, Tennessee...... 26 2.05 16 1.73
Nashville, Tennessee.... 24 1.93 22 2.20
New Jersey/I-95 Corri-
dor.................... 6 1.94 -- --
Oklahoma City, Oklahoma. 10 0.57 10 0.70
Orlando, Florida........ 13 1.05 11 1.00
Phoenix, Arizona........ 22 1.58 21 2.03
Portland, Oregon........ 25 2.44 18 1.96
Reno, Nevada............ 17 1.93 17 2.74
Rio Grande Valley, Tex-
as..................... 14 0.97 13 0.96
Salt Lake City, Utah.... 8 2.26 7 2.37
San Antonio, Texas...... 61 4.46 52 4.57
San Diego, California... 3 0.54 3 0.78
Seattle, Washington..... 9 1.59 5 1.00
South Bay (San Francis-
co), California........ 66 7.64 63 9.29
Tampa, Florida.......... 60 4.39 60 5.56
Tulsa, Oklahoma......... 10 0.50 10 0.63
Washington,
D.C./Baltimore......... 35 4.98 19 3.70
Other................... 9 0.80 5 0.37
--- ------ --- ------
Total............... 989(2) 100.00% 819(3) 100.00%
=== ====== === ======
</TABLE>
- --------
(1) Includes properties under development at their budgeted total development
costs, rather than costs incurred to date.
(2) Includes 47 buildings under development.
(3) Includes 68 buildings under development.
34
<PAGE>
Consistent with SCI's strategy to build a critical mass in the three key
target markets of Chicago, Los Angeles and the New Jersey/I-95 corridor, the
combined percentage of real estate investments for these markets to SCI's total
real estate investments, increased from 4.65% at December 31, 1995 to 10.11% at
December 31, 1996.
THE PARTNERSHIPS
SCI's intention is to own substantially all properties directly; however, to
facilitate certain strategic acquisitions, SCI has completed four transactions
which involved the formation of the partnerships described below. At December
31, 1996, SCI owned directly or indirectly 68.7%, 97.4%, 75.6% and 96.4% of SCI
Limited Partnership-I, SCI Limited Partnership-II, SCI Limited Partnership-III
and SCI Limited Partnership-IV, respectively (collectively, the
"Partnerships"). The properties owned through SCI Limited Partnership-I cannot
be sold, prior to the occurrence of certain events, without the consent of the
limited partners thereto, other than in tax-deferred exchanges, which
restriction could adversely affect SCI's ability to strategically reconfigure
the portion of its investment assets represented by this Partnership. There are
no restrictions on the sale of properties held by SCI Limited Partnership-II,
SCI Limited Partnership-III or SCI Limited Partnership-IV. SCI views all assets
acquired as long-term investments but will only agree to partnership resale
restrictions where the assets acquired are of such strategic quality that SCI
anticipates that there will be no change in investment strategy with respect to
such assets through the duration of the restriction. SCI may acquire additional
properties through partnerships in the future.
The Partnerships have been organized as Delaware limited partnerships.
Generally, pursuant to the Partnership agreements, SCI, as the sole general
partner in each of the Partnerships other than SCI Limited Partnership-IV, in
which a wholly owned subsidiary of SCI is the sole general partner, has full
responsibility for the management and control of the Partnerships, and the
limited partners have no authority to transact business for, or, except as
described below, participate in the management decisions of, the Partnerships.
However, any decision to amend certain provisions of the applicable Partnership
agreement, to dissolve a Partnership prior to the term set forth in the
applicable Partnership agreement or to enter into certain extraordinary
transactions where the limited partners would not receive the same
consideration as shareholders of SCI, would require the consent of all limited
partners. Pursuant to the Partnership agreements, SCI or its wholly owned
subsidiary, as the case may be, may not voluntarily withdraw from the
applicable Partnership or transfer or assign its interests in the Partnership
without the consent of all of the limited partners thereto. The limited
partners may freely transfer their Partnership units to affiliates, provided
that such transfer does not cause a termination of the Partnership for federal
income tax purposes and does not cause SCI to cease to comply with requirements
under the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a REIT. Each of the Partnership agreements grants to limited
partners the right to exchange their Partnership units for Common Shares,
subject to the conditions described below.
Distinction from Other REIT Partnerships
The Partnerships differ from partnerships recently formed by other REITs
(which are commonly referred to as UPREITs) in that:
. A substantial majority of the limited partners were previously
unaffiliated with SCI, thus the Partnership transactions were negotiated
on an arms' length basis;
. None of the limited partners have a controlling influence over SCI, which
is the sole general and managing partner of each of the Partnerships
other than SCI Limited Partnership-IV, in which a wholly owned subsidiary
of SCI is the sole general partner;
. SCI or its wholly-owned subsidiary, as the case may be, has sole
discretion as to the disposition of assets held in the Partnerships,
subject to one Partnership's requirement that for the foreseeable future
all dispositions be through tax-deferred exchanges, as to which SCI has
sole discretion; and
. SCI is not restricted from acquiring properties outside the Partnerships
and intends to own a majority of its assets directly, so that no conflict
of interests exists with respect to future acquisitions.
35
<PAGE>
13.9% of SCI's real estate is owned by the following partnerships:
SCI Limited Partnership-I
In connection with the formation of SCI Limited Partnership-I, certain
previously unaffiliated parties (including Mr. Lyons) agreed to contribute
certain properties to this Partnership in exchange for the issuance by such
Partnership of approximately 4,520,533 Partnership units. In exchange for the
Partnership units, the limited partners contributed the following properties:
(i) 1,704,333 square feet of industrial property in SCI's San Francisco (South
Bay Area), California target market; and (ii) 2,186,572 square feet in SCI's
San Francisco (East Bay Area), California target market. The foregoing
properties had an aggregate purchase price to SCI of $190 million.
The Partnership agreement governing SCI Limited Partnership-I grants limited
partners the right to consent to (i) the sale or other disposition of any
property of the Partnership (other than through a tax-deferred exchange or a
pledge to secure a financing) or (ii) the incurrence of any indebtedness
(other than loans which SCI may make to the Partnership for capital
requirements). The requirement for the consent of the limited partners in
connection with a sale or other disposition of a property expires upon the
earlier to occur of the 30th anniversary of the date of the Partnership
agreement or the date on which 75% of the Partnership units outstanding have
been exchanged for Common Shares. Limited partners are entitled to exchange
each Partnership unit for up to one Common Share. A maximum of 4,520,531
Common Shares were so issuable effective as of January 1, 1995. On May 31,
1996, SCI filed a registration statement to register the resale of 4,520,531
Common Shares issuable upon exchange of SCI Limited Partnership-I units. The
registration statement was declared effective on June 29, 1996. Additionally,
the limited partners are entitled to receive fully cumulative quarterly
distributions per Partnership unit equal to the quarterly distributions
payable in respect of Common Shares. In the event that the Partnership sells
any of its properties, limited partners are entitled to a pro rata
distribution of the net proceeds of such sale, with a corresponding downward
adjustment in the number of Common Shares for which a unit may be exchanged.
Each limited partner has agreed that, from and after the time that such
limited partner has exercised its right to exchange a Partnership unit for a
Common Share and for a period of four years after the date of the Partnership
agreement, the limited partner will not, during any calendar year, sell Common
Shares owned by the limited partner if such sale would exceed 33% of the
aggregate number of Partnership units and Common Shares outstanding on the
date of the Partnership agreement. All cash flow available after payment of
distributions to limited partners will be distributed to SCI, as general
partner.
SCI Limited Partnership-II
In exchange for approximately 645,867 Partnership units, the limited
partners of SCI Limited Partnership-II contributed the following properties:
(i) 437,542 square feet of industrial property in SCI's Dallas/Fort Worth,
Texas target market; (ii) 217,504 square feet in SCI's Austin, Texas target
market; (iii) 132,605 square feet in SCI's San Francisco (East Bay Area),
California target market; (iv) 51,750 square feet in SCI's Denver, Colorado
target market; (v) 493,894 square feet in SCI's Charlotte, North Carolina
target market; and (vi) 270,000 square feet in SCI's El Paso, Texas target
market. The foregoing properties had an aggregate purchase price to SCI of
$45.5 million. None of the limited partners of SCI Limited Partnership-II is
affiliated with SCI or the REIT Manager.
The Partnership agreement governing SCI Limited Partnership-II granted to
limited partners the right to exchange each Partnership unit for a Common
Share beginning on February 15, 1995. On May 19, 1995, SCI filed a
registration statement to register the resale of 955,864 Common Shares
issuable upon exchange of SCI Limited Partnership-II Partnership units and
such registration statement was declared effective on June 26, 1995. Through
December 31, 1996, limited partners had exchanged 555,654 of their Partnership
units in SCI Limited Partnership-II for 555,651 Common Shares (and cash
payments for partial units). As a result of these conversions, SCI's general
partnership interest increased from 81.2% to 97.4% and 90,213 limited
partnership units remain outstanding in SCI Limited Partnership-II. Limited
partners are also entitled to fully cumulative
36
<PAGE>
quarterly distributions equal to the quarterly distributions paid in respect
of a Common Share and any unpaid distributions will bear interest at prime
plus 1%. Until the 10th anniversary of the date of the Partnership agreement,
upon any exchange of Partnership units for Common Shares, limited partners are
entitled to receive all cumulated and unpaid distributions (together with
interest thereon). After the 10th anniversary of the date of the Partnership
agreement, limited partners are not entitled to receive cumulated and unpaid
distributions (or interest thereon) upon any exchange of Partnership units for
Common Shares unless the fair market value of a Common Share for which a unit
is exchangeable is less than 110% of the amount paid by a partner for a unit.
All cash flow available after payment of distributions to limited partners
will be distributed to SCI, as general partner. In the event that the
Partnership sells any of its properties, SCI as general partner is entitled to
a distribution of all net proceeds from such sale.
SCI Limited Partnership-III and SCI Limited Partnership-IV
On October 28, 1994, SCI acquired $91.7 million of additional properties and
related assets through two Partnerships, SCI Limited Partnership-III and SCI
Limited Partnership-IV. SCI Limited Partnership-IV contained approximately $70
million of properties and related assets at December 31, 1996, and is
structured as a distinct entity to maintain the credit rating of the secured
notes assumed by such Partnership. A total of 583,512 limited partnership
units were issued by these two Partnerships to certain previously unaffiliated
parties (including Mr. Schwartz). SCI contributed $35.4 million of cash to
these Partnerships in 1994 to retire debt, pay part of the aggregate property
purchase price, make capital improvements and pay closing costs. $47.1 million
of mortgage debt was assumed by these Partnerships. During 1995, SCI
contributed an additional $11.9 million to SCI Limited Partnership-III for
property acquisitions which increased SCI's general partnership interest from
50.4% to 71.8%.
During 1996, SCI Limited Partnership-III disposed of a 160,000 square foot
building in Tampa, Florida and, in a Section 1031 exchange, acquired three
properties in San Antonio, Texas totalling 281,600 square feet. SCI
contributed $4.2 million for the San Antonio, Texas property acquisition which
increased SCI's general partnership interest from 71.8% to 75.6%. Also during
1996, SCI Limited Partnership-IV sold a 42,240 square feet building in
Saginaw, Michigan. The sale proceeds and SCI's contribution of $150,000 were
used to purchase a 4.15 acre land parcel in Dallas, Texas, in a Section 1031
exchange. The general partnership interest of SCI IV, Inc., a wholly-owned
subsidiary of SCI, changed from 96.36% to 96.38 % as a result of this
transaction.
The Partnership agreements for these Partnerships are substantially similar
to the Partnership agreement governing SCI Limited Partnership-II and permit
holders of limited partnership units to exchange each unit for a Common Share
beginning on October 29, 1995. SCI or its wholly owned subsidiary, as the case
may be, as general partner, has complete discretion and control with respect
to all management matters, including disposition of assets, except for certain
restrictions on the retirement of assumed debt.
Limited partners are entitled to fully cumulative quarterly distributions
equal to the quarterly distributions paid in respect of a Common Share and any
unpaid distributions will bear interest at prime plus 1%. Until the 10th
anniversary of the date of the Partnership agreements, upon any exchange of
Partnership units for Common Shares, limited partners are entitled to receive
all cumulated and unpaid distributions (together with interest thereon). After
the 10th anniversary of the date of the Partnership agreements, limited
partners are not entitled to receive cumulated and unpaid distributions (or
interest thereon) upon any exchange of Partnership units for Common Shares
unless the fair market value of a Common Share for which a unit is
exchangeable is less than 110% of the amount paid by a limited partner for a
unit. All cash flow available after payment of distributions to limited
partners will be distributed to SCI or its wholly owned subsidiary, as the
case may be, as general partner. In the event that the Partnerships sell any
of their respective properties, SCI or its wholly owned subsidiary, as the
case may be, as general partner, is entitled to a distribution of all net
proceeds from such sale, except (during the first 10 years of the Partnerships
only) to the extent of unpaid distributions and interest thereon.
37
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
SCI from time to time may be a party to a variety of legal proceedings
arising in the ordinary course of its business. Such matters generally are not
expected to have a material adverse effect on SCI's business, financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
38
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
SCI's Common Shares are listed on the NYSE under the symbol "SCN." The
following table sets forth the high and low sale prices of the Common Shares
as reported in the NYSE Composite Tape, and distributions per Common Share,
for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------- ------- -------------
<S> <C> <C> <C>
1995:
First Quarter............................ $17 3/4 $15 1/4 $0.23375(1)
Second Quarter........................... 17 1/2 14 1/2 0.23375
Third Quarter............................ 16 1/2 15 0.23375
Fourth Quarter........................... 17 5/8 16 0.23375
1996:
First Quarter............................ $18 7/8 $16 1/2 $0.2525(2)
Second Quarter........................... 18 16 7/8 0.2525
Third Quarter............................ 18 1/4 16 7/8 0.2525
Fourth Quarter........................... 22 1/2 17 7/8 0.2525
1997:
First Quarter (through February 27,
1997)................................... $22 1/4 $19 7/8 $0.2675(3)
</TABLE>
- --------
(1) Declared in the fourth quarter of 1994 and paid in the first quarter of
1995.
(2) Declared in the fourth quarter of 1995 and paid in the first quarter of
1996.
(3) Declared in the fourth quarter of 1996 and paid in the first quarter of
1997.
On February 21, 1997, SCI had approximately 97,706,709 Common Shares
outstanding, which were held of record by approximately 1,100 shareholders.
SCI, in order to qualify as a REIT, is required to make distributions (other
than capital gain distributions) to its shareholders in amounts at least equal
to (i) the sum of (A) 95% of its "REIT taxable income" (computed without
regard to the dividends paid deduction and its net capital gain) and (B) 95%
of the net income (after tax), if any, from foreclosure property, minus (ii)
the sum of certain items of noncash income. SCI's distribution strategy is to
distribute what it believes is a conservative percentage of its cash flow,
permitting SCI to retain funds for capital improvements and other investments
while funding its distributions.
SCI announces the following year's projected annual distribution level after
the Board's annual budget review and approval in December of each year. At its
December 1996 Board meeting, the Board announced a projected increase in the
annual distribution level from $1.01 to $1.07 per Common Share. The payment of
distributions is subject to the discretion of the Board and is dependent upon
the financial condition and operating results of SCI.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed SCI's current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in the Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholder's basis in the Common Shares, it will generally be
treated as gain from the sale or exchange of that shareholder's Common Shares.
SCI annually notifies shareholders of the taxability of distributions paid
during the preceding year. The following summarizes the taxability of
distributions paid in 1995 and 1994 on the Common Shares and the estimated
taxability for 1996:
39
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Per Common Share:
Ordinary Income..................................... $0.879 $0.692 $0.67
Capital Gains....................................... -- -- --
Return of Capital................................... 0.131 0.243 0.18
------ ------ -----
Total............................................. $ 1.01 $0.935 $0.85
====== ====== =====
</TABLE>
Under federal income tax rules, SCI's earnings and profits are first
allocated to its Series A Preferred Shares, Series B Preferred Shares and
Series C Preferred Shares, which increases the portion of the Common Shares
distribution classified as return of capital. The portion of distributions
characterized as return of capital results primarily from the excess of
distributions over earnings primarily because noncash charges such as
depreciation are added to earnings in determining distribution levels. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Result of Operations."
For federal income tax purposes, the following summary reflects the
estimated taxability of dividends paid on the Series A Preferred Shares,
Series B Preferred Shares and Series C Preferred Shares for the periods prior
to 1996 and the estimated taxability for 1996:
<TABLE>
<CAPTION>
DATE OF ISSUANCE TO
1996 DECEMBER 31, 1995
------------------- -------------------
<S> <C> <C>
Per Series A Preferred Share:
Ordinary Income............... $ 2.35 $1.24
Capital Gains................. -- --
------ -----
Total....................... $ 2.35 $1.24
====== =====
<CAPTION>
DATE OF ISSUANCE TO
DECEMBER 31, 1996
-------------------
<S> <C> <C>
Per Series B Preferred Share:
Ordinary Income............... $ 1.50
Capital Gains................. --
------
Total....................... $ 1.50
======
Per Series C Preferred Share:
Ordinary Income............... $ 0.57
Capital Gains................. --
------
Total....................... $ 0.57
======
</TABLE>
SCI's tax return for the year ended December 31, 1996 has not been filed,
and the taxability information for 1996 is based upon the best available data.
SCI's tax returns for prior years have not been examined by the Internal
Revenue Service and, therefore, the taxability of distributions is subject to
change.
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
In March 1995, SCI adopted a Dividend Reinvestment and Share Purchase Plan
(the "Plan"). The Plan allows holders of Common Shares the opportunity to
acquire additional Common Shares by automatically reinvesting distributions.
Common Shares are acquired pursuant to the Plan at a price equal to 98% of the
market price of such Common Shares, without payment of any brokerage
commission or service charge. The Plan also allows participating shareholders
to purchase a limited number of additional Common Shares at 98% of the market
price of such Common Shares, by making optional cash payments, without payment
of any brokerage commission or service charge. Shareholders who do not
participate in the Plan continue to receive distributions as declared.
40
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial data for SCI. Such summary
financial data is qualified in its entirety by, and should be read in
conjunction with, "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes
thereto included or incorporated by reference in this report (amounts in
thousands, except per share data).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Rental Income......... $ 227,000 $ 153,879 $ 70,609 $ 9,963 $ 1,592
Series A Preferred
Share Dividends...... 12,690 6,698 -- -- --
Series B Preferred
Share Dividends (1).. 12,066 -- -- -- --
Series C Preferred
Share Dividends (2).. 1,139 -- -- -- --
Net Earnings (Loss)
Attributable to
Common Shares........ 53,460 42,015 25,101 4,412 (59)
Common Share
Distributions........ $ 85,340 $ 64,445 $ 37,698 $ 7,001 $ 390
PER SHARE DATA:
Net Earnings (Loss)
Attributable to
Common Shares........ $ 0.63 $ 0.61 $ 0.57 $ 0.47 $ (0.06)
Series A Preferred
Share Dividends...... 2.35 1.24 -- -- --
Series B Preferred
Share Dividends (1).. 1.50 -- -- -- --
Series C Preferred
Share Dividends (2).. 0.57
Common Share
Distributions........ $ 1.01 $ 0.935 $ 0.85 $ 0.75 $ 0.45
Weighted Average
Common Shares
Outstanding.......... 84,504 68,924 44,265 9,334 930
OTHER DATA:
Net Cash Provided by
Operating Activities $ 136,201 $ 100,154 $ 47,222 $ 12,084 $ 865
Net Cash Used in
Investing Activities. (665,878) (628,795) (631,871) (260,780) (31,549)
Net Cash Provided by
Financial Activities 512,212 529,606 599,382 254,770 31,032
Funds from Operations
Attributable to
Common Shares (3).... $ 116,890 $ 84,060 $ 46,307 $ 7,189 $ 499
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Income Producing Real
Estate Owned, at
Cost................. $2,274,684 $1,622,404 $1,073,026 $354,436 $35,114
Land Held for
Development.......... 109,316 60,363 42,147 21,667 5,886
Total Assets.......... 2,462,306 1,833,972 1,194,937 401,855 42,253
Mortgage Notes
Payable.............. 139,952 145,276 144,262 40,109 --
Long-Term Debt........ 524,191 324,527 -- -- --
Total Liabilities..... 805,933 639,040 350,607 141,618 1,684
Minority Interest..... 56,984 58,741 66,555 50,786 --
Total Shareholders'
Equity............... $1,599,389 $1,136,191 $ 777,775 $209,451 $40,569
Number of Common
Shares Outstanding... 93,677 81,416 64,587 19,762 4,111
</TABLE>
- --------
(1) Series B Preferred Shares were not issued until February 1996.
(2) Series C Preferred Shares were not issued until November 1996.
(3) SCI believes that Funds from Operations is helpful in understanding a
property portfolio in that such calculation reflects cash flow from
operating activities and the properties' ability to support interest
payments and general operating expenses before the impact of certain
activities, such as gains or losses from sales of depreciated property and
changes in accounts receivable and accounts payable. For an explanation of
Funds from Operations, see "Item 7. Management's Discussion and Analysis of
Financial Condition and
41
<PAGE>
Results of Operations--Funds from Operations." Funds from Operations should
not be considered as an alternative to net income or any other generally
accepted accounting principles ("GAAP") measurement of performance as an
indicator of SCI's operating performance or as an alternative to cash flows
from operating, investing or financing activities as a measure of liquidity.
In January 1995, SCI changed to a more conservative policy of expensing the
amortization of loan costs in determining Funds from Operations. For
comparability, prior period amounts have been restated to conform to this
policy. The Funds from Operations measure presented by SCI may not be
comparable to similarly titled measures of other REITs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with SCI's financial
statements and the notes thereto included in Item 14 of this report.
The statements contained in this discussion and elsewhere in this report that
are not historical facts are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based on current
expectations, estimates and projections about the industry and markets in which
SCI operates, management's beliefs and assumptions made by management. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
("Future Factors") which are difficult to predict. Therefore, actual outcomes
and results may differ materially from what is expressed or forecasted in such
forward-looking statements. SCI undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Future Factors include: (i) changes in general economic
conditions in its target markets that could adversely affect demand for SCI's
properties and the creditworthiness of SCI's customers, (ii) changes in
financial markets and interest rates that could adversely affect SCI's cost of
capital and its ability to meet its financing needs and obligations, and (iii)
those factors discussed below. These are representative of the Future Factors
that could affect the outcome of the forward-looking statements.
OVERVIEW
SCI's operating results depend primarily upon net operating income from
distribution properties, which is substantially influenced by (i) the demand
for and supply of distribution properties in SCI's target market cities, (ii)
the pace and economic returns at which SCI can acquire and develop additional
distribution properties, and (iii) the extent to which SCI can sustain improved
market performance as measured by lease rates and occupancy. SCI's target
market cities and submarkets have benefitted substantially in recent periods
from demographic trends (including population and job growth) which influence
the demand for distribution properties. SCI believes its ability to compete is
significantly enhanced relative to other companies because of the REIT
Manager's depth of management, including the SCI National Operating System(TM),
which includes acquisition and development personnel, and presence in local
markets. The REIT Manager is a subsidiary of Security Capital Group, SCI's
largest shareholder. As a result of 1996 acquisitions and developments, SCI's
rentable square footage increased by 22.1 million square feet or 37.8% to 80.6
million square feet as of December 31, 1996 from 58.5 million square feet as of
December 31, 1995. As of December 31, 1996, the portfolio was 93.35% leased.
SCI expects that its ability to acquire and develop distribution properties at
favorable economic returns will continue through 1997. Over the longer term,
SCI expects master-planned, full service distribution park developments to
constitute an increasing percentage of SCI's growth. Additionally, SCI
Development Services Incorporated ("SCI Development Services") (see "--Results
of Operations--Other Real Estate Income") is expected to contribute recurring
income in subsequent periods. As of December 31, 1996, 1.2 million square feet
of SCI's 5.9 million square feet under development consisted of build-to-suits
representing a total expected investment of $47.4 million.
SCI frequently acquires properties which are underleased and develops
properties which are not fully leased at the start of construction, which
reduces SCI's overall occupancy rate below its stabilized level but provides
opportunities to increase revenues. The term "stabilized" means that capital
improvements, repositioning, new
42
<PAGE>
management and new marketing programs (or development and marketing, in the
case of newly developed properties) have been completed and in effect for a
sufficient period of time (but in no case longer than 12 months for properties
acquired by SCI and 12 months after shell completion for properties developed
by SCI) to achieve stabilized occupancy (typically 93%, but ranging from 90%
to 95%, depending on the submarket and product type) at market rents. SCI has
been successful in increasing occupancies on acquired and developed properties
during their initial months of operations resulting in an occupancy rate of
96.27% for stabilized properties owned as of December 31, 1996. The average
increase in rental rates for new and renewed leases on previously leased space
during 1996 was 13.0%. As leases are renewed or new leases are acquired, SCI
expects most lease rates on renewals or new leases to increase in 1997. These
factors should improve SCI's results of operations. Capital and credit market
conditions which affect SCI's cost of equity and debt capital may influence
future growth in operating results.
No assurance can be given that expected trends for 1997 in leasing rates,
occupancy rates and economic returns on acquired and developed properties will
be realized. There are risks associated with SCI's development and acquisition
activities which include: development and acquisition opportunities explored
by SCI may be abandoned; construction costs of a project may exceed original
estimates due to increased materials, labor or other expenses; and
construction and lease-up may not be completed on schedule, resulting in
increased debt service expense and construction costs. Acquisition activities
entail risks that investments will fail to perform in accordance with
expectations and that analysis with respect to the cost of improvements to
bring an acquired project up to standards will prove inaccurate, as well as
general investment risks associated with any new real estate investment.
Although SCI undertakes a thorough evaluation of the physical condition of
each new project before it is acquired, certain defects or necessary repairs
may not be detected until after the project is acquired, which could increase
SCI's total acquisition cost. The occurrence of any of the events described
above could adversely affect SCI's ability to achieve its projected returns on
acquisitions and projects under development and could hinder SCI's ability to
make expected distributions.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Net earnings attributable to Common Shares increased by $11.5 million or
27.4% to $53.5 million in 1996 from $42.0 million in 1995. The increase in net
earnings is principally due to increased distribution properties in operation,
resulting from 1996 and 1995 acquisition and development activity.
Net earnings are expected to increase in subsequent periods due to the
acquisition and development of additional operating properties and the
continued increase in the stabilized portfolio rental rates and the pre-
stabilized portfolio rental rates and occupancy.
Historically, the primary components of revenue and earnings growth have
been SCI's acquisition and development activity. SCI has acquired and
developed 942 operating properties totalling 80.6 million square feet from its
inception through December 31, 1996 at a historical cost of $2.3 billion.
Projected 1997 property level earnings before interest, taxes, depreciation
and amortization ("EBITDA") for these properties is 10.63% of SCI's aggregate
cost. Aggregate cost for the properties includes the purchase price, closing
costs and budgeted capital improvements and marketing costs prior to
stabilization (and all development costs, in the case of developed
properties). Projected EBITDA is based on current lease rates for stabilized
properties and current market rates for properties being stabilized and
anticipated operating expenses. EBITDA does not represent and should not be
substituted for net earnings as defined by GAAP and is not indicative of cash
flows from operations or that cash flows are sufficient to fund all cash
needs. No assurance can be given that projected levels of EBITDA will be
achieved by these properties nor that future acquisitions and developments
will achieve the same level of EBITDA relative to SCI's investment basis. The
EBITDA measure presented by SCI may not be comparable to similarly titled
measures of other REITs.
Rental Revenues
Rental revenues for 1996 increased by $73.1 million or 47.5% to $227.0
million, as compared to $153.9 million for 1995. Of this increase, $27.8
million was generated by the 181 properties acquired in 1995, $11.5 million
was generated by the 49 developments completed in 1995, $18.6 million was
generated by the 111
43
<PAGE>
properties acquired in 1996, and $12.9 million was generated by the 86
developments completed in 1996. The remaining $2.3 million increase was
attributable to revenue increases in the 526 properties owned at January 1,
1995. The revenue increase in properties owned at January 1, 1995 was due to
an increase in their average occupancy level from 94.33% for 1995 to 95.69%
for 1996 and increased rental rates on leases signed on previously occupied
space.
Other Real Estate Income
Other real estate income consists primarily of gains on disposition of
undepreciated property and fees and other income from build-to-suit customers
generated to a large extent by SCI Development Services. SCI Development
Services develops build-to-suit distribution space facilities or works on a
fee basis for customers whose space needs do not meet SCI's strict investment
criteria for long-term ownership. SCI Development Services is expected to
generate recurring income in subsequent periods. Through its preferred stock
ownership, SCI will realize substantially all economic benefits of SCI
Development Services' activities. The activities of SCI Development Services
are consolidated with SCI. SCI Development Services pays federal and state
taxes at the applicable corporate rate.
Interest Income
Interest income for 1996 decreased $604,000 from 1995, primarily resulting
from the investment of lower average balances of cash and cash equivalents in
interest bearing accounts in 1996 as compared to 1995.
Rental Expenses
Rental expenses, net of recoveries, increased by $8.2 million or 44.3% to
$26.7 million in 1996 from $18.5 million in 1995. The increase in rental
expenses is primarily attributable to 1995 and 1996 acquisitions and
developments, which increased SCI's rentable square footage by 19.4 million
square feet in 1995 and 22.1 million square feet in 1996, to 80.6 million
square feet as of December 31, 1996 from 39.1 million square feet as of
December 31, 1994.
Interest Expense
Interest expense increased by $6.8 million or 21.3% to $38.8 million in 1996
from $32.0 million in 1995. Total interest capitalized increased by $7.5
million or 87.2% to $16.1 million in 1996 from $8.6 million in 1995. The
increase in interest expense was principally caused by the issuance of $325
million in Senior Notes during 1995 and the issuance of $200 million in
additional Senior Notes in May 1996. (See "--Liquidity and Capital
Resources"). The capitalized interest increase is attributable to increased
development activity in 1996.
REIT Management Fee
The REIT Management fee paid by SCI is based on SCI's cash flow (as defined
in the REIT Management Agreement, see "--REIT Management Agreement") before
the REIT Management fee and therefore increased in 1996 as compared to 1995
because cash flow increased substantially. As SCI arranges amortizing, fixed
rate, long-term unsecured debt and nonconvertible preferred share financing as
more fully described in "--Liquidity and Capital Resources" below, the REIT
Management fee will effectively decline in proportion to SCI's Funds from
Operations because regularly scheduled principal payments or their imputed
equivalent, as defined in such agreement, associated with the long-term debt
and distributions actually paid with respect to any nonconvertible preferred
shares are deducted from the cash flow amount on which the REIT Management fee
is based. See "-- REIT Management Agreement."
Other Expense
Other expense increased by $0.7 million or 31.8% to $2.9 million in 1996
from $2.2 million in 1995. Other expenses consist of land holding costs and
acquisition and build-to-suit pursuit cost write-offs. Land holding
44
<PAGE>
costs were $1.5 million in 1996 compared to $1.1 million in 1995, and
acquisition and build-to-suit pursuit cost write-offs were $1.4 million in
1996 compared to $1.1 million in 1995. The increase is principally the result
of the increased acreage and value in land holdings and an increase in the
amount of build-to-suit activity.
Preferred Share Dividends
In June 1995, SCI issued $135.0 million of Series A Preferred Shares that
are entitled to receive an annual dividend of $2.35 per share (equivalent to
an annual dividend rate of 9.4% of the liquidation preference), which amounted
to $12.7 million in 1996 compared to $6.7 million for the period from the June
1995 issue date through December 31, 1995. In February 1996, SCI issued $201.3
million of Series B Preferred Shares that are entitled to receive an annual
dividend of $1.75 per share (equivalent to an annual dividend rate of 7% of
the liquidation preference), which amounted to $12.1 million for the period
from the February 1996 issue date through December 31, 1996. On November 13,
1996, SCI issued $100.0 million of Series C Preferred Shares that are entitled
to receive an annual dividend of $4.27 per share (equivalent to an annual
dividend rate of 8.54% of the liquidation preference) which amounted to $1.1
million for the period from the November 1996 issue date to December 31, 1996.
The preferred share dividends will increase the percentage of the Common Share
distributions that constitutes a non-taxable return of capital.
1995 COMPARED TO 1994
Net earnings attributable to Common Shares increased by $16.9 million or
67.3% to $42.0 million in 1995 from $25.1 million in 1994. The increase in net
earnings was principally due to increased distribution properties in
operation, increased rental rates and increased occupancies. Historically, the
primary components of revenue and earnings growth have been SCI's acquisition
and development activity. SCI had acquired and developed operating properties
with an aggregate cost of $1.7 billion from its inception through December 31,
1995. As a result of 1995 acquisition and development activity, SCI's rentable
square footage increased by 19.4 million square feet or 49.6% to 58.5 million
square feet as of December 31, 1995 from 39.1 million square feet as of
December 31, 1994.
Rental Revenues
Rental revenues for 1995 increased by $83.3 million or 118% to $153.9
million, as compared to $70.6 million for 1994. Of this increase, $51.9
million was generated by the 346 properties acquired in 1994, $3.5 million was
generated by the 15 developments completed in 1994, $19.2 million was
generated by the 181 properties acquired in 1995 and $6.9 million was
generated by the 49 developments completed in 1995. The remaining $1.8 million
increase was attributable to revenue increases in the 164 properties owned at
January 1, 1994. The revenue increase in properties owned at January 1, 1994
was due to an increase in their average occupancy level from 93.32% for 1994
to 95.42% for 1995 and increased rental rates on leases signed on previously
occupied space.
Other Real Estate Income
Other real estate income consists primarily of gains on disposition of
undepreciated property and fees and other income generated to a large extent
by SCI Development Services. SCI Development Services develops build-to-suit
distribution space facilities or works on a fee basis for customers whose
space needs do not meet SCI's strict investment criteria for long-term
ownership. Through its preferred stock ownership, SCI will realize
substantially all economic benefits of SCI Development Services' activities.
The activities of SCI Development Services are consolidated with SCI. SCI
Development Services pays federal and state taxes at the applicable corporate
rate.
Interest Income
Interest income for 1995 increased $632,000 from 1994, primarily resulting
from the investment of higher average balances of cash and cash equivalents.
The higher average balances were the result of increased cash flow from
operations and cash provided by 1995 financing activities.
45
<PAGE>
Rental Expenses
Rental expenses, net of recoveries, increased by $11.3 million or 157% to
$18.5 million in 1995 from $7.2 million in 1994. The increase in rental
expenses is primarily attributable to 1994 and 1995 acquisitions and
developments.
Interest Expense
Interest expense increased by $24.4 million or 321% to $32.0 million in 1995
from $7.6 million in 1994. Total interest capitalized increased by $6.4
million or 291% to $8.6 million in 1995 from $2.2 million in 1994. The
increase in interest expense was principally caused by higher outstanding
balances on SCI's line of credit and the 1995 issuance of $325 million in
Senior Notes (See "--Liquidity and Capital Resources"). The capitalized
interest increase is attributable to increased development activity in 1995.
REIT Management Fee
The REIT Management fee paid by SCI is based on SCI's cash flow (as defined
in the REIT Management Agreement, see "--REIT Management Agreement") before
the REIT Management fee and therefore increased in 1995 as compared to 1994
because cash flow increased substantially. As SCI arranges amortizing, fixed
rate, long-term unsecured debt and nonconvertible preferred share financing as
more fully described in "--Liquidity and Capital Resources" below, the REIT
Management fee will effectively decline in proportion to SCI's Funds from
Operations because regularly scheduled principal payments or their imputed
equivalent, as defined in such agreement, associated with the long-term debt
and distributions actually paid with respect to any nonconvertible preferred
shares are deducted from the cash flow amount on which the REIT Management fee
is based. See "--REIT Management Agreement."
Other Expense
Other expense increased by $1.0 million or 83% to $2.2 million in 1995 from
$1.2 million in 1994. Other expenses consist of land holding costs and
acquisition and build-to-suit pursuit cost write-offs. Land holding costs were
$1.1 million in 1995 compared to $625,000 in 1994, and acquisition and build-
to-suit pursuit cost write-offs were $1.1 million in 1995 compared to $594,000
in 1994. The increase is principally the result of the increased acreage and
value in land holdings and a substantial increase in the amount of build-to-
suit activity.
Preferred Share Dividend
In June 1995, SCI issued $135 million of Series A Preferred Shares that are
entitled to receive an annual dividend of $2.35 per share (equivalent to an
annual dividend rate of 9.4% of the liquidation preference), which amounted to
$6.7 million for the period from the June 21, 1995 issue date through December
31, 1995. The preferred share dividends will increase the percentage of the
Common Share distributions that constitutes a non-taxable return of capital.
ENVIRONMENTAL MATTERS
SCI did not experience any environmental condition on its properties which
materially adversely affected its results of operations or financial position.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased by $36.0 million or 35.9%
from $100.2 million in 1995 to $136.2 million in 1996, primarily as a result
of increased properties in operation. Cash used in investing activities
increased from $628.8 million in 1995 to $665.9 million in 1996. Cash provided
by financing activities decreased to $512.2 million in 1996 compared to $529.6
million in 1995. Cash provided by financing activities for 1996 consisted
primarily of $199.6 million of proceeds from the May 1996 long-term debt
offering, $289.4 million of net proceeds from the sale of the Series B and
Series C Preferred Shares and $210.8 million of net proceeds
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<PAGE>
from SCI's rights offering of Common Shares, less $42.4 million net repayment
of the line of credit. Cash provided by financing activities for 1995
consisted primarily of $324.5 million of proceeds from long-term debt
offerings, $130.4 million of net proceeds from the sale of Series A Preferred
Shares and $249.7 million of net proceeds from SCI's Common Shares rights
offering, less $79.0 million net repayment of the line of credit.
Additionally, distributions paid to common and preferred shareholders and to
minority interests were $116.5 million in 1996 compared to $76.2 million in
1995, and mortgage payments were $23.4 million in 1996 compared to $13.7
million in 1995.
On February 7, 1997, SCI completed a public offering of 4,025,000 Common
Shares. Net proceeds to SCI after underwriting discounts and offering costs
were $80.4 million.
In November 1996, SCI established a $200.0 million Medium-Term Note program.
Under such program, SCI may offer up to $200.0 million in Medium-Term Notes,
Series A, due nine months or more from the date of issue. Each note will bear
interest at a fixed rate or at a variable rate determined by reference to an
interest rate formula and will be issued either as an Amortizing Note or as an
Original Issue Discount Note.
On February 4, 1997, SCI issued $100.0 million of Series A 2015 Notes under
its Medium-Term Note program. The Series A 2015 Notes will bear interest at
7.81%, payable semi-annually on February 1 and August 1, commencing August 1,
1997. Installments of principal will be paid annually on each February 1,
commencing February 1, 2010, in the following amounts: $20 million in 2010,
$15 million in 2011, $15 million in 2012, $20 million in 2013, $20 million in
2014 and $10 million in 2015. The Series A 2015 Notes have a weighted average
life to maturity of 15.35 years. The average effective interest cost is 7.73%,
including all costs associated with the offering plus $1.7 million in proceeds
received on January 31, 1997 in connection with two interest rate protection
agreements entered into in August and November 1996 in anticipation of the
debt offering. Both the August 1996 and the November 1996 interest rate
protection agreements were in the form of a forward treasury lock agreement
with an investment bank. The August agreement included a notional principal
amount of $30.0 million and a reference price of 99.653 on the thirty year
Treasury Bond. The November agreement included a notional principal amount of
$50.0 million and a reference price of 101 29/32 on the ten year Treasury
Note. The settlement date on both contracts was January 31, 1997.
On November 13, 1996, SCI issued 2,000,000 Series C Preferred Shares. The
Series C Preferred Shares have a liquidation preference of $50.00 per share
for an aggregate liquidation preference of $100 million plus accrued and
unpaid dividends. The net proceeds (after underwriting commission and other
offering costs) of the Series C Preferred Shares issued were $97.1 million.
Holders of the Series C Preferred Shares are entitled only to limited voting
rights under certain conditions. Holders of the Series C Preferred Shares are
entitled to receive, when, as and if declared by the Board, out of funds
legally available for payment of distributions, cumulative preferential cash
distributions at a rate of 8.54% of the liquidation preference per annum
(equivalent to $4.27 per share), payable quarterly in arrears on the last day
of March, June, September and December of each year. On or after November 13,
2026 the Series C Preferred Shares may be redeemed for cash at the option of
SCI. The redemption price (other than the portion thereof consisting of
accrued and unpaid distributions) is payable solely out of the sale proceeds
of other capital shares of SCI, which may include shares of other series of
preferred shares. The Series C Preferred Shares rank on a parity with the
Series A Preferred Shares and the Series B Preferred Shares with respect to
payment of distributions and amounts upon liquidation. In anticipation of the
Series C Preferred Share offering, an interest rate swap agreement was entered
into on October 31, 1996 with a termination date of November 11, 1996. The
notional principal amount was $90.0 million with a fixed rate of 6.707%
payable by SCI in exchange for a floating rate equal to the bid yield-to-
maturity on the 6% U.S. Treasury Bond due February 15, 2026. SCI paid $224,721
to terminate the swap agreement on November 11, 1996.
On August 21, 1996, SCI commenced a rights offering to sell 6,787,806 Common
Shares at $17.25 per Common Share and also authorized an additional 3,393,903
Common Shares for oversubscriptions or third party subscribers. In September
1996, SCI issued 7,865,645 Common Shares of the 10,181,709 Common Shares
subscribed for and recorded subscriptions receivable of $40.0 million. In
October 1996, 2,316,064 Common
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<PAGE>
Shares were issued and all subscriptions receivable were collected. Gross
proceeds from the offering totaled $175.6 million. On September 24, 1996, SCI
offered 2,036,342 Common Shares to third party subscribers to SCI's rights
offering of August 21, 1996 that were not accepted in whole or in part due to
demand in excess of the Common Shares offered. All of the Common Shares were
subscribed for as of September 30, 1996 and subscriptions receivable for gross
proceeds of $35.1 million recorded. In October 1996, all of such Common Shares
were issued and all subscriptions receivable were collected.
On May 17, 1996, SCI issued $50 million of Senior Notes due 2002 (the "2002
Notes"), $100 million of Senior Notes due 2008 (the "2008 Notes"), and $50
million of Senior Notes due 2016 (the "2016 Notes"), and together with the
2002 Notes and the 2008 Notes, (the "May 1996 Notes"). The 2002 Notes bear
interest at 7.25% per annum and require annual principal payments of $12.5
million, commencing May 15, 1999. The 2008 Notes bear interest at 7.95% per
annum and require annual principal payments of $25 million, commencing May 15,
2005. The 2016 Notes bear interest at 8.65% per annum and require aggregate
annual principal payments of $5 million, commencing 2010 through 2013, $7.5
million in 2014, $10 million in 2015, and $12.5 million in 2016. In order to
lock in interest rates for the 2016 Notes prior to pricing of such Notes, SCI
entered into an interest rate protection agreement in the form of a forward
treasury lock agreement with an investment bank on May 9, 1996. The agreement
included a determination date of May 15, 1996 and a settlement date of May 16,
1996. The notional amount was $50 million with a reference price of 97.203. On
the pricing date of May 14, 1996, the forward treasury lock agreement was
unwound at a price of 99.375 and SCI paid $1.086 million in settlement. The
lower interest rate obtained on the pricing date of May 14, 1996 plus the
$1.086 million settlement payment resulted in SCI achieving the equivalent of
the rate that was locked in on May 9, 1996 for the 2016 Notes. In order to
hedge a portion of the 2008 Notes prior to pricing such Notes, SCI entered
into an interest rate swap agreement with an investment bank on May 9, 1996.
The agreement included an effective date of May 15, 1996 and termination date
of May 15, 2006. The notional amount of the interest rate swap agreement was
$50 million. On May 14, 1996, the interest rate swap agreement was terminated
and SCI paid $837,000 in settlement. The lower interest rate obtained on the
pricing date of May 14, 1996 plus the $837,000 settlement resulted in SCI
achieving an interest rate which approximated market interest rates on May 9,
1996 for a portion of the 2008 Notes. Collectively, the May 1996 Notes
originally had an average life to maturity of 10.8 years and an average
effective interest cost, inclusive of offering discounts, issuance costs and
the interest rate protection agreements of 8.41% per annum.
On February 21, 1996 and February 26, 1996, SCI issued a total of 8,050,000
Series B Preferred Shares. The Series B Preferred Shares have a liquidation
preference of $25.00 per share for an aggregate liquidation preference of
$201.3 million plus any accrued and unpaid dividends. Holders of the Series B
Preferred Shares are entitled only to limited voting rights under certain
conditions. The Series B Preferred Shares are convertible at any time, unless
previously redeemed, at the option of the holders thereof into Common Shares
at a conversion price of $19.50 per Common Share (equivalent to a conversion
rate of 1.282 Common Shares for each Series B Preferred Share), subject to
adjustment in certain circumstances. Holders of the Series B Preferred Shares
are entitled to receive, when, as and if declared by the Board, out of funds
legally available for the payment of distributions, cumulative preferential
cash distributions in an amount per share equal to the greater of 7% of the
liquidation preference per annum (equivalent to $1.75 per share) or the
distributions on the Common Shares, or portion thereof, into which a Series B
Preferred Share is convertible. Such distributions will equal the number of
Common Shares, or portion thereof, into which a Series B Preferred Share is
convertible. Such distributions are cumulative from the date of original issue
and are payable quarterly in arrears on the last day of March, June, September
and December of each year. The Series B Preferred Shares are redeemable at the
option of SCI on or after February 21, 2001. The Series B Preferred Shares
rank on a parity with the Series A Preferred Shares and the Series C Preferred
Shares with respect to payment of distributions and amounts upon liquidation.
On September 29, 1995 and October 3, 1995, SCI completed a $250.0 million
public offering and issued a total of 16,260,163 Common Shares at a price of
$15.375 per Common Share in conjunction with a rights offering.
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<PAGE>
On June 21, 1995, SCI issued 5,400,000 Series A Preferred Shares. The Series
A Preferred Shares have a liquidation preference of $25.00 per share for an
aggregate liquidation preference of $135.0 million plus any accrued and unpaid
dividends. The net proceeds (after underwriting commissions and other offering
costs) of the Series A Preferred Shares issued were $130.4 million. Holders of
the Series A Preferred Shares are entitled only to limited voting rights under
certain conditions. Holders of the Series A Preferred Shares are entitled to
receive, when, as and if declared by the Board, out of funds legally available
for the payment of distributions, cumulative preferential cash distributions
at the rate of 9.4% of the liquidation preference per annum (equivalent to
$2.35 per share). The Series A Preferred Shares are redeemable at the option
of SCI on or after June 21, 2000. The redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out
of the sale proceeds of other capital shares of SCI, which may include shares
of other series of preferred shares. The Series A Preferred Shares rank on a
parity with the Series B Preferred Shares and the Series C Preferred Shares
with respect to payment of distributions and amounts upon liquidation.
On May 16, 1995, SCI issued $75 million of Senior Notes due 2009 (the "May
2009 Notes"), $17.5 million of Senior Notes due 2001 (the "2001 Notes"), $17.5
million of Senior Notes due 2000 (the "2000 Notes") and $15 million of Senior
Notes due 1998 (the "1998 Notes" and, together with the May 2009 Notes, the
2001 Notes and the 2000 Notes, the "May 1995 Notes"). The May 2009 Notes bear
interest at 7.875% per annum and require annual principal payments of $9.375
million, commencing May 15, 2002. The 2001 Notes, 2000 Notes and 1998 Notes
bear interest at 7.30%, 7.25% and 7.125% per annum, respectively, with the
principal payable at maturity. Collectively, the May 1995 Notes originally had
an average life to maturity of 8.2 years and an average effective interest
cost, inclusive of offering discounts and issuance costs, of 7.92% per annum.
On March 2, 1995, SCI issued $150 million of Senior Notes due 2009 (the
"March 2009 Notes") and $50 million of Senior Notes due 2015 (the "2015 Notes"
and, together with the March 2009 Notes, the "March 1995 Notes"). The March
2009 Notes bear interest at 8.72% per annum and require annual principal
payments of $18.75 million, commencing March 1, 2002. The 2015 Notes bear
interest at 9.34% per annum and require aggregate annual principal payments of
$5 million in 2010, $6.25 million in 2011, $7.5 million in 2012, $8.75 million
in 2013, $10 million in 2014 and $12.5 million in 2015. Collectively, the
March 1995 Notes originally had an average life to maturity of 12.38 years and
an average effective interest cost, inclusive of offering discounts and
issuance costs, of 9.04% per annum.
All of the foregoing Notes (the Series A 2015 Notes, the May 1996 Notes, the
May 1995 Notes and the March 1995 Notes) are redeemable at any time at the
option of SCI, in whole or in part, at a redemption price equal to the sum of
the principal amount of the Notes being redeemed plus accrued interest thereon
to the redemption date plus an adjustment, if any, based on the yield to
maturity relative to market yields available at redemption. Such Notes are
governed by the terms and provisions of an indenture agreement (the
"Indenture") between SCI and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as
defined in the Indenture, does not exceed 40% and (iii) SCI's pro forma
interest coverage ratio, as defined in the Indenture, for the four preceding
fiscal quarters is not less than 1.5:1. In addition, SCI may not at any time
own Total Unencumbered Assets, as defined in the Indenture, equal to less than
150% of the aggregate outstanding principal amount of SCI's unsecured debt. As
of December 31, 1996, SCI was in compliance with all such debt covenants.
SCI has a line of credit agented by NationsBank in the amount of $350
million. The line of credit, as amended and restated effective May 2, 1996,
bears interest at SCI's option at either (a) the greater of the federal funds
rate plus 0.5% and prime or (b) LIBOR plus 1.25%, based upon SCI's current
senior debt rating, and is scheduled to mature in May 1998. This line may be
extended annually for an additional year with the approval of NationsBank and
the Bank Group. If the Bank Group elects not to extend the line of credit, at
SCI's election, the facility will either (a) convert to a three year term
note, or (b) continue on a revolving basis with the remaining one year
maturity. All debt incurrences are subject to a covenant that SCI maintain a
debt to tangible net worth ratio of not greater than 1 to 1. Additionally, SCI
is required to maintain an adjusted net worth
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<PAGE>
(as defined) of at least $1.0 billion, to maintain interest payment coverage
of not less than 2 to 1, and to maintain a fixed charge coverage ratio (as
defined) of not less than 1.4 to 1. As of December 31, 1996, SCI was in
compliance with these debt covenants. As of February 26, 1997 no borrowings
were outstanding on SCI's line of credit.
From inception through December 31, 1996, SCI had invested $2.3 billion for
the acquisition and development of 942 operating distribution properties.
These acquisitions and developments were financed with cash on hand, the
issuance of limited partnership units, the assumption of existing mortgage
debt and borrowings under SCI's line of credit which were repaid with the
proceeds of SCI's equity and debt offerings.
At December 31, 1996, SCI had $220.9 million of budgeted development cost
for developments in process, of which $106.6 million was unfunded. SCI expects
to finance construction, development and acquisitions primarily with cash on
hand, borrowings under its line of credit and cash from future securities
offerings. When issuing debt, SCI intends primarily to arrange fully
amortizing, fixed rate, 10-year to 20-year debt to finance additional
acquisitions and developments. To a lesser extent, under certain
circumstances, SCI may arrange for debt with different maturities in order to
optimize its debt maturity schedule.
SCI utilizes derivative instruments in anticipation of future financing
transactions in order to manage well defined interest rate risk. Through
hedging, SCI can effectively manage the risk of increases in interest rates on
future debt issuances. In anticipation of debt offerings in 1997, on November
20, 1996, SCI entered into a forward treasury lock agreement on $26.0 million
of U.S. Treasuries maturing August 15, 2026 at a base price of 103.453. This
contract terminates on July 15, 1997 and effectively fixes the thirty year
Treasury Bond at a rate of 6.56%. SCI also entered into a swap agreement (the
"Transaction") on November 20, 1996 which becomes effective on July 15, 1997,
has a notional principal amount of $30.0 million, and requires SCI, as the
counterparty, to pay a fixed rate of 6.61% on the notional amount in exchange
for a floating rate equal to the three month LIBOR rate for a ten year term.
At the option of SCI, the Transaction can be early terminated from and
including the effective date of July 15, 1997. If SCI does not exercise its
option to early terminate the agreement as of January 15, 1998, the
Transaction will early terminate, cancel, and cash settle on that date. As of
February 26, 1997, the fair value of these open contracts totaled $2.1
million.
SCI considers its liquidity and ability to generate cash from operations and
financings to be adequate and expects it to continue to be adequate to meet
SCI's acquisition, development, operating, debt service and shareholder
distribution requirements.
SCI's current distribution policy is to pay quarterly distributions to
shareholders based upon what the Board and the REIT Manager consider to be a
reasonable percentage of cash flow. Because depreciation is a non-cash
expense, cash flow typically will be greater than earnings from operations and
net earnings. Therefore, quarterly distributions will consistently be higher
than quarterly earnings.
Pursuant to the terms of the Series A Preferred Shares, the Series B
Preferred Shares and the Series C Preferred Shares (the "Preferred Shares"),
SCI is restricted from declaring or paying any distribution with respect to
the Common Shares unless all cumulative distributions with respect to the
Preferred Shares have been paid and sufficient funds have been set aside for
distributions that have been declared for the then current distribution period
with respect to the Preferred Shares. The Preferred Share dividends do not
reduce the amount SCI has budgeted for Common Share distributions, but do
increase the percentage of the Common Share distribution that constitutes a
non-taxable return of capital.
Net cash flow provided by operating activities was $136.2 million for 1996,
compared to $100.2 million for 1995, and $47.2 million for 1994. The primary
differences between the periods relate to new property acquisitions and
development completions as described under "--Results of Operations" above.
SCI's investment activities used approximately $665.9 million, $628.8 million
and $631.9 million of cash in 1996, 1995 and 1994, respectively. After
deducting distributions to shareholders, SCI's financing activities provided
net cash flow of $512.2 million, $529.6 million and $599.4 million for 1996,
1995 and 1994, respectively.
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FUNDS FROM OPERATIONS
Funds from Operations attributable to Common Shares increased $32.8 million
or 39.0% to $116.9 million in 1996 from $84.1 million in 1995. SCI believes
that Funds from Operations is helpful in understanding a property portfolio in
that such calculation reflects cash flow from operating activities and the
properties' ability to support interest payments and general operating
expenses before the impact of certain activities, such as changes in accounts
receivable and accounts payable. Funds from Operations should not be
considered as an alternative to net earnings or any other GAAP measurement of
performance, as an indicator of SCI's operating performance, or as an
alternative to cash flows from operating, investing or financing activities as
a measure of liquidity. The Funds from Operations measure presented by SCI may
not be comparable to other similarly titled measures of other REITs.
Funds from Operations represents SCI's net earnings (computed in accordance
with GAAP) before minority interest and before gains/losses on disposition of
depreciated property, plus depreciation and amortization. In January 1995, SCI
changed to a more conservative policy of expensing loan cost amortization in
determining Funds from Operations. For comparability, Funds from Operations
has been restated to give effect to this policy as if it had been in effect in
prior years.
STATEMENT OF FUNDS FROM OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Net earnings attributable to Common Shares........... $ 53,460 $42,015 $25,101
Add (Deduct):
Depreciation and amortization.................... 59,850 39,767 18,169
Minority interest................................ 3,326 3,331 2,992
(Gain)/loss on disposition of depreciated real
estate.......................................... 29 (1,053) --
Other............................................ 225 -- 45
-------- ------- -------
Funds from Operations attributable to Common Shares.. $116,890 $84,060 $46,307
======== ======= =======
</TABLE>
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. On January 22, 1997, SCI announced
that it had received a proposal from Security Capital Group, SCI's largest
shareholder and owner of the REIT Manager and Client Services, to exchange the
REIT Manager and Client Services for Common Shares. As a result of the
transaction, SCI would become an internally managed REIT, and Security Capital
Group would remain SCI's largest shareholder. The Board has formed a special
committee comprised of independent Trustees to review the proposed
transaction. The transaction is subject to approval by the special committee
and the full Board. If the Board approves the transaction, a proxy statement,
subject to review by the Securities and Exchange Commission, will be mailed to
SCI shareholders prior to a shareholder vote on the proposed transaction. See
"Item 1. Business--Security Capital Industrial Trust."
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.
See "Item 1. Business--The REIT Manager" for a description of the services
included in the REIT Management fee. 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
imputed 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 the Series A Preferred Shares and
Series C Preferred Shares. The REIT Management Agreement provides that the
Notes described above under "--Liquidity and Capital Resources" will be
treated as having regularly scheduled principal and interest payments like a
20-year level monthly payment, fully amortizing mortgage, and the imputed
principal and interest payments are deducted from
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cash flow in determining the fee. 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, 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 security 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. For example, land holding
costs and pursuit cost write-offs fluctuate in relation to SCI's acquisition
and development activity.
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 development, 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.
To better serve national companies and enable SCI to exclusively meet all of
their distribution space needs, SCI Development Services develops build-to-suit
distribution space facilities or works on a fee basis for customers whose space
needs do not meet SCI's strict investment criteria for long-term ownership.
Through its preferred stock ownership, SCI will realize substantially all
economic benefits of SCI Development Services' activities. 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
by SCI Development Services for 1996 was approximately $1.3 million, which is
included in SCI's consolidated REIT Management fee expense of $21.5 million.
Dividends and interest paid by SCI Development Services to SCI are excluded
from SCI's cash flow for determining the REIT Management fee paid by SCI.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SCI's Consolidated Balance Sheets as of December 31, 1996 and 1995, its
Consolidated Statements of Operations, Shareholders' Equity and Cash Flows for
each of the three years in the period ended December 31, 1996, Notes to
Consolidated Financial Statements and Schedule III--Real Estate and Accumulated
Depreciation, together with the reports of Arthur Andersen LLP, independent
public accountants, are included under Item 14 of this report and are
incorporated herein by reference. Selected quarterly financial data is
presented in Note 8 of Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding SCI's executive officers and executive officers of
the REIT Manager, see "Item 1. Business--Officers of SCI and Directors and
Officers of the REIT Manager and Relevant Affiliates." The other information
required by this Item 10 is incorporated herein by reference to the description
under the captions "Election of Trustees" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in SCI's definitive proxy statement for its
1997 annual meeting of shareholders (the "1997 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Trustee Compensation" and "SCI Officers" in the 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the caption
"Principal Shareholders" in the 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 1997 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Consolidated Financial Statements and Schedule on
page 54 of this report, which is incorporated herein by
reference.
2. Financial Statement Schedules:
Schedule III.
All other schedules have been omitted since the required information
is presented in the financial statements and the related notes or is
not applicable.
3. Exhibits:
See Index to Exhibits on pages 96 to 99 of this report, which is
incorporated herein by reference.
(b) Reports on Form 8-K: The following report on Form 8-K was filed
during the last quarter of the period covered by this report:
<TABLE>
<CAPTION>
DATE ITEM REPORTED FINANCIAL STATEMENTS
---- ------------- --------------------
<S> <C> <C>
November 15, 1996 5, 7 No
</TABLE>
(c) Exhibits: The Exhibits required by Item 601 of Regulation S-K are
listed in the Index to Exhibits on pages 96 to 99 of this report, which is
incorporated herein by reference.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Security Capital Industrial Trust:
Report of Independent Public Accountants................................. 55
Consolidated Balance Sheets.............................................. 56
Consolidated Statements of Operations.................................... 57
Consolidated Statements of Cash Flows.................................... 58
Consolidated Statements of Shareholders' Equity.......................... 59
Notes to Consolidated Financial Statements............................... 60
Report of Independent Public Accountants................................. 76
Schedule III--Real Estate and Accumulated Depreciation................... 77
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Security Capital Industrial Trust:
We have audited the accompanying consolidated balance sheets of Security
Capital Industrial Trust and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits 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 statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Security Capital
Industrial Trust and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 10, 1997
55
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
ASSETS 1996 1995
------ ---------- ----------
<S> <C> <C>
Real Estate............................................ $2,508,747 $1,827,670
Less accumulated depreciation........................ 109,147 56,406
---------- ----------
2,399,600 1,771,264
Cash and Cash Equivalents.............................. 4,770 22,235
Accounts Receivable.................................... 5,397 5,764
Other Assets........................................... 52,539 34,709
---------- ----------
Total assets....................................... $2,462,306 $1,833,972
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Line of credit....................................... $ 38,600 $ 81,000
Long-term debt....................................... 524,191 324,527
Mortgage notes payable............................... 91,757 96,013
Securitized debt..................................... 36,025 38,090
Assessment bonds payable............................. 12,170 11,173
Accounts payable and accrued expenses................ 35,357 32,826
Construction payable................................. 24,645 20,437
Distributions payable................................ 25,058 20,558
Other liabilities.................................... 18,130 14,416
---------- ----------
Total liabilities.................................. 805,933 639,040
---------- ----------
Commitments and Contingencies
Minority Interest...................................... 56,984 58,741
Shareholders' Equity:
Series A Preferred Shares; $0.01 par value: 5,400,000
shares issued and outstanding at December 31, 1996
and 1995; stated liquidation preference of $25 per
share............................................... 135,000 135,000
Series B Convertible Preferred Shares; $0.01 par val-
ue; 8,050,000 shares issued and outstanding at De-
cember 31, 1996; stated liquidation preference of
$25 per share....................................... 201,250 --
Series C Preferred Shares; $0.01 par value; 2,000,000
shares issued and outstanding at December 31, 1996;
stated liquidation preference of $50 per share...... 100,000 --
Common shares of beneficial interest, $0.01 par val-
ue; 93,676,546 shares issued and outstanding at De-
cember 31, 1996 and 81,416,451 shares issued and
outstanding at December 31, 1995.................... 937 814
Additional paid-in capital........................... 1,257,347 1,059,142
Accumulated undistributed net realized gain on dispo-
sition of real estate............................... -- --
Distributions in excess of net earnings.............. (95,145) (58,765)
---------- ----------
Total shareholders' equity......................... 1,599,389 1,136,191
---------- ----------
Total liabilities and shareholders' equity......... $2,462,306 $1,833,972
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
56
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Income:
Rental income..................................... $227,000 $153,879 $70,609
Other real estate income.......................... 5,342 2,899 --
Interest income................................... 1,121 1,725 1,093
-------- -------- -------
Total income.................................... 233,463 158,503 71,702
-------- -------- -------
Expenses:
Rental expenses, net of recoveries of $33,677 in
1996, $20,139 in 1995 and $10,490 in 1994........ 26,674 18,460 7,244
Depreciation and amortization..................... 59,850 39,767 18,169
Interest expense.................................. 38,819 32,005 7,568
REIT management fee............................... 21,472 14,207 8,673
General and administrative........................ 1,025 839 770
Other expense..................................... 2,913 2,234 1,220
-------- -------- -------
Total expenses.................................. 150,753 107,512 43,644
-------- -------- -------
Net earnings before minority interest and gain
(loss) on disposition of real estate............... 82,710 50,991 28,058
Minority interest share in net earnings............. 3,326 3,331 2,992
-------- -------- -------
Net earnings before gain (loss) on disposition of
real estate........................................ 79,384 47,660 25,066
Gain (loss) on disposition of real estate........... (29) 1,053 35
-------- -------- -------
Net earnings........................................ 79,355 48,713 25,101
Less preferred share dividends...................... 25,895 6,698 --
-------- -------- -------
Net Earnings Attributable to Common Shares.......... $ 53,460 $ 42,015 $25,101
======== ======== =======
Weighted Average Common Shares Outstanding.......... 84,504 68,924 44,265
======== ======== =======
Per Share Net Earnings Attributable to Common
Shares............................................. $ 0.63 $ 0.61 $ 0.57
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
57
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net earnings.................................... $ 79,355 $ 48,713 $ 25,101
Minority interest............................... 3,326 3,331 2,992
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization................. 59,850 39,767 18,169
(Gain)/Loss on disposition of real estate..... 29 (1,053) (35)
Rent leveling................................. (4,777) (4,364) (1,862)
Amortization of deferred financing costs...... 2,339 2,092 1,023
Increase in accounts receivable and other as-
sets........................................... (10,166) (14,392) (10,994)
Increase in accounts payable and accrued ex-
penses......................................... 2,531 19,028 8,497
Increase in other liabilities................... 3,714 7,032 4,331
-------- -------- --------
Net cash provided by operating activities... 136,201 100,154 47,222
-------- -------- --------
Investing Activities:
Real estate investments......................... (657,873) (633,251) (629,424)
Tenant improvements and lease commissions....... (14,806) (6,163) (2,425)
Recurring capital expenditures.................. (2,851) (330) (22)
Proceeds from disposition of real estate........ 9,652 10,949 --
-------- -------- --------
Net cash used in investing activities....... (665,878) (628,795) (631,871)
-------- -------- --------
Financing Activities:
Proceeds from sale of shares, net of expenses... 434,587 279,977 283,703
Net proceeds from sale of shares to Affiliates.. 64,416 100,001 312,315
Proceeds from dividend reinvestment, share pur-
chase plan and exercised warrants.............. 574 217 --
Proceeds from long-term debt offerings.......... 199,632 324,455 --
Debt issuance costs............................. (4,698) (6,194) (3,783)
Distributions paid to common shareholders....... (85,340) (64,445) (37,698)
Distributions paid to minority interest hold-
ers............................................ (5,237) (5,033) (4,003)
Preferred share dividends....................... (25,895) (6,698) --
Payments on note payable to Affiliates.......... -- -- (8,000)
Proceeds from line of credit.................... 411,200 361,100 424,720
Payments on line of credit...................... (453,600) (440,100) (348,126)
Regularly scheduled principal payments on mort-
gage notes payable............................. (3,738) (3,491) (1,577)
Balloon principal payments made upon maturity... (19,689) (10,183) (18,169)
-------- -------- --------
Net cash provided by financing activities... 512,212 529,606 599,382
-------- -------- --------
Net Increase/(Decrease) in Cash and Cash Equiva-
lents........................................... (17,465) 965 14,733
Cash and Cash Equivalents, beginning of period... 22,235 21,270 6,537
-------- -------- --------
Cash and Cash Equivalents, end of period......... $ 4,770 $ 22,235 $ 21,270
======== ======== ========
Supplemental Schedule of Noncash Investing and
Financing Activities:
In connection with formation of limited part-
nerships, real estate was acquired in exchange
for the following:
Assumption of existing mortgage notes pay-
able, assessment bonds payable and
securitized debt............................ $ -- $ -- $ 55,452
Minority ownership interest contributed..... -- -- 16,780
In conjunction with real estate acquired:
Assumption of existing mortgage notes pay-
able....................................... 18,103 14,688 68,447
Conversion of minority interest partnership
units into common shares....................... -- 6,112 --
-------- -------- --------
Total....................................... $ 18,103 $ 20,800 $140,679
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
58
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
SERIES A SERIES B SERIES C UNDISTRIBUTED
PREFERRED PREFERRED PREFERRED NET REALIZED
COMMON SHARES SHARES AT SHARES AT SHARES AT GAIN ON
---------------- AGGREGATE AGGREGATE AGGREGATE ADDITIONAL DISTRIBUTIONS DISPOSITION
NUMBER OF PAR LIQUIDATION LIQUIDATION LIQUIDATION PAID-IN SUBSCRIPTIONS IN EXCESS OF OF REAL
SHARES VALUE PREFERENCE PREFERENCE PREFERENCE CAPITAL RECEIVABLE NET EARNINGS ESTATE
--------- ------ ----------- ----------- ----------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1993............. 19,762 $364.0 $ -- $ -- $ -- $ 402,179 $(189,912) $ (3,180) $ --
Subscriptions
receivable
collected....... 16,642 -- -- -- -- -- 189,912 -- --
Sale of common
shares.......... 310 3.1 -- -- -- 3,407 -- -- --
Initial public
offering........ 3,261 32.6 -- -- -- 37,467 -- -- --
Public rights
offering........ 6,612 66.1 -- -- -- 99,934 -- -- --
Sale of common
shares.......... 18,000 180.0 -- -- -- 274,320 -- -- --
Less costs of
raising capital. -- -- -- -- -- (9,304) -- -- --
Net earnings
before gain on
disposition of
real estate..... -- -- -- -- -- -- -- 25,066 --
Gain on
disposition of
real estate..... -- -- -- -- -- -- -- -- 35
Common share
distributions... -- -- -- -- -- -- -- (37,663) (35)
Distributions
accrued......... -- -- -- -- -- -- -- (15,097) --
------ ------ -------- -------- -------- ---------- --------- -------- ------
Balances at
December 31,
1994............. 64,587 645.8 -- -- -- 808,003 -- (30,874) --
Sale of common
shares.......... 16,260 162.6 -- -- -- 249,837 -- -- --
Sale of
preferred
shares.......... -- -- 135,000 -- -- -- -- -- --
Dividend
reinvestment and
share purchase
plan............ 13 0.1 -- -- -- 217 -- -- --
Less cost of
raising capital. -- -- -- -- -- (5,022) -- -- --
Limited
partnership
units converted
to common
shares.......... 556 5.6 -- -- -- 6,107 -- -- --
Net earnings
before gain on
disposition of
real estate..... -- -- -- -- -- -- -- 47,660 --
Gain on
disposition of
real estate..... -- -- -- -- -- -- -- -- 1,053
Common share
distributions... -- -- -- -- -- -- -- (48,295) (1,053)
Series A
Preferred Share
dividends....... -- -- -- -- -- -- -- (6,698) --
Distributions
accrued......... -- -- -- -- -- -- -- (20,558) --
------ ------ -------- -------- -------- ---------- --------- -------- ------
Balances at
December 31,
1995............. 81,416 814.1 135,000 -- -- 1,059,142 -- (58,765) --
Sale of common
shares.......... 12,218 122.5 -- -- -- 210,639 -- -- --
Sales of
preferred
shares.......... -- -- -- 201,250 100,000 -- -- -- --
Dividend
reinvestment and
share purchase
plan............ 21 .2 -- -- -- 356 -- -- --
Common shares
issued upon
exercise of
warrants........ 22 .2 -- -- -- 218 -- -- --
Less cost of
raising capital. -- -- -- -- -- (13,008) -- -- --
Net earnings
before loss on
disposition of
real estate..... -- -- -- -- -- -- -- 79,384 --
Loss on
disposition of
real estate..... -- -- -- -- -- -- -- -- (29)
Common share
distributions... -- -- -- -- -- -- -- (64,811) 29
Preferred share
dividends....... -- -- -- -- -- -- -- (25,895) --
Distributions
accrued......... -- -- -- -- -- -- -- (25,058) --
------ ------ -------- -------- -------- ---------- --------- -------- ------
Balances at
December 31,
1996............. 93,677 $937.0 $135,000 $201,250 $100,000 $1,257,347 $ -- $(95,145) $ --
====== ====== ======== ======== ======== ========== ========= ======== ======
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
Balances at
December 31,
1993............. $ 209,451
Subscriptions
receivable
collected....... 189,912
Sale of common
shares.......... 3,410
Initial public
offering........ 37,500
Public rights
offering........ 100,000
Sale of common
shares.......... 274,500
Less costs of
raising capital. (9,304)
Net earnings
before gain on
disposition of
real estate..... 25,066
Gain on
disposition of
real estate..... 35
Common share
distributions... (37,698)
Distributions
accrued......... (15,097)
-------------
Balances at
December 31,
1994............. 777,775
Sale of common
shares.......... 250,000
Sale of
preferred
shares.......... 135,000
Dividend
reinvestment and
share purchase
plan............ 217
Less cost of
raising capital. (5,022)
Limited
partnership
units converted
to common
shares.......... 6,112
Net earnings
before gain on
disposition of
real estate..... 47,660
Gain on
disposition of
real estate..... 1,053
Common share
distributions... (49,348)
Series A
Preferred Share
dividends....... (6,698)
Distributions
accrued......... (20,558)
-------------
Balances at
December 31,
1995............. 1,136,191
Sale of common
shares.......... 210,762
Sales of
preferred
shares.......... 301,250
Dividend
reinvestment and
share purchase
plan............ 356
Common shares
issued upon
exercise of
warrants........ 218
Less cost of
raising capital. (13,008)
Net earnings
before loss on
disposition of
real estate..... 79,384
Loss on
disposition of
real estate..... (29)
Common share
distributions... (64,782)
Preferred share
dividends....... (25,895)
Distributions
accrued......... (25,058)
-------------
Balances at
December 31,
1996............. $1,599,389
=============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
59
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. NATURE OF OPERATIONS:
Security Capital Industrial Trust ("SCI"), a Maryland real estate investment
trust ("REIT"), is a national operating company focused exclusively on meeting
the distribution space needs of national, regional and local industrial real
estate users through the SCI National Operating System(TM). SCI engages in the
acquisition, development, marketing, operation and long-term ownership of
distribution facilities, and the development of master-planned distribution
parks and build-to-suit facilities for its customers. SCI's operating strategy
is to provide an exceptional level of services to its existing and prospective
customers on a national, regional and local basis. SCI deploys capital in
markets with excellent long-term growth prospects where SCI can achieve a
strong market position through the acquisition and development of generic,
flexible facilities designed for both warehousing and light manufacturing
uses. As of December 31, 1996, SCI's portfolio contained 80.6 million square
feet in 942 operating buildings and had an additional 5.9 million square feet
under development in 47 buildings for a total of 86.5 million square feet in
36 target market cities. SCI completed its initial public offering on March
31, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REIT Organization Status
In January 1993, SCI was formed as a Maryland real estate investment trust.
In February 1993, Security Capital Industrial Investors Incorporated, a
Delaware corporation, was merged with and into SCI. SCI has made an election
to be taxed as a REIT under the Internal Revenue Code of 1986, as amended.
REITs are not required to pay federal income taxes if minimum distribution
and income, asset and shareholder tests are met. During 1996, 1995 and 1994,
SCI was in compliance with the REIT requirements. Thus, no federal income tax
provision has been reflected in the accompanying consolidated financial
statements.
Basis of Presentation
The accompanying consolidated financial statements include the results of
SCI, its subsidiaries and its majority-owned and controlled partnerships (SCI
has no unconsolidated subsidiaries or minority ownership interests). The
effects of intercompany transactions have been eliminated. Certain amounts
included in the consolidated financial statements for prior years have been
reclassified to conform with the 1996 financial statement presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Real Estate and Depreciation
Real estate is carried at cost. Costs directly related to the acquisition,
renovation or development of real estate are capitalized and are depreciated
over the following useful lives:
<TABLE>
<S> <C>
Tenant improvements............. 10 years
Acquired buildings.............. 30 years
Developed buildings............. 40 years
</TABLE>
60
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation is computed using a straight-line method. Certain real estate
was acquired through formation of partnerships (Note 5) wherein SCI
contributed cash and the limited partners contributed real estate in exchange
for partnership units which are ultimately exchangeable for SCI's Common
Shares of Beneficial Interest, par value $0.01 per share (the "Common
Shares"). In consolidating the partnerships' assets, real estate cost includes
the estimated fair value attributable to the limited partners' interests at
the acquisition dates because (1) SCI's cash contributions constituted over
50% of the acquisition prices, (2) the acquisitions were from unrelated third-
parties and (3) the limited partners were not considered "promoters" under SEC
Staff Accounting Bulletin 48. The limited partners' interests will be
reflected as minority interest in the consolidated financial statements until
the units are exchanged for SCI Common Shares. In management's opinion, real
estate assets are not carried at amounts in excess of their estimated net
realizable values.
Recent Accounting Pronouncement
Effective January 1, 1996, SCI adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which had no material impact on its
consolidated financial statements. SFAS No. 121 establishes accounting
standards for the review for impairment of long-lived assets to be held and
used, whenever the carrying amount of an asset may not be recoverable, and
requires that certain long-lived assets to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell.
Capitalized Interest
SCI capitalizes interest costs incurred during the land development or
construction period of qualifying projects.
Deferred Loan Fees
Included in other assets as of December 31, 1996 and 1995 are costs of $9.2
million and $6.8 million, respectively, associated with obtaining financing
(Note 4) which have been capitalized and are being amortized (to interest
expense or capitalized interest, as appropriate) over the life of the loan
using the effective interest rate method.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in bank accounts and funds
invested in money market funds.
Minority Interest
Minority interest is carried at cost and represents limited partners'
interests in various real estate partnerships controlled by SCI. As discussed
in Real Estate and Depreciation, certain minority interests are carried at the
pro rata share of the estimated fair value of property at the acquisition
dates. Common Shares of SCI issued upon exchange of limited partnership units
will be accounted for at the cost of the minority interest surrendered.
Earnings per Share
Per share data is computed based on the weighted average number of common
shares outstanding during the period. Exercise of outstanding warrants and
options to acquire 29,764 Common Shares would not have a material dilutive
effect on earnings per share. The conversion of the limited partnership units
(as discussed in Note 5) and the Series B Cumulative Convertible Redeemable
Preferred Shares, par value $.01 per share (Series B Preferred Shares), into
Common Shares is not assumed since the effect would not be dilutive.
61
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest Rate Contracts
SCI utilizes various interest rate contracts to hedge interest rate risk on
anticipated debt offerings. These anticipatory hedges are designated, and
effective, as hedges of identified debt issuances which have a high
probability of occurring. Gains and losses resulting from changes in the
market value of these contracts are deferred and amortized into interest
expense over the life of the related debt issuance.
3. REAL ESTATE:
Real estate investments are comprised of income producing distribution
facilities, construction in progress and land planned for distribution
facility development in the following markets:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL COST
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Atlanta, Georgia.............................. 7.99% 8.32%
Austin, Texas................................. 3.32 3.26
Birmingham, Alabama........................... 1.33 1.83
Charlotte, North Carolina..................... 2.39 2.90
Chattanooga, Tennessee........................ 0.60 0.83
Chicago, Illinois............................. 3.80 0.83
Cincinnati, Ohio.............................. 2.57 2.48
Columbus, Ohio................................ 2.16 2.26
Dallas/Fort Worth, Texas...................... 4.79 3.17
Denver, Colorado.............................. 2.37 2.89
East Bay (San Francisco), California.......... 4.49 5.91
El Paso, Texas................................ 2.99 3.70
Fort Lauderdale/Miami, Florida................ 1.05 0.94
Houston, Texas................................ 5.16 6.34
Indianapolis, Indiana......................... 4.69 5.87
Kansas City, Kansas/Missouri.................. 1.95 2.37
Las Vegas, Nevada............................. 1.99 1.24
Los Angeles/Orange County, California......... 3.65 2.91
Louisville, Kentucky.......................... 0.46 0.22
Memphis, Tennessee............................ 2.03 1.83
Nashville, Tennessee.......................... 1.87 2.13
New Jersey/I-95 Corridor...................... 1.92 --
Oklahoma City, Oklahoma....................... 0.56 0.74
Orlando, Florida.............................. 1.15 1.06
Phoenix, Arizona.............................. 1.69 1.81
Portland, Oregon.............................. 2.29 1.83
Reno, Nevada.................................. 2.01 2.36
Rio Grande Valley, Texas...................... 0.89 1.04
Salt Lake City, Utah.......................... 2.35 2.29
San Antonio, Texas............................ 4.56 4.78
San Diego, California......................... 0.61 0.55
Seattle, Washington........................... 1.57 1.46
South Bay (San Francisco), California......... 7.84 9.71
Tampa, Florida................................ 4.53 5.94
Tulsa, Oklahoma............................... 0.49 0.67
Washington, D.C./Baltimore.................... 5.08 3.14
Other......................................... 0.81 0.39
------------ ------------
100.00% 100.00%
============ ============
</TABLE>
62
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following summarizes real estate investments as of December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land held for development.......................... $ 109,316 $ 60,363
Land under development............................. 40,465 56,944
Improved land...................................... 356,428 242,015
Buildings and improvements......................... 1,918,256 1,380,389
Construction in progress........................... 77,506 80,958
Capitalized preacquisition costs................... 6,776 7,001
---------- ----------
Total real estate.............................. 2,508,747 1,827,670
Less accumulated depreciation...................... 109,147 56,406
---------- ----------
Net real estate................................ $2,399,600 $1,771,264
========== ==========
</TABLE>
Capitalized preacquisition costs include $1,634,000 and $2,137,000 of funds
on deposit with title companies as of December 31, 1996 and 1995, respectively,
for property acquisitions.
Other real estate income consists primarily of gains on disposition of
undepreciated property and fees and other income from build-to-suit customers
generated to a large extent by SCI Development Services Incorporated ("SCI
Development Services"). SCI Development Services develops build-to-suit
distribution space facilities or works on a fee basis for customers whose space
needs do not meet SCI's strict investment criteria for long-term ownership.
Through its preferred stock ownership, SCI will realize substantially all
economic benefits of SCI Development Services' activities. The activities of
SCI Development Services are consolidated with SCI and all intercompany
transactions eliminated. As of December 31, 1996, the outstanding balances of
development and mortgage loans made by SCI to SCI Development Services for the
purchase of distribution facilities and land for distribution facility
development aggregated $162.0 million. SCI Development Services pays federal
and state taxes at the applicable corporate rate.
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
1996 was approximately $1.3 million. Dividends and interest paid by SCI
Development Services to SCI are excluded from SCI's cash flow for determining
the REIT Management fee paid by SCI.
SCI leases its properties to customers under agreements which are classified
as operating leases. The leases generally provide for payment of all or a
portion of utilities, property taxes and insurance by the customer. SCI's
largest customer accounted for less than 1.5% of SCI's 1996 rental income (on
an annualized basis), and the annualized base rent for SCI's 20 largest
customers accounted for less than 12.9% of SCI's 1996 rental income (on an
annualized basis). Minimum lease payments receivable on non-cancelable leases
with lease periods greater than one year are as follows (in thousands):
<TABLE>
<S> <C>
1997.......................... $ 241,100
1998.......................... 202,698
1999.......................... 161,395
2000.......................... 119,975
2001.......................... 83,309
Thereafter.................... 200,772
----------
$1,009,249
==========
</TABLE>
In addition to the December 31, 1996 construction payable accrual of $24.6
million, SCI had unfunded commitments on its contracts for developments under
construction totaling $106.6 million. These commitments
63
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
relate to development activity in Atlanta, Charlotte, Chicago, Cincinnati,
Dallas, East Bay (San Francisco), Houston, Indianapolis, Kansas City, Las
Vegas, Nashville, Orange County, CA, Orlando, Portland, Rio Grande Valley,
Salt Lake City, San Antonio, Seattle, Tampa, and Washington, D.C./Baltimore.
4. BORROWINGS:
Mortgage notes payable, assessment bonds payable and securitized debt
consisted of the following at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
BALLOON
PERIODIC PAYMENT
INTEREST MATURITY PAYMENT PRINCIPAL DUE AT
DESCRIPTION MARKET RATE DATE DATE BALANCE MATURITY
----------- ----------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Notes Payable:
Charlotte Commerce Park
#4.................... Charlotte 9.250% 06/01/97 (1) $ 1,522 $ 1,511
DeSoto Business Park... Baltimore 9.750 03/01/97 (1) 6,053 6,008
Downtown Distribution
Center................ San Antonio 9.375 07/01/97 (1) 1,186 1,169
Eigenbrodt Way Distri-
bution Center #1...... East Bay 8.590 04/01/03 (1) 1,723 1,479
Gateway Corporate Cen-
ter #10............... South Bay 8.590 04/01/03 (1) 2,094 1,361
Hayward Industrial Cen-
ter I & II............ East Bay 8.590 04/01/03 (1) 14,541 12,480
Landmark One Distribu-
tion Center #1........ San Antonio 9.250 06/01/97 (1) 1,886 1,872
Oxmoor Distribution
Center #1............. Birmingham 8.390 04/01/99 (1) 4,131 3,895
Oxmoor Distribution
Center #2............. Birmingham 8.100 05/01/99 (1) 1,521 1,439
Oxmoor Distribution
Center #3............. Birmingham 8.100 05/01/99 (1) 1,511 1,426
Peter Cooper Distribu-
tion Center #1........ El Paso 10.625 06/01/99 (1) 2,664 2,619
Platte Valley Indus-
trial Center #1....... Kansas City 9.750 03/01/00 (1) 524 256
Platte Valley Indus-
trial Center #3....... Kansas City 9.750 06/01/98 (1) 1,168 1,091
Platte Valley Indus-
trial Center #4....... Kansas City 10.100 11/01/21 (2) 2,100 --
Platte Valley Indus-
trial Center #5....... Kansas City 9.500 07/01/97 (1) 2,911 2,795
Platte Valley Indus-
trial Center #8....... Kansas City 8.750 08/01/04 (1) 2,000 1,488
Platte Valley Indus-
trial Center #9....... Kansas City 8.100 04/01/17 (2) 3,477 --
Princeton Distribution
Center................ Cincinnati 9.250 02/19/99 (1) 1,247 1,300
Rio Grande Industrial
Center #1............. Brownsville 8.875 09/01/01 (1) 3,368 2,544
Riverside Industrial
Center #3............. Kansas City 8.750 08/01/04 (1) 1,571 1,170
Riverside Industrial
Center #4............. Kansas City 8.750 08/01/04 (1) 4,246 3,161
Southwide Lamar Indus-
trial Center #1....... Memphis 7.670 05/01/24 (1) 421 674
Sullivan 75 Distribu-
tion Center #1........ Atlanta 9.960 04/01/04 (1) 1,857 1,663
Tampa West Distribution
Center #20............ Tampa 9.125 11/30/00 (2) 203 --
Thorton Business Center
#1- #4................ South Bay 8.590 04/01/03 (1) 9,537 8,185
Titusville Industrial
Center #1............. Orlando 10.000 09/01/01 (1) 4,942 4,181
Vista Del Sol Indus-
trial Center #1....... El Paso 9.680 08/01/07 (2) 2,978 --
Vista Del Sol Indus-
trial Center #3....... El Paso 9.680 08/01/07 (2) 1,260 --
West One Business Cen-
ter #1................ Las Vegas 8.250 09/01/00 (1) 4,584 4,252
West One Business Cen-
ter #3................ Las Vegas 9.000 09/01/04 (1) 4,531 3,847
--------
8.99% Weighted average rate $ 91,757
========
Assessment Bonds Pay-
able:
City of Las Vegas...... Las Vegas 8.75% 10/01/13 (2) $ 312 $ --
City of Las Vegas...... Las Vegas 8.75 10/01/13 (2) 241 --
City of Hayward........ South Bay 7.00 03/01/98 (2) 7 --
City of Fremont........ South Bay 7.00 03/01/11 (2) 10,870 --
City of Wilsonville.... Portland 6.82 08/19/04 (2) 161 --
City of Kent........... Seattle 7.85 06/20/05 (2) 134 --
City of Kent........... Seattle 7.98 05/20/09 (2) 76 --
City of Portland....... Portland 7.25 11/07/15 (2) 113 --
City of Portland....... Portland 7.25 11/17/07 (2) 6 --
City of Portland....... Portland 7.25 09/15/16 (2) 250 --
--------
7.10% Weighted average rate $ 12,170
========
Securitized Debt:
Tranche A.............. (3) 7.74% 02/01/04 (1) $ 27,686 $20,821
Tranche B.............. (3) 9.94 02/01/04 (1) 8,339 7,215
--------
8.25% Weighted average rate $ 36,025
========
</TABLE>
- --------
(1) Amortizing monthly with a balloon payment due at maturity.
(2) Fully amortizing.
(3) Secured by real estate located primarily in Fort Lauderdale/Miami, Orlando
and Tampa.
64
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mortgage notes payable are secured by real estate with an aggregate
undepreciated cost of $165.0 million at December 31, 1996. Assessment bonds
payable are secured by real estate with an aggregate undepreciated cost of
$219.6 million at December 31, 1996. Securitized debt is collateralized by
real estate with an aggregate undepreciated cost of $68.1 million at December
31, 1996.
Line of Credit
SCI has a $350.0 million unsecured revolving line of credit agreement with
NationsBank of Texas, N.A. (as agent for a bank group). Borrowings bear
interest at SCI's option, at either (a) the greater of the federal funds rate
plus 0.5% and the prime rate, or (b) LIBOR plus 1.25% based upon SCI's current
senior debt ratings. The prime rate was 8.25% and the 30 day LIBOR rate was
5.50% at December 31, 1996. Additionally, there is a commitment fee ranging
from .125% to .25% per annum of the unused line of credit balance. The line is
scheduled to mature in May 1998 and may be extended annually for an additional
year with the approval of NationsBank and the other participating lenders; if
not extended, at SCI's election, the facility will either (a) convert to a
three year term note or (b) continue on a revolving basis with the remaining
one year maturity. All debt incurrences are subject to a covenant that SCI
maintain a debt to tangible net worth ratio of not greater than 1 to 1.
Additionally, SCI is required to maintain an adjusted net worth (as defined)
of at least $1.0 billion, to maintain interest payment coverage of not less
than 2 to 1 and to maintain a fixed charge coverage ratio of not less than 1.4
to 1. SCI is in compliance with all covenants contained in the line of credit,
and as of February 10, 1997, no borrowings were outstanding on the line of
credit.
A summary of SCI's line of credit borrowings is as follows for the years
ended December 31, (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Weighted average daily interest rate.................. 7.02% 8.0%
Borrowings outstanding at December 31................. $ 38,600 $ 81,000
Weighted average daily borrowings..................... $ 44,268 $ 61,132
Maximum borrowings outstanding at any month end....... $124,200 $246,000
Total line of credit at December 31................... $350,000 $350,000
</TABLE>
Long-Term Debt
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
8.72% Senior Unsecured Notes, issued on March 2, 1995 in an
original principal amount of $150,000,000. Interest is pay-
able March 1 and September 1 of each year. The Notes are
payable in eight consecutive annual installments of
$18,750,000 commencing March 1, 2002 and maturing on March
1, 2009..................................................... $150,000 $150,000
9.34% Senior Unsecured Notes, issued on March 2, 1995 in an
original principal amount of $50,000,000. Interest is pay-
able March 1 and September 1 of each year. The Notes are
payable in six consecutive annual installments ranging from
$5,000,000 to $12,500,000 commencing on March 1, 2010 and
maturing on March 1, 2015................................... 50,000 50,000
7.13% Senior Unsecured Notes due 1998, issued on May 16, 1995
in an original principal amount of $15,000,000, net of orig-
inal issue discount. Interest is payable May 15 and November
15 of each year............................................. 14,993 14,990
7.25% Senior Unsecured Notes due 2000, issued on May 16, 1995
in an original principal amount of $17,500,000, net of orig-
inal issue discount. Interest is payable May 15 and November
15 of each year............................................. 17,448 17,444
</TABLE>
65
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
7.30% Senior Unsecured Notes due 2001, issued on May 16,
1995 in an original principal amount of $17,500,000, net of
original issue discount. Interest is payable May 15 and No-
vember 15 of each year..................................... 17,435 17,429
7.88% Senior Unsecured Notes, issued on May 16, 1995 in an
original principal amount of $75,000,000, net of original
issue discount. Interest is payable May 15 and November 15
of each year. The Notes are payable in eight annual in-
stallments of $9,375,000 beginning May 15, 2002 and matur-
ing on May 15, 2009........................................ 74,668 74,664
7.25% Senior Unsecured Notes, issued on May 17, 1996 in an
original principal amount of $50,000,000, net of original
issue discount. Interest is payable May 15 and November 15
of each year. The Notes are payable in four annual install-
ments of $12,500,000 beginning May 15, 1999 and maturing on
May 15, 2002............................................... 49,951 --
7.95% Senior Unsecured Notes, issued on May 17, 1996 in an
original principal amount of $100,000,000, net of original
issue discount. Interest is payable May 15 and November 15
of each year. The Notes are payable in four annual install-
ments of $25,000,000 beginning May 15, 2005 and maturing on
May 15, 2008............................................... 99,840 --
8.65% Senior Unsecured Notes, issued on May 17, 1996 in an
original principal amount of $50,000,000, net of original
issue discount. Interest is payable May 15 and November 15
of each year. The Notes are payable in seven annual in-
stallments ranging from $5,000,000 to $12,500,000 beginning
May 15, 2010 and maturing on May 15, 2016.................. 49,856 --
-------- --------
Total long-term debt, net of original issue discount.... $524,191 $324,527
======== ========
</TABLE>
All of the foregoing Notes are redeemable at any time at the option of SCI,
in whole or in part, at a redemption price equal to the sum of the principal
amount of the Notes being redeemed plus accrued interest thereon to the
redemption date plus an adjustment, if any, based on the yield to maturity
relative to market yields available at redemption. The Notes are governed by
the terms and provisions of an indenture agreement (the "Indenture") between
SCI and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40% and (iii) SCI's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5:1. In addition, SCI may not at any time own total
unencumbered assets, as defined in the Indenture, equal to less than 150% of
the aggregate outstanding principal amount of SCI's unsecured debt. At December
31, 1996, SCI was in compliance with all debt covenants contained in the
Indenture.
Approximate principal payments due on long-term debt, mortgage notes payable,
assessment bonds payable and securitized debt during each of the years in the
five-year period ending December 31, 2001 and thereafter are as follows (in
thousands):
<TABLE>
<S> <C>
1997............................ $ 18,265
1998............................ 19,782
1999............................ 25,689
2000............................ 38,429
2001............................ 40,686
2002 and thereafter............. 522,101
--------
Total principal due............. 664,952
Less: Original issue discount... (809)
--------
Total carrying value........ $664,143
========
</TABLE>
66
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1996, 1995 and 1994, interest expense was $38,819,000, $32,005,000,
and $7,568,000, respectively, which was net of capitalized interest of
$16,138,000, $8,599,000 and $2,208,000, respectively. Total amortization of
deferred loan fees included in interest expense was $2,339,000, $2,092,000 and
$1,023,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
The total interest paid in cash on all outstanding debt was $50,704,000,
$33,634,000, and $8,992,000 during 1996, 1995, and 1994, respectively.
5. MINORITY INTEREST:
Minority interest represents limited partners' interests in five real estate
partnerships controlled by SCI.
SCI owns a 70.0% general partnership interest in Red Mountain Joint Venture,
which owns approximately $3 million of property in Albuquerque, New Mexico.
On December 22, 1993, SCI acquired a 68.7% controlling general partnership
interest in SCI Limited Partnership-I, which owns distribution facilities
primarily in the San Francisco Bay area. Limited partners are entitled to
exchange each partnership unit for one Common Share and are entitled to
receive preferential cumulative quarterly distributions per unit equal to the
quarterly distribution in respect of Common Shares. At December 31, 1996,
4,520,533 limited partnership units were outstanding and no units had been
exchanged.
During the first two quarters of 1994, SCI acquired a 81.2% controlling
general partnership interest in SCI Limited Partnership-II, which owns
distribution facilities primarily in Austin, Charlotte, Dallas, Denver, El
Paso and the San Francisco Bay area. Limited partners are entitled to exchange
each partnership unit for one Common Share and are entitled to receive
preferential cumulative quarterly distributions per unit equal to the
quarterly distribution in respect of Common Shares. During the third quarter
of 1995 certain limited partners in SCI Limited Partnership-II exercised their
conversion rights to exchange partnership units for Common Shares on a one for
one basis. As a result of these conversions, SCI's general partnership
interest in SCI Limited Partnership-II increased to 97.4%, and SCI's
outstanding Common Shares increased by 555,651 shares. As of December 31,
1996, there were 90,213 limited partnership units outstanding in SCI Limited
Partnership-II.
In October 1994, SCI acquired a 50.4% controlling general partnership
interest in SCI Limited Partnership-III, which owns distribution facilities
primarily in Tampa, Florida. During 1995, SCI contributed an additional $11.9
million to this partnership for asset acquisitions which increased SCI's
general partnership interest to 71.8%. During 1996, SCI contributed $4.2
million for a property acquisition in San Antonio, Texas which increased SCI's
general partnership interest from 71.8% to 75.6%. Limited partners are
entitled to exchange each partnership unit for one Common Share and are
entitled to receive preferential cumulative quarterly distributions per unit
equal to the quarterly distribution in respect of Common Shares. As of
December 31, 1996, there were 514,900 limited partnership units outstanding in
SCI Limited Partnership-III and no units had been exchanged.
In October 1994, SCI IV, Inc., a wholly-owned subsidiary of SCI, made a
$27.5 million cash contribution to SCI Limited Partnership-IV, a Delaware
limited partnership (Partnership-IV), in exchange for a 96.36% general partner
interest in Partnership-IV, and third party investors that were not affiliated
with SCI contributed an aggregate of $1.0 million in assets to Partnership-IV
in exchange for limited partner interests totalling 3.6% in Partnership-IV.
SCI contributed an additional $150,000 to the partnership in 1996 in
conjunction with a Section 1031 exchange transaction which increased SCI's
interest from 96.36% to 96.38%. SCI IV, Inc., as general partner, manages the
activities of Partnership-IV and has fiduciary responsibilities to
Partnership-IV and its other partners.
Both Partnership-IV and SCI IV, Inc. are legal entities that are separate
and distinct from SCI, its affiliates and each other, and each has separate
assets, liabilities, business functions and operations. The assets owned by
67
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Partnership-IV consist of income producing, improved real property located in
Florida, Ohio and Oklahoma. The sole assets owned by SCI IV, Inc. are its
general partner advances to and interest in Partnership-IV. SCI and its
affiliates had no borrowings from Partnership-IV at December 31, 1996 and
1995. Partnership-IV had $1,384,000 and $283,000 of borrowings from SCI IV,
Inc. at December 31, 1996 and 1995, respectively. SCI IV, Inc. had $1,384,000
and $283,000 of borrowings from SCI and its affiliates at December 31, 1996
and 1995, respectively. For financial reporting purposes, the assets,
liabilities, results of operations and cash flows of each of Partnership-IV
and SCI IV, Inc. are included in SCI's consolidated financial statements, and
the third party investors' interests in Partnership-IV are reflected as
minority interest. Limited partners are entitled to exchange each partnership
unit for one Common Share and are entitled to receive preferential cumulative
quarterly distributions per unit equal to the quarterly distribution in
respect of Common Shares. At December 31, 1996, there were 68,612 limited
partnership units outstanding in Partnership-IV and no units had been
exchanged.
6. SHAREHOLDERS' EQUITY:
On November 13, 1996, SCI issued 2,000,000 Series C Cumulative Redeemable
Preferred Shares (the "Series C Preferred Shares"). The Series C Preferred
Shares have a liquidation preference of $50.00 per share for an aggregate
liquidation preference of $100.0 million plus accrued and unpaid dividends.
The net proceeds (after underwriting commission and other offering costs) of
the Series C Preferred Shares issued were $97.1 million. Holders of the Series
C Preferred Shares are entitled to receive, when, as and if declared by SCI's
Board of Trustees (the "Board"), out of funds legally available for payment of
distributions, cumulative preferential cash distributions at a rate of 8.54%
of the liquidation preference per annum (equivalent to $4.27 per share). On or
after November 13, 2026, the Series C Preferred Shares may be redeemed for
cash at the option of SCI. The redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out
of the sale proceeds of other capital shares of SCI, which may include shares
of other series of preferred shares.
On August 21, 1996, SCI commenced a rights offering to sell 6,787,806 Common
Shares at $17.25 per Common Share and also authorized an additional 3,393,903
Common Shares for oversubscriptions or third party subscribers. In September
1996, SCI issued 7,865,645 Common Shares of the 10,181,709 Common Shares
subscribed for and recorded subscriptions receivable of $40.0 million. In
October 1996, 2,316,064 Common Shares were issued and all subscriptions
receivable were collected. Gross proceeds from the offering totaled $175.6
million.
On September 24, 1996, SCI offered 2,036,342 Common Shares to third party
subscribers in the rights offering that were not accepted in whole or in part
due to demand in excess of the Common Shares offered. All of the Common Shares
were subscribed for as of September 30, 1996 and subscriptions receivable for
gross proceeds of $35.1 million recorded. In October 1996, all of such Common
Shares were issued and all subscriptions receivable were collected.
Security Capital Group Incorporated ("Security Capital Group"), an affiliate
of SCI's REIT Manager, purchased 3,734,240 Common Shares in connection with
the September rights offering at the same price paid by the public. As of
December 31, 1996, Security Capital Group owned 46.0% of SCI's outstanding
93,676,546 Common Shares.
In February 1996, SCI issued a total of 8,050,000 Series B Cumulative
Convertible Redeemable Preferred Shares (the "Series B Preferred Shares"). The
Series B Preferred Shares have a liquidation preference of $25.00 per share
for an aggregate liquidation preference of $201.3 million plus any accrued and
unpaid dividends. Holders of the Series B Preferred Shares are only entitled
to limited voting rights under certain conditions. The Series B Preferred
Shares are convertible at any time, unless previously redeemed, at the option
of the holders thereof into Common Shares at a conversion price of $19.50 per
share (equivalent to a conversion rate of
68
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1.282 common shares for each Series B Preferred Share), subject to adjustment
in certain circumstances. Holders of the Series B Preferred Shares are
entitled to receive, when, as and if declared by the Board, out of funds
legally available for the payment of distributions, cumulative preferential
cash distributions in an amount per share equal to the greater of 7% of the
liquidation preference per annum (equivalent to $1.75 per share) or the
distribution on the common shares, or portion thereof, into which a Series B
Preferred Share is convertible. Distributions on the Series B Preferred Shares
are cumulative from the date of original issue and payable quarterly in
arrears on the last day of March, June, September and December of each year.
The Series B Preferred Shares are redeemable at the option of SCI on or after
February 21, 2001.
On September 29, 1995, SCI issued 9,421,505 Common Shares at $15.375 per
share and received subscriptions for 6,838,658 additional Common Shares at the
same price in conjunction with a rights offering ($250 million). The
additional Common Shares were issued on October 3, 1995. Security Capital
Group purchased 6,504,148 Common Shares in this offering (40% of the shares
sold). As of December 31, 1995, Security Capital Group owned 48.3% of SCI's
outstanding 81,416,451 Common Shares.
On June 21, 1995, SCI issued 5,400,000 Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest (the "Series A Preferred Shares"). The
Series A Preferred Shares have a liquidation preference of $25.00 per share
for an aggregate liquidation preference of $135.0 million plus any accrued and
unpaid dividends. The net proceeds (after underwriting commission and other
offering costs) of the Series A Preferred Shares issued were $130.4 million.
Holders of the Series A Preferred Shares are entitled only to limited voting
rights under certain conditions. Holders of the Series A Preferred Shares will
be entitled to receive, when, as and if declared by the Board, out of funds
legally available for the payment of distributions, cumulative preferential
cash distributions at the rate of 9.4% of the liquidation preference per annum
(equivalent to $2.35 per share). Such distributions are cumulative from the
date of original issue and are payable quarterly in arrears on the last day of
March, June, September, and December of each year. The Series A Preferred
Shares are redeemable at the option of SCI on or after June 21, 2000. The
redemption price (other than the portion thereof consisting of accrued and
unpaid distributions) is payable solely out of the sale proceeds of other
capital shares of SCI, which may include shares of other series of preferred
shares.
In October and November 1994, SCI completed an offering of 18,000,000 Common
Shares at a price of $15.25 per share. 17,750,000 Common Shares were issued on
October 5, 1994, and 250,000 Common Shares were issued on November 17, 1994.
9,800,000 of the Common Shares were purchased by Security Capital Group, at
the same price paid by the public, with no underwriting discount or commission
($149.5 million). 8,200,000 of the Common Shares were sold through an
underwritten offering at $15.25 per share. The underwriting discount on these
Common Shares was $0.80 per share. After additional costs of the offering, net
proceeds to SCI were $266.9 million.
On June 29, 1994, SCI completed a rights offering and issued 6,611,571
Common Shares at $15.125 per share ($100 million). Security Capital Group
purchased 3,517,483 Common Shares in this offering (53% of the shares sold).
On March 31, 1994, SCI completed its initial public offering and sold
3,260,870 Common Shares at $11.50 per share ($37.5 million). Security Capital
Group purchased 523,370 Common Shares in this offering (16% of the shares
sold).
Dividend Reinvestment and Share Purchase Plan
In March 1995, SCI adopted a Dividend Reinvestment and Share Purchase Plan
(the "1995 Plan"), which commenced in April 1995. The 1995 Plan allows holders
of Common Shares the opportunity to acquire additional Common Shares by
automatically reinvesting distributions. Common Shares are acquired pursuant
to the 1995 Plan at a price equal to 98% of the market price of such Common
Shares, without payment of any
69
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
brokerage commission or service charge. The 1995 Plan also allows
participating common shareholders to purchase a limited number of additional
Common Shares at 98% of the market price of such Common Shares, by making
optional cash payments, without payment of any brokerage commission or service
charge. Holders of Common Shares who do not participate in the 1995 Plan
continue to receive distributions as declared.
Option Plan
In April 1994, SCI adopted its Share Option Plan for Outside Trustees (the
"Outside Trustees Plan"). Under the Outside Trustees Plan, there are 100,000
Common Shares approved which can be granted to non-employee Trustees. All
options granted are for a term of five years and are immediately exercisable
in whole or in part. The exercise price of the options granted may not be less
than the fair market value on the date of the grant. At December 31, 1996
there were 18,000 options for Common Shares outstanding and exercisable under
the Outside Trustees Plan at exercise prices of $15.50, $16.00, and $17.50.
SCI adopted the provisions of Statement of Financial Accounting Standards
No. 123 (SFAS 123) "Accounting for Stock Based Compensation" during 1996.
Under the provisions of this statement, SCI will continue to account for the
Outside Trustees Plan under the provisions of APB Opinion No. 25, and make the
pro forma disclosures required by SFAS 123 where applicable. The effect of
adopting this statement was immaterial to SCI's consolidated financial
statements.
Shareholder Purchase Rights
On December 7, 1993, the Board declared a dividend of one preferred share
purchase right ("Right") for each outstanding Common Share to be distributed
to all holders of record of the Common Shares on December 31, 1993. Each Right
entitles the registered holder to purchase one-hundredth of a Participating
Preferred Share for an exercise price of $40.00 per one-hundredth of a
Participating Preferred Share, subject to adjustment as provided in the Rights
Agreement. The Rights will generally be exercisable only if a person or group
(other than certain affiliates of SCI) acquires 20% or more of the Common
Shares or announces a tender offer for 25% or more of the Common Shares. Under
certain circumstances, upon a shareholder acquisition of 20% or more of the
Common Shares (other than certain affiliates of SCI), each Right will entitle
the holder to purchase, at the Right's then-current exercise price, a number
of Common Shares having a market value of twice the Right's exercise price.
The acquisition of SCI pursuant to certain mergers or other business
transactions will entitle each holder of a Right to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time equal to twice the Right's exercise price.
The Rights held by certain 20% shareholders will not be exercisable. The
Rights will expire on December 7, 2003, unless the expiration date of the
Rights is extended, and the Rights are subject to redemption at a price of
$0.01 per Right under certain circumstances.
7. DISTRIBUTIONS:
The annual distribution per Common Share was $1.01 in 1996, $0.935 in 1995
and $0.85 in 1994. Distributions attributable to realized gains on the
disposition of investments may be considered for payment to shareholders on a
special, as-incurred basis.
For federal income tax purposes, the following summarizes the taxability of
distributions paid on Common Shares in 1995 and 1994 and the estimated
taxability for 1996:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income..................................... $0.879 $0.692 $0.67
Capital gains....................................... -- -- --
Return of capital................................... 0.131 0.243 0.18
------ ------ -----
Total............................................. $1.010 $0.935 $0.85
====== ====== =====
</TABLE>
70
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 17, 1996, SCI declared a distribution of $0.2675 per Common
Share payable on February 18, 1997 to shareholders of record as of February 4,
1997. At the same time, SCI announced that it set an annualized distribution
level of $1.07 per Common Share for 1997.
Pursuant to the terms of the preferred shares, SCI is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative distributions with respect to the preferred shares have been
paid and sufficient funds have been set aside for distributions that have been
declared for the then-current distribution period with respect to the
preferred shares.
For federal income tax purposes, the following summary reflects the
taxability of dividends paid on the Series A Preferred Shares, Series B
Preferred Shares, and Series C Preferred Shares for the period prior to 1996
and the estimated taxability for 1996.
<TABLE>
<CAPTION>
DATE OF ISSUANCE TO
1996 DECEMBER 31, 1995
------------------- -------------------
<S> <C> <C>
Per Series A Preferred Share:
Ordinary Income............... $2.35 $1.24
Capital Gains................. -- --
----- -----
Total....................... 2.35 $1.24
===== =====
<CAPTION>
DATE OF ISSUANCE TO
DECEMBER 31, 1996
-------------------
<S> <C> <C>
Per Series B Preferred Share:
Ordinary Income............... $1.50
Capital Gains................. --
-----
Total....................... $1.50
=====
Per Series C Preferred Share:
Ordinary Income............... $0.57
Capital Gains................. --
-----
Total....................... $0.57
=====
</TABLE>
SCI's tax return for the year ended December 31, 1996 has not been filed,
and the taxability information for 1996 is based upon the best available data.
SCI's tax returns have not been examined by the Internal Revenue Service and,
therefore, the taxability of the distributions is subject to change.
8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected quarterly financial data (in thousands except for per share
amounts) for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
YEAR
THREE MONTHS ENDED, ENDED
-------------------------------- --------
3-31 6-30 9-30 12-31 12-31
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1996:
Rental income..................... $50,062 $54,361 $59,391 $63,186 $227,000
======= ======= ======= ======= ========
Earnings from operations.......... $17,262 $19,456 $20,427 $25,565 $ 82,710
Minority interest share in net
earnings......................... 756 884 859 827 3,326
Loss on disposition of real es-
tate............................. (29) -- -- -- (29)
------- ------- ------- ------- --------
Net earnings...................... 16,477 18,572 19,568 24,738 79,355
Less preferred share dividends.... 4,673 6,695 6,694 7,833 25,895
------- ------- ------- ------- --------
Net earnings attributable to Com-
mon Shares....................... $11,804 $11,877 $12,874 $16,905 $ 53,460
======= ======= ======= ======= ========
Net earnings per Common Share..... $ 0.14 $ 0.15 $ 0.16 $ 0.18 $ 0.63
======= ======= ======= ======= ========
</TABLE>
71
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR
THREE MONTHS ENDED, ENDED
------------------------------- --------
3-31 6-30 9-30 12-31 12-31
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1995:
Rental income....................... $32,901 $35,340 $40,372 $45,266 $153,879
======= ======= ======= ======= ========
Earnings from operations............ $10,528 $10,372 $13,121 $16,970 $ 50,991
Minority interest share in net earn-
ings............................... 865 874 807 785 3,331
Gain on disposition of real estate.. -- -- -- 1,053 1,053
------- ------- ------- ------- --------
Net earnings........................ 9,663 9,498 12,314 17,238 48,713
Less preferred share dividends...... -- 353 3,172 3,173 6,698
------- ------- ------- ------- --------
Net earnings attributable to Common
Shares............................. $ 9,663 $ 9,145 $ 9,142 $14,065 $ 42,015
======= ======= ======= ======= ========
Net earnings per Common Share....... $ 0.15 $ 0.14 $ 0.14 $ 0.17 $ 0.61
======= ======= ======= ======= ========
</TABLE>
9. REIT MANAGEMENT AGREEMENT:
Security Capital Industrial Incorporated (the "REIT Manager"), a subsidiary
of Security Capital Group (Note 6), is the REIT manager of SCI. All officers
of SCI are employees of the REIT Manager and SCI currently has no employees.
Pursuant to the REIT management agreement, in exchange for providing research,
strategic planning, investment analysis, acquisition and development services,
asset management, capital markets, legal and accounting services and day-to-
day management of SCI's operations, the REIT Manager is entitled to receive
from SCI a REIT management fee, payable quarterly, equal to 16% of cash flow,
as defined in the agreement, before deducting (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 has been none since
inception of the REIT management agreement); and, after deducting (iv) actual
or assumed regularly scheduled principal and interest payments on long term
debt and (v) distributions actually paid with respect to any non-convertible
preferred shares of beneficial interest of SCI. The REIT management agreement
has been amended so that the long term senior notes described in Note 4 will
be treated as if they had regularly scheduled principal and interest payments
similar to 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. Cash flow does not include interest
and income from SCI Development Services, realized gains from dispositions of
investments or income from cash equivalent investments. The REIT Manager also
receives a fee of .2% of the average daily balance of funds invested in
interest bearing cash accounts, the earnings on which are not subject to the
16% fee. For the years ended December 31, 1996, 1995 and 1994, the REIT
Manager earned REIT management fees totalling $21,472,000, $14,207,000 and
$8,673,000, respectively.
10. PROPERTY MANAGEMENT COMPANY:
Commencing January 1994, SCI Client Services Incorporated ("Client
Services"), a subsidiary of Security Capital Group, 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 provides for a
monthly fee to Client Services of no more than 3% per annum of property
revenues, paid monthly, plus leasing commissions consistent with industry
practice, which together were $10.1 million, $4.7 million and $1.7 million for
1996, 1995 and 1994, respectively. As of December 31, 1996, Client Services
managed 90.0% of SCI's 80.6 million total operating square feet. 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 terms management believes are no less favorable to SCI than
could be obtained with unaffiliated third parties.
72
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. RELATED PARTY TRANSACTIONS:
SCI leases space to related parties on market terms that management believes
are no less favorable to SCI than those that could be obtained with
unaffiliated third parties. These transactions are summarized as follows:
<TABLE>
<CAPTION>
SECURITY
CAPITAL REIT CLIENT
GROUP MANAGER SERVICES
(NOTE 6) (NOTE 9) (NOTE 10) TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Rental revenue during the year ended De-
cember 31, 1994........................ $203,220 $ 44,926 $112,542 $ 360,688
Rental revenue during the year ended De-
cember 31, 1995........................ $415,264 $210,856 $194,335 $ 820,455
Rental revenue during the year ended De-
cember 31, 1996........................ $593,657 $210,856 $571,970 $1,376,483
Square feet leased as of December 31,
1996................................... 102,268 25,007 84,520 211,795
Annualized revenue for leases in effect
at December 31, 1996................... $744,718 $210,856 $766,190 $1,721,764
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is presented in accordance with the requirements of SFAS No. 107. The estimated
fair value amounts have been determined by SCI using available market
information and valuation methodologies.
As of December 31, 1996 and 1995, the carrying amounts of certain financial
instruments employed by SCI, including cash and cash equivalents, accounts and
notes receivable, accounts payable and accrued expenses were representative of
their fair values because of the short-term maturity of these instruments. As
of December 31, 1995, based on the borrowings available to SCI, the carrying
value of the long-term debt and mortgages was a reasonable estimation of their
fair values. As of December 31, 1996, the fair value of the long-term debt and
mortgages has been estimated based on quoted market prices for the same or
similar issues or by discounting the future cash flows using rates currently
available for debt with similar terms and maturities. The increase in the fair
value of long-term debt and mortgages over the carrying value in the table
below is a result of a net reduction in the interest rates available to SCI at
December 31, 1996 from the interest rates in effect at the dates of issuance.
The long-term debt and many of the mortgages contain pre-payment penalties or
yield maintenance provisions which would make the cost of refinancing exceed
the benefit of refinancing at the lower rates. As of December 31, 1996, the
fair value of all derivative financial instruments are amounts at which they
could be settled, based on quoted market prices or estimates obtained from
brokers (there were no derivative financial instruments outstanding as of
December 31, 1995). The following table reflects the carrying amount and
estimated fair value of SCI's financial instruments (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Balance sheet financial instruments
Long-term debt....................................... $524,191 $549,613
Mortgages............................................ $139,952 $142,643
Derivative financial instruments
Interest rate contracts.............................. $ -- $ 1,218
</TABLE>
73
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Derivative Financial Instruments
SCI has only limited involvement with derivative financial instruments and
does not use them for trading purposes. SCI uses derivatives to manage well-
defined interest rate risk.
The primary risks associated with derivative instruments are market risk
(price risk) and credit risk. Price risk is defined as the potential for loss
in the value of the derivative due to adverse changes in market prices
(interest rates). SCI utilizes derivative instruments in anticipation of
future transactions to manage well defined interest rate risk. Through
hedging, SCI can effectively manage the risk of increases in interest rates on
future debt issuances.
Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. SCI
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. As of December 31,
1996, the counterparties to all outstanding contracts were financial
institutions with AA or A+ credit ratings. SCI does not anticipate non-
performance by any of the counterparties to its derivative contracts. Should a
counterparty fail to perform, however, SCI would incur a financial loss to the
extent of the positive fair market value of the derivative instruments.
The following table summarizes the activity in interest rate contracts for
the year ended December 31, 1996 (in millions):
<TABLE>
<CAPTION>
INTEREST INTEREST
RATE FUTURES RATE
CONTRACTS SWAPS
------------ --------
<S> <C> <C>
Notional amount at December 31, 1995............. $ -- $ --
New contracts.................................... 156.0 173.0
Matured or expired contracts..................... (50.0) --
Terminated contracts............................. -- (140.0)
------ ------
Notional amount at December 31, 1996............. $106.0(1) $ 33.0(2)
====== ======
</TABLE>
- --------
(1) Included in the $106.0 million notional amount at December 31, 1996 are
two contracts totalling $80.0 million which settled on January 31, 1997
(see Note 14. Subsequent Events), and a $26.0 million contract with a
termination date of July 15, 1997. The $26.0 million contract locks in the
30 year Treasury at a rate of 6.56%.
(2) The remaining swap contract as of December 31, 1996, which matures in
2007, provides for SCI to pay a fixed rate of 6.61% and receive a floating
rate equal to the three month LIBOR rate.
Deferred losses totalling $1.9 million on matured, expired or terminated
interest rate contracts were recorded on the balance sheet as of December 31,
1996. These losses related to the unwind of hedges placed for the May 1996
debt offering (see Note 4) and are being amortized into interest expense over
a weighted average amortization period of 10.8 years.
13. COMMITMENTS AND CONTINGENCIES:
Environmental Matters
All of the properties acquired by SCI have been subjected to Phase I
environmental reviews. While some of these assessments have led to further
investigation and sampling, none of the environmental assessments has
revealed, nor is SCI aware of any environmental liability (including asbestos
related liability) that SCI believes would have a material adverse effect on
SCI's business, financial condition or results of operations.
74
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
14. SUBSEQUENT EVENTS:
On January 22, 1997, SCI announced that it received a proposal from Security
Capital Group to exchange the REIT Manager and Client Services, the REIT
manager's property management affiliate, for Common Shares. As a result of the
proposed transaction, SCI would become an internally managed REIT, and
Security Capital Group would remain SCI's largest shareholder. SCI's Board has
formed a special committee comprised of independent Trustees to review the
proposed transaction. The proposed transaction is subject to approval by the
special committee, the full Board and SCI's shareholders.
On February 7, 1997, SCI completed a public offering of 4,025,000 Common
Shares. Net proceeds to SCI after underwriting discounts and offering costs
were $80.4 million.
On February 4, 1997, SCI issued $100.0 million of Series A 2015 Notes under
its Medium-Term Note program established in November 1996. The Series A 2015
Notes bear interest at 7.81%, payable semi-annually on February 1 and August
1, commencing August 1, 1997. Installments of principal will be paid annually
on each February 1, commencing February 1, 2010, in the following amounts: $20
million in 2010, $15 million in 2011, $15 million in 2012, $20 million in
2013, $20 million in 2014 and $10 million in 2015. The Series A 2015 Notes
have a weighted average life to maturity of 15.35 years and a final maturity
extending to 2015. The average effective interest cost is 7.73%, including all
costs associated with the offering plus $1.7 million in proceeds received on
January 31, 1997 in connection with two interest rate protection agreements
entered into in August and November 1996 in anticipation of the debt offering.
Both the August 1996 and the November 1996 interest rate protection agreements
were in the form of a forward treasury lock agreement with an AA rated
financial institution. The August agreement included a notional principal
amount of $30.0 million and a reference price of 99.653 on the thirty year
Treasury Note. The November agreement included a notional principal amount of
$50.0 million and a reference price of 101-29/32 on the ten year Treasury
Note. The settlement date on both contracts was January 31, 1997.
On October 11, 1996, and as amended on October 31, 1996, SCI filed a shelf
registration statement with the Securities and Exchange Commission regarding
the offering from time to time of $600 million in one or more series of its
debt securities, preferred shares of beneficial interest and common shares of
beneficial interest, and had approximately $78 million remaining under its
previous shelf registration statement. After the Series C Preferred Share
offering in November 1996 (see Note 6) and the offerings described above, as
of February 10, 1997, approximately $393 million in securities were available
to be issued under the shelf registration statement.
75
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Security Capital Industrial Trust:
We have audited, in accordance with generally accepted auditing standards,
the financial statements of Security Capital Industrial Trust included in this
Form 10-K, and have issued our report thereon dated February 10, 1997. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The supplemental Schedule III--Real Estate and Accumulated
Depreciation ("Schedule III") is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The Schedule III has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
Chicago, Illinois
February 10, 1997
76
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
------------------- CAPITALIZED --------------------------- ACCUMULATED DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ------ ------- ------ ------------ -------------- ------ ------------ ------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING
PROPERTIES
Atlanta, Georgia
Atlanta Airport
Distribution
Center.......... 3 $1,758 $ -- $ 4,610 $1,763 $ 4,605 $ 6,368 $ (70) 1996
Atlanta NE
Distribution
Center.......... 4 3,248 -- 11,942 3,248 11,942 15,190 (156) 1996
Atlanta West
Distribution
Center.......... 21 6,995 36,055 7,007 6,995 43,062 50,057 (2,496) 1994, 1996
Carter-Pacific
Business Center. 3 556 3,151 59 556 3,210 3,766 (115) 1995
Chattahoochee
Business Center. 4 362 2,049 601 438 2,574 3,012 -- 1996
Fulton Park
Distribution
Center.......... 4 447 2,533 (79) 426 2,475 2,901 -- 1996
International
Airport
Industrial
Center.......... 9 2,939 14,146 4,436 2,969 18,552 21,521 (1,251) 1994, 1995
LaGrange
Distribution
Center.......... 1 174 986 103 174 1,089 1,263 (91) 1994
Northeast
Industrial
Center.......... 4 1,109 6,283 (158) 1,050 6,184 7,234 (168) 1996
Northmont
Industrial
Center.......... 1 566 3,209 135 566 3,344 3,910 (244) 1994
Oakcliff
Industrial
Center.......... 3 608 3,446 142 608 3,588 4,196 (206) 1995
Olympic
Industrial
Center.......... 2 698 3,956 950 757 4,847 5,604 (120) 1996
Peachtree
Commerce
Business Center. 4 707 4,004 490 707 4,494 5,201 (379) 1994
Peachtree
Distribution
Center.......... 1 302 1,709 27 302 1,736 2,038 (115) 1994
Plaza Industrial
Center.......... 1 66 372 11 66 383 449 (19) 1995
Pleasantdale
Industrial
Center.......... 2 541 3,184 102 541 3,286 3,827 (214) 1995
Regency
Industrial
Center.......... 9 1,853 10,480 555 1,856 11,032 12,888 (804) 1994
Sullivan 75
Distribution
Center.......... 3 (d) 728 4,123 217 728 4,340 5,068 (291) 1994, 1995
Tradeport
Distribution
Center.......... 3 1,464 4,563 5,215 1,479 9,763 11,242 (479) 1994, 1996
Weaver
Distribution
Center.......... 2 935 5,182 369 935 5,551 6,486 (350) 1995
Westfork
Industrial
Center.......... 10 2,483 14,115 415 2,483 14,530 17,013 (720) 1995
Zip Industrial
Center.......... 4 533 3,023 (275) 485 2,796 3,281 -- 1996
Austin, Texas
Braker Service
Center.......... 3 1,765 10,002 789 1,765 10,791 12,556 (1,012) 1994
Corridor Park
Corporate
Center.......... 6 2,109 1,681 12,135 2,131 13,794 15,925 (369) 1995, 1996
Montopolis
Distribution
Center.......... 1 580 3,384 430 580 3,814 4,394 (349) 1994
Pecan Business
Center.......... 4 630 3,572 217 631 3,788 4,419 (177) 1995
Rutland
Distribution
Center.......... 2 460 2,617 197 462 2,812 3,274 (275) 1993
Southpark
Corporate
Center.......... 7 1,946 -- 13,894 1,946 13,894 15,840 (694) 1994, 1995, 1996
Walnut Creek
Corporate
Center.......... 12 2,707 5,649 15,668 2,707 21,317 24,024 (671) 1994, 1995, 1996
</TABLE>
77
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------ ACCUMULATED DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ------ ------- ------- ------------ -------------- ------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Birmingham,
Alabama
Oxmoor
Distribution
Center......... 4 (d) 2,398 13,591 123 2,398 13,714 16,112 (1,215) 1994
Perimeter
Distribution
Center......... 2 2,489 14,109 428 2,490 14,536 17,026 (1,285) 1994
Charlotte, North
Carolina
Barringer
Industrial
Center......... 3 308 1,746 380 308 2,126 2,434 (176) 1994
Bond
Distribution
Center......... 2 905 5,126 859 905 5,985 6,890 (527) 1994
Charlotte
Commerce
Center......... 10 (d) 4,341 24,954 765 4,342 25,718 30,060 (2,221) 1994
Charlotte
Distribution
Center......... 5 3,131 -- 11,549 3,131 11,549 14,680 (344) 1995, 1996
Northpark
Distribution
Center......... 1 307 1,742 38 307 1,780 2,087 (145) 1994
Chattanooga,
Tennessee
Stone Fort
Distribution
Center......... 4 2,063 11,688 150 2,063 11,838 13,901 (889) 1994
Tiftonia
Distribution
Center......... 1 146 829 182 146 1,011 1,157 (51) 1995
Chicago, Illinois
Bedford Park
Distribution
Center......... 1 473 2,678 17 473 2,695 3,168 (15) 1996
Bridgeview
Distribution
Center......... 4 1,302 7,378 384 1,302 7,762 9,064 (102) 1996
Des Plaines
Distribution
Center......... 3 2,158 12,232 278 2,159 12,509 14,668 (311) 1995, 1996
Elk Grove
Distribution
Center......... 8 3,674 20,820 1,793 3,674 22,613 26,287 (555) 1995, 1996
Glendale Heights
Distribution
Center......... 1 1,126 6,382 40 1,126 6,422 7,548 -- 1996
Glenview
Distribution
Center......... 1 214 1,213 7 214 1,220 1,434 (7) 1996
Itasca
Distribution
Center......... 1 319 1,808 23 319 1,831 2,150 (41) 1996
Mitchell
Distribution
Center......... 1 1,236 7,004 287 1,236 7,291 8,527 (137) 1996
Northlake
Distribution
Center......... 1 372 2,106 41 372 2,147 2,519 (47) 1996
Tri-Center
Distribution
Center......... 3 889 5,038 82 889 5,120 6,009 (42) 1996
Cincinnati, Ohio
Airpark
Distribution
Center......... 2 1,692 -- 10,020 1,718 9,994 11,712 (169) 1996
Blue
Ash/Interstate
Distribution
Center......... 1 144 817 469 144 1,286 1,430 (44) 1995
Capital
Distribution
Center I....... 4 1,750 9,922 574 1,751 10,495 12,246 (680) 1994
Capital
Distribution
Center II...... 5 1,953 11,067 876 1,953 11,943 13,896 (853) 1994
</TABLE>
78
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------ ACCUMULATED DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ------ ------- ------- ------------ -------------- ------- ------------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Capital
Industrial
Center I........ 10 1,039 5,885 841 1,039 6,726 7,765 (375) 1994, 1995
Empire
Distribution
Center.......... 3 529 2,995 223 529 3,218 3,747 (138) 1995
Production
Distribution
Center.......... 1 (f) 598 2,717 (18) 479 2,818 3,297 (201) 1994
Springdale
Commerce Center. 3 421 2,384 431 421 2,815 3,236 (74) 1996
Columbus, Ohio
Capital Park
South
Distribution
Center.......... 3 1,981 -- 18,781 1,981 18,781 20,762 (320) 1996
Columbus West
Industrial
Center.......... 3 645 3,655 578 645 4,233 4,878 (199) 1995
Corporate Park
West............ 2 679 3,849 45 679 3,894 4,573 (54) 1996
Fischer
Distribution
Center.......... 1 1,197 6,785 561 1,197 7,346 8,543 (475) 1995
McCormick
Distribution
Center.......... 5 1,664 9,429 697 1,664 10,126 11,790 (666) 1994
New World
Distribution
Center.......... 1 207 1,173 411 207 1,584 1,791 (120) 1994
Dallas/Fort
Worth, Texas
Carter
Industrial
Center.......... 1 334 -- 2,301 334 2,301 2,635 (8) 1996
Dallas Corporate
Center.......... 4 3,325 -- 15,517 3,325 15,517 18,842 (208) 1996
Franklin
Distribution
Center.......... 2 528 2,991 392 528 3,383 3,911 (317) 1994
Freeport
Distribution
Center.......... 1 613 3,473 34 613 3,507 4,120 (19) 1996
Great Southwest
Distribution
Center.......... 8 2,260 10,697 3,420 2,269 14,108 16,377 (590) 1994, 1995, 1996
Great Southwest
Industrial
Center.......... 2 308 1,744 96 308 1,840 2,148 (68) 1995
Lone Star
Distribution
Center.......... 2 967 5,477 57 967 5,534 6,501 (107) 1996
Metropolitan
Distribution
Center.......... 1 201 1,097 716 297 1,717 2,014 (76) 1995
Northgate
Distribution
Center.......... 5 1,570 8,897 339 1,570 9,236 10,806 (700) 1994, 1996
Northpark
Business Center. 2 467 2,648 158 467 2,806 3,273 (79) 1995, 1996
Northway
Business Plaza.. 7 565 3,202 184 565 3,386 3,951 -- 1995
Redbird
Distribution
Center.......... 2 738 4,186 86 739 4,271 5,010 (112) 1994, 1996
Skyline Business
Center.......... 4 409 2,320 21 409 2,341 2,750 -- 1995
Stemmons
Distribution
Center.......... 1 272 1,544 341 272 1,885 2,157 (103) 1995
Stemmons
Industrial
Center.......... 11 1,497 8,484 993 1,497 9,477 10,974 (532) 1994, 1995, 1996
Trinity Mills
Distribution
Center.......... 4 1,709 9,684 584 1,709 10,268 11,977 (191) 1996
Valwood Business
Center.......... 2 520 2,945 (35) 520 2,910 3,430 -- 1995
</TABLE>
79
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------ ACCUMULATED DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ------ ------- ------- ------------ -------------- ------- ------------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Denver, Colorado
Denver Business
Center.......... 5 1,156 7,486 5,892 1,156 13,378 14,534 (1,141) 1992, 1994, 1996
Havana
Distribution
Center.......... 1 401 2,281 67 401 2,348 2,749 (270) 1993
Moline
Distribution
Center.......... 1 327 1,850 95 327 1,945 2,272 (181) 1994
Moncrieff
Distribution
Center.......... 1 314 2,493 147 314 2,640 2,954 (356) 1992
Pagosa Distribu-
tion Center..... 1 406 2,322 100 406 2,422 2,828 (295) 1993
Stapleton Dis-
tribution Cen-
ter............. 1 219 1,247 49 219 1,296 1,515 (148) 1993
Upland Distribu-
tion Center I... 6 820 5,710 8,007 821 13,716 14,537 (1,243) 1992, 1994, 1995
Upland Distribu-
tion Center II.. 6 2,456 13,946 486 2,489 14,399 16,888 (1,569) 1993, 1994
East Bay (San
Francisco),
California
East Bay Indus-
trial Center.... 1 531 3,009 137 531 3,146 3,677 (246) 1994
Eigenbrodt Way
Distribution
Center.......... 1 (d) 393 2,228 39 393 2,267 2,660 (226) 1993
Hayward Commerce
Center.......... 4 1,933 10,955 276 1,933 11,231 13,164 (1,104) 1993
Hayward Commerce
Park............ 9 2,764 15,661 1,037 2,764 16,698 19,462 (1,603) 1994
Hayward Distri-
bution Center... 7 (e) 3,417 19,255 262 3,417 19,517 22,934 (1,947) 1993
Hayward Indus-
trial Center.... 13 (d) 4,481 25,393 1,727 4,481 27,120 31,601 (2,603) 1993
Patterson Pass
Business Center. 2 862 4,885 34 862 4,919 5,781 (492) 1993
San Leandro Dis-
tribution
Center.......... 3 1,387 7,862 188 1,387 8,050 9,437 (817) 1993
El Paso, Texas
Billy the Kid
Distribution
Center.......... 1 273 1,547 453 273 2,000 2,273 (145) 1994
Broadbent Indus-
trial Center.... 3 676 5,183 248 676 5,431 6,107 (668) 1993
Goodyear Distri-
bution Center... 1 511 2,899 32 511 2,931 3,442 (251) 1994
Northwestern
Corporate Cen-
ter............. 4 1,272 3,155 6,632 1,278 9,781 11,059 (819) 1992, 1993, 1994
Pan Am Distribu-
tion Center..... 1 318 -- 2,330 318 2,330 2,648 (107) 1995
Peter Cooper
Distribution
Center.......... 1 (d) 495 2,816 42 495 2,858 3,353 (244) 1994
Vista Corporate
Center.......... 4 1,945 -- 10,211 1,946 10,210 12,156 (420) 1994, 1995, 1996
Vista Del Sol
Industrial Cen-
ter............. 7 (d) 2,255 12,782 9,310 3,516 20,831 24,347 (1,468) 1994, 1995
</TABLE>
80
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------ ACCUMULATED
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & TOTAL DEPRECIATION
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS (A,B) (C)
----------- ------ ------- ------- ------------ -------------- ------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fort
Lauderdale/Miami,
Florida
Airport West
Distribution
Center......... 1 675 3,825 644 1,276 3,868 5,144 (129)
North Andrews
Distribution
Center......... 1 (f) 698 3,956 91 698 4,047 4,745 (292)
Port 95 Distri-
bution Center.. 1 1,174 6,654 26 1,174 6,680 7,854 (370)
Houston, Texas
Crosstimbers
Distribution
Center......... 1 359 2,035 427 359 2,462 2,821 (213)
Hempstead Dis-
tribution Cen-
ter............ 3 1,013 5,740 545 1,013 6,285 7,298 (551)
I-10 Central
Distribution
Center......... 2 181 1,023 100 181 1,123 1,304 (104)
I-10 Central
Service Center. 1 58 330 29 58 359 417 (33)
Pine Forest
Business Cen-
ter............ 18 4,859 27,557 1,451 4,859 29,008 33,867 (1,684)
Post Oak Busi-
ness Center.... 16 3,462 17,966 2,468 3,462 20,434 23,896 (1,718)
Post Oak Distri-
bution Center.. 7 2,115 12,017 1,224 2,115 13,241 15,356 (1,433)
South Loop Dis-
tribution Cen-
ter............ 5 1,051 5,964 689 1,052 6,652 7,704 (527)
Southwest Free-
way Industrial
Center......... 1 84 476 27 84 503 587 (44)
West by North-
west Industrial
Center......... 13 3,076 8,382 17,984 3,088 26,354 29,442 (1,308)
White Street
Distribution
Center......... 1 469 2,656 164 469 2,820 3,289 (168)
Indianapolis, In-
diana
Eastside Distri-
bution Center.. 2 471 2,668 246 472 2,913 3,385 (106)
North by North-
east Distribu-
tion Center.... 1 1,058 -- 6,009 1,059 6,008 7,067 (107)
Park 100 Indus-
trial Center... 29 10,918 61,874 2,854 10,985 64,661 75,646 (2,757)
Park Fletcher
Distribution
Center......... 12 3,251 18,418 1,612 3,309 19,972 23,281 (711)
Shadeland Indus-
trial Center... 3 428 2,431 440 429 2,870 3,299 (130)
Kansas City,
Kansas/Missouri.
44th Street
Business Cen-
ter............ 1 143 813 284 143 1,097 1,240 (27)
<CAPTION>
DATE OF CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- ----------------------
<S> <C>
Fort
Lauderdale/Miami,
Florida
Airport West
Distribution
Center......... 1995
North Andrews
Distribution
Center......... 1994
Port 95 Distri-
bution Center.. 1995
Houston, Texas
Crosstimbers
Distribution
Center......... 1994
Hempstead Dis-
tribution Cen-
ter............ 1994
I-10 Central
Distribution
Center......... 1994
I-10 Central
Service Center. 1994
Pine Forest
Business Cen-
ter............ 1993, 1994, 1995
Post Oak Busi-
ness Center.... 1993, 1994, 1996
Post Oak Distri-
bution Center.. 1993, 1994
South Loop Dis-
tribution Cen-
ter............ 1994
Southwest Free-
way Industrial
Center......... 1994
West by North-
west Industrial
Center......... 1993, 1994, 1995, 1996
White Street
Distribution
Center......... 1995
Indianapolis, In-
diana
Eastside Distri-
bution Center.. 1995
North by North-
east Distribu-
tion Center.... 1995
Park 100 Indus-
trial Center... 1994, 1995
Park Fletcher
Distribution
Center......... 1994, 1995, 1996
Shadeland Indus-
trial Center... 1995
Kansas City,
Kansas/Missouri.
44th Street
Business Cen-
ter............ 1996
</TABLE>
81
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
------------------ CAPITALIZED ----------------------------- DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C) ACQUISITION
----------- ------ ------- ----- ------------ -------------- ----- ------------ ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Congleton Dis-
tribution Cen-
ter............. 3 518 2,937 203 518 3,140 3,658 (254) 1994
Lamar Distribu-
tion Center..... 1 323 1,829 274 323 2,103 2,426 (166) 1994
Macon Bedford
Distribution
Center.......... 1 304 1,725 140 304 1,865 2,169 (34) 1996
Platte Valley
Industrial Cen-
ter............. 9 (d) 3,533 20,017 550 3,533 20,567 24,100 (1,479) 1994
Riverside Dis-
tribution Cen-
ter............. 5 (d) 533 3,024 226 534 3,249 3,783 (230) 1994
Riverside Indus-
trial Center.... 5 (d) 1,012 5,736 212 1,012 5,948 6,960 (419) 1994
Terrace &
Lackman
Distribution
Center.......... 1 285 1,615 397 285 2,012 2,297 (139) 1994
Las Vegas, Nevada
Hughes Airport
Center.......... 1 876 -- 3,511 910 3,477 4,387 (241) 1994
Las Vegas Corpo-
rate Center..... 5 (e) 3,255 -- 14,229 3,256 14,228 17,484 (537) 1994, 1995, 1996
West One Busi-
ness Center..... 4 (d) 2,468 13,985 78 2,468 14,063 16,531 (156) 1996
Louisville, Ken-
tucky
Louisville Dis-
tribution Cen-
ter............. 2 1,219 3,402 6,200 1,220 9,601 10,821 (173) 1995, 1996
Memphis, Tennes-
see
Airport Distri-
bution Center... 15 4,543 25,748 1,894 4,544 27,641 32,185 (1,230) 1995, 1996
Delp Distribu-
tion Center..... 6 1,910 10,826 814 1,910 11,640 13,550 (678) 1995
Fred Jones Dis-
tribution Cen-
ter............. 1 125 707 66 125 773 898 (49) 1994
Southwide Indus-
trial Center.... 4 (d) 423 3,365 271 425 3,634 4,059 (236) 1994
Nashville, Ten-
nessee
Bakertown Dis-
tribution Cen-
ter............. 2 463 2,626 53 463 2,679 3,142 (103) 1995
I-40 Industrial
Center.......... 3 665 3,774 150 666 3,923 4,589 (200) 1995, 1996
Interchange City
Distribution
Center.......... 3 1,953 5,767 3,638 2,095 9,263 11,358 (423) 1994, 1995, 1996
Space Park South
Distribution
Center.......... 15 3,499 19,830 929 3,499 20,759 24,258 (1,514) 1994
New Jersey/I-95
Corridor
Clearview Dis-
tribution Cen-
ter............. 1 2,232 12,648 -- 2,232 12,648 14,880 -- 1996
Kilmer Distribu-
tion Center..... 4 2,526 14,313 -- 2,526 14,313 16,839 -- 1996
Meadowland In-
dustrial Center. 1 2,409 13,653 246 2,409 13,899 16,308 (191) 1996
</TABLE>
82
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED -------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oklahoma City,
Oklahoma
Greenfield Serv-
ice Center..... 2 257 1,172 362 258 1,533 1,791 (134)
Melcat Distribu-
tion Center.... 1 240 1,363 268 240 1,631 1,871 (133)
Meridian Busi-
ness Center.... 2 195 1,109 402 196 1,510 1,706 (99)
Oklahoma Distri-
bution Center.. 3 893 5,082 266 893 5,348 6,241 (607)
Will Rogers
Service Center. 2 334 1,891 252 334 2,143 2,477 (170)
Orange County,
California
Mid-Counties
Distribution
Center......... 5 2,804 15,895 1,431 2,805 17,325 20,130 (719)
North County
Distribution
Center......... 2 16,543 -- 22,571 16,543 22,571 39,114 (119)
Pacific Business
Center......... 2 1,179 -- 4,820 1,179 4,820 5,999 (66)
Santa Ana Dis-
tribution Cen-
ter............ 1 647 3,668 26 647 3,694 4,341 (246)
Orlando, Florida
33rd Street In-
dustrial Cen-
ter............ 9 (d)(f) 1,980 11,237 523 1,980 11,760 13,740 (531)
Chancellor Dis-
tribution Cen-
ter............ 1 380 2,156 692 380 2,848 3,228 (182)
La Quinta Dis-
tribution Cen-
ter............ 1 354 2,006 592 354 2,598 2,952 (182)
Titusville In-
dustrial Cen-
ter............ 1 (d) 283 1,603 62 283 1,665 1,948 (118)
Phoenix, Arizona
24th Street In-
dustrial Cen-
ter............ 2 503 2,852 188 503 3,040 3,543 (299)
Alameda Distri-
bution Center.. 1 369 2,423 166 369 2,589 2,958 (397)
Hohokam 10 In-
dustrial Cen-
ter............ 5 2,940 -- 10,992 2,940 10,992 13,932 (108)
I-10 West Busi-
ness Center.... 3 263 1,525 102 263 1,627 1,890 (186)
Kyrene Commons
Distribution
Center......... 1 430 2,656 77 430 2,733 3,163 (435)
Martin Van Buren
Distribution
Center......... 6 572 3,285 188 572 3,473 4,045 (318)
Papago Distribu-
tion Center.... 1 420 2,383 73 420 2,456 2,876 (225)
Pima Distribu-
tion Center.... 1 306 1,742 195 306 1,937 2,243 (195)
Tiger Distribu-
tion Center.... 1 402 2,279 592 402 2,871 3,273 (265)
Watkins Distri-
bution Center.. 1 242 1,375 192 243 1,566 1,809 (101)
Portland, Oregon
Argyle Distribu-
tion Center.... 3 946 5,388 211 946 5,599 6,545 (589)
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- ----------------
<S> <C>
Oklahoma City,
Oklahoma
Greenfield Serv-
ice Center..... 1994
Melcat Distribu-
tion Center.... 1994
Meridian Busi-
ness Center.... 1994
Oklahoma Distri-
bution Center.. 1993
Will Rogers
Service Center. 1994
Orange County,
California
Mid-Counties
Distribution
Center......... 1995
North County
Distribution
Center......... 1996
Pacific Business
Center......... 1996
Santa Ana Dis-
tribution Cen-
ter............ 1994
Orlando, Florida
33rd Street In-
dustrial Cen-
ter............ 1994, 1995, 1996
Chancellor Dis-
tribution Cen-
ter............ 1994
La Quinta Dis-
tribution Cen-
ter............ 1994
Titusville In-
dustrial Cen-
ter............ 1994
Phoenix, Arizona
24th Street In-
dustrial Cen-
ter............ 1994
Alameda Distri-
bution Center.. 1992
Hohokam 10 In-
dustrial Cen-
ter............ 1996
I-10 West Busi-
ness Center.... 1993
Kyrene Commons
Distribution
Center......... 1992
Martin Van Buren
Distribution
Center......... 1993, 1994
Papago Distribu-
tion Center.... 1994
Pima Distribu-
tion Center.... 1993
Tiger Distribu-
tion Center.... 1994
Watkins Distri-
bution Center.. 1995
Portland, Oregon
Argyle Distribu-
tion Center.... 1993
</TABLE>
83
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------- DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C) ACQUISITION
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Columbia Distri-
bution Center... 2 550 3,121 107 551 3,227 3,778 (231) 1994
PDX Corporate
Center North.... 7 (e) 2,405 -- 10,698 2,542 10,561 13,103 (380) 1995, 1996
Wilsonville Cor-
porate Center... 6 (e) 2,963 -- 11,143 2,963 11,143 14,106 (301) 1995, 1996
Reno, Nevada
Golden Valley
Distribution
Center.......... 2 2,850 -- 10,331 2,812 10,369 13,181 -- 1996
Meredith Kleppe
Business Center. 5 1,573 8,949 699 1,573 9,648 11,221 (991) 1993
Pacific Indus-
trial Center.... 4 2,501 -- 10,519 2,501 10,519 13,020 (568) 1994, 1995
Packer Way Busi-
ness Center..... 3 458 2,604 408 458 3,012 3,470 (312) 1993
Packer Way Dis-
tribution Cen-
ter............. 2 506 2,879 164 506 3,043 3,549 (318) 1993
Spice Island
Distribution
Center.......... 1 435 2,466 648 435 3,114 3,549 (51) 1996
Rio Grande Val-
ley, Texas
Rio Grande Dis-
tribution Cen-
ter............. 5 (d) 527 2,987 480 527 3,467 3,994 (160) 1995
Rio Grande In-
dustrial Center. 8 (d) 2,188 12,399 1,190 2,188 13,589 15,777 (664) 1995
Salt Lake City,
Utah
Centennial Dis-
tribution Cen-
ter............. 2 1,149 -- 7,769 1,149 7,769 8,918 (281) 1995
Clearfield Dis-
tribution Cen-
ter............. 2 2,500 14,165 101 2,481 14,285 16,766 (471) 1995
Ogden Distribu-
tion Center..... 1 463 2,625 50 463 2,675 3,138 -- 1996
Salt Lake Inter-
national Distri-
bution Center... 2 1,364 2,792 7,520 1,364 10,312 11,676 (289) 1994, 1996
San Antonio,
Texas
10711 Distribu-
tion Center..... 2 582 3,301 473 582 3,774 4,356 (338) 1994
Blossom Business
Center.......... 2 573 3,249 605 573 3,854 4,427 (182) 1995
Coliseum Distri-
bution Center... 2 1,102 2,380 10,433 1,568 12,347 13,915 (728) 1994, 1995
Distribution
Drive Center.... 1 473 2,680 191 473 2,871 3,344 (382) 1992
Downtown Distri-
bution Center... 1 (d) 241 1,364 255 241 1,619 1,860 (146) 1994
I-10 Central
Distribution
Center.......... 1 223 1,275 161 223 1,436 1,659 (202) 1992
I-35 Business
Center.......... 4 663 3,773 350 663 4,123 4,786 (477) 1993
Ison Business
Center.......... 3 648 3,674 1,146 648 4,820 5,468 (219) 1995
Landmark One
Distribution
Center.......... 1 (d) 341 1,933 251 341 2,184 2,525 (177) 1994
Macro Distribu-
tion Center..... 1 225 1,282 139 225 1,421 1,646 (191) 1993
</TABLE>
84
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED -------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northwest Corpo-
rate Center.... 6 609 3,453 341 609 3,794 4,403 --
Perrin Creek
Corporate Cen-
ter............ 6 1,547 -- 8,502 1,610 8,439 10,049 (216)
San Antonio Dis-
tribution Cen-
ter I.......... 13 2,154 12,247 2,628 2,154 14,875 17,029 (1,881)
San Antonio Dis-
tribution Cen-
ter II......... 3 969 -- 5,713 885 5,797 6,682 (429)
San Antonio Dis-
tribution Cen-
ter III........ 6 1,709 9,684 503 1,709 10,187 11,896 (210)
Sentinel Busi-
ness Center.... 6 1,276 7,230 797 1,276 8,027 9,303 (560)
Woodlake Distri-
bution Center.. 2 248 1,405 64 248 1,469 1,717 (134)
San Diego, Cali-
fornia
Carmel Mountain
Ranch Indus-
trial
Center......... 2 1,834 -- 4,384 1,834 4,384 6,218 (2)
Eastgate Distri-
bution Center.. 1 2,204 -- 5,151 2,204 5,151 7,355 --
Seattle, Washing-
ton
Andover East
Business Cen-
ter............ 2 535 3,033 198 535 3,231 3,766 (234)
Fife Corporate
Center......... 3 4,059 -- 7,820 4,060 7,819 11,879 --
Kent Corporate
Center......... 2 2,882 1,987 8,246 3,154 9,961 13,115 (395)
Van Doren's Dis-
tribution Cen-
ter............ 1 (e) 895 -- 3,343 977 3,261 4,238 (62)
South Bay (San
Francisco), Cal-
ifornia
Bayside Business
Center......... 2 (e) 2,088 -- 3,802 2,088 3,802 5,890 (24)
Bayside Corpo-
rate Center.... 7 (e) 4,365 -- 16,080 4,365 16,080 20,445 (454)
Bayside Plaza I. 12 (e) 5,212 18,008 393 5,216 18,397 23,613 (1,839)
Bayside Plaza
II............. 2 (e) 634 -- 2,784 634 2,784 3,418 (342)
Gateway Corpo-
rate Center.... 11 (d)(e) 7,575 24,746 4,432 7,575 29,178 36,753 (2,876)
Shoreline Busi-
ness Center.... 8 (e) 4,328 16,101 314 4,328 16,415 20,743 (1,634)
Shoreline Busi-
ness Center II. 2 (e) 922 -- 4,595 922 4,595 5,517 (283)
Spinnaker Busi-
ness Center.... 12 (e) 7,043 25,220 662 7,043 25,882 32,925 (2,606)
Thornton Busi-
ness Center.... 5 (d) 3,988 11,706 6,072 3,989 17,777 21,766 (1,373)
Trimble Distri-
bution Center.. 5 2,836 16,067 606 2,836 16,673 19,509 (1,628)
Tampa, Florida
Adamo Distribu-
tion Center.... 1 105 595 300 105 895 1,000 (24)
Clearwater Dis-
tribution Cen-
ter............ 2 (f) 92 524 48 92 572 664 (39)
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- ----------------
<S> <C>
Northwest Corpo-
rate Center.... 1995
Perrin Creek
Corporate Cen-
ter............ 1995, 1996
San Antonio Dis-
tribution Cen-
ter I.......... 1992, 1993, 1994
San Antonio Dis-
tribution Cen-
ter II......... 1994
San Antonio Dis-
tribution Cen-
ter III........ 1996
Sentinel Busi-
ness Center.... 1994
Woodlake Distri-
bution Center.. 1994
San Diego, Cali-
fornia
Carmel Mountain
Ranch Indus-
trial
Center......... 1996
Eastgate Distri-
bution Center.. 1996
Seattle, Washing-
ton
Andover East
Business Cen-
ter............ 1994
Fife Corporate
Center......... 1996
Kent Corporate
Center......... 1995
Van Doren's Dis-
tribution Cen-
ter............ 1995
South Bay (San
Francisco), Cal-
ifornia
Bayside Business
Center......... 1996
Bayside Corpo-
rate Center.... 1995,1996
Bayside Plaza I. 1993
Bayside Plaza
II............. 1994
Gateway Corpo-
rate Center.... 1993,1996
Shoreline Busi-
ness Center.... 1993
Shoreline Busi-
ness Center II. 1995
Spinnaker Busi-
ness Center.... 1993
Thornton Busi-
ness Center.... 1993,1996
Trimble Distri-
bution Center.. 1994
Tampa, Florida
Adamo Distribu-
tion Center.... 1995
Clearwater Dis-
tribution Cen-
ter............ 1994
</TABLE>
85
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED ------------------------------- DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C) ACQUISITION
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commerce Park
Distribution
Center.......... 4 811 4,597 205 811 4,802 5,613 (342) 1994
Eastwood Distri-
bution Center... 1 (f) 122 690 36 122 726 848 (51) 1994
Joe's Creek Dis-
tribution Cen-
ter............. 3 (f) 242 1,369 174 242 1,543 1,785 (102) 1994
Lakeland Distri-
bution Center... 1 938 5,313 541 938 5,854 6,792 (498) 1994
Orchid Lake In-
dustrial Center. 1 41 235 10 41 245 286 (17) 1994
Plant City Dis-
tribution Cen-
ter............. 1 (f) 206 1,169 50 206 1,219 1,425 (86) 1994
Sabal Park Dis-
tribution Cen-
ter............. 1 352 -- 3,042 352 3,042 3,394 (26) 1996
Silo Bend Dis-
tribution Cen-
ter............. 4 (f) 2,887 16,358 655 2,887 17,013 19,900 (1,131) 1994
Silo Bend Indus-
trial Center.... 1 (f) 525 2,975 222 525 3,197 3,722 (226) 1994
St. Petersburg
Service Center.. 1 35 197 21 35 218 253 (15) 1994
Tampa East Dis-
tribution Cen-
ter............. 12 (f) 2,780 15,757 1,337 2,780 17,094 19,874 (1,165) 1994
Tampa East In-
dustrial Center. 2 (f) 332 1,880 104 332 1,984 2,316 (139) 1994
Tampa West Dis-
tribution Cen-
ter............. 16 (d)(f) 3,341 19,046 1,663 3,400 20,650 24,050 (1,421) 1994, 1995
Tampa West In-
dustrial Center. 4 (f) 700 1,161 3,569 700 4,730 5,430 (119) 1994, 1996
Tampa West Serv-
ice Center...... 4 (f) 970 5,501 273 971 5,773 6,744 (405) 1994
Tulsa, Oklahoma
52nd Street Dis-
tribution Cen-
ter............. 1 340 1,924 64 340 1,988 2,328 (141) 1994
70th East Dis-
tribution Cen-
ter............. 1 129 733 131 129 864 993 (54) 1994
East 55th Street
Distribution
Center.......... 1 (f) 210 1,191 28 210 1,219 1,429 (88) 1994
Expressway Dis-
tribution Cen-
ter............. 4 573 3,280 322 573 3,602 4,175 (405) 1993
Henshaw Distri-
bution Center... 3 500 2,829 70 499 2,900 3,399 (213) 1994
Washington,
D.C./Baltimore
Ardmore Distri-
bution Center... 3 1,431 8,110 231 1,431 8,341 9,772 (549) 1994
Ardmore Indus-
trial Center.... 2 984 5,581 128 985 5,708 6,693 (381) 1994
Chantilly Dis-
tribution Cen-
ter............. 1 1,650 -- 9,352 2,103 8,899 11,002 -- 1996
Concorde Indus-
trial Center.... 4 1,538 8,717 319 1,538 9,036 10,574 (470) 1995
De Soto Business
Park............ 5 (d) 1,774 10,055 978 1,774 11,033 12,807 (170) 1996
Eisenhower In-
dustrial Center. 3 1,240 7,025 894 1,240 7,919 9,159 (515) 1994
Fleet Distribu-
tion Center..... 8 3,198 18,121 430 3,198 18,551 21,749 (558) 1996
</TABLE>
86
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
--------------------- CAPITALIZED --------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- -------- ------------ -------------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hampton Central
Distribution
Center........... 1 986 -- 3,635 986 3,635 4,621 (59)
Patapsco Distribu-
tion Center...... 1 270 1,528 499 270 2,027 2,297 (57)
Sunnyside Indus-
trial Center..... 3 1,541 8,733 947 1,541 9,680 11,221 (618)
Other markets..... 9 (f) 2,703 16,583 (105) 2,825 16,356 19,181 (748)
--- -------- ---------- -------- -------- ---------- ---------- ---------
Total Operating
Properties..... 942 $352,574 $1,406,914 $515,196 $356,428 $1,918,256 $2,274,684 $(109,147)
--- -------- ---------- -------- -------- ---------- ---------- ---------
LAND UNDER DEVELOP-
MENT
Atlanta, Georgia
Atlanta North East
Distribution
Center........... $ 1,287 -- $ 334 $ 1,621 -- $ 1,621 --
Charlotte, North
Carolina
Charlotte Distri-
bution Center.... 695 -- 483 1,178 -- 1,178 --
Chicago, Illinois
O'Hare Cargo Dis-
tribution Center. 3,557 -- 1,615 5,172 -- 5,172 --
North Avenue Dis-
tribution Center. 1,675 -- 99 1,774 -- 1,774 --
Cincinnati, Ohio
Princeton Distri-
bution Center.... (d) 816 -- 204 1,020 -- 1,020 --
Dallas/Fort Worth,
Texas
Dallas Corporate
Center........... 615 -- 310 925 -- 925 --
Great Southwest
Industrial
Center II........ 836 -- 7 843 -- 843 --
East Bay (San Fran-
cisco), California
Patterson Pass
Business Center.. 590 -- 409 999 -- 999 --
Houston, Texas
West by Northwest
Industrial
Center........... 744 -- 89 833 -- 833 --
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- ----------------
<S> <C>
Hampton Central
Distribution
Center........... 1996
Patapsco Distribu-
tion Center...... 1995
Sunnyside Indus-
trial Center..... 1994
Other markets..... 1991, 1994, 1996
Total Operating
Properties.....
LAND UNDER DEVELOP-
MENT
Atlanta, Georgia
Atlanta North East
Distribution
Center........... 1995
Charlotte, North
Carolina
Charlotte Distri-
bution Center.... 1995, 1996
Chicago, Illinois
O'Hare Cargo Dis-
tribution Center. 1996
North Avenue Dis-
tribution Center. 1996
Cincinnati, Ohio
Princeton Distri-
bution Center.... 1996
Dallas/Fort Worth,
Texas
Dallas Corporate
Center........... 1995
Great Southwest
Industrial
Center II........ 1996
East Bay (San Fran-
cisco), California
Patterson Pass
Business Center.. 1996
Houston, Texas
West by Northwest
Industrial
Center........... 1993
</TABLE>
87
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED -------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Indianapolis, In-
diana
Ameriplex Dis-
tribution Cen-
ter............. 634 -- 55 689 -- 689 --
Kansas City,
Kansas/Missouri
Platte Valley
Ind Ctr......... 416 -- 44 460 -- 460 --
Las Vegas, Nevada
Black Mountain
Distribution
Center.......... 1,108 -- 70 1,178 -- 1,178 --
Las Vegas Corpo-
rate Center..... (e) 893 -- 411 1,304 -- 1,304 --
Nashville, Ten-
nessee
Interchange City
Distribution
Center.......... 369 -- 558 927 -- 927 --
Orange County,
California
Mid-Counties
Distribution
Center.......... 3,360 -- (2,809) 551 -- 551 --
Pacific Business
Center.......... 3,017 -- 183 3,200 -- 3,200 --
Foothill Busi-
ness Center..... 1,841 -- 68 1,909 -- 1,909 --
Orlando, Florida
Orlando Central
Park............ 613 -- 78 691 -- 691 --
Portland, Oregon
PDX Corporate
Center North.... 1,464 -- 346 1,810 -- 1,810 --
The Evergreen
Park............ 2,241 -- 788 3,029 -- 3,029 --
Rio Grande Val-
ley, Texas
Valley Indus-
trial Center.... 230 -- 102 332 -- 332 --
Salt Lake City,
Utah
Centennial Dist
Center.......... 2,115 -- 39 2,154 -- 2,154 --
San Antonio,
Texas
Tri-County Dis-
tribution Cen-
ter............. 496 -- 119 615 -- 615 --
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- -------------
<S> <C>
Indianapolis, In-
diana
Ameriplex Dis-
tribution Cen-
ter............. 1996
Kansas City,
Kansas/Missouri
Platte Valley
Ind Ctr......... 1994
Las Vegas, Nevada
Black Mountain
Distribution
Center.......... 1995
Las Vegas Corpo-
rate Center..... 1993, 1995
Nashville, Ten-
nessee
Interchange City
Distribution
Center.......... 1995
Orange County,
California
Mid-Counties
Distribution
Center.......... 1995
Pacific Business
Center.......... 1995
Foothill Busi-
ness Center..... 1995
Orlando, Florida
Orlando Central
Park............ 1996
Portland, Oregon
PDX Corporate
Center North.... 1996
The Evergreen
Park............ 1996
Rio Grande Val-
ley, Texas
Valley Indus-
trial Center.... 1996
Salt Lake City,
Utah
Centennial Dist
Center.......... 1996
San Antonio,
Texas
Tri-County Dis-
tribution Cen-
ter............. 1996
</TABLE>
88
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
-------------------- CAPITALIZED -------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- ------- ------------ -------------- ------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Seattle Washington
Van Doren's
Distribution
Center............ (e) 1,670 -- 212 1,882 -- 1,882 --
Tampa, Florida
Sabal Park
Distribution
Center............ 428 -- 76 504 -- 504 --
Washington
DC/Baltimore
Airport Commons
Distribution
Center............ 2,320 -- 37 2,357 -- 2,357 --
Chantilly
Distribution
Center............ 592 -- 677 1,269 -- 1,269 --
Hampton Central
Distribution
Center............ 880 -- 359 1,239 -- 1,239 --
--- ------- --- ------ ------- --- --------- ---
Total Land Under
Development..... $35,502 -- $4,963 $40,465 -- $ 40,465 --
--- ------- --- ------ ------- --- --------- ---
<CAPTION>
LAND HELD FOR
DEVELOPMENT
-------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta, Georgia
Atlanta West
Distribution
Center............ $ 750 -- $ 1 $ 751 -- $ 751 --
Atlanta NE
Distribution
Center............ 520 -- 266 786 -- 786 --
Clark Howell Road
Distribution
Center............ 1,679 -- 126 1,805 -- 1,805 --
Riverside
Distribution
Center............ 1,378 -- 119 1,497 -- 1,497 --
Austin, Texas
Corridor Park
Corporate Center.. 585 -- 727 1,312 -- 1,312 --
Southpark
Corporate Center.. 526 -- 62 588 -- 588 --
Walnut Creek
Corporate Center.. 1.029 -- 32 1,061 -- 1,061 --
Charlotte, North
Carolina
Charlotte
Distribution
Center............ 1,599 -- -- 1,599 -- 1,599 --
Chicago, Illinois
North Avenue
Distribution
Center............ 1,524 -- 73 1,597 -- 1,597 --
O'Hare Cargo
Distribution
Center............ 2,216 -- 655 2,871 -- 2,871 --
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- -------------
<S> <C>
Seattle Washington
Van Doren's
Distribution
Center............ 1994
Tampa, Florida
Sabal Park
Distribution
Center............ 1995
Washington
DC/Baltimore
Airport Commons
Distribution
Center............ 1996
Chantilly
Distribution
Center............ 1995
Hampton Central
Distribution
Center............ 1994
Total Land Under
Development.....
<CAPTION>
LAND HELD FOR
DEVELOPMENT
-------------
<S> <C>
Atlanta, Georgia
Atlanta West
Distribution
Center............ 1994
Atlanta NE
Distribution
Center............ 1995
Clark Howell Road
Distribution
Center............ 1996
Riverside
Distribution
Center............ 1996
Austin, Texas
Corridor Park
Corporate Center.. 1994
Southpark
Corporate Center.. 1996
Walnut Creek
Corporate Center.. 1994, 1996
Charlotte, North
Carolina
Charlotte
Distribution
Center............ 1995, 1996
Chicago, Illinois
North Avenue
Distribution
Center............ 1996
O'Hare Cargo
Distribution
Center............ 1996
</TABLE>
89
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
------------------ CAPITALIZED ----------------------------- DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C) ACQUISITION
----------- ------ ------- ----- ------------ -------------- ----- ------------ ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cincinnati, Ohio
Sharonville Dis-
tribution Cen-
ter............. 1,780 -- 35 1,815 -- 1,815 -- 1996
Princeton Dis-
tribution Cen-
ter............. 436 -- (1) 435 -- 435 -- 1996
Columbus, Ohio
Capital Park
South Distribu-
tion Center..... 909 -- 320 1,229 -- 1,229 -- 1994, 1995, 1996
International
Street Commerce
Center.......... 555 -- 27 582 -- 582 -- 1996
Dallas/Fort
Worth, Texas
Dallas Corporate
Center.......... 1,534 -- -- 1,534 -- 1,534 -- 1995
Freeport Distri-
bution Center... 414 -- 1 415 -- 415 -- 1996
GSW Distribution
Center.......... 1,539 -- -- 1,539 -- 1,539 -- 1996
Denver, Colorado
Upland Distribu-
tion Center I... 1,128 -- 17 1,145 -- 1,145 -- 1994
East Bay (San
Francisco), Cali-
fornia
Patterson Pass
Business Center. 920 -- 597 1,517 -- 1,517 -- 1996
El Paso, Texas
Northwestern
Corporate Cen-
ter............. 3,455 -- 2,853 6,308 -- 6,308 -- 1991, 1992
Vista Corporate
Center.......... 351 -- 123 474 -- 474 -- 1993
Vista Del Sol
Industrial Cen-
ter............. 2,923 -- 191 3,114 -- 3,114 -- 1994, 1996
Fort
Lauderdale/Miami,
Florida
Port 95 Distri-
bution Center I. 8,419 -- -- 8,419 -- 8,419 -- 1996
Houston, Texas
West by North-
west Industrial
Center.......... 1,859 -- 203 2,062 -- 2,062 -- 1993
Indianapolis, In-
diana
North by North-
east Distribu-
tion Center..... 437 -- 54 491 -- 491 -- 1994
Plainfield Park. 1,967 -- 656 2,623 -- 2,623 -- 1996
</TABLE>
90
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
------------------- CAPITALIZED ------------------------------ DATE OF
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED CONSTRUCTION/
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C) ACQUISITION
----------- ------ ------- ------ ------------ -------------- ------ ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Las Vegas, Nevada
Black Mountain
Distribution
Center.......... 2,845 -- 117 2,962 -- 2,962 -- 1995, 1996
Las Vegas Corpo-
rate Center..... (e) 2,772 -- 248 3,020 -- 3,020 -- 1995
Louisville, Ken-
tucky
Riverport Dis-
tribution Cen-
ter............. 539 -- 47 586 -- 586 -- 1996
Los Angeles Ba-
sin, California
Foothills Busi-
ness Center..... 11,350 -- 174 11,524 -- 11,524 -- 1995, 1996
Nashville, Ten-
nessee
Nashville/l-24
Distribution
Center.......... 776 -- 90 866 -- 866 -- 1996
Orlando, Florida
Orlando Central
Park............ 4,007 -- 30 4,037 -- 4,037 -- 1996
Phoenix, Arizona
Kyrene Commons
Distribution
Center.......... 2,530 -- 46 2,576 -- 2,576 -- 1992, 1996
Portland, Oregon
The Evergreen
Park............ 2,235 -- -- 2,235 -- 2,235 -- 1996
Reno, Nevada
Golden Valley
Distribution
Center.......... 609 -- 1,601 2,210 -- 2,210 -- 1995
Rio Grande Val-
ley, Texas
Rio Grande In-
dustrial Center. 429 -- 10 439 -- 439 -- 1995
Salt Lake City,
Utah
Salt Lake Inter-
national Distri-
bution Center... 1,804 -- 16 1,820 -- 1,820 -- 1994, 1995
Centennial Dis-
tribution Cen-
ter............. 2,726 -- 46 2,772 -- 2,772 -- 1996
</TABLE>
91
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNTS AT
WHICH CARRIED
INITIAL COSTS COSTS AT CLOSE OF PERIOD
--------------------- CAPITALIZED --------------------------------
NO. OF ENCUM- BUILDING & SUBSEQUENT BUILDING & ACCUMULATED
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(A,B) DEPRECIATION(C)
----------- ------ ------- -------- ------------ -------------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Antonio, Texas
Coliseum Distribu-
tion Center...... 651 -- 326 977 -- 977 --
Perrin Creek Cor-
porate Center.... 2,637 -- 153 2,790 -- 2,790 --
San Antonio Dis-
tribution
Center III....... 1,290 -- 13 1,303 -- 1,303 --
San Diego, Califor-
nia
Carmel Mountain
Ranch Industrial
Center........... 1,899 -- 40 1,939 -- 1,939 --
Seattle, Washington
Van Doren's Dis-
tribution Center. (e) 1,138 -- 110 1,248 -- 1,248 --
South Bay (San
Francisco),
California
Mowry Business
Center........... 5,931 -- 103 6,034 -- 6,034 --
Tampa, Florida
Sabal Park Distri-
bution Center.... 1,694 -- 95 1,789 -- 1,789 --
Tampa East Distri-
bution Center.... 3,528 -- 7 3,535 -- 3,535 --
Washington,
DC/Baltimore
Hampton Central
Distribution
Center........... 1,298 -- (2) 1,296 -- 1,296 --
Meadowridge
Distribution
Center........... 5,617 -- 172 5,789 -- 5,789 --
--- -------- ---------- -------- -------- ---------- ---------- ---------
Total Land Held
for
Development.... $ 98,737 -- $ 10,579 $109,316 -- $ 109,316 --
--- -------- ---------- -------- -------- ---------- ---------- ---------
Grand Total........ $486,813 $1,406,914 $530,738 $506,209 $1,918,256 $2,424,465 $(109,147)
=== ======== ========== ======== ======== ========== ========== =========
<CAPTION>
DATE OF
CONSTRUCTION/
DESCRIPTION ACQUISITION
----------- -------------
<S> <C>
San Antonio, Texas
Coliseum Distribu-
tion Center...... 1994
Perrin Creek Cor-
porate Center.... 1996
San Antonio Dis-
tribution
Center III....... 1996
San Diego, Califor-
nia
Carmel Mountain
Ranch Industrial
Center........... 1995
Seattle, Washington
Van Doren's Dis-
tribution Center. 1994
South Bay (San
Francisco),
California
Mowry Business
Center........... 1996
Tampa, Florida
Sabal Park Distri-
bution Center.... 1995
Tampa East Distri-
bution Center.... 1994
Washington,
DC/Baltimore
Hampton Central
Distribution
Center........... 1994
Meadowridge
Distribution
Center........... 1996
Total Land Held
for
Development....
Grand Total........
</TABLE>
92
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION--(CONTINUED)
DECEMBER 31, 1996
(IN THOUSANDS)
- --------
(a) Reconciliation of total cost to balance sheet caption at December 31, 1996
(in thousands):
<TABLE>
<S> <C>
total per schedule III....................................... $2,424,465
construction in process...................................... 77,506
capitalized preacquisition costs............................. 6,776
----------
Total real estate......................................... $2,508,747(g)
==========
</TABLE>
(b) The aggregate cost for federal income tax purposes was approximately
$2,340,922,000.
(c) Buildings are depreciated over their estimated useful lives (30 years for
acquisitions, 40 years for developments).
(d) $165,049,812 of these properties are pledged as collateral for $91,756,998
in mortgage notes payable.
(e) $219,627,378 of these properties are subject to lien under $12,170,468 of
net assessment bonds payable.
(f) $68,139,988 of these properties are pledged as collateral for $27,685,408
and $8,339,169 in first and second priority mortgage notes, respectively.
(g) A summary of activity for real estate and accumulated depreciation is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
(IN THOUSANDS)
-----------------
<S> <C>
Real Estate
Balance at beginning of year.......................... $1,827,670
Additions:
Acquisitions/Completions............................ 649,049
Improvements........................................ 43,568
Cost of real estate sold.............................. (7,863)
Change in construction in process..................... (3,452)
Change in capitalized preacquisition costs............ (225)
----------
Balance at end of year................................ $2,508,747
==========
Accumulated Depreciation
Balance at beginning of year.......................... $ 56,406
Depreciation expense.................................. 52,919
Accumulated depreciation associated with real estate
sold................................................. (178)
----------
Balance at end of year................................ $ 109,147
==========
</TABLE>
93
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Industrial
Trust, a Maryland real estate investment trust, and the undersigned Trustees
and officers of Security Capital Industrial Trust, hereby constitutes and
appoints Thomas G. Wattles, K. Dane Brooksher, M. Gordon Keiser, Edward F.
Long, Jeffrey A. Klopf, Ariel Amir, Edward J. Schneidman and Michael T. Blair
its or his true and lawful attorneys-in-fact and agents, for it or him and in
its or his name, place and stead, in any and all capacities, with full power to
act alone, to sign any and all amendments to this report, and to file each such
amendment to this report, with all exhibits thereto, and any and all documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as it or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them may
lawfully do or cause to be done by virtue hereof.
94
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Security Capital Industrial Trust
/s/ Thomas G. Wattles
By: _________________________________
Thomas G. Wattles
Date: February 27, 1997 Co-Chairman, Chief Investment
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas G. Wattles Co-Chairman, Chief February 27,
____________________________________ Investment 1997
Thomas G. Wattles Officer and Trustee
/s/ K. Dane Brooksher Co-Chairman, Chief February 27,
____________________________________ Operating 1997
K. Dane Brooksher Officer and Trustee
/s/ M. Gordon Keiser Senior Vice President February 27,
____________________________________ (Principal Financial 1997
M. Gordon Keiser Officer)
/s/ Edward F. Long Vice President and February 27,
____________________________________ Controller 1997
Edward F. Long (Principal Accounting
Officer)
/s/ Irving F. Lyons III Managing Director and February 27,
____________________________________ Trustee 1997
Irving F. Lyons III
/s/ Stephen L. Feinberg Trustee February 27,
____________________________________ 1997
Stephen L. Feinberg
/s/ Donald P. Jacobs Trustee February 27,
____________________________________ 1997
Donald P. Jacobs
/s/ William G. Myers Trustee February 27,
____________________________________ 1997
William G. Myers
/s/ John E. Robson Trustee February 27,
____________________________________ 1997
John E. Robson
</TABLE>
95
<PAGE>
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
SEQUENTIAL
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----------
<C> <S> <C>
4.1 Amended and Restated Declaration of Trust of SCI
(Incorporated by reference to exhibit 4.1 to SCI's
Registration Statement No. 33-73382)
4.2 First Certificate of Amendment of Amended and Restated
Declaration of Trust of SCI (Incorporated by reference
to exhibit 3.1 to SCI's Form 8-K dated June 14, 1994)
4.3 Second Articles of Amendment of Restated Declaration of
Trust of SCI (Incorporated by reference to exhibit 4.3
to SCI's Registration Statement No. 33-87306)
4.4 Articles Supplementary relating to SCI's Series A
Cumulative Redeemable Preferred Shares of Beneficial
Interest (Incorporated by reference to exhibit 4.8 to
SCI's Form 8-A registration statement relating to such
shares)
4.5 First Articles of Amendment to Articles Supplementary
relating to SCI's Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest (Incorporated
by reference to exhibit 10.3 to SCI's Form 10-Q for the
quarter ended September 30, 1995)
4.6 Articles Supplementary relating to SCI's Series B
Cumulative Convertible Redeemable Preferred Shares of
Beneficial Interest (Incorporated by reference to
exhibit 4.1 to SCI's Form 8-K dated February 14, 1996)
4.7 Articles Supplementary with respect to SCI's Series C
Cumulative Redeemable Preferred Shares of Beneficial
Interest (Incorporated by reference to exhibit 4.8 to
SCI's Form 8-A dated November 13, 1996).
4.8 Bylaws of SCI (Incorporated by reference to exhibit 4.3
to SCI's Registration Statement No. 33-83208)
4.9 Rights Agreement, dated as of December 31, 1993,
between SCI and State Street Bank and Trust Company, as
Rights Agent, including form of Rights Certificate
(Incorporated by reference to exhibit 4.4 to SCI's
Registration Statement No. 33-78080)
4.10 First Amendment to Rights Amendment, dated as of
February 15, 1995, between SCI, State Street Bank and
Trust Company and The First National Bank of Boston, as
successor Rights Agent (Incorporated by reference to
exhibit 3.1 to SCI's Form 10-Q for the quarter ended
September 30, 1995)
4.11 Second Amendment to Rights Agreement, dated as of June
22, 1995, between SCI, State Street Bank and Trust
Company and The First National Bank of Boston
(Incorporated by reference to Exhibit 3.1 to SCI's Form
10-Q for the quarter ended September 30, 1995).
4.12 Form of share certificate for Common Shares of
Beneficial Interest of SCI (Incorporated by reference
to exhibit 4.4 to SCI's Registration Statement No. 33-
73382)
4.13 Form of share certificate for Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest of
SCI (Incorporated by reference to exhibit 4.7 to SCI's
Form 8-A registration statement relating to such
shares)
4.14 8.72% Note due March 1, 2009 (Incorporated by reference
to exhibit 4.7 to SCI's Form 10-K for the year ended
December 31, 1994)
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----------
<C> <S> <C>
4.15 Form of share certificate for Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial
Interest of SCI (Incorporated by reference to exhibit
4.8 to SCI's Form 8-A registration statement relating
to such shares)
4.16 Form of share certificate for Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest of
SCI....................................................
4.17 9.34% Note due March 1, 2015 (Incorporated by reference
to exhibit 4.8 to SCI's Form 10-K for the year ended
December 31, 1994)
4.18 7.875% Note due May 15, 2009 (Incorporated by reference
to exhibit 4.4 to SCI's Form 8-K dated May 9, 1995)
4.19 7.30% Note due May 15, 2001 (Incorporated by reference
to exhibit 4.3 to SCI's Form 8-K dated May 9, 1995)
4.20 7.25% Note due May 15, 2000 (Incorporated by reference
to exhibit 4.2 to SCI's Form 8-K dated May 9, 1995)
4.21 7.125% Note due May 15, 1998 (Incorporated by reference
to exhibit 4.1 to SCI's Form 8-K dated May 9, 1995)
4.22 7.25% Note due May 15, 2002 (Incorporated by reference
to exhibit 4.1 to SCI's Form 10-Q for the quarter ended
June 30, 1996)
4.23 7.95% Note due May 15, 2008 (Incorporated by reference
to exhibit 4.2 to SCI's Form 10-Q for the quarter ended
June 30, 1996)
4.24 8.65% Note due May 15, 2016 (Incorporated by reference
to exhibit 4.3 to SCI's Form 10-Q for the quarter ended
June 30, 1996)
4.25 7.81% Medium-Term Notes, Series A, due February 1,
2015...................................................
4.26 Indenture, dated as of March 1, 1995, between SCI and
State Street Bank and Trust Company, as Trustee
(Incorporated by reference to exhibit 4.9 to SCI's Form
10-K for the year ended December 31, 1994)
4.27 Collateral Trust Indenture, dated as of July 22, 1993,
between Krauss/Schwartz Properties, Ltd. and
NationsBank of Virginia, N.A., as Trustee (Incorporated
by reference to exhibit 4.10 to SCI's Form 10-K for the
year ended December 31, 1994)
4.28 First Supplemental Collateral Trust Indenture, dated as
of October 28, 1994, among SCI Limited Partnership-IV,
Krauss/Schwartz Properties, Ltd., and NationsBank of
Virginia, N.A., as Trustee (Incorporated by reference
to exhibit 10.6 to SCI's Form 10-Q for the quarter
ended September 30, 1994)
10.1 Contribution Agreement for the Formation of SCI Limited
Partnership-I, dated as of December 17, 1993, among SCI
and the parties set forth therein (Incorporated by
reference to exhibit 10.3 to SCI's Registration
Statement No. 33-73382)
10.2 Agreement of Limited Partnership of SCI Limited
Partnership-I, dated as of December 22, 1993, by and
among SCI, as general partner, and the limited partners
set forth therein (Incorporated by reference to exhibit
10.4 to SCI's Registration Statement No. 33-73382)
10.3 Agreement of Purchase and Sale, dated as of December
22, 1993, by and between King & Lyons, King & Lyons-
Tracy Industrial, Charles W. King Jr. and Irving F.
Lyons, III and SCI (Incorporated by reference to
exhibit 10.8 to SCI's Registration Statement No. 33-
73382)
</TABLE>
97
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----------
<C> <S> <C>
10.4 Pledge Agreement, dated as of December 22, 1993, by
King & Lyons in favor of SCI (Incorporated by reference
to exhibit 10.9 to SCI's Registration Statement No. 33-
73382)
10.5 Transfer and Registration Rights Agreement, dated as of
December 22, 1993, among SCI and the investors listed
on the signature pages thereto (Incorporated by
reference to exhibit 10.10 to SCI's Registration
Statement No. 33-73382)
10.6 Contribution Agreement of SCI Limited Partnership-II,
dated as of January 28, 1994, among SCI and the parties
set forth therein (Incorporated by reference to exhibit
10.11 to SCI's Registration Statement No. 33-73382)
10.7 Amended and Restated Agreement of Limited Partnership
of SCI Limited Partnership-II, dated as of February 15,
1994, among SCI, as general partner, and the limited
partners set forth therein (Incorporated by reference
to exhibit 10.12 to SCI's Registration Statement No.
33-78080)
10.8 Seventh Amended and Restated REIT Management Agreement,
dated as of June 30, 1996, between SCI and Security
Capital Industrial Incorporated (Incorporated by
reference to exhibit 10 to SCI's Form 8-K dated August
20, 1996)
10.9 Second Amended and Restated Investor Agreement, dated
as of November 18, 1993, between SCI and Security
Capital Group Incorporated (Incorporated by reference
to exhibit 10.14 to SCI's Registration Statement No.
33-73382)
10.10 First Supplemental Investment Agreement, dated as of
August 23, 1995, among SCI, Security Capital Group
Incorporated and SC Realty Incorporated (Incorporated
by reference to exhibit 10.11 to SCI's Form 10-K for
the year ended December 31, 1995)
10.11 Amended and Restated Credit Agreement, entered into as
of May 2, 1996, between SCI and NationsBank Texas N.A.,
as agent bank, and the lenders party thereto
(Incorporated by reference to exhibit 10 to SCI's Form
10-Q for the quarter ended March 31, 1996)
10.12 Form of Indemnification Agreement entered into between
SCI and its Trustees and executive officers
(Incorporated by reference to exhibit 10.16 to SCI's
Registration Statement No. 33-73382)
10.13 Indemnification Agreements between SCI and each of its
independent Trustees (Incorporated by reference to
exhibit 10.16 to SCI's Form 10-K for the year ended
December 31, 1995)
10.14 Declaration of Trust for the benefit of SCI's
independent Trustees (Incorporated by reference to
exhibit 10.17 to SCI's Form 10-K for the year ended
December 31, 1995)
10.15 Transfer and Registration Rights Agreement dated as of
February 15, 1994, among SCI and the investors listed
on the signature pages thereto (Incorporated by
reference to exhibit 10.18 to SCI's Registration
Statement No. 33-78080)
10.16 Share Option Plan for Outside Trustees (Incorporated by
reference to exhibit 10.18 to SCI's Form 10-Q for the
quarter ended June 30, 1994)
10.17 Dividend Reinvestment and Share Purchase Plan
(Incorporated by reference to the prospectus contained
in Registration Statement No. 33-91366)
10.18 Contribution and Sale Agreement for SCI Limited
Partnership-III and SCI Limited Partnership-IV, dated
as of August 22, 1994, among SCI and the parties set
forth therein (Incorporated by reference to exhibit
10.19 to SCI's Registration Statement No. 33-83208)
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----------
<C> <S> <C>
10.19 First Amendment to Contribution and Sale Agreement,
dated as of October 14, 1994, among SCI and the parties
set forth therein (Incorporated by reference to exhibit
10.1 to SCI's Form 10-Q for the quarter ended September
30, 1994)
10.20 Second Amendment to Contribution and Sale Agreement,
dated as of October 21, 1994, among SCI and the parties
set forth therein (Incorporated by reference to exhibit
10.2 to SCI's Form 10-Q for the quarter ended September
30, 1994)
10.21 Amended and Restated Agreement of Limited Partnership
of SCI Limited Partnership-III, dated as of October 28,
1994, by and among SCI, as general partner, and the
limited partners set forth therein (Incorporated by
reference to exhibit 10.3 to SCI's Form 10-Q for the
quarter ended September 30, 1994)
10.22 Amended and Restated Agreement of Limited Partnership
of SCI Limited Partnership-IV, dated as of October 28,
1994, by and among SCI IV, Inc., as general partner,
and the limited partners set forth therein
(Incorporated by reference to exhibit 10.4 to SCI's
Form 10-Q for the quarter ended September 30, 1994)
10.23 Registration Rights Agreement, dated as of October 28,
1994, among SCI and the investors listed on the
signature pages thereto (Incorporated by reference to
exhibit 10.5 to SCI's Form 10-Q for the quarter ended
September 30, 1994)
10.24 Option Agreement and Consent, dated October 24, 1994,
by and between SCI and Farm Bureau Life Insurance
Company (Incorporated by reference to exhibit 10.7 to
SCI's Form 10-Q for the quarter ended September 30,
1994)
11.1 Statement re Computation of Per Share Earnings.........
12.1 Statement re: Computation of Ratio of Earnings to Fixed
Charges................................................
12.2 Statement re: Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Share Dividends...
21.1 Subsidiaries of SCI (Incorporated by reference to
Exhibit 21 to SCI's Registration Statement No. 33-
87306).................................................
23.1 Consent of Arthur Andersen LLP.........................
24.1 Power of Attorney (included at page 94)
27 Financial Data Schedule................................
</TABLE>
99
<PAGE>
EXHIBIT 4.16
Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest
Par Value $0.01
THIS CERTIFICATE IS TRANSFERABLE IN
NEW YORK, NEW YORK
AND BOSTON, MASSACHUSETTS
SECURITY CAPITAL INDUSTRIAL TRUST
ORGANIZED UNDER THE LAWS
OF THE STATE OF MARYLAND
CUSIP 814138 40 0
SEE THE REVERSE FOR CERTAIN RESTRICTIONS
THIS CERTIFIES THAT
IS THE OWNER OF
fully paid and non-assessable Preferred Shares of Security Capital
Industrial Trust, a real estate investment trust organized under the laws of the
State of Maryland (the "Trust") transferable only on the books of the Trust by
the holder hereof in person or by duly authorized Attorney upon the surrender of
this Certificate property endorsed.
The Preferred Shares evidenced by this Certificate are subject to an
Amended and Restated Declaration of Trust dated as of December 15, 1993, as
amended from time to time, which Amended and Restated Declaration of Trust is
filed and of record with the Maryland State Department of Assessments and
Taxation and is hereby incorporated in and made a part of this Certificate. The
holder hereof has no interest, legal or equitable, in any specific property of
the Trust. This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Trust and facsimile signatures of its
duly authorized officers.
Dated:
/s/ Thomas G. Wattles
---------------------- Countersigned and Registered:
Chairman THE FIRST NATIONAL BANK OF BOSTON
Transfer Agent
and Registrar
/s/ Jeffrey A. Klopf By /s/ M. Dinzic
---------------------- ---------------------------------
SECRETARY Authorized Signature
SEAL MARYLAND
SECURITY CAPITAL INDUSTRIAL TRUST
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
THE AMENDED AND RESTATED DECLARATION OF TRUST ON FILE IN THE OFFICE OF THE
MARYLAND STATE DEPARTMENT OF ASSESSMENTS AND TAXATION SETS FORTH A FULL
STATEMENT OF (A) ALL OF THE DESIGNATIONS, PREFERENCES, RIGHTS, VOTING POWERS,
RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS AND
CONDITIONS OF REDEMPTION, AND OTHER RELATIVE RIGHTS OF THE SHARES OF EACH CLASS
OF SHARES AUTHORIZED TO BE ISSUED AND (B) THE AUTHORITY OF THE BOARD OF TRUSTEES
TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT
THEY HAVE BEEN SET AND THE AUTHORITY OF THE BOARD OF TRUSTEES TO SET THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES OF PREFERRED SHARES. THE
TRUST WILL FURNISH A COPY OF SUCH STATEMENT TO ANY HOLDER OF SHARES WITHOUT
CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL PLACE OF BUSINESS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the
right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -
--------------------------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
--------------------------------------
(State)
UNIF TRF MIN ACT -
--------------------------------------
(Cust) (Minor)
(until age ___) under Uniform Transfers
to Minors Act
---------------------------------------
(State)
----------------------
(State)
Additional abbreviations may be used though not in the above list.
For Value Received, _______________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
_______________________________________________________Series C Preferred Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint_____________________________________________________________________
________________________________________________________________________Attorney
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated____________________
-----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate in every
particular, without alteration or
enlargement or any change whatever.
<PAGE>
EXHIBIT 4.25
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE
DEPOSITARY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY.
THIS NOTE IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE
NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
REGISTERED REGISTERED
SECURITY CAPITAL INDUSTRIAL TRUST
MEDIUM-TERM NOTE, SERIES A
(Fixed Rate)
FORM OF FACE OF FIXED RATE REGISTERED NOTE
7.81% MEDIUM-TERM NOTES, SERIES A, DUE 2015
REGISTERED PRINCIPAL AMOUNT
No.: 1 $100,000,000
CUSIP No.: 81413WAA8
Unless this Note is presented by an authorized representative of The Depository
Trust Company (55 Water Street, New York, New York) to the issuer or its agent
for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of The Depository Trust Company and any payment is
made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.*
IF APPLICABLE, THE "TOTAL AMOUNT OF OID," THE "ORIGINAL ISSUE DATE," THE "YIELD
TO MATURITY," AS WELL AS THE METHOD USED TO
<PAGE>
DETERMINE THE YIELD TO MATURITY WHERE THERE IS A SHORT ACCRUAL PERIOD AND THE
AMOUNT OF OID ALLOCABLE TO SUCH SHORT ACCRUAL PERIOD WILL BE SET FORTH BELOW.
THE CALCULATION OF THE AMOUNT OF OID UPON (A) OPTIONAL REDEMPTION OR (B)
DECLARATION OF ACCELERATION IS DISCUSSED ON THE REVERSE HEREOF.
ISSUE PRICE: 100,000,000
ORIGINAL ISSUE DATE: 02-04-97
STATED MATURITY: 02-01-15
SPECIFIED CURRENCY: U.S. DOLLARS
AUTHORIZED DENOMINATIONS: $1,000
INTEREST RATE: 7.81% PER ANNUM
INTEREST PAYMENT DATES: 02-01 & 08-01
INTEREST PAYMENT PERIODS: SEMI-ANNUAL
ORIGINAL ISSUE DISCOUNT SECURITY:
[ ] YES [ X ] NO
TOTAL AMOUNT OF OID: NA
YIELD TO MATURITY: NA
INITIAL ACCRUAL PERIOD OID: NA
OPTION TO ELECT REPAYMENT:
[ ] YES [ X ] NO
OPTIONAL REPAYMENT
DATE(S): NA
EXCHANGE RATE AGENT: NA
AMORTIZING SECURITY:
[ X ] YES [ ] NO
AMORTIZATION FORMULA: NA
AMORTIZATION PAYMENT
DATE(S): SEE ADDENDUM
ATTACHED
ADDENDUM ATTACHED:
[ X ] YES [ ] NO
OPTIONAL REDEMPTION:
[ X ] YES [ ] NO
INITIAL REDEMPTION DATE:
02-04-97
REDEMPTION PRICE: [ X ] 100% of the Principal Amount plus a Make-Whole Amount
or [ ] Initially __________% of Principal Amount and declining by __________%
of the Principal Amount on each anniversary of the Initial Redemption Date until
the Redemption Price is 100% of the Principal Amount.
OPTIONAL EXTENSIONS OF
MATURITY: [ ] YES [ X ] NO
EXTENSION PERIOD: NA
NUMBER OF EXTENSION
PERIODS: NA
FINAL MATURITY DATE: NA
OTHER/ADDITIONAL PROVISIONS: NA
Security Capital Industrial Trust, a real estate investment trust organized
and existing under the laws of the State of
-2-
<PAGE>
Maryland (hereinafter called the "Company," which term shall include any
successor under the Indenture hereinafter referred to), for value received,
hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of
$100,000,000 on the Stated Maturity specified above (except to the extent
redeemed or repaid prior to the Stated Maturity) and to pay interest thereon at
the Interest Rate per annum specified above from the Original Issue Date
specified above until the principal hereof is paid or duly made available for
payment (except as provided below), in arrears monthly, quarterly, semiannually,
or annually as specified above as the Interest Payment Period on each Interest
Payment Date (as specified above), commencing with the first Interest Payment
Date next succeeding the Original Issue Date specified above, and on the Stated
Maturity (or any redemption or repayment date); provided, however, that if the
Original Issue Date occurs between a Record Date, as defined below, and the next
succeeding Interest Payment Date, interest payments will commence on the second
Interest Payment Date succeeding the Original Issue Date to the registered
holder of this Note on the Record Date with respect to such second Interest
Payment Date.
Payment of the principal of this Note, any premium and the interest due at
the Stated Maturity (or any redemption or repayment date), or any prior date on
which the principal or an installment of principal of this Note becomes due and
payable, whether by the declaration of acceleration or otherwise, will be made
in immediately available funds upon presentation and surrender of this Note
(and, with respect to any applicable repayment of this Note, upon presentation
and surrender of this Note and a duly completed election form as contemplated on
the reverse hereof) at the office or agency of such paying agent as the Company
may determine maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts (a "Paying Agent"), or at the office or agency of such other
Paying Agent as the Company may determine; provided, however, that if the
Specified Currency specified above is other than U.S. dollars and such payment
is to be made in the Specified Currency in accordance with the provisions on the
reverse hereof, such payment will be made by wire transfer of immediately
available funds to an account with a bank designated by the holder hereof at
least 15 calendar days prior to Maturity, provided that such bank has
appropriate facilities therefor and that this Note (and, if applicable, a duly
completed repayment election form) is presented and surrendered at the
aforementioned office or agency maintained by the Company in time for the
Trustee to make such payment in such funds in accordance with its normal
procedures. Payment of interest due on any Interest Payment Date other than
Maturity will be made at the aforementioned office or agency maintained by the
Company or, at the option of the Trustee, by check mailed to the address of the
person entitled thereto as such address shall appear in the Security Register
maintained by the Trustee;
-3-
<PAGE>
provided, however, that a holder of U.S. $1,000,000 (or, if the Specified
Currency is other than U.S. dollars, the equivalent thereof in the Specified
Currency) or more in aggregate principal amount of Notes (whether having
identical or different terms and provisions) will be entitled to receive
interest payments on any Interest Payment Date other than Maturity by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15
calendar days prior to such Interest Payment Date. Any such wire transfer
instructions received by the Trustee shall remain in effect until revoked by
such holder.
If the Specified Currency shown above is other than U.S. dollars, payments
of principal of (and premium, if any) and interest on the Notes will be made in
the applicable Specified Currency, except as provided on the reverse hereof.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, and, if so specified on the face hereof, in the Addendum
hereto, which further provisions shall for all purposes have the same effect as
if set forth at this place.
Notwithstanding any provisions to the contrary contained herein, if the
face of this Note specifies that an Addendum is attached hereto or that
"Other/Additional Provisions" apply to this Note, this Note shall be subject to
the terms set forth in such Addendum or such "Other/Additional Provisions".
Unless the certificate of authentication hereon has been executed by the
Trustee or its Authenticating Agent, as defined on the reverse hereof, by manual
signature, this Note shall not be entitled to any benefit under the Indenture,
as defined on the reverse hereof, or be valid or obligatory for any purpose.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
SECURITY CAPITAL INDUSTRIAL TRUST
By: /s/ Thomas G. Wattles
---------------------
Thomas G. Wattles
Co-Chairman
Attest:
By: /s/ Jeffrey A. Klopf
--------------------
Jeffrey A. Klopf
Secretary
Dated: NOVEMBER 19 , 1996
----------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY: /s/ Carolina D. Altomare
------------------------
Authorized Officer
-5-
<PAGE>
FORM OF REVERSE OF NOTE
General. This Note is one of a duly authorized issue of Medium-Term Notes
having maturities nine months or more from the date of issue (the "Notes") of
the Company. The Notes are issuable under an Indenture, dated as of March 1,
1995, as amended, modified or supplemented from time to time (the "Indenture"),
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities of the Company, the Trustee and holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and delivered. State
Street Bank and Trust Company has been appointed Authenticating Agent (the
"Authenticating Agent," which term includes any successor authenticating agent)
with respect to the Notes, and State Street Bank and Trust Company at its
corporate trust office at Two International Place, Boston, MA 02110 has been
appointed registrar and Paying Agent with respect to the Notes. The terms of
individual Notes may vary with respect to interest rates, interest rate
formulas, issue dates, maturity dates, or otherwise, all as provided in the
Indenture. To the extent not inconsistent herewith, the terms of the Indenture
are hereby incorporated by reference herein.
This Note is unsecured and ranks pari passu with all other unsecured and
unsubordinated indebtedness of the Company (excluding subsidiary debt) for
borrowed money.
Payments. Interest payments on each Interest Payment Date for this Note
will include accrued interest from and including the Original Issue Date or from
and including the last date in respect of which interest has been paid, as the
case may be, to, but excluding such Interest Payment Dates or the Stated
Maturity (or earlier redemption or repayment date), as the case may be.
Interest payments for this Note will be computed and paid on the basis of a 360-
day year of twelve 30-day months. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date, will, subject to certain
exceptions described herein, be paid to the person in whose name this Note (or
one or more predecessor Notes) is registered at the close of business on the
date 15 days prior to an Interest Payment Date (whether or not a Business Day)
(each such date a "Record Date"); provided, however, that interest payable on
the Stated Maturity (or any redemption or repayment date) will be payable to the
person to whom the principal hereof shall be payable.
In the case where the Interest Payment Date or the Stated Maturity (or any
redemption or repayment date) does not fall on a Business Day, or if this Note
is payable in a Specified Currency
-6-
<PAGE>
other than U.S. dollars, a Business Day in the country issuing the Specified
Currency (or, for ECUs, Brussels), payment of interest, premium, if any, or
principal otherwise payable on such date need not be made on such date, but may
be made on the next succeeding Business Day with the same force and effect as if
made on the Interest Payment Date or on the Stated Maturity (or any redemption
or repayment date), and no interest shall accrue for the period from and after
the Interest Payment Date or the Stated Maturity (or any redemption or repayment
date) to such next succeeding Business Day.
If the Specified Currency shown on the face of this Note is other than U.S.
dollars, payments of principal of (and premium, if any) and interest on the
Notes will be made in the applicable Specified Currency; provided, however, that
payments of principal (and premium, if any) and interest on Notes denominated in
other than U.S. dollars will nevertheless be made in U.S. dollars:
(a) at the option of the holders of the Notes under the procedures
described in the two following paragraphs; and
(b) at the Company's option in the case of imposition of exchange
controls or other circumstances beyond the Company's control.
Except as provided in the next paragraph, if the Specified Currency shown
on the face of this Note is other than U.S. dollars, payments of interest and
principal (and premium, if any) will be made in U.S. dollars if the registered
holder of such Note on the relevant Record Date, or at Maturity, as the case may
be, has transmitted a written request for such payment in U.S. dollars to the
Paying Agent at the office of the Paying Agent on or before such Record Date, or
the date 15 days before Maturity, as the case may be. Such request may be in
writing (mailed or hand delivered) or by cable, or other form of facsimile
transmission. Any such request will remain in effect for any further payments
of interest and principal (and premium, if any) on such Note payable to such
holder, unless such request is revoked on or before the relevant Record Date or
the date 15 days before Maturity, as the case may be.
The U.S. dollar amount to be received by a holder of a Note denominated in
other than U.S. dollars who elects to receive payment in U.S. dollars will be
determined by the exchange rate agent, or any successor thereto (the "Exchange
Rate Agent"), at approximately 11:00 a.m., New York City time, on the second
Business Day preceding the applicable Payment Date, by selecting the indicative
quotations for the Specified Currency appearing at such time on the bank
composite or multi-contributor pages of the Quoting Source (as defined below)
for the first three banks, in
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<PAGE>
descending order of their appearance on a list of banks to be agreed to by the
Company and the Exchange Rate Agent prior to such second Business Day, which are
offering quotes on the Quoting Source. The Exchange Rate Agent shall select
from among the selected quotations the one which will yield the largest number
of U.S. dollars upon conversion from such Specified Currency. The "Quoting
Source" shall mean Reuters Monitor Foreign Exchange Service, or if the Exchange
Rate Agent determines that such service is not available, Telerate Monitor
Foreign Exchange Service. If the Exchange Rate Agent determines that neither
Service is available, the Company and the Exchange Rate Agent shall agree on a
comparable display or other comparable manner of obtaining quotations and such
display or manner shall become the Quoting Source.
In the case of a Specified Currency other than ECUs, if (i) fewer than
three bid quotations are available at the time a determination is to be made by
the Exchange Rate Agent pursuant to the preceding paragraph, or (ii) the
Exchange Rate Agent received no later than 12:00 noon, New York City time, on
such second Business Day preceding the applicable Payment Date notice from the
Company that there exist exchange controls or other circumstances beyond the
Company's control rendering such Specified Currency unavailable, then the
Exchange Rate Agent shall, prior to such Payment Date, notify the Company and
the Trustee of the noon buying rate in New York City for cable transfers, in the
Specified Currency indicated in such notice, as certified for customers purposes
by the Federal Reserve Bank of New York (the "Market Exchange Rate") as of such
second Business Day. If the Market Exchange Rate for such date is not then
available, the Exchange Rate Agent shall immediately notify the Company and the
Trustee of the most recently available Market Exchange Rate for such Specified
Currency. In the case of ECUs, if: (i) fewer than three bid quotations are
available at the time a determination is to be made by the Exchange Rate Agent
pursuant to the preceding paragraph, or (ii) the Exchange Rate Agent receives no
later than 12:00 noon, New York City time, on such second Business Day preceding
the applicable Payment Date notice from the Company that (A) there exist
exchange controls or other circumstances beyond the Company's control, rendering
ECUs unavailable or (B) ECUs are no longer used in the European Monetary System,
rendering ECUs unavailable, then the Exchange Rate Agent shall, prior to such
Payment Date, notify the Company and the Trustee of the rate of conversion for
ECUs into U.S. dollars, determined as of such second Business Day on the
following basis: The component currencies of the ECUs for this purpose (the
"Components") shall be the currency amounts that were components of the ECUs as
of the last date on which ECUs were used in the European Monetary System. The
equivalent of ECUs in U.S. dollars shall be calculated by aggregating the U.S.
dollar equivalent of the Components. The U.S. dollar equivalent
-8-
<PAGE>
of each of the Components shall be determined by the Exchange Rate Agent on the
basis of the most recently available Market Exchange Rate for the Components, or
as otherwise specified to the Exchange Rate Agent by the Company.
If the Specified Currency shown on the face hereof is a currency or
currency unit other than U.S. dollars, and such Specified Currency is not
available due to the imposition of exchange controls or other circumstances
beyond the control of the Company, the Company shall be entitled to satisfy its
obligations to the holder of this Note by making such payment in U.S. dollars on
the basis of the most recently available noon-buying rate for cable transfers in
The City of New York, as determined by the Federal Reserve Bank of New York.
Any payment made under such circumstances in U.S. dollars where the required
payment is other than U.S. dollars will not constitute an Event of Default.
All percentages resulting from any calculations under this Note will be
rounded, if necessary, to the nearest one hundred thousandth of a percentage
point (with five one-millionths of a percentage point being rounded upward) and
all currency or currency unit amounts used in or resulting from any such
calculation in respect of the Notes will be rounded to the nearest one-hundredth
of a unit (with five one-thousandths being rounded upward).
Sinking Fund. This Note will not be subject to any sinking fund and,
unless otherwise provided on the face hereof in accordance with the provisions
of the following two paragraphs, will not be redeemable or subject to repayment
at the option of the holder prior to Maturity.
Redemption. Unless otherwise indicated on the face of this Note, this Note
may not be redeemed prior to the Stated Maturity. If the face of this Note
indicates that this Note is subject to optional redemption, this Note will be
redeemable at the Company's option, as a whole or from time to time in part in
increments of U.S. $1,000 or the minimum Authorized Denomination (provided that
any remaining principal amount hereof shall be at least U.S. $1,000 or such
minimum Authorized Denomination) on and after the Initial Redemption Date set
forth on the face of this Note, on any date prior to the Stated Maturity at a
redemption price (the "Redemption Price"), as specified on the face of this
Note, equal to either (i) the price specified as a percentage of the face amount
to be redeemed plus accrued interest to the Redemption Date (subject to the
right of holders of record on the relevant Record Date to receive interest due
on an Interest Payment Date that is on or prior to the Redemption Date) or (ii)
100% of the principal amount thereof plus accrued interest to the Redemption
Date (subject to the right of holders of record on the
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<PAGE>
relevant Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), plus a Make-Whole Premium, if any.
The "Make-Whole Premium" in respect of this Note is intended to be the
amount, if any, which, when added to the then outstanding principal amount of
this Note, would, if invested on the Redemption Date of this Note in U.S.
Treasury securities with maturities equal to the Remaining Life of this Note,
have a yield to maturity equal to the original yield to maturity of this Note,
based on the initial public offering price of this Note. The amount of the
Make-Whole Premium in respect of the principal amount of this Note will be
calculated by the Company and will be the excess, if any, of (i) the sum of the
present values, as of the Redemption Date of this Note, of (A) the respective
interest payments (exclusive of the amount of accrued interest to the Redemption
Date) on this Note that, but for such redemption, would have been payable on
their respective Interest Payment Dates after such Redemption Date, and (B) the
payment of such principal amount that, but for such redemption, would have been
payable on the Stated Maturity over (ii) the amount of such principal to be
redeemed. Such present values will be determined in accordance with generally
accepted principles of financial analysis by discounting the amounts of such
payments of interest and principal from their respective Stated Maturities to
such Redemption Date at a discount rate equal to the Treasury Yield.
The "Treasury Yield" in respect of this Note shall be determined as of the
date on which notice of redemption of this Note is sent to the holder hereof by
reference to the most recent Federal Reserve Statistical Release H.15(519) (or
successor publication) which has become publicly available not more than two
Business Days prior to such date (or, if such Statistical Release (or successor
publication) is no longer published or no longer contains the applicable data,
to the most recently published issue of The Wall Street Journal (Eastern
Edition) published not more than two Business Days prior to such date that
contains such data or, if The Wall Street Journal (Eastern Edition) is no longer
published or no longer contains such data, to any publicly available source of
similar market data), and shall be the most recent weekly average yield on
actively traded U.S. Treasury securities adjusted to a constant maturity equal
to the Remaining Life of this Note and, if applicable, converted to a bond
equivalent yield basis as described below. The "Remaining Life of this Note"
shall equal the number of years from the Redemption Date to the Stated Maturity
of this Note; provided that if the Remaining Life of this Note is not equal to
the constant maturity of a U.S. Treasury security for which a weekly average
yield is specified in the applicable source, then the Remaining Life of this
Note shall be rounded to the nearest one-twelfth of one year and the Treasury
Yield shall be obtained by
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<PAGE>
linear interpolation (computed to the fifth decimal place (one thousandth of a
percentage point) and then rounded to the fourth decimal place (one hundredth of
a percentage point)), after rounding to the nearest one-twelfth of one year,
from the weekly average yields of (a) the actively traded U.S. Treasury security
with a maturity closest to and less than the Remaining Life of this Note and (b)
the actively traded U.S. Treasury security with a maturity closest to and
greater than the Remaining Life of this Note, except that if the Remaining Life
of this Note is less than three months, the weekly average yield on actively
traded U.S. Treasury securities adjusted to a constant maturity of three months
shall be used. The Treasury Yield shall, if expressed on a yield basis other
than that equivalent to a bond equivalent yield basis, be converted to a bond
equivalent yield basis and shall be computed to the fifth decimal place (one
thousandth of a percentage point) and then rounded to the fourth decimal place
(one hundredth of a percentage point).
Notice of redemption will be provided by mailing a notice of such
redemption to each holder by first class mail, postage prepaid, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the
respective address of each holder as that address appears in the Security
Register. In the event of redemption of this Note in part only, a new Note or
Notes for the amount of the unredeemed portion hereof shall be issued in the
name of the holder hereof upon the presentation and cancellation hereof.
Repayment. Unless otherwise indicated on the face of this Note, this Note
shall not be subject to repayment at the option of the holder prior to the
Stated Maturity. If so indicated on the face of this Note, this Note may be
subject to repayment at the option of the holder on the date or dates, if any,
specified on the face hereof (the "Optional Redemption Date" or "Optional
Redemption Dates") on the terms set forth herein.
On any Optional Repayment Date, this Note will be repayable in whole or in
part in increments of U.S. $1,000 or the minimum Authorized Denomination of the
Specified Currency indicated on the face hereof (provided that any remaining
principal amount hereof shall not be less than the minimum Authorized
Denomination hereof) at the option of the holder hereof at a price equal to 100%
of the principal amount to be repaid, together with interest hereon payable to
the date of repayment. For this Note to be repaid in whole or in part at the
option of the holder hereof, the Company must receive at the corporate trust
office of the Paying Agent in the City of Boston, Commonwealth of Massachusetts,
at least 30 days but not more than 60 days prior to the repayment, (i) this Note
with the form entitled "Option to Elect Repayment" on the reverse hereof duly
completed or (ii) a telegram, facsimile transmission or a letter from a member
of a
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<PAGE>
national securities exchange or a member of the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States which must set forth the name of the holder of this Note, the
principal amount of this Note, the principal amount of this Note to be repaid,
the certificate number or a description of the tenor and terms of this Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that this Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse hereof, will be received by
the Paying Agent not later than the third Business Day after the date of such
telegram, facsimile transmission or letter; provided, that such telegram,
facsimile transmission or a letter from a member of a national securities
exchange or a member of the NASD or a commercial bank or trust company in the
United States shall only be effective if in such case, this Note and form duly
completed are received by the Paying Agent by such third Business Day. Exercise
of such repayment option by the holder hereof shall be irrevocable. In the
event of repayment of this Note in part only, a new Note or Notes of like tenor
for the amount of the unpaid portion hereof and otherwise having the same terms
as this Note shall be issued in the name of the holder hereof upon cancellation
hereof.
Optional Extension of Maturity. If so specified on the face hereof, the
Stated Maturity of this Note may be extended at the option of the Company for
the period or periods of whole years specified on the face hereof (each an
"Extension Period") up to but not beyond the date (the "Final Maturity") set
forth on the face hereof. If the Company exercises such option, the Trustee
will mail to the holder of this Note at least 45 but not more than 60 days prior
to the old Stated Maturity a notice (the "Extension Notice"), first class
postage prepaid, indicating (a) the election of the Company to extend the
Maturity; (b) the new Stated Maturity; (c) the interest rate applicable to the
Extension Period; and (d) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which, the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the Trustee's mailing of the Extension Notice, the
Stated Maturity of this Note shall be extended automatically and, except as
modified by the Extension Notice and as described in the next paragraph, this
Note will have the same terms as prior to the mailing of such Notice.
Notwithstanding the foregoing, not later than 10:00 a.m., New York City
time, on the twentieth calendar day prior to the Maturity then in effect (or, if
such day is not a Business Day, not later than 10:00 a.m., New York City time,
on the immediately succeeding Business Day), the Company may, at its option,
revoke the interest rate provided for in the Extension Notice and
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<PAGE>
establish a higher interest rate for the Extension Period by causing the Paying
Agent to send notice of such higher interest rate to the holder of such Note by
first class mail, postage prepaid, or by such other means as shall be agreed
between the Company and the Paying Agent. Such notice shall be irrevocable. All
Notes with respect to which the Maturity is extended in accordance with an
Extension Notice will bear such higher interest rate.
If the Company extends the Maturity of this Note, the holder will have the
option to require the Company to repay such Note on Maturity then in effect at a
price equal to the principal amount thereof plus all accrued and unpaid interest
to such date. In order to obtain repayment on the old Stated Maturity once the
Company has extended the Maturity hereof, the holder must follow the procedures
set forth for optional repayment, except that the period for delivery of this
Note or notification to the Paying Agent shall be at least 25 but not more than
35 calendar days prior to the old Stated Maturity and except that if holder has
tendered this Note for repayment pursuant to an Extension Notice, the holder
may, by written notice to the Paying Agent, revoke any such tender for repayment
until 3:00 p.m., New York City time, on the twentieth calendar day prior to the
old Stated Maturity (or, if such day is not a Business Day, until 3:00 p.m., New
York City time, on the immediately succeeding Business Day).
Registration of Transfer. State Street Bank and Trust Company has been
appointed registrar for the Notes (the "Registrar," which term includes any
successor registrar appointed by the Company), and the Registrar will maintain
at its office at Two International Place, Boston, MA 02110 a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Registrar by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form approved by the
Registrar and duly executed by the registered holder hereof in person or by the
holder's attorney duly authorized in writing, and thereupon the Registrar shall
issue in the name of the transferee or transferees, in exchange herefor, a new
Note or Notes having identical terms and provisions for an equal aggregate
principal amount in authorized denominations, subject to the terms and
conditions set forth herein; provided, however, that the Registrar will not be
required to register the transfer of or exchange any Note that has been called
for redemption in whole or in part, or as to which the holder thereof has
elected to cause such Note to be repaid in whole or in part, except the
unredeemed or unpaid portion of Notes being redeemed or repaid in part, or to
register the transfer of or exchange Notes to the extent and during the period
so provided in the Indenture with respect to the redemption of Notes. Notes are
exchangeable at said office for other Notes of other authorized denominations of
equal
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<PAGE>
aggregate principal amount having identical terms and provisions. All such
exchanges and transfers of Notes will be free of charge, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge in connection therewith. All Notes surrendered for exchange shall be
accompanied by a written instrument of transfer in form approved by the
Registrar and executed by the registered holder in person or by the holder's
attorney duly authorized in writing. The date of registration of any Note
delivered upon any exchange or transfer of Notes shall be such that no gain or
loss of interest results from such exchange or transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Registrar, a new Note of like tenor will be issued by the
Company in exchange for the Note so mutilated or defaced, or in lieu of the Note
so destroyed or lost or stolen, but, in the case of any destroyed or lost or
stolen Note, only upon receipt of evidence satisfactory to the Registrar and the
Company that such Note was destroyed or lost or stolen and, if required, upon
receipt also of indemnity satisfactory to each of them. All expenses and
reasonable charges associated with procuring such indemnity and with the
preparation, authentication and delivery of a new Note shall be borne by the
owner of the Note mutilated, defaced, destroyed, lost or stolen.
This Note, and any Note or Notes issued upon transfer or exchange hereof,
is issuable only in fully registered form, without coupons, in denominations of
U.S. $1,000 or any integral multiple of U.S. $1,000 or the minimum Authorized
Denomination. If the Specified Currency shown on the face of this Note is other
than U.S. Dollars, the authorized denominations shall be the amount of the
Specified Currency for such Note equivalent, at the noon buying rate in The City
of New York for cable transfers for such Specified Currency (the "Exchange
Rate") on the sixth Business Day in The City of New York and in the country
issuing such currency (or, for ECUs, Brussels) next preceding the date of issue
of such Note, to U.S. $1,000 (rounded to the nearest 1,000 units of such
Specified Currency) and any greater amount that is an integral multiple of 1,000
units of such Specified Currency.
Events of Default. If an Event of Default (as defined in the Indenture)
with respect to the Notes of this series shall occur and be continuing, the
principal of the Notes of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.
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<PAGE>
Original Issue Discount Notes. Notwithstanding anything herein to the
contrary, if this Note is an Original Issue Discount Note, the amount payable in
the event of redemption or repayment prior to the Stated Maturity hereof in lieu
of the principal amount due at the Stated Maturity hereof shall be the Amortized
Face Amount of this Note as of the Redemption Date or the date of repayment, as
the case may be, multiplied by the Redemption Price. The "Amortized Face
Amount" of this Note shall be the amount equal to (a) the Issue Price (as set
forth on the face hereof) plus (b) that portion of the difference between the
Issue Price and the principal amount hereof that has accrued at the Yield to
Maturity (as set forth on the face hereof) (computed in accordance with
generally accepted United States bond yield computation principles using a
constant yield method) at the date as of which the Amortized Face Amount is
calculated but in no event shall the Amortized Face Amount of this Note exceed
its principal amount.
The constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as defined
below), corresponds to the shortest period between Interest Payment Dates (with
ratable accruals within a compounding period, a coupon rate equal to the initial
coupon rate applicable to this Note and an assumption that the Maturity of this
Note will not be accelerated). If the period from the Original Issue Date to the
initial Interest Payment Date (the "Initial Period") is shorter than the
compounding period for this Note, a proportionate amount of the yield for an
entire compounding period will be accrued. If the Initial Period is longer than
the compounding period, then such period will be divided into a regular
compounding period and a short period, with the short period being treated as
provided in the preceding sentence.
Modifications and Waivers; Obligation of the Company Absolute. The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the holders of the Securities of each series to be affected under
the Indenture at any time by the Company and the Trustee with the consent of the
holders of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected. The Indenture also contains
provisions permitting the holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the holder of
this Note shall be conclusive and binding upon such holder and upon all future
holders of this Note and of any Note issued upon the registration of transfer
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<PAGE>
hereof or in exchange hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
No provision of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place, and
rate or formula, and in the coin or currency, herein and in the Indenture
prescribed unless otherwise agreed between the Company and the registered holder
of this Note.
Registered Holder Treated as Owner. Prior to due presentment of this Note
for registration of transfer, the Company or any agent of the Company, the
Registrar or the Trustee may treat the holder in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Registrar, the Trustee nor any such agent
shall be affected by notice to the contrary.
No Recourse Against Certain Persons. No recourse under or upon any
obligation, covenant or agreement contained in the Indenture or in this Note, or
because of any indebtedness evidenced thereby, shall be had against any
promoter, as such, or against any past, present or future shareholder, officer
or trustee, as such, of the Company or of any successor, either directly or
through the Company or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance of this Note by the holder hereof and as part of
the consideration for the issue of this Note.
Governing Law. This Note shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
CUSIP Number. Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused "CUSIP"
numbers to be printed on this Note as a convenience to the holders of this Note.
No representation is made as to the correctness or accuracy of such CUSIP
numbers as printed on this Note, and reliance may be placed only on the other
identification numbers printed hereon.
Defined Terms. All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Defeasance. The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company on this Note and (b) certain
restrictive covenants and
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the related defaults and Events of Default applicable to the Company, in each
case, upon compliance by the Company with certain conditions set forth in the
Indenture, which provisions apply to this Note.
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=========================================
=========================================
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Security of Security Capital Industrial Trust and hereby does
irrevocably constitute and appoint
........................................................................Attorney
to transfer said Security on the books of the within-named Company with full
power of substitution in the premises.
Dated: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
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<PAGE>
FORM OF OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) and instruct(s) the Company
to repay the within Note (or portion thereof specified below) pursuant to its
terms at a price equal to 100% of the principal amount to be repaid, together
with unpaid interest to the Repayment Date, to the undersigned, at _____________
________________________________________________________________________________
(Please print or typewrite name and address of the undersigned)
If less than the entire principal amount of the within Note is to be repaid,
specify the portion thereof (which shall be increments of U.S. $1,000 (or if the
Specified Currency is other than U.S. dollars, the minimum Authorized
Denomination specified on the face hereof)) which the holder elects to have
repaid:________________; and specify the denomination or denominations (which
shall not be less than the minimum authorized denomination) of the Notes to be
issued to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid):_________________________
Dated: ______________________
NOTICE: The signature on this Option to Elect Repayment must correspond with the
name as written upon the face of the within instrument in every particular
without alteration or enlargement.
* Applies only if this Note is a Registered Global Security.
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<PAGE>
ADDENDUM
--------
The following definitions replace in their entirety, the definitions of "Make-
Whole Premium" and "Treasury Yield" contained in this Note:
"Make-Whole Amount" or "Make-Whole Premium" means, in connection with
any optional redemption or accelerated payment of any Note, the excess, if
any of (i) the aggregate present value as of the date of such redemption or
accelerated payment of each dollar of principal being redeemed or paid and
the amount of interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been payable in respect
of such dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semiannual basis, such principal and
interest at the Treasury Yield (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment
had not been made, over (ii) the aggregate principal amount of the Notes
being redeemed or paid.
"Treasury Yield" means 0.25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest
month) corresponding to the remaining life to maturity, as of the payment
date of the principal being redeemed or paid. If no maturity exactly
corresponds to such maturity, yields for the two published maturities most
closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Treasury Yield shall be interpolated
or extrapolated from such yields on a straight-line basis, rounded in each
of such relevant periods to the nearest month. For the purposes of
calculating the Treasury Yield, the most recent Statistical release
published prior to the date of determination of the Make-Whole Amount shall
be used.
The following definition is added to this Note:
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded
United States government securities adjusted to constant maturities, or, if
such statistical release is not published at the time of
<PAGE>
any determination under the Indenture, then such other reasonably
comparable index which shall be designated by the Company.
The Amortization schedule for this Note is as follows:
The installments of principal on each $1,000 original principal amount of
Notes shall be payable annual on each February 1, commencing February 1,
2010, in the following amounts: $200 in 2010, $150 in 2011, $150 in 2012,
$200 in 2013, $200 in 2014 and $100 in 2015.
<PAGE>
Exhibit 11.1
SECURITY CAPITAL INDUSTRIAL TRUST
FULLY DILUTED EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Reconciliation of net earnings per primary
earnings per share computation to amount
used for fully diluted computation:
Net earnings per Statement of
Operations $ 53,460 $ 42,015 $ 25,101
Add: minority interest 3,326 3,331 2,992
--------- --------- ---------
Net earnings, as adjusted $ 56,786 $ 45,346 $ 28,093
========= ========= =========
Reconciliation of weighted average number
of shares outstanding per primary earnings
per share computation to amount used
for fully diluted computation:
Weighted average number of shares
outstanding per primary earnings
per share computation 84,504 68,924 44,265
Add: Weighted average effect of
conversion of partnership
units into SCI shares as if occurred
upon inception of partnerships 5,194 5,485 4,754
--------- --------- ---------
Weighted average number of
shares, as adjusted 89,698 74,409 49,019
========= ========= =========
Primary earnings per share $ 0.63 $ 0.61 $ 0.57
========= ========= =========
Fully diluted earnings per share $ 0.63 $ 0.61 $ 0.57
========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 12.1
SECURITY CAPITAL INDUSTRIAL TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Net Earnings (Loss) from Operations..... $ 79,384 $47,660 $25,066 $4,412 $(187)
Add:
Interest Expense...................... 38,819 32,005 7,568 321 504
-------- ------- ------- ------ -----
Earnings as Adjusted.................... $118,203 $79,665 $32,634 $4,733 $ 317
======== ======= ======= ====== =====
Fixed Charges:
Interest Expense...................... $ 38,819 $32,005 $ 7,568 $ 321 $ 504
Capitalized Interest.................. 16,138 8,599 2,208 98 124
-------- ------- ------- ------ -----
Total Fixed Charges................. $ 54,957 $40,604 $ 9,776 $ 419 $ 628
======== ======= ======= ====== =====
Ratio of Earnings (Loss) to Fixed
Charges................................ 2.2 2.0 3.3 11.3 (a)
======== ======= ======= ====== =====
</TABLE>
- --------
(a) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover fixed charges for the period ended
December 31, 1992 by $311,000.
<PAGE>
EXHIBIT 12.2
SECURITY CAPITAL INDUSTRIAL TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C>
Net Earnings (Loss) from Operations..... $ 79,384 $47,660 $25,066 $4,412 $(187)
Add:
Interest Expense...................... 38,819 32,005 7,568 321 504
-------- ------- ------- ------ -----
Earnings as Adjusted.................... $118,203 $79,665 $32,634 $4,733 $ 317
======== ======= ======= ====== =====
Combined Fixed Charges and Preferred
Share Dividends:
Interest Expense...................... $ 38,819 $32,005 $ 7,568 $ 321 $ 504
Capitalized Interest.................. 16,138 8,599 2,208 98 124
-------- ------- ------- ------ -----
Total Fixed Charges................. 54,957 40,604 9,776 419 628
Preferred Share Dividends (a)......... 25,895 6,698 -- -- --
-------- ------- ------- ------ -----
Combined Fixed Charges and Preferred
Share Dividends........................ $ 80,852 $47,302 $ 9,776 $ 419 $ 628
======== ======= ======= ====== =====
Ratio of Earnings (Loss) to Combined
Fixed Charges and
Preferred Share Dividends.............. 1.5 1.7 3.3 11.3 (b)
======== ======= ======= ====== =====
</TABLE>
- --------
(a) SCI had no preferred shares in any of the historical periods presented
prior to 1995.
(b) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover combined fixed charges and preferred
dividends for the period ended December 31, 1992 by $311,000.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 10-K, into the Trust's previously filed
Registration Statement File Nos. 33-91366, 33-92490, 333-4961 and 333-13909.
It should be noted that we have not audited any financial statements of the
Trust subsequent to December 31, 1996, or performed any audit procedures
subsequent to the date of our reports.
Arthur Andersen LLP
Chicago, Illinois
February 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Form 10-K for the twelve months ended December 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,770
<SECURITIES> 0
<RECEIVABLES> 5,397
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,508,747
<DEPRECIATION> 109,147
<TOTAL-ASSETS> 2,462,306
<CURRENT-LIABILITIES> 0
<BONDS> 664,143
<COMMON> 937
0
436,250
<OTHER-SE> 1,162,202
<TOTAL-LIABILITY-AND-EQUITY> 2,462,306
<SALES> 227,000
<TOTAL-REVENUES> 233,463
<CGS> 0
<TOTAL-COSTS> 26,674
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,819
<INCOME-PRETAX> 53,460
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,460
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0
</TABLE>
