SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 22, 2003

 

DIVIDEND CAPITAL TRUST INC.

(Exact name of small business issuer as specified in its charter)

 

 

518 17^th Street, Suite 1700

Denver, CO 80202

(Address of principal executive offices)

 

(303) 228-2200

(Registrant’s telephone number)

 

 

Item 2. Acquisition or Disposition of Assets

 

Purchase of the Plainfield Distribution Facility.  On December 30, 2003, we filed a Form 8-K dated December 15, 2003, with regard to the acquisition of a distribution facility located in Plainfield, Indiana, a submarket of Indianapolis (“Plainfield”), without the requisite financial information. Accordingly, we are filing this Form 8-K/A to include that financial information.

 

Amendment of Previously Filed Form 8-K/A’s.  We previously filed a Form 8-K/A on October 3, 2003 and we filed a Form 8-K/A on January 9, 2004 with the requisite financial information for the Chickasaw properties and the Mallard Lake and West by Northwest properties, respectively. The Form 8-K/A’s previously filed contained certain pro forma financial information which included the estimated real estate operations of our Nashville facility and our Rancho Business Center, both of which had no operating history upon acquisition.  Upon further consideration of the provisions of the SEC Accounting Disclosure Rules and Practices, Topic Three, “Pro Forma Financial Information, Forecasts, and Forward Looking Information,” we are amending our previously filed 8-K/A’s to more appropriately present the pro forma financial information pursuant to Rule 3-14.

 

2

 

Item 7. Financial Statements and Exhibits.

 

(a) Financial Statements of Real Estate Property Acquired:
	Plainfield Distribution Facility:
		Independent Auditors’ Report		F-1
		Statements of Revenue and Certain Expenses for the Nine Months Ended September 30, 2003 (Unaudited) and for the Year Ended December 31, 2002		F-2
		Notes to Statements of Revenue and Certain Expenses		F-3
	Chickasaw Distribution Facilities:
		Independent Auditors’ Report		F-5
		Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2003 (Unaudited) and for the Year Ended December 31, 2002		F-6
		Notes to Statements of Revenue and Certain Expenses		F-7
	Mallard Lake Distribution Facility:
		Independent Auditors’ Report		F-9
		Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2003 (Unaudited) and for the Year Ended December 31, 2002		F-10
		Notes to Statements of Revenue and Certain Expenses		F-11
	West by Northwest Distribution Facility:
		Independent Auditors’ Report		F-13
		Statements of Revenue and Certain Expenses for the Nine Months Ended September 30, 2003 (Unaudited) and for the Year Ended December 31, 2002		F-14
		Notes to Statements of Revenue and Certain Expenses		F-15
(d) Unaudited Pro Forma Financial Information:
		Pro Forma Financial Information (Unaudited)		F-17
		Pro Forma Consolidated Balance Sheet as of September 30, 2003 (Unaudited)		F-18
		Pro Forma Consolidated Statements of Operations for the Nine Months Ended September 30, 2003 (Unaudited)		F-19
		Pro Forma Consolidated Statements of Operations for the Year Ended December 31, 2002 (Unaudited)		F-20

 

3

 

		Notes to Pro Forma Consolidated Financial Statements (Unaudited)		F-21
(c) Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations for the Year ended December 31, 2002 (Unaudited)				F-26
		Note to Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations (Unaudited)		F-27

 

(d) Exhibits:

 

Exhibit Number		Exhibit Title
99.1		Press Release dated December 29, 2003

 

4

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	DIVIDEND CAPITAL TRUST INC.
March 2, 2004
	By:	/s/  Evan H. Zucker
		Evan H. Zucker
		Chief Executive Officer

 

5

 

Independent Auditors’ Report

 

The Board of Directors
Dividend Capital Trust Inc.:

 

We have audited the accompanying statement of revenue and certain expenses of the Plainfield Distribution Facility located in Plainfield, Indiana (the Property) for the year ended December 31, 2002. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc., as described in note 2. The presentation is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Plainfield Distribution Facility for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

 

 

	/s/ KPMG LLP
Denver, Colorado
February 4, 2004

 

F-1

 

Plainfield Distribution Facility

 

Statements of Revenue and Certain Expenses

 

		For the Nine Months Ended September 30, 2003			For the Year Ended December 31, 2002
		(Unaudited)
REVENUE:
Rental revenue		$	867,798		1,072,129
Other revenue		19,791			13,122
Total revenue		887,589			1,085,251
CERTAIN EXPENSES:
Property taxes		35,301			47,067
Repairs and maintenance		35,837			24,935
Management fees		21,530			27,625
Other operating expenses		47,140			77,874
Total expenses		139,808			177,501
EXCESS OF REVENUE OVER CERTAIN EXPENSES		$	747,781		907,750

 

The accompanying notes are an integral part of these financial statements.

 

F-2

 

Plainfield Distribution Facility

 

Notes to Statements of Revenue and Certain Expenses
as of December 31, 2002

 

Note 1—Business

 

The accompanying statements of revenue and certain expenses reflects the operations of the Plainfield Distribution Facility (the “Property”) for the nine months ended September 30, 2003 (unaudited) and for the year ended December 31, 2002.  The Property was acquired by Dividend Capital Trust Inc. and subsidiary (the “Company”) on December 22, 2003 for a purchase price of approximately $15.1 million.

 

Note 2—Basis of Presentation

 

The accompanying statements of revenue and certain expenses has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc. and is not intended to be a complete presentation of the Property’s revenues and expenses.

 

The accompanying statements of revenue and certain expenses was prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the rules and regulations of the Securities and Exchange Commission.  These financial statements exclude certain expenses such as mortgage interest, depreciation and amortization, professional fees and other costs not directly related to future operations of the Property.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Interim Information (unaudited)

 

In the opinion of management, the unaudited information as of September 30, 2003 included herein contains all the adjustments necessary, which are of a normal recurring nature, to present fairly the revenue and certain expenses for the nine months ended September 30, 2003. Results of interim periods are not necessarily indicative of results to be expected for the year.  Management is not aware of any material factors that would cause the information included herein to not be indicative of future operating results.

 

Note 3—Operating Leases

 

The Property’s revenue is obtained from tenant rental payments as provided for under non-cancelable operating leases. The Property is currently “net” leased to two tenants. “Net” means that the tenants are responsible for repairs, maintenance, property taxes, utilities, insurance and other operating costs while we as landlord, have responsibility for capital repairs or replacement of specific structural components of a property such as the roof of the building, the truck court and parking areas, as well as the interior floor or slab of the building. The Property records rental revenue for the full term of the lease on a straight-line basis. In this case, where the minimum rental payments increase over the life of the lease, the Property records a receivable due from tenants for the difference between the amount of revenue recorded and the amount of cash received.  This accounting treatment resulted in an increase in rental revenue of $22,539 and $27,579 for the periods ended September 30, 2003 and December 31, 2002, respectively.

 

F-3

 

Future minimum rental payments due under the leases, excluding tenant reimbursements of operating expenses, as of December 31, 2002, were as follows:

 

Year Ending December 31:
2003		$	1,127,012
2004		1,127,012
2005		1,133,457
2006		1,165,679
2007		1,202,111
Thereafter		4,256,557
Total		$	10,011,828

 

Tenant reimbursements of operating expenses are included in other revenue on the accompanying statements of revenue and certain expenses.

 

As of December 31, 2002, the Property was 68.3% leased to two tenants, DDD Company and Puritan Bennett.  The following table describes these tenants and terms of their respective lease agreements.

 

Tenant		Leased Square Feet		Percent of Property		Annualized Rental Revenue		Lease Expiration		Rental Increases		Industry/Business
PB Government Solutions		161,113		36.4	%	$533,280		10/31/2010		11/1/2005 through 10/31/2010 $571,951		Integrated mail and document management solutions
Puritan Bennett		141,028		31.9	%	593,364		2/29/2012		3/1/07 through 2/29/2012  $637,447		Manufacturer and distributor of healthcare devices
Total		302,141		68.3	%	$1,126,644

 

F-4

 

INDEPENDENT AUDITORS’ REPORT

 

The Board of Directors
Dividend Capital Trust Inc.:

 

We have audited the accompanying statement of revenue and certain expenses of the Chickasaw Distribution Facilities located in Memphis, Tennessee (the “Property”) for the year ended December 31, 2002.  This financial statement is the responsibility of the Property’s management.  Our responsibility is to express an opinion on the financial statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

 

The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc., as described in Note 2.  The presentation is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Chickasaw Distribution Facilities for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

 

 

	/s/ KPMG LLP
Denver, Colorado
August 15, 2003

 

F-5

 

Chickasaw Distribution Facilities

 

Statements of Revenue and Certain Expenses

 

		For the Six Months Ended June 30, 2003			For the Year Ended December 31, 2002
		(Unaudited)
REVENUE:
Rental revenue		$	588,729		$	629,530
Other revenue		203,143			91,381
Total revenue		791,872			720,911
CERTAIN EXPENSES:
Repairs and maintenance		7,917			19,187
Utilities		11,044			25,621
Property taxes		136,615			143,711
Management fees		23,937			18,624
Operating services		38,482			55,035
Total expenses		217,995			262,178
EXCESS REVENUE OVER CERTAIN EXPENSES		$	573,877		$	458,733

 

The accompanying notes are an integral part of these financial statements.

 

F-6

 

Chickasaw Distribution Facilities

 

Notes to Statements of Revenue and Certain Expenses
as of December 31, 2002

 

Note 1 — Business

 

The accompanying statements of revenue and certain expenses reflect the operations of the Chickasaw Distribution Facilities (the “Property”).  The Property contains two one-story, distribution facilities with approximately 392,000 rentable square feet and is located on approximately 21 acres of land.  The construction of the two distribution facilities was completed in 2000 and they were in the lease-up phase through 2002.  As of December 31, 2002, the Property had an occupancy rate of 94.2%.

 

The Property was acquired by Dividend Capital Trust Inc. and subsidiary (the “Company”) from an unrelated party on July 22, 2003 for $14,280,000, which was paid with the proceeds from the Company’s public offering under the registration statement, as amended, filed on April 15, 2002.  In addition, The Company incurred approximately $564,000 in related acquisition costs (including an acquisition fee of $428,000 payable to our Advisor, Dividend Capital Advisors LLC), which were capitalized as a cost of acquiring the property.

 

Note 2 — Basis of Presentation

 

The accompanying Statement of Revenue and Certain Expenses has been prepared for the purposes of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Current Report on Form 8-K of Dividend Capital Trust Inc. and is not intended to be a complete presentation of the Property’s revenues and expenses.

 

The accounting records of the Property are maintained on the accrual basis.  The accompanying statement of revenue and certain expenses was prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and exclude certain expenses such as mortgage interest, depreciation and amortization, professional fees and other costs not directly related to future operations of the Property.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

 

Interim Information (unaudited)

 

In the opinion of management, the unaudited information as of June 30, 2003 included herein contains all the adjustments necessary, which are of a normal recurring nature, to present fairly the revenue and certain expenses for the six months ended June 30, 2003.  Results of interim periods are not necessarily indicative of results to be expected for the year.  Management is not aware of any material factors that would cause the information included herein to not be indicative of future operating results.

 

F-7

 

NOTE 3 — OPERATING LEASES

 

Future minimum rental payments due under these leases, excluding tenant reimbursements of operating expenses, as of December 31, 2002, are as follows:

 

 

Tenant reimbursements of operating expenses are included in other revenue on the accompanying statement of revenue and certain expenses.

 

The following table exhibits those tenants who accounted for greater than 10% of the revenues for the year ended December 31, 2002, and the corresponding percentage of the future minimum revenues above:

 

Tenant		Percentage of 2002 Revenues		Percentage of Future Revenues
A		44.00	%	12.80	%
B		20.70	%	0.00	%
C		13.60	%	25.40	%
D		13.30	%	22.60	%
Total		91.60	%	60.80	%

 

F-8

 

Independent Auditors’ Report

 

The Board of Directors
Dividend Capital Trust Inc.:

 

We have audited the accompanying statement of revenue and certain expenses of the Mallard Lake Distribution Facility located in Hanover Park, Illinois (the Property) for the year ended December 31, 2002. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc., as described in Note 2. The presentation is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Mallard Lake Distribution Facility for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

 

 

	/s/ KPMG LLP
Denver, Colorado
November 14, 2003

 

F-9

 

Mallard Lake Distribution Facility

 

Statements of Revenue and Certain Expenses

 

		For the Nine Months Ended September 30, 2003			For the Year Ended December 31, 2002
		(Unaudited)
REVENUE:
Rental revenue		$	721,989		$	957,577
Other revenue		1,275			14,412
Total revenue		723,264			971,989
CERTAIN EXPENSES:
Repairs and maintenance		—			4,968
Management fees		9,758			13,264
Other operating expenses		1,999			5,020
Total expenses		11,757			23,252
EXCESS OF REVENUE OVER CERTAIN EXPENSES		$	711,507		$	948,737

 

The accompanying notes are an integral part of these financial statements.

 

F-10

 

Mallard Lake Distribution Facility

 

Notes to Statements of Revenue and Certain Expenses
as of December 31, 2002

 

Note 1—Business

 

The accompanying statement of revenue and certain expenses reflects the operations of the Mallard Lake Distribution Facility (the “Property”). Completed in 1999, the Property contains a one-story distribution facility with 39 foot clear heights, approximately 222,122 rentable square feet and is located on approximately 11.8 acres of land. As of December 31, 2002, the Property was 100% occupied by a single tenant.

 

The Property was acquired by Dividend Capital Trust Inc. and subsidiary (the “Company”) from an unrelated party on October 29, 2003 for a purchase price of $10,978,631, which was paid with the proceeds from the Company’s public offering under the registration statement filed on April 15, 2002, as amended. In addition, The Company incurred approximately $390,900 in related acquisition costs (including an acquisition fee of $329,400 payable to the Company’s related advisor, Dividend Capital Advisors LLC), which were capitalized as a cost of acquiring the property.

 

Note 2—Basis of Presentation

 

The accompanying Statement of Revenue and Certain Expenses has been prepared for the purposes of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc. and is not intended to be a complete presentation of Mallard Lake Distribution Facility’s revenues and expenses.

 

The accounting records of the Property are maintained on the accrual basis. The accompanying statement of revenue and certain expenses was prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and exclude certain expenses such as mortgage interest, depreciation and amortization, professional fees and other costs not directly related to future operations of the Property.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Interim Information (unaudited)

 

In the opinion of management, the unaudited information as of September 30, 2003 included herein contains all the adjustments necessary, which are of a normal recurring nature, to present fairly the revenue and certain expenses for the nine months ended September 30, 2003. Results of interim periods are not necessarily indicative of results to be expected for the year. Management is not aware of any material factors that would cause the information included herein to not be indicative of future operating results.

 

Note 3—Operating Leases

 

The Property’s revenue is obtained from tenant rental payments as provided for under a non-cancelable operating lease. The Property is currently 100% “net” leased to a single tenant. “Net” means that the tenant is responsible for repairs, maintenance, property taxes, utilities, insurance and other operating costs while we, as landlord, have responsibility for capital repairs or replacement of

 

F-11

 

specific structural components of a property such as the roof of the building, the truck court and parking areas, as well as the interior floor or slab of the building. The Company records rental revenue for the full term of the lease on a straight-line basis. In this case where the minimum rental payments increase over the life of the lease, the Company records a receivable due from tenants for the difference between the amount of revenue recorded and the amount of cash received.

 

Future minimum rental payments due under the lease, excluding tenant reimbursements of operating expenses, as of December 31, 2002, are as follows:

 

 

Tenant reimbursements of operating expenses are included in other revenue on the accompanying statement of revenue and certain expenses.

 

As of December 31, 2002, the Property was 100% leased to a single tenant which operates in the document storage industry. As such all current and future revenues generated from this tenant will exceed 10% of the Properties total rental revenue.

 

F-12

 

Independent Auditors’ Report

 

The Board of Directors
Dividend Capital Trust Inc.:

 

We have audited the accompanying statement of revenue and certain expenses of the West by Northwest Distribution Facility located in Houston, Texas (the Property) for the year ended December 31, 2002. This financial statement is the responsibility of the Property’s management. Our responsibility is to express an opinion on this financial statement based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc., as described in Note 2. The presentation is not intended to be a complete presentation of the Property’s revenue and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the West by Northwest Distribution Facility for the year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

 

 

	/s/ KPMG LLP
Denver, Colorado
November 14, 2003

 

F-13

 

West by Northwest Distribution Facility

 

Statements of Revenue and Certain Expenses

 

		For the Nine Months Ended September 30, 2003			For the Year Ended December 31, 2002
		(Unaudited)
REVENUE:
Rental revenue		$	212,318		$	707,684
Other revenue		119,761			292,636
Total revenue		332,079			1,000,320
CERTAIN EXPENSES:
Real estate taxes		154,644			203,383
Repair and maintenance		23,825			32,925
Utilities expense		19,779			20,488
Management fees		10,347			19,023
Other operating expenses		19,424			20,648
Total expenses		228,019			296,467
EXCESS OF REVENUE OVER CERTAIN EXPENSES		$	104,060		$	703,853

 

The accompanying notes are an integral part of these financial statements.

 

F-14

 

West by Northwest Distribution Facility

 

Notes to Statements of Revenue and Certain Expenses

as of December 31, 2002

 

Note 1—Business

 

The accompanying statement of revenue and certain expenses reflects the operations of the West by Northwest Distribution Facility (the “Property”). Completed in 1997, the Property contains a one-story distribution facility with 30 foot clear heights, 189,467 rentable square feet and is located on approximately 9.5 acres of land. As of December 31, 2002, the Property was 100% occupied by two tenants.

 

The Property was acquired by Dividend Capital Trust Inc. and subsidiary (the “Company”) from an unrelated party on October 30, 2003 for a purchase price of $8,275,000, which was paid with the proceeds from the Company’s public offering under the registration statement filed on April 15, 2002, as amended. In addition, The Company incurred approximately $322,000 in related acquisition costs (including an acquisition fee of $248,250 payable to the Company’s related advisor, Dividend Capital Advisors LLC), which were capitalized as a cost of acquiring the property.

 

Note 2—Basis of Presentation

 

The accompanying Statement of Revenue and Certain Expenses has been prepared for the purposes of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and for inclusion in the Current Report on Form 8-K/A of Dividend Capital Trust Inc. and is not intended to be a complete presentation of West by Northwest’s revenues and expenses.

 

The accounting records of the Property are maintained on the accrual basis. The accompanying statement of revenue and certain expenses was prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and exclude certain expenses such as mortgage interest, depreciation and amortization, professional fees and other costs not directly related to future operations of the Property.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Interim Information (unaudited)

 

In the opinion of management, the unaudited information as of September 30, 2003 included herein contains all the adjustments necessary, which are of a normal recurring nature, to present fairly the revenue and certain expenses for the nine months ended September 30, 2003. Results of interim periods are not necessarily indicative of results to be expected for the year. Management is not aware of any material factors that would cause the information included herein to not be indicative of future operating results.

 

Note 3—Operating Leases

 

The Property’s revenue is obtained from tenant rental payments as provided for under a non-cancelable operating lease. The Property is currently 100% “net” leased to a single tenant. “Net” means that the tenant is responsible for repairs, maintenance, property taxes, utilities, insurance and other operating costs while we, as landlord, have responsibility for capital repairs or replacement of specific structural components of a property such as the roof of the building, the truck court and

 

F-15

 

parking areas, as well as the interior floor or slab of the building. The Company records rental revenue for the full term of the lease on a straight-line basis. In this case where the minimum rental payments increase over the life of the lease, the Company records a receivable due from tenants for the difference between the amount of revenue recorded and the amount of cash received.

 

Future minimum rental payments due under the lease, excluding tenant reimbursements of operating expenses, as of December 31, 2002, are as follows:

 

Year Ending December 31:
2003		$	283,185
2004		622,492
2005		704,817
2006		727,553
2007		246,307
Thereafter		—
Total		$	2,584,354

 

Tenant reimbursements of operating expenses are included in other revenue on the accompanying statement of revenue and certain expenses.

 

As of December 31, 2002, the Property was 100% leased to a single tenant that operates in the high tech manufacturing industry. As such, all current and future revenues generated from this tenant will exceed 10% of the Properties total rental revenues.

 

F-16

 

Dividend Capital Trust Inc. and Subsidiary

 

Pro Forma Financial Information

 

(Unaudited)

 

The accompanying unaudited pro forma consolidated balance sheet presents the historical financial information of the Company as of September 30, 2003 as adjusted for the previous acquisitions of the Rancho Business Center, Mallard Lake, West by Northwest, Park West, Pinnacle, DFW and Plainfield all made subsequent to September 30, 2003, as if these transactions had occurred on September 30, 2003.

 

The accompanying unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2003 and the year ended December 31, 2002 combine the historical operations of the Company with the historical operations of the above acquired properties, if such properties had historical operating results, as if these transactions had occurred on January 1, 2002.  Rancho Business Center was acquired with no operating history and as such no activity associated with Rancho Business Center has been assumed in the presentation of the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2003 and the year ended December 31, 2002.

 

The unaudited pro forma consolidated financial statements have been prepared by the Company’s management based upon the historical financial statements of the Company and of the individually acquired properties. These pro forma statements may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. For instance, no pro forma adjustments were recorded to reflect an increase in general and administrative expenses, if such amounts increase as a result of the acquisitions.  The pro forma financial statements should be read in conjunction with the historical financial statements included in the Company’s previous filings with the Securities and Exchange Commission.

 

F-17

 

Dividend Capital Trust Inc. and Subsidiary
Pro Forma Consolidating Balance Sheet
As of September 30, 2003
(Unaudited)

 

		DCT Historical		Rancho Business Center			Mallard Lake			West by Northwest			Park West, Pinnacle and DFW			Plainfield			Pro Forma Adjustments			Pro Forma Consolidated
ASSETS
Real estate		$34,876,256		$	9,281,409	(b)	$	10,122,156	(b)	$	7,526,436	(b)	$	61,327,691	(b)	$	14,309,288	(b)	$	—		$	137,443,236
Intangible lease costs		4,560,182		556,985		(b)	1,247,414		(b)	1,070,491		(b)	5,727,995		(b)	1,353,722		(b)	—			14,516,789
Acc. dep. & amort		(428,668	)	—			—			—			—			—			—			(428,668		)
Net Investment in Real Estate		39,007,770		9,838,394			11,369,570			8,596,927			67,055,686			15,663,010			—			151,531,357
Cash and cash equivalents		16,415,362		(9,775,841		)(a)	(11,087,705		)(a)	(7,668,438		)(a)	(25,146,429		)(a)	(9,569,830		)(a)	49,417,883		(j)	2,585,002
Other assets, net		1,551,852		12,832		(c)(d)	(231,865		)(d)	(348,232		)(d)	287,288		(e)	—			—			1,271,875
Total Assets		$56,974,984		$	75,385		$	50,000		$	580,257		$	42,196,545		$	6,093,180		$	49,417,883		$	155,388,234
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable & accrued expenses		$591,531		$	30,385	(f)	$	—		$	164,399	(f)	$	—		$	22,954	(f)	$	—		$	809,269
Dividends payable		695,850		—			—			—			—			—			—			695,850
Other liabilities		458,699		45,000		(g)	50,000		(g)	415,858		(h)	370,097		(h)	70,226		(g)	—			1,409,880
Intangible lease liability, net		127,421		—			—			—			1,326,448		(b)	—			—			1,453,869
Line of credit		—		—			—			—			—			6,000,000		(i)	—			6,000,000
Mortgage note payable		—		—			—			—			40,500,000		(i)	—			—			40,500,000
Total Liabilities		1,873,501		75,385			50,000			580,257			42,196,545			6,093,180			—			50,868,868
Minority Interest		1,000		—			—			—			—			—			—			1,000
Shareholders’ Equity:
Common stock		63,981		—			—			—			—			—			56,478		(j)	120,459
Additional paid-in-capital		55,920,950		—			—			—			—			—			49,361,405		(j)	105,282,355
Distributions in excess of earnings		(884,448	)	—			—			—			—			—			—			(884,448		)
Total Shareholders’ Equity		55,100,483		—			—			—			—			—			49,417,883		(j)	104,518,366
Total Liabilities & Shareholders’ Equity		$56,974,984		$	75,385		$	50,000		$	580,257		$	42,196,545		$	6,093,180		$	49,417,883		$	155,388,234

 

F-18

 

Dividend Capital Trust Inc. and Subsidiary
Pro Forma Statement of Operations
For the Nine Months Ended September 30, 2003
(Unaudited)

 

		DCT Corporate				Chickasaw Facility			Mallard Lake			West by Northwest			Park West, Pinnacle and DFW			Plainfield			Pro Forma Adjustments			Consolidated
REVENUE:
Rental revenue		$		960,115		$	598,888	(1)	$	721,989	(1)	$	212,318	(1)	$	3,154,540	(1)	$	785,170	(1)	$	—		$	6,433,020
Other income		50,748				203,143		(1)	1,275		(1)	119,761		(1)	908,052		(1)	19,791		(1)	—			1,302,770
Total Income		1,010,863				802,031			723,264			332,079			4,062,592			804,961			—			7,735,790
EXPENSES:
Operating expenses		88,978				217,995		(1)	11,757		(1)	228,019		(1)	1,170,833		(1)	139,808		(1)	—			1,857,390
Depreciation & amortization		428,391				362,726		(1)	201,060		(1)	155,606		(1)	2,353,591		(1)	389,942		(1)	—			3,891,316
Interest expense		164,263				—			—			—			1,518,750		(1)	101,250		(1)	—			1,784,263
General and administrative  expenses		223,491				—			—			—			—			—			—			223,491
Total Operating Expenses		905,123				580,721			212,817			383,625			5,043,174			631,000			—			7,756,460
NET INCOME (LOSS)		$	105,740			$	221,310		$	510,447		$	(51,546	)	$	(980,582	)	$	173,961		$	—		$	(20,670	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		2,160,712																			9,885,112		(2)	12,045,824
Diluted		2,180,712																			9,885,112		(2)	12,065,824
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted		$	0.05																					$	(0.00	)

 

F-19

 

Dividend Capital Trust Inc. and Subsidiary
Pro Forma Statement of Operations
For the Year Ended December 31, 2002
(Unaudited)

 

		DCT Corporate				Chickasaw Facility			Mallard Lake Facility			West by Northwest Facility			Park West, Pinnacle and DFW			Plainfield			Pro Forma Adjustments			Consolidated
REVENUE:
Rental revenue		$		—		$	649,849	(1)	$	957,577	(1)	$	707,684	(1)	$	2,677,779	(1)	$	961,959	(1)	$	—		$	5,954,848
Other income		155				91,381		(1)	14,412		(1)	292,636		(1)	701,477		(1)	13,122		(1)	—			1,113,183
Total Income		155				741,230			971,989			1,000,320			3,379,256			975,081			—			7,068,031
EXPENSES:
Operating expenses		—				262,178		(1)	23,252		(1)	296,467		(1)	1,372,523		(1)	177,501		(1)	—			2,131,921
Depreciation & amortization		—				725,453		(1)	268,079		(1)	207,475		(1)	3,138,121		(1)	519,923		(1)	—			4,859,051
Interest expense		—				—			—			—			2,025,000		(1)	135,000		(1)	—			2,160,000
General and administrative  expenses		212,867				—			—			—			—			—			—			212,867
Total Operating Expenses		212,867				987,631			291,331			503,942			6,535,644			832,424			—			9,363,839
NET INCOME (LOSS) before minority interest		(212,712			)	(246,401		)	680,658			496,378			(3,156,388		)	142,657			—			(2,295,808		)
Minority Interest		200,000				—			—			—			—			—			—			200,000
NET INCOME (LOSS)		$	(12,712		)	$	(246,401	)	$	680,658		$	496,378		$	(3,156,388	)	$	142,657		$	—		$	(2,095,808	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		200																			12,045,624		(2)	12,045,824
Diluted		200																			12,065,624		(2)	12,065,824
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted		$	(63.56		)																			$	(0.17	)

 

F-20

 

Dividend Capital Trust Inc. and Subsidiary

 

Notes to Pro Forma Consolidated Financial Statements

 

(Unaudited)

 

Pro Forma Consolidated Balance Sheet as of September 30, 2003:

 

(a)                                  Cash paid for the acquisitions closed subsequent to September 30, 2003 consists of the following:

 

		Rancho Business Center			Mallard Lake			West by Northwest			Park West, Pinnacle and DFW			Plainfield
Purchase Price		$	10,001,955		$	10,978,631		$	8,275,000		$	63,550,000		$	15,107,000
Closing Costs		5,898			715			445			69,706			32,574
Over Funding Due From Title Company		—			—			—			287,288			—
Acquisition fee paid to affiliate		298,373			329,359			248,250			1,906,500			453,210
Less:
Debt proceeds		—			—			—			40,500,000			6,000,000
Earnest money		500,000			221,000			330,000			—			—
Credit for Tenant Security Deposits		—			—			21,336			167,065			—
Credit for Tenant Improvement Allowance		—			—			290,000			—			—
Credit for Pre-paid Rents		—			—			49,522			—			—
Credit for Real Estate Taxes		30,385			—			164,399			—			22,954
Cash paid at closing		9,775,841			11,087,705			7,668,438			25,146,429			9,569,830
Add:
Debt proceeds		—			—			—			40,500,000			6,000,000
Earnest money		500,000			221,000			330,000			—			—
Credits		30,385			—			525,257			(120,224		)	—
Estimated remaining closing costs		45,000			50,000			55,000			203,033			70,226
Due Diligence costs		12,551			10,865			18,232			—			—
Intangible Lease Liability		—			—			—			1,326,448			—
Total Acquisition Costs		$	10,363,777		$	11,369,570		$	8,596,927		$	67,055,686		$	15,640,056

 

(b)                                 The purchase price of these acquisitions was allocated to tangible and intangible assets in accordance with SFAS No. 141, “Business Combinations.”

 

(c)                                  This amount consists of a restricted cash item related to an allowance for tenant improvements.

 

(d)                                 These amounts represent deferred acquisition costs that were reclassed to investment in real estate. Deferred acquisition costs are costs incurred prior to the closing of the acquisition such as due diligence costs.

 

(e)                                  This amount represents the amount due from the title company as a result of over funding at closing.

 

(f)                                    These amounts are accruals related to property taxes and other payables assumed at closing for which we were given a credit to reduce the cash paid upon the purchase of the property.

 

(g)                                 These amounts consist of tenant deposits and management’s estimate of remaining acquisition costs.

 

F-21

 

(h)                                 These amounts consist of tenant deposits, management’s estimate on remaining acquisition costs and certain liabilities assumed at closing for commitments associated with new leases such as tenant improvements and leasing commissions.

 

(i)                                     The Park West, Pinnacle and DFW facilities were acquired with proceeds from the Company’s public offering and through the proceeds received through a mortgage note in the amount of $40.5 million. The Plainfield facility was also acquired with proceeds from the Company’s public offering and through the proceeds received from our senior secured revolving credit facility in the amount of $6.0 million (see note (3)).

 

(j)                                     A certain amount of capital was raised through the Company’s public offering after September 30, 2003 which was used to fund the acquisitions.  As such, management included the number of shares that were sold subsequent to September 30, 2003 through December 22, 2003, the date of the latest acquisition in order to facilitate adequate funding of these acquisitions.

 

Shares Sold from October 1 through December 22, 2003		5,647,758
Gross Proceeds		$	56,477,580
Less Selling Costs		(7,059,697		)
Net Proceeds		$	49,417,883

 

Pro Forma Consolidated Statements of Operations for the Nine Months Ended September 30, 2003 and for the Twelve Months Ended December 31, 2002:

 

(1)                                  In accordance with Rule 3.14 of Regulation S-X, the following acquisitions required an audit of the statement of revenue and certain expenses. The pro forma adjustments presented are based on the historical information reported within the audited statement of revenue and certain expenses plus certain pro forma adjustments as follows:

 

Chickasaw

 

		9-Months(e)								12-Months
		Chickasaw Facility*				Pro Forma Adjustments		Total Pro Forma		Chickasaw Facility*		Pro Forma Adjustments		Total Pro Forma
REVENUE:
Rental revenue		$		588,729		10,159	(a)	598,888		629,530		20,319(a	)	649,849
Other income		203,143				—		203,143		91,381		—		91,381
Total Income		791,872				10,159		802,031		720,911		20,319		741,230
EXPENSES:
Operating Expenses		217,995				—		217,995		262,178		—		262,178
Depreciation & amortization		—				362,726	(b)	362,726		—		725,453(b	)	725,453
Interest expense		—				—		—		—		—		—
General and administrative expenses		—				—		—		—		—		—
Total Operating Expenses		217,995				362,726		580,721		262,178		725,453		987,631
NET INCOME (LOSS)		$	573,877			(352,567	)	221,310		458,733		(705,134	)	(246,401	)

 

F-22

 

Mallard Lake

 

		9-Months							12-Months
		Mallard Lake Facility*			Pro Forma Adjustments		Total Pro Forma		Mallard Lake Facility*		Pro Forma Adjustments		Total Pro Forma
REVENUE:
Rental revenue		$	721,989		—	(a)	721,989		957,577		—	(a)	957,577
Other income		1,275			—		1,275		14,412		—		14,412
Total Income		723,264			—		723,264		971,989		—		971,989
EXPENSES:
Operating Expenses		11,757			—		11,757		23,252		—		23,252
Depreciation & amortization					201,060	(b)	201,060		—		268,079	(b)	268,079
Interest expense		—			—		—		—		—		—
General and administrative expenses		—			—		—		—		—		—
Total Operating Expenses		11,757			201,060		212,817		23,252		268,079		291,331
NET INCOME (LOSS)		$	711,507		(201,060	)	510,447		948,737		(268,079	)	680,658

 

West by Northwest

 

		9-Months								12-Months
		West by Northwest Facility*				Pro Forma Adjustments		Total Pro Forma		West by Northwest Facility*		Pro Forma Adjustments		Total Pro Forma
REVENUE:
Rental revenue		$		212,318	(c)	—	(a)	212,318		707,684	(c)	—	(a)	707,684
Other income		119,761				—		119,761		292,636		—		292,636
Total Income		332,079				—		332,079		1,000,320		—		1,000,320
EXPENSES:
Operating Expenses		228,019				—		228,019		296,467				296,467
Depreciation & amortization		—				155,606	(b)	155,606		—		207,475	(b)	207,475
Interest expense		—				—		—		—		—		—
General and administrative expenses		—				—		—		—		—		—
Total Operating Expenses		228,019				155,606		383,625		296,467		207,475		503,942
NET INCOME (LOSS)		$	104,060			(155,606	)	(51,546	)	703,853		(207,475	)	496,378

 

F-23

 

Park West, Pinnacle and DFW

 

		9-Months								12-Months
		Park West, Pinnacle and DFW*				Pro Forma Adjustments		Total Pro Forma		Park West, Pinnacle and DFW*		Pro Forma Adjustments		Total Pro Forma
REVENUE:
Rental revenue		$		3,130,351		24,189	(a)	3,154,540		2,645,527		32,252(a	)	2,677,779
Other income		908,052				—		908,052		701,477		—		701,477
Total Income		4,038,403				24,189		4,062,592		3,347,004		32,252		3,379,256
EXPENSES:
Operating Expenses		1,170,833				—		1,170,833		1,372,523		—		1,372,523
Depreciation & amortization		—				2,353,591	(b)	2,353,591		—		3,138,121	(b)	3,138,121
Interest expense		—				1,518,750	(d)	1,518,750		—		2,025,000	(d)	2,025,000
General and administrative expenses		—				—		—		—		—		—
Total Operating Expenses		1,170,833				3,872,341		5,043,174		1,372,523		5,163,121		6,535,644
NET INCOME (LOSS)		$	2,867,570			(3,848,152	)	(980,582	)	1,974,481		(5,130,869	)	(3,156,388	)

 

Plainfield

 

		9-Months								12-Months
		Plainfield*				Pro Forma Adjustments		Total Pro Forma		Plainfield*		Pro Forma Adjustments		Total Pro Forma
REVENUE:
Rental revenue		$		867,798		(82,628	)(a)	785,170		1,072,129		(110,170	)(a)	961,959
Other income		19,791				—		19,791		13,122		—		13,122
Total Income		887,589				(82,628	)	804,961		1,085,251		(110,170	)	975,081
EXPENSES:
Operating Expenses		139,808				—		139,808		177,501		—		177,501
Depreciation & amortization		—				389,942	(b)	389,942		—		519,923	(b)	519,923
Interest expense		—				101,250	(d)	101,250		—		135,000	(d)	135,000
General and administrative expenses		—				—		—		—		—		—
Total Operating Expenses		139,808				491,192		631,000		177,501		654,923		832,424
NET INCOME (LOSS)		$	747,781			(573,820	)	173,961		907,750		(765,093	)	142,657

 

*                               As filed pursuant to Rule 3.14 of Regulation S-X

 

(a)                        In accordance with SFAS No. 141, these amounts represent the amortization amounts of the above and below market values of the in-place leases. The intangible lease assets and liabilities are amortized over the life of the lease to rental income.

 

F-24

 

(b)                       Depreciation and amortization expense for the Pro Forma periods presented is based on the allocation of the purchase price between tangible and intangible assets. The Company depreciates these assets on a straight-line basis over the estimated useful life of the assets. The following table represents the allocation of the total cost of the acquisitions presented:

 

		Depreciation or Amortization Period		Consolidated
Land		N/A		$	17,380,389
Buildings		40 Years		105,614,686
Land Improvements		20 Years		7,105,857
Tenant Improvements		Term of the Lease		7,342,304
Intangible Lease and Acquisition Costs, net		Average Life of Lease		13,081,686
Total Cost				$	150,524,922

 

(c)                        One of the property’s two tenants vacated their space during December 2002. There was no adjustment made to the historical financial information that would consider this vacant space during 2003.

 

(d)                       Interest expense for the Pro Forma periods presented was calculated given the terms of our senior secured revolving credit facility and mortgage note. The following table sets forth the calculation for the pro forma adjustments as if the notes were outstanding as of January 1, 2002:

 

							Pro Forma Amounts
Amount			Note		Interest Rate		For the Nine Month Period			For the Twelve Month Period
$	6,000,000		Senior Secured Revolving Credit Facility		Annual interest rate equal to adjusted LIBOR plus 1.125% or (at the election of Dividend Capital) 1.0% over the Prime rate.		$	101,250		$	135,000
$	40,500,000		Mortgage Note		Annual interest rate equal to 5.0%.		$	1,518,750		$	2,025,000
					Total		$	1,620,000		$	2,160,000

 

(e)                        These pro forma amounts only reflect the operating results prior to acquisition as the actual operating results since acquisition are reflected in the Company’s historical operating results.

 

(2)                        For purposes of calculating the pro forma weighted average number of common shares outstanding, management determined the number of shares sold as of the latest acquisition, Plainfield, which was December 22, 2003. As the pro forma financial information presented assumes these acquisitions occurred on January 1, 2002, the number of shares outstanding as of December 22, 2003, are assumed to have been outstanding as of January 1, 2002 as well.

 

F-25

 

Dividend Capital Trust Inc. and Subsidiary

 

Statement of Estimated Taxable Operating Results and Cash
to be Made Available by Operations
For the Year Ended December 31, 2002
(Unaudited)

 

The following represents an estimate of the taxable operating results and cash to be made available by operations expected to be generated by the Company (including the operations of the recently acquired properties) based upon the pro forma consolidated statement of operations for the year ended December 31, 2002.  These estimated results do not purport to represent results of operations for these properties in the future and were prepared on the basis described in the accompanying note, which should be read in conjunction herewith.  For instance, no pro forma adjustments were recorded to reflect an increase in general and administrative expenses, if such amounts increase as a results of the acquisitions.

 

Revenue		$	6,317,146
Expenses
Operating expenses		2,131,921
Depreciation and amortization expense		3,824,125
Interest expense		2,160,000
General and administrative expenses		212,867
Total expenses		8,328,913
Estimated Taxable Operating Loss		$	(2,011,767	)
Add Depreciation and amortization expense		3,824,125
Estimated Cash to be Made Available by Operations		$	1,812,358

 

F-26

 

Dividend Capital Trust Inc. and Subsidiary

 

Note to Statement of Estimated Taxable Operating Results
And Cash to be Made Available by Operations
For the Year Ended December 31, 2002
(Unaudited)

 

Note 1 — Basis of Presentation

 

Depreciation has been estimated based upon an allocation of the purchase price of the Properties to land, building, land improvements and building improvements and assuming (for tax purposes) a 39.5-year, 20-year and 10-year useful life, respectively, for the depreciable assets applied on a straight-line method.

 

No income taxes have been provided because the Company is organized and operates in such a manner so as to qualify as a Real Estate Investment Trust (“REIT”) under the provisions of the Internal Revenue Code (the “Code”).  Accordingly, the Company generally will not pay Federal income taxes provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code.

 

F-27