**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

**FORM 10-Q**

 

 

**(Mark One)**

** **

**ý****            Quarterly Report UnderSection 13 or 15(d) of the Securities Exchange Act of 1934**

 

For the quarterly period ended**September 30, 2003**

 

or

 

**o****            Transition Report UnderSection 13 or 15(d) of the Securities Exchange Act of 1934**

**                For the transition periodfrom               to**

 

**Commission File No. 333-86234**

 

**DIVIDEND CAPITAL TRUST INC.**

(Exactname of registrant as specified in its charter)

 

| **Maryland**                                                     | **82-0538520**                        |
|------------------------------------------------------------------|---------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) | (I.R.S.  Employer Identification No.) |
|                                                             |                                  |
| **518  Seventeenth Street, Suite 1700**

**Denver,  CO**         | **80202**

(Zip  Code)                |
| (Address  of principal executive offices)                        |                                  |

 

Registrant’stelephone number, including area code: **(303) 228-2200**

 

Indicate by a check mark whether theregistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes ý  No o

 

Indicate by a check mark whether theregistrant is an accelerated filer (as defined in Rule 12b-2 of the ExchangeAct). Yes o No ý

 

As of November 6, 2003, 8,307,086 shares ofcommon stock of Dividend Capital Trust Inc., par value $0.01 per share, wereoutstanding.

 

 

 

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**Dividend Capital Trust Inc. and Subsidiary**

 

**Index toForm 10-Q**

 

** **
|           |                                                                                                                                                                                                                                               |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PART I.**    | FINANCIAL  INFORMATION                                                                                                                                                                                                                             |
|           |                                                                                                                                                                                                                                               |
| Item 1.        | Financial  Statements:                                                                                                                                                                                                                             |
|           | Condensed  Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002  (Unaudited)                                                                                                                                                 |
|           | Condensed  Consolidated Statements of Operations for the Three and Nine Months Ended  September 30, 2003, for the Three Months Ended September 30, 2002 and for the  Period From Inception (April 12, 2002) through September 30, 2002 (Unaudited) |
|           | Condensed  Consolidated Statements of Shareholders’ Equity (Deficit) for the Nine Months  Ended September 30, 2003 (Unaudited)                                                                                                                |
|           | Condensed  Consolidated Statements of Cash Flows   for the Nine Months Ended September 30, 2003 and for the Period from  Inception (April 12, 2002) to September 30, 2002 (Unaudited)                                                         |
|           | Notes  to Condensed Consolidated Financial Statements (Unaudited)                                                                                                                                                                                  |
| Item 2.        | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                        |
| Item  3.       | Quantitative and Qualitative  Disclosure About Market Risk                                                                                                                                                                                         |
| Item 4.        | Controls  and Procedures                                                                                                                                                                                                                           |
|           |                                                                                                                                                                                                                                               |
| **PART II.**   | OTHER INFORMATION                                                                                                                                                                                                                                  |
|           |                                                                                                                                                                                                                                               |
| Item  1.       | Legal Proceedings                                                                                                                                                                                                                                  |
| Item 2.        | Changes  in Securities and Use of Proceeds                                                                                                                                                                                                         |
| Item 3.        | Defaults upon Senior Securities                                                                                                                                                                                                                    |
| Item 4.        | Submission  of Matters to a Vote of Security Holders                                                                                                                                                                                               |
| Item  5.       | Other Information                                                                                                                                                                                                                                  |
| Item 6.        | Exhibits  and Reports on Form 8-K                                                                                                                                                                                                                  |
|           |                                                                                                                                                                                                                                               |
| **SIGNATURES** |                                                                                                                                                                                                                                               |
|           |                                                                                                                                                                                                                                               |
|           |                                                                                                                                                                                                                                               |
|           |                                                                                                                                                                                                                                               |
|           |                                                                                                                                                                                                                                               |

 

2

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**PART I. FINANCIAL INFORMATION**

** **

**ITEM 1. FINANCIAL STATEMENTS**

 

 

**Dividend Capital Trust Inc. andSubsidiary**

 

CondensedConsolidated Balance Sheets

 

 
|                                                             |   | **As of**          |       | **As of**         |   |
|------------------------------------------------------------------|--------|--------------------|------------|-------------------|--------|
|                                                             |   | **September  30,** |       | **December  31,** |   |
|                                                             |   | **2003**           |       | **2002**          |   |
|                                                             |   | (Unaudited)        |       |              |   |
| **ASSETS**                                                       |   |               |       |              |   |
| Real estate                                                      |   | $                  | 34,876,256 |              | $      | — |   |
| Intangible lease asset                                           |   | 4,560,182          |       | —            |   |
| Less accumulated depreciation and amortization                   |   | (428,668           | )          | —            |   |
| **Net Investment in Real Estate**                                |   | 39,007,770         |       | —            |   |
|                                                             |   |               |       |              |   |
| Cash and cash equivalents                                        |   | 16,415,362         |       | 11,055            |   |
| Restricted cash                                                  |   | —             |       | 681,890           |   |
| Other assets, net                                                |   | 1,551,852          |       | 58,733            |   |
| **Total Assets**                                                 |   | $                  | 56,974,984 |              | $      | 751,678 |   |
|                                                             |   |               |       |              |   |
| **LIABILITIES & SHAREHOLDERS’ EQUITY**                  |   |               |       |              |   |
| Liabilities:                                                     |   |               |       |              |   |
| Accounts payable and accrued expenses                            |   | $                  | 591,531    |              | $      | 79,500 |   |
| Dividends payable                                                |   | 695,850            |       | —            |   |
| Subscriptions for common shares                                  |   | —             |       | 681,890           |   |
| Other liabilities                                                |   | 458,699            |       | —            |   |
| Intangible lease liability, net                                  |   | 127,421            |       | —            |   |
| **Total Liabilities**                                            |   | 1,873,501          |       | 761,390           |   |
|                                                             |   |               |       |              |   |
| Minority Interest                                                |   | 1,000              |       | 1,000             |   |
|                                                             |   |               |       |              |   |
| Shareholders’ Equity (Deficit):                             |   |               |       |              |   |
| Preferred shares, 50,000,000 shares authorized, none outstanding |   | —             |       | —            |   |
| Shares-in-trust, 100,000,000 shares authorized, none outstanding |   | —             |       | —            |   |
| Common shares, $0.01 par value, 350,000,000 shares authorized,   |   |               |       |              |   |
| 6,398,066 and 200 shares issued and outstanding as of September  |   |               |       |              |   |
| 30, 2003 and December 31, 2002, respectively                     |   | 63,981             |       | 2                 |   |
| Additional paid-in capital                                       |   | 55,920,950         |       | 1,998             |   |
| Distributions in excess of earnings                              |   | (884,448           | )          | (12,712           | )      |
| **Total Shareholders’ Equity (Deficit)**                    |   | 55,100,483         |       | (10,712           | )      |
| **Total Liabilities and Shareholders’ Equity (Deficit)**    |   | $                  | 56,974,984 |              | $      | 751,678 |   |

 

 

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

3

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**Dividend Capital Trust Inc. andSubsidiary**

 

CondensedConsolidated Statements of Operations

(Unaudited)

 

 
|                                                             |   | **Three  Months Ended** |    | **Nine  Months Ended** |   | **For the  Period From Inception (April 12, 2002) through** |   |
|------------------------------------------------------------------|--------|-------------------------|---------|------------------------|--------|-------------------------------------------------------------|--------|
|                                                             |   | **September  30,**      |    | **September  30,**     |   | **September  30,**                                          |   |
|                                                             |   | **2003**                |    | **2002**               |   | **2003**                                                    |   | **2002** |   |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| **REVENUE:**                                                     |   |                    |    |                   |   |                                                        |   |   |   |
| Rental revenue                                                   |   | $                       | 842,519 |                   | $      | —                                                      |   | $ | 960,115 |   | $ | — |   |
| Other income                                                     |   | 10,828                  |    | —                 |   | 50,748                                                      |   | — |   |
| **Total Revenue**                                                |   | 853,347                 |    | —                 |   | 1,010,863                                                   |   | — |   |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| **EXPENSES:**                                                    |   |                    |    |                   |   |                                                        |   |   |   |
| Operating expenses                                               |   | 88,978                  |    | —                 |   | 88,978                                                      |   | — |   |
| Depreciation & amortization                                  |   | 359,787                 |    | —                 |   | 428,391                                                     |   | — |   |
| Interest expense                                                 |   | 137,985                 |    | —                 |   | 164,263                                                     |   | — |   |
| General and administrative   expenses                       |   | 117,787                 |    | 17,500                 |   | 223,491                                                     |   | 30,800 |   |
| **Total Expenses**                                               |   | 704,537                 |    | 17,500                 |   | 905,123                                                     |   | 30,800 |   |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| **NET INCOME (LOSS)**                                            |   | $                       | 148,810 |                   | $      | (17,500                                                     | )      | $ | 105,740 |   | $ | (30,800 | ) |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| **WEIGHTED AVERAGE NUMBER OF COMMON********SHARES  OUTSTANDING** |   |                    |    |                   |   |                                                        |   |   |   |
| Basic                                                            |   | 4,393,069               |    | 200                    |   | 2,160,712                                                   |   | 200 |   |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| Diluted                                                          |   | 4,413,069               |    | 200                    |   | 2,180,712                                                   |   | 200 |   |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| **NET INCOME (LOSS) PER COMMON SHARE**                           |   |                    |    |                   |   |                                                        |   |   |   |
| Basic and Diluted                                                |   | $                       | 0.03    |                   | $      | (87.50                                                      | )      | $ | 0.05 |   | $ | (154.00 | ) |
|                                                             |   |                    |    |                   |   |                                                        |   |   |   |
| Diluted                                                          |   | $                       | 0.03    |                   | $      | (87.50                                                      | )      | $ | 0.05 |   | $ | (154.00 | ) |

 

 

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

 

4

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**Dividend Capital Trust Inc. andSubsidiary**

 

CondensedConsolidated Statements of Shareholders’ Equity (Deficit)

Forthe Nine Months Ended September 30, 2003

(Unaudited)

 

 

 
| ** **                                                    | ** ** |               | ** ** | **Additional********Paid-in********Capital** | ** ** | **Distributions  in   Excess of****Earnings** | ** ** | **Total********Shareholders’********Equity (Deficit)** | ** ** |
|---------------------------------------------------------------|------------|--------------------|------------|----------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------------------------|------------|
|                                                          |       |               |       |
|                                                          |       | **Common  Shares** |       |
|                                                          |       | **Shares**         |       | **Amount**                                   |       |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| **Balances, December 31, 2002**                               |       | 200                |       | $                                            | 2          |                                          | $          | 1,998                                                       |       | $ | (12,712 | ) | $ | (10,712 | ) |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| Issuance of common stock, net of offering costs of $7,997,582 |       | 6,397,866          |       | 63,979                                       |       | 55,917,098                                    |       | —                                                      |       | 55,981,077 |   |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| Amortization of stock options                                 |       | —             |       | —                                       |       | 1,854                                         |       | —                                                      |       | 1,854 |   |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| Dividends on common shares                                    |       | —             |       | —                                       |       | —                                        |       | (977,476                                                    | )          | (977,476 | ) |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| Net income                                                    |       | —             |       | —                                       |       | —                                        |       | 105,740                                                     |       | 105,740 |   |
|                                                          |       |               |       |                                         |       |                                          |       |                                                        |       |   |   |
| **Balances, September 30, 2003**                              |       | 6,398,066          |       | $                                            | 63,981     |                                          | $          | 55,920,950                                                  |       | $ | (884,448 | ) | $ | 55,100,483 |   |

 

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

 

5

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**Dividend Capital Trust Inc. andSubsidiary**

 

CondensedConsolidated Statements of Cash Flows

(Unaudited)

 

 
|                                                                                              |   | **For the  Nine Months Ended** |       | **For the  Period from Inception (April 12, 2002) through** |   |
|---------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|-------------------------------------------------------------|--------|
|                                                                                              |   | **September  30, 2003**        |       | **September  30, 2002**                                     |   |
|                                                                                              |   |                           |       |                                                        |   |
| **OPERATING ACTIVITIES:**                                                                         |   |                           |       |                                                        |   |
| Net income (loss)                                                                                 |   | $                              | 105,740    |                                                        | $      | (30,800 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities: |   |                           |       |                                                        |   |
| Depreciation and amortization                                                                     |   | 426,434                        |       | —                                                      |   |
| Increase in other assets                                                                          |   | (88,321                        | )          | —                                                      |   |
| Increase in accounts payable, accrued expenses and other liabilities                              |   | 537,266                        |       | 25,000                                                      |   |
| **Net cash provided by (used in) operating activities**                                           |   | 981,119                        |       | (5,800                                                      | )      |
|                                                                                              |   |                           |       |                                                        |   |
| **INVESTING ACTIVITIES:**                                                                         |   |                           |       |                                                        |   |
| Real estate investments                                                                           |   | (34,876,256                    | )          | —                                                      |   |
| Increase in intangible lease asset                                                                |   | (4,560,182                     | )          | —                                                      |   |
| Increase in intangible lease liability                                                            |   | 133,688                        |       | —                                                      |   |
| Increase in deferred acquisition costs                                                            |   | (902,477                       | )          | —                                                      |   |
| **Net cash used in investing activities**                                                         |   | (40,205,227                    | )          | —                                                      |   |
|                                                                                              |   |                           |       |                                                        |   |
| **FINANCING ACTIVITIES:**                                                                         |   |                           |       |                                                        |   |
| Decrease (increase) in advance for offering costs, related party                                  |   | 52,923                         |       | (187,263                                                    | )      |
| Increase in amounts due from transfer agent                                                       |   | (557,423                       | )          | —                                                      |   |
| Increase in investor deposits                                                                     |   | 100,000                        |       | —                                                      |   |
| Proceeds from sale of common shares                                                               |   | 64,012,962                     |       | 2,000                                                       |   |
| Offering costs for issuance of common stock                                                       |   | (7,698,421                     | )          | —                                                      |   |
| Proceeds from issuance of Partnership Units to related party                                      |   | —                         |       | 200,000                                                     |   |
| Distributions to common shareholders                                                              |   | (281,626                       | )          | —                                                      |   |
| **Net cash provided by financing activities**                                                     |   | 55,628,415                     |       | 14,737                                                      |   |
|                                                                                              |   |                           |       |                                                        |   |
| **NET INCREASE IN CASH AND CASH EQUIVALENTS**                                                     |   | $                              | 16,404,307 |                                                        | $      | 8,937 |   |
|                                                                                              |   |                           |       |                                                        |   |
| **CASH AND CASH EQUIVALENTS, beginning of period**                                                |   | $                              | 11,055     |                                                        | $      | — |   |
|                                                                                              |   |                           |       |                                                        |   |
| **CASH AND CASH EQUIVALENTS, end of period**                                                      |   | $                              | 16,415,362 |                                                        | $      | 8,937 |   |
|                                                                                              |   |                           |       |                                                        |   |
| **Cash paid for interest expense**                                                                |   | 121,912.00                     |       | —                                                      |   |

 

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

 

 

6

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**Dividend Capital Trust Inc. andSubsidiary**

 

Notesto Condensed Consolidated Financial Statements

(Unaudited)

 

 

**Note 1 – Organization and Summary of Significant AccountingPolicies**

 

*Organization*

 

                Dividend Capital Trust Inc. (the “Company” or“Dividend Capital”) was formed as a Maryland corporation in April 2002 in orderto invest in commercial real estate properties consisting primarily ofhigh-quality industrial buildings net leased to corporate tenants.  The Company currently operates in a mannerthat meets all the requirements necessary to qualify as a real estateinvestment trust (“REIT”) and intends to qualify as a REIT for federal taxpurposes commencing with its taxable year ending December 31, 2003.  The Company is structured as an umbrellapartnership REIT (“UPREIT”) under which substantially all of the Company’scurrent and future business is and will be conducted through a controllinginterest in its subsidiary, Dividend Capital Operating Partnership LP (the“Partnership”), a Delaware limited partnership.  The Company commenced its operations in conjunction with theclosing of its first real estate acquisition on June 9, 2003 (see Note 2) andas a result the financials statements of the Company are no longer presented asa development stage enterprise.

 

                Dividend Capital Advisors LLC (the “Advisor”), arelated party, provides investment management and administrative services tothe Company under an Advisory Agreement dated July 11, 2002.  Dividend Capital Securities LLC (the “DealerManager”), a related party, serves as the dealer manager of the Company’spublic offering (see Note 7).

 

*Interim Financial Information*

 

                The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”) and withthe instructions to Form 10-Q and Article 10 of Regulation S-X for interimfinancial information.  Accordingly,these statements do not include all of the information and footnotes requiredby GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensedconsolidated financial statements include all adjustments, consisting only ofnormal recurring items necessary for their fair presentation in conformity withGAAP.  The preparation of financialstatements requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingentassets and liabilities as of the date of the financial statements and thereported amounts of revenue and expenses during the reporting period.  Actual results may differ from thoseestimates.  Interim results are not necessarilyindicative of results for a full year. The information included in this Form 10-Q should be read in conjunctionwith the Company’s audited financial statements as of December 31, 2002 andrelated notes thereto, and the Company’s prospectus, as amended.

 

*Principles of Consolidation*

 

                The accounts of the Company and the Partnership, itscontrolled subsidiary, are consolidated in the accompanying financialstatements.  All significantintercompany accounts and transactions have been eliminated in consolidation.

 

7

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*Use of Estimates*

 

                The preparation of financial statements in conformitywith GAAP requires management to make estimates and assumptions relating to thereported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the consolidated financial statements andthe reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates. Estimates and assumptions arereviewed periodically and the effects of revision are reflected in the periodthey are determined to be necessary.

 

*Real Estate*

 

                Upon the acquisition of operating properties, theCompany allocates the purchase price of the properties to identifiable tangibleand intangible assets associated with the property based upon their estimatedfair values in accordance with Statement of Financial Accounting Standards(“SFAS”) No. 141, “Business Combinations.” These tangible and intangible assets are depreciated or amortized overthe useful life of such assets.    Thedifference between the purchase price and the estimated fair market value ofthe tangible assets is the identified intangible lease asset which is amortizedover the average life of the in-place leases.

 

                In some cases, the acquired operating property mayhave in-place leases where the current rental rate is above or below marketrental rates.  In such cases, SFAS No.141 requires the discounted difference between the current and market rentalrates to be recorded as an asset or liability and amortized over the life ofthe lease to rental revenue.  Related tothis treatment, as of September 30, 2003, the Company had approximately $50,000and $127,000 recorded as an intangible asset and an intangible liability,respectively, net of amortization of approximately $2,400 and $6,300,respectively.

 

                From time to time, the Company receives payments fromthe seller of properties under master lease agreements covering vacant space atthe time of acquisition. The seller is generally obligated to make such paymentuntil the earlier of the commencement of rent from a tenant for the vacantspace or until the termination of the master lease agreement. GAAP requires theCompany to record these payments as a reduction of the purchase price of theproperty upon receipt of the payment, rather than as rental income. As ofSeptember 30, 2003, the Company had one property, Chickasaw DistributionFacility (Building A), which contained a master lease agreement with theseller.  The cumulative amount of masterlease payments under this master lease agreement as of September 30, 2003, wasapproximately $25,000.

 

*Cash and Cash Equivalents*

 

                The Company considers all highly liquid instrumentswith maturities when purchased of three months or less to be cash equivalents.

 

*Restricted Cash*

 

                The Company is currently engaged in a public offeringof its common stock.  As of December 31,2002, the Company had not met certain escrow requirements in connection withthe offering. Until the Company received subscriptions covering at least200,000 shares from at least 100 non-affiliated investors, offering proceedswere required to be held in escrow.  Theescrow conditions were satisfied on February 10, 2003, at which time 226,567shares of common stock were issued to investors.

 

8

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*Costs of Raising Capital*

 

                Costs incurred in connection with the issuance ofequity securities are deducted from shareholders’ equity.

 

*Revenue Recognition*

 

                TheCompany’s properties may have certain leases that provide for tenant occupancyduring periods for which no rent is due or where minimum rent payments increaseduring the term of the lease. The Company records rental revenue for the fullterm of each lease on a straight-line basis. In cases where the minimum rentalpayments increase over the life of the lease, the Company records a receivabledue from tenants (“deferred rents receivable”) for the difference between theamount of revenue recorded and the amount of cash received.  When the Company acquires a property, theterm of existing leases is considered to commence as of the acquisition datefor the purposes of this calculation. For the nine months ended September 30,2003, the statement of operations includes an increase in rental revenue ofapproximately $29,300 related to the straight-lining of revenue.  Included in other assets of the accompanyingcondensed consolidated balance sheet is approximately $29,300 of deferred rentsreceivable associated with the straight-lining of rental revenues.

 

*Income Taxes*

 

                TheCompany currently operates in a manner that meets all the requirementsnecessary to qualify for REIT status and will make an election under InternalRevenue Code Section 856 for the taxable year ending December 31, 2003.  In order for a former C corporation to electto be a REIT, it must distribute 100% of its C corporation earnings and profitsand agree to be subject to federal tax at the corporate level to the extent ofany subsequently recognized built-in gains within a ten year period.  The Company does not anticipate that it willhave any built-in gains at the time of its conversion to REIT status.  As a REIT, the Company generally will not besubject to federal income taxation at the corporate level to the extent itdistributes annually all of its REIT taxable income, as defined in the InternalRevenue Code, to its shareholders and satisfies other requirements.  No provision has been made for federalincome taxes in the accompanying condensed consolidated financial statements.

 

*Stock-BasedCompensation*

 

                TheCompany has two stock-based employee and director compensation plans.  As of September 30, 2003, the Company hadgranted 40,000 options under the Director Stock Option Plan.  The Company accounts for these plans underthe fair value recognition provisions of SFAS No. 123, “Accounting forStock-Based Compensation,” and related interpretations.  As of September 30, 2003, no options hadbeen granted under the Employee Stock Option Plan.

 

*Basic and Diluted Net Income (Loss) Per Common Share*

 

                Basicnet income (loss) per common share is determined by dividing net income (loss)attributable to common shareholders by the weighted average number of commonshares outstanding during the period. Diluted net income per common shareincludes the effects of potentially issuable common stock, but only ifdilutive, including the presumed exchange of limited partnership units (seeNote 5) for common shares.

 

 

9

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*New Accounting Principles*

 

InJanuary 2003, the FASB issued Interpretation No. 46 “Consolidation of VariableInterest Entities.”  The Company isrequired to adopt the Interpretation for financial statements for the fiscalyear or interim period beginning after June 15, 2003.  This Interpretation clarifies the application of AccountingResearch Bulletin No. 51, “Consolidated Financial Statements,” and requires theconsolidation of results of variable interest entities in which the Company hasa majority variable interest. The Company does not expect the adoption of thisInterpretation to have a material impact on the Company’s financial position,results of operations or cash flows.

                In May 2003, the FASB issued SFAS No. 150,“Accounting for Certain Financial Instruments with Characteristics of bothLiabilities and Equity.”  SFAS No. 150requires that an issuer that possesses certain financial instruments toclassify such instruments as a liability (or as an asset in somecircumstances).  SFAS No. 150 iseffective for financial instruments entered into or modified after May 31,2003, and otherwise is effective at the beginning of the first interim periodbeginning after December 15, 2003. Management is currently evaluating SFAS No. 150, however, the Companydoes not expect the adoption of SFAS No. 150 to have a material impact on theCompany’s financial position, results of operations or cash flows based oncurrent interpretations and guidance.

 

**Note 2 – Real Estate**

 

*Acquisitions*

 

                During the nine months ended September 30, 2003, theCompany acquired three industrial buildings for a combined purchase price of$37,780,000, exclusive of related closing costs and acquisition fees paid tothe Advisor, as further described below.

 

**              *NashvilleFacility***

**             **On June 9,2003, the Company closed on an acquisition of a one story, single tenant, newlyconstructed distribution facility located in Nashville, Tennessee (the“Nashville Facility”).  The NashvilleFacility contains 756,000 rentable square feet and is located on approximately50 acres of land.  The purchase pricefor the Nashville Facility was $23,500,000, which was paid with $11,350,000from our senior secured loan (see Note 3) and $12,150,000 from proceeds from ourpublic offering.  The total cost of theNashville facility including closing costs and other expenses (including anacquisition fee of $705,000 paid to our Advisor) was approximately$24,480,000.  The results of operationsfrom this acquired property, from the date of acquisition through September 30,2003, are included in the Company’s result of operations for the three and ninemonths ended September 30, 2003. This facility is currently 100% leased toBridgestone/Firestone North American Tire, LLC, a wholly owned subsidiary ofBridgestone Americas Holding, Inc. the North American holding company and awholly owned subsidiary of the Japanese parent, Bridgestone Corporation.

 

                ***Chickasaw Facilities***

                On July 22, 2003, the Company closed on anacquisition of two distribution facilities located in Memphis, Tennesseetotaling approximately 392,000 square feet (together the “ChickasawFacilities”).  The total cost of the twofacilities including closing costs and other expenses (including an acquisitionfee of $428,400 payable to our Advisor) was approximately $14,850,000.  The total cost was funded from the netproceeds received from the Company’s public offering.  As of September 30, 2003, the two facilities were approximately94.0% leased to various tenants with the remaining vacancy master leased by theseller for a period of twelve months. Master lease payments are accounted foras an adjustment to the purchase price and as of September 30, 2003, theCompany had received approximately $25,000 which reduced the amount invested inreal estate in the accompanying condensed consolidated balance sheet.  

 

10

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The results of operationsfrom this acquired property, from the date of acquisition through September 30,2003, are included in the Company’s results of operations for the three andnine months ended September 30, 2003.

 

**Note 3 – Borrowings**

 

                On June 9, 2003, the Company obtained an $11,350,000senior secured loan (the “Loan”) from Bank of America, N.A., at a variableannual interest rate equal to adjusted LIBOR plus 2.25% or (at the election ofDividend Capital) 1.0% over the Prime rate. The Loan was secured by theNashville facility.  In September 2003,the Company exercised its right to pre-pay the balance of the Loan in full,with accrued interest, pursuant to the loan agreement, with proceeds from theCompany’s public offering.  Thispre-payment resulted in a write-off of deferred loan costs to interest expensein the amount of approximately $41,000 for the periods ended September 30,2003.

 

**Note 4 – Public Offering**

 

                On April 15, 2002, the Company filed a registrationstatement (the “Registration Statement”) with the Securities and ExchangeCommission (“SEC”) covering a public offering of its common stock and theRegistration Statement was declared effective by the SEC on July 17, 2002.  The common stock is being offered at a priceof $10 per share on a 200,000 share minimum, 25,000,000 share maximum,best-efforts basis. The Registration Statement also covers up to 4,000,000shares available pursuant to the Company’s distribution reinvestment plan andup to 1,000,000 shares issuable upon the exercise of warrants that may be soldto broker-dealers participating in the offering.  Until the Company received subscriptions covering at least200,000 shares from at least 100 non-affiliated investors, offering proceedswere required to be held in escrow.  Theescrow conditions were satisfied on February 10, 2003, at which time 226,567shares of common stock were issued to investors.  As of September 30, 2003, 6,397,866 shares of common stock hadbeen sold under this Registration Statement for gross proceeds of approximately$63,978,660.

 

**Note 5****– Minority Interest**

 

**               **Minorityinterest consists of the following as of:

 

|                              |   | **September  30, 2003** |   | **December  31, 2002** |   |
|-----------------------------------|--------|-------------------------|--------|------------------------|--------|
|                              |   |                    |   |                   |   |
| Limited partnership units         |   | $                       | — |                   | $      | — |   |
| Limited partnership Special Units |   | 1,000                   |   | 1,000                  |   |
| Total                             |   | $                       | 1,000  |                   | $      | 1,000 |   |

 

*Limited Partnership Units*

 

                Upon inception (April 12, 2002),the Partnership issued to the Advisor 20,000 limited partnership unitsin exchange for $200,000 representing an initial 99% limited partnershipinterest.  As of September 30, 2003, the Advisor held a limited partnership interest in the Partnership of less than1.0%.

 

                The allocation of net loss tothe limited partnership unit holder for the period ended December 31, 2002 hadreduced the minority interest balance to zero. The excess loss attributable to the minority interest for the periodsended December 31, 2002 and September 30, 2003 was $10,758 and $998, 

 

11

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respectively. The total accumulated excess loss of $11,756 will be applied to futureincome attributable to the minority interest.

 

                Limited partnership units areredeemable at the option of the unit holder. The Company, at its solediscretion, has the option of redeeming the limited partnership units for cashor common shares.

 

*Limited Partnership Special Units*

 

                During the quarter endedSeptember 30, 2002, the Partnership issued 10,000 special units (the “SpecialUnits”) to an affiliate of the Advisor for consideration of $1,000.  The holders of Special Units do notparticipate in the profits and losses of the Partnership.  Amounts distributable to theholder of the Special Units will depend on operations and the amount of net sales proceeds received from propertydispositions or upon other events.  Ingeneral, after holders of regular partnership interests have receivedcumulative distributions equal to their capital contributions plus a 7% cumulativenon-compounded annual return on their gross contributions, the holder of theSpecial Units and the holders of regular partnership interests will receive 15%and 85%, respectively, of the net sales proceeds received by the Partnershipupon the disposition of the Partnership’s assets.

 

                The Special Units will be redeemed by the Partnershipfor cash upon the occurrence of specified events that result in a terminationor non-renewal of the Advisory Agreement. If the Advisory Agreement is terminated by the Company for cause, the redemption price shall be $1.  If the Company’s shares are listed forpublic trading or if the Advisory Agreement is terminated upon the occurrenceof certain other events, the redemption price of the Special Units will be theamount which would have been distributed to the holder of the Special Units ifthe Partnership had sold all of its assets for their then fair market values,paid all of its liabilities and distributed any remaining amounts to partnersin liquidation in accordance with the partnership agreement of thePartnership.  The fair market value ofthe assets will be determined by the public market prices in the event of alisting of the Company’s shares or by the net sales proceeds received in the eventof the disposition of the Company’s properties.  In the case of certain other events, fair market value will bedetermined by the then fair market value of the Partnership’s assets, asdetermined by an appraisal, less all of its liabilities.

 

**Note 6 – Related Party Transactions**

 

*Advisory Transactions*

 

                The Advisor is considered a related party as certainexecutives and board members of the Company have material, indirect ownershipinterests in the Advisor.  In addition,all executives of the Company are also executives of the Advisor.  The Company has entered into the AdvisoryAgreement with the Advisor pursuant to which the Company will pay certainacquisition and advisory fees to the Advisor. The amount of such fees shall equal up to 3.0% of the aggregate purchaseprice of all properties acquired by the Company.  As of September 30, 2003, the Company had paid the Advisorapproximately $1.1 million in connection with the acquisition services providedby the Advisor.

 

                The Company will be responsible for the payment ofall organization and offering expenses not to exceed 3.0% of gross offeringproceeds.  The Advisor is obligated tofund all organization and offering expenses in excess of 3.0% of gross offeringproceeds.  As of September 30, 2003, theAdvisor had funded approximately $9.7 million of offering related costs and theCompany has reimbursed the Advisor approximately $1.8 million of these costs.

 

 

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*Dealer Manager Transactions*

 

                The Dealer Manager is considered a related party ascertain executives and board members of the Company have material, indirectownership interests in the Dealer Manager. The Company has entered into a dealer manager agreement with the DealerManager pursuant to which the Company will pay up to 2.5% of gross offeringproceeds to the Dealer Manager as compensation for managing the offering.  The Dealer Manager may re-allow a portion ofsuch fees to broker-dealers who participate in the offering.  The Company will also pay a sales commissionof up to 7% on shares sold in the offering. The Dealer Manager has indicated that all of the sales commissions areexpected to be paid to participating broker-dealers who are responsible foreffecting sales.  As of September 30,2003, the Company had paid approximately $5.9 million for commissions andmanagement of the Company’s initial offering, of which approximately $4.3million has been paid to selling broker-dealers who are not affiliated with theCompany.

 

**Note 7 – Subsequent Events**

 

*Acquisitions*

 

                ***Rancho Facility***

                On October 20, 2003, the Company acquired the RanchoTechnology Park facility (the “Rancho Facility”), which is a one-story, newlyconstructed distribution facility with 201,493 square feet of leasable space.The cost of the Rancho Facility (including an acquisition fee of $297,795payable to our Advisor) was approximately $10,350,000, which was paid with theproceeds from the Company’s public offering. These costs include certain escrow amounts related to the newly negotiatedlease with Ozburn-Hessey Logistics, LLC (OHL) totaling approximately $585,000which represents amounts to be paid for tenant finish and leasing commissions.

 

                CHEP USA, GP entered into a net lease forapproximately 50% of the facility’s gross leasable square feet.  CHEP USA, GP, a wholly-owned subsidiary ofBrambles Group, operates globally and distributes, collects, reworks andreissues more than 200 million pallets and containers annually.

 

                Theremaining space is currently leased to OHL. As a full service logisticscompany, OHL provides distribution services, transportation management andequipment sourcing to large national and regional companies. Per the leaseagreement, rent will commence either; 1) November 15, 2003, if the temporaryoccupancy permit has been obtained, or 2) the later of January 15, 2004 or uponobtaining the occupancy permit. Per the master lease agreement with the seller,the seller is obligated to pay rent on this space at the same monthly rate thatOHL will assume until the space is occupied and rent has commenced.

 

***Mallard Lake***

                OnOctober 29, 2003, Dividend Capital acquired a 222,122 square foot distributionfacility (“Mallard Lake”) in the Mallard Lake Distributions Center, a businesspark in Hanover Park, Illinois (an industrial submarket of Chicago). TheCompany purchased the building from an unrelated third party that developedMallard Lake during 1999. The cost of Mallard Lake (including an acquisitionfee of $329,259 payable to our Advisor) was approximately $11,400,000, whichwas paid with proceeds from the Company’s public offering.  The facility is fully leased to IronMountain Inc. (NYSE: IRM), an international information storage, management andprotection services company.

 

***West by Northwest***

                OnOctober 30, 2003, the Company acquired an 189,467 square foot industrialdistribution building (“West by Northwest”) in the West by Northwest BusinessCenter. The West by Northwest 

 

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Business Center is located in Houston’snorthwest submarket and was developed by an unrelated third party during1997.  The cost of West by Northwest(including an acquisition fee of $248,250 payable to our Advisor) wasapproximately $8,610,000, which was paid for with proceeds from the Company’spublic offering and proceeds from the Credit Facility (as discussed below). Thebuilding is fully leased to Inventec Electronics Corp, USA., the Americansubsidiary of Inventec Corp., a Taiwanese designer and manufacturer oftechnology products, including computers, handhelds and servers.

 

*SeniorSecured Revolving Credit Facility*

 

**               **On October 30,2003 the Company executed an agreement with Bank One, N.A. for a senior securedrevolving credit facility (the “Credit Facility”) for $50 million which may beincreased up to $200 million in total. Simultaneously, the Company borrowed $3.0 million under this CreditFacility to fund the closing of the West by Northwest Business Center. TheCredit Facility bears interest at LIBOR plus 1.125% to 1.500%.  The Credit Facility matures in April 2004,however, upon successful syndication of this facility, it is expected that thefacility will be amended and restated, under the terms consistent with thecurrent facility, to include a maturity date three years after the closing ofthe syndication.

 

*Public Offering*

 

                Asof November 6, 2003, the Company had sold approximately 8.3 million shares ofcommon stock for gross proceeds of approximately $83.1 million.  In conjunction with the sale of such shares,the Company had incurred fees payable to the Dealer Manager in the amount ofapproximately $7.6 million, of which approximately $7.2 million has been paid.Of the amount paid to the Dealer Manager, approximately $5.3 million wasre-allowed by the Dealer Manager to selling broker-dealers who are notaffiliated with the Company.   Inaddition, the Company incurred amounts payable to the Advisor for reimbursementof offering costs of approximately $2.5 million, of which approximately $2.4million has been paid.

 

*Special Meeting of Shareholders*

 

                OnOctober 16, 2003, the Board of Directors (the “Board”) of the Company held aspecial meeting to vote on certain proposed amendments to the Company’sarticles of incorporation. The Board approved the amendments to the Company’sarticles of incorporation and recommended that the Company’s shareholdersapprove such amendments. A special meeting of shareholders of the Company willbe held at the Company’s corporate offices on November 21, 2003.

 

                Avote will be held at this special meeting to amend theCompany’s articles of incorporation regarding a reduction of the current feesand reimbursements paid to the Dealer Manager and the Advisor. Additionally, avote will be held to change the Company’s articles of incorporation regardingthe Company’s leverage restriction and to give authority to an investmentcommittee (consisting of a majority of independent directors) to approveacquisitions of up to $25 million.

 

                TheBoard has fixed October 16, 2003 as the record date for the determination ofshareholders entitled to receive notice of and to vote at the special meetingor any postponement or adjournment of the meeting.

 

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**ITEM2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

##  

        This report on Form 10-Q contains certain forward-lookingstatements.  When used in this report,the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,”“project,” “intend,” “believe,” and similar expressions are intended toidentify forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934.  There are various factors thatcould cause actual results to differ materially from those which are expressedin, or implied by, such forward-looking statements.  Such factors include changes in general economic conditions,changes in real estate conditions, changes in interest rates, the amount ofequity capital provided by the Company’s public offering, the availability ofdebt financing on terms that are favorable to the Company, the ability of theCompany to acquire and lease properties on favorable terms, and the ability oftenants to make payments under their respective leases.  Readers of this filing are cautioned toconsider these uncertainties in connection with all forward-looking statements.

 

**Overview**

 

        Dividend Capital was formed in April 2002 as a Marylandcorporation in order to invest in industrial buildings net leased to corporatetenants.  The Company operates in a mannerto qualify as a REIT for federal tax purposes commencing with its taxable yearending December 31, 2003.  The Companyis structured as an UPREIT under which substantially all of the Company’scurrent and future business is and will be conducted through a controllinginterest in its subsidiary, Dividend Capital Operating Partnership LP.

 

On April 15, 2002, theCompany filed its Registration Statement with the SEC covering a publicoffering of its common stock and the Registration Statement was declared effectiveby the SEC on July 17, 2002.  The commonstock is being offered at a price of $10 per share on a 200,000 share minimum,25,000,000 share maximum, best-efforts basis. The Registration Statement alsocovers up to 4,000,000 shares available pursuant to the Company’s distributionreinvestment plan and up to 1,000,000 shares issuable upon the exercise ofwarrants that may be sold to broker-dealers participating in the offering.  Until the Company received subscriptionscovering at least 200,000 shares from at least 100 non-affiliated investors,offering proceeds were required to be held in escrow.  The escrow conditions were satisfied on February 10, 2003, atwhich time 226,567 shares of common stock were issued to investors.

 

**Results of Operations**

 

*Summary*

 

        During the nine months ended September 30, 2003, the Companyacquired its first real estate assets for a combined purchase price of$37,780,000, which was funded from the proceeds from our public offering.  As a result of these acquisitions, and due tothe fact the period from inception through September 30, 2002 did not representa full nine month’s of activity, the results of our operations for the threeand nine months ended September 30, 2003 have significant differences comparedto our results of operations for the period from inception (April 12, 2002)through September 30, 2002.

 

*Rental Revenue*

 

        The increase in rental revenue is attributable to the revenuegenerated by the newly acquired distribution facilities, the Nashville Facilityand the Chickasaw Facilities. The Nashville Facility and the ChickasawFacilities produced over $625,000 and $332,000 of revenue, respectively, forthe nine months ended September 30, 2003.

 

 

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*Other Income*

 

        Other income primarily includes interest income.  Other income increased primarily due toapproximately $46,000 of interest earned from cash balances held in interestbearing bank accounts during the period ended September 30, 2003.

 

*Depreciation and Amortization on Real EstateInvestments*

 

        The increase in depreciation and amortization expenseassociated with real estate investments is a result of several months ofdepreciation and amortization on the newly acquired properties.  The depreciation and amortization expenseincludes the amortization of the intangible lease assets resulting from SFASNo. 141, “Business Combinations,” which requires the Company to allocate aportion of the purchase price to an intangible asset that is subsequentlyamortized over the average life of the in-place leases.

 

*Interest Expense*

 

        The increase in interest expense is attributable to thesenior secured loan obtained to finance the closing of the NashvilleFacility.  The loan was paid in full inSeptember 2003 resulting in a write-off of deferred loan costs to interestexpense in the amount of approximately $41,000.

 

*General and Administrative Expenses*

 

        The increase in general and administrative expenses duringthe period ended September 30, 2003 compared to the period from inception(April 12, 2002) through September 30, 2002 is due to increased operatingactivities and a full nine months of operations.

 

**Liquidity and Capital Resources**

 

*Overview*

 

**       **The Company’smanagement is committed to maintaining a strong balance sheet and preservingthe Company’s financial flexibility, which management believes enhances itsability to capitalize on attractive investment opportunities as they becomeavailable.  The Company’s managementbelieves its liquidity and ability to generate cash from its operatingactivities and financing activities are adequate to meet all of the Company’scash flow needs during 2003 and for the foreseeable future.

 

*Operating Activities*

 

        Cash flow provided by operating activities increasedapproximately $980,000 for the nine month period ended September 30, 2003compared to the period from inception (April 12, 2002) through September 30,2002 due to the cash flow provided by the newly acquired properties.  In addition, the Company realized highergeneral and administrative costs related to the operations of the newlyacquired properties which were partially offset by an increase in interestincome resulting from higher cash balances. See “Results of Operations” for amore complete discussion of the factors impacting our operating performance.

 

 

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*Investing and Financing Activities*

 

        The funds used in investing activities increasedapproximately $40.2 million primarily due to the acquisitions of the NashvilleFacility, the Chickasaw Facilities and the associated acquisition costs.  In addition, the deferred acquisition costswere greater during the period ended September 30, 2003 compared to the periodended September 30, 2002 due to the Company having additional deposits forpotential property acquisitions.

 

        Funds provided by financing activities increased primarilydue to the proceeds received from the Company’s public offering, which werepartially offset by the increase in offering costs. As of September 30, 2003,the Company had sold 6,397,866 shares of common stock for gross proceeds ofapproximately $64.0 million and paid related offering costs of approximately$8.0 million.

 

        Our articles of incorporation limits our maximum leverage to50% of the value of our properties.  Asof September 30, 2003, our properties were unencumbered by debt.  If we were to borrow the maximum amountpermitted by our articles of incorporation, we would have approximately $19.7million in additional cash from financing, using this standard.

 

        The Company is currently seeking to raise additional capitalthrough the sale of limited partnership interests (“DCX Units”) in DividendCapital Operating Partnership LP, which is in conjunction with tax deferredexchanges under either or both of Sections 1031 and 721 of the Internal RevenueCode.  The issuance price per DCX Unitwill be determined at the time of such issuance by reference to the fair marketvalue per common share of Dividend Capital Trust which is currently $10.00 pershare. Unit holders will be entitled to receive distributions equal todistributions declared by the Company’s board of directors for commonshareholders.  Although each DCX Unitwill be economically equivalent to one common share of Dividend Capital Trust,DCX Unit holders are not entitled to vote on Dividend Capital Trustmatters.  Upon holding DCX Units for aperiod of at least one year, and subject to certain restrictions, an investormay require Dividend Capital Operating Partnership to redeem some or all of theinvestors DCX Units for Dividend Capital Trust’s common stock or, at the optionof Dividend Capital Operating Partnership, for cash.  The Company’s management believes this additional capital raisingeffort will provide the Company with cost efficient capital which will be usedto acquire high quality industrial properties. Similarly to the Company’spublic offering, certain fees, commissions and reimbursements may be paid torelated parties of up to 10.0% of the gross proceeds generated from theissuance of DCX Units.

* *

*Debt Service Requirements*

 

        The Company financed $11,350,000 of the purchase price forthe acquisition of the Nashville, Tennessee distribution facility with a seniorsecured loan.  In accordance with theloan agreement, in September 2003, the Company exercised its right to prepaythe balance of this loan in full, including accrued interest.

 

        On October 30, 2003, the Company executed an agreement withBank One, N.A. for a $50 million credit facility which may be increased up to$200 million in total.  Simultaneously,the Company 

 

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borrowed $3.0 million underthis credit facility to fund the closing of the West by Northwest BusinessCenter. The credit facility bears interest at LIBOR plus 1.125% to 1.500%.  The credit facility matures in April 2004however, upon successful syndication of this facility, it is expected that thefacility will be amended and restated, under the terms consistent with thecurrent facility, to include a maturity date three years after the closing ofthe syndication.  The terms of thecredit facility includes certain financial covenants relating to minimum networth, minimum liquidity, fixed charge average and total debt to total assets ratiosthat are tested on an annual and quarterly basis.

 

**Critical Accounting Policies**

 

*General*

 

        The following discussion pertains to critical accountingpolicies management believes are most “critical” to the portrayal of theCompany’s financial condition and results of operations which requiremanagement’s most difficult, subjective or complex judgments. These judgmentsoften result from the need to make estimates about the effect of matters thatare inherently uncertain.  Thisdiscussion addresses judgments known to management pertaining to trends, eventsor uncertainties known which were taken into consideration upon the applicationof those policies and the likelihood that materially different amounts would bereported upon taking into consideration different conditions and assumptions.The following discussion of critical accounting policies was written inaddition to the discussion of critical accounting policies discussed in ourForm 10-K filed for the year ended December 31, 2002 and as such should be readin conjunction with such filing.

 

*Real Estate Acquisitions*

 

        Upon the acquisition of operating properties, management mustmake significant assumptions in order to allocate the purchase price of theproperties to identifiable tangible and intangible assets associated with theproperty in accordance with SFAS No. 141, “Business Combinations.”  Management uses the best informationavailable such as appraisals, current market rental rates, rental growth,discount rates and other factors to determine the most appropriateallocation.  However, if inappropriateinformation is used in regards to these estimates, misclassification of assetsor liabilities and incorrect calculation of depreciation amounts would occur,which would misstate our net income.

 

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**ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISK**

 

**         **The Company has obtained floating rate debt financing to fund propertyacquisitions, and therefore it is exposed to interest rate changes. The Company’s interest rate riskmanagement objectives are to limit the impact of interest rate changes onearnings and cash flows and to limit its potential overall borrowingcosts.  To achieve its objectives, theCompany may borrow primarily at fixed rates or variable rates with the lowestmargins available and in some cases, with the ability to convert variable ratesto fixed rates. The Company may enter into derivative financial instrumentssuch as interest rate swaps, caps and treasury locks in order to mitigate anyinterest rate risk on a related financial instrument.  The Company does not enter into derivative or interest ratetransactions for speculative purposes. As of September 30, 2003, the Company had not entered into anyderivative financial instruments.

 

**ITEM 4.   CONTROLS AND PROCEDURES**

 

*Evaluation of DisclosureControls and Procedures*

 

        Regulations under the SecuritiesExchange Act of 1934 require public companies to maintain “disclosure controlsand procedures,” which are defined to mean a company’s controls and otherprocedures that are designed to ensure that information required to bedisclosed in the reports that it files or submits under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported, within the timeperiods specified in the Commission’s rules and forms.  The Company’s chief executive officer andchief financial officer, based on their evaluation of the Company’s disclosurecontrols and procedures before the filing date of this report, concluded thatCompany’s disclosure controls and procedures were effective for this purpose.

 

*Changes in InternalControls*

 

        There were no significant changes in theCompany’s internal controls or, to the Company’s knowledge, in other factorsthat could significantly affect these controls subsequent to the date of theirevaluation.

 

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**PART II****. OTHER INFORMATION**

**ITEM1.  LEGALPROCEEDINGS**

        None.

##  

**ITEM2.  CHANGESIN SECURITIES AND USE OF PROCEEDS**

        None.

##  

**ITEM3.  DEFAULTS UPONSENIOR SECURITIES**

        None.

##  

**ITEM4.  SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

        On October 16, 2003, the Board of Directors (the “Board”) ofthe Company held a special meeting to vote on certain proposed amendments tothe Company’s articles of incorporation. The Board approved the amendments tothe Company’s articles of incorporation and recommended that the Company’sshareholders approve such amendments. A special meeting of shareholders of theCompany will be held at the Company’s corporate offices at 518 17thStreet, Suite 1700 Denver, Colorado on November 21, 2003 at 10:00 a.m. localtime, for the following purposes:

(1)                                  To approve anamendment to the Company’s articles of incorporation to:

                                                (a) reduce themaximum acquisition fee that may be paid to the Advisor from 3% to 1% and toadd a maximum asset management fee of 0.75% per annum of the undepreciated costof the Company’s properties;

                                                (b) reduce theamount that the Company may reimburse the Advisor for organizational andoffering expenses from 3% to 2% of the gross proceeds of the Company’s publicoffering;

                                                (c) reduce theamount that the Company may pay the dealer manager from 2.5% to 2% of the grossproceeds of the Company’s public offering, limit the amount of this fee thatmay be re-allowed by the dealer manager to 1.0% and reduce the maximum amountof up-front selling commissions that the Company may pay the dealer managerfrom 7% to 6% of the gross proceeds of the Company’s public offering (exceptthat the selling commission may remain at up to 7% where the purchaser electsto pay a deferred commission); and

                                                (d) reduce themaximum property management fee paid to an affiliate of the Advisor from thelesser of 4.5% of the Company’s gross revenues or 0.6% of the net asset valueof the Company’s properties  to thelesser of 3% of the Company’s gross revenues or 0.6% of the net asset value ofthe Company’s properties.

(2)                                  To approve anamendment to the Company’s articles of incorporation that would calculate theCompany’s 50% leverage restriction based on the Company’s gross assets insteadof based on the value of the Company’s properties, and to eliminate the 75%leverage restriction on any individual property. “Gross Assets” shall mean thetotal assets of the Company, at cost, before deducting depreciation or othernon-cash reserves, calculated in accordance with Generally Accepted AccountingPrinciples (“GAAP”); less those assets required to by GAAP to be included inthe total assets of the Company which the Company does not legally own.

 

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(3)                                  To approve anamendment to the Company’s articles of incorporation that would permit theinvestment committee of the Board, consisting of a majority of independentdirectors, to approve any single property acquisition transaction of up to $25million in total purchase price.

(4)                                  To transactsuch other business as may properly come before the meeting, or any adjournmentthereof.

        The Board has fixed October 16, 2003 asthe record date for the determination of shareholders entitled to receivenotice of and to vote at the special meeting or any postponement or adjournmentof the meeting.

 

**ITEM5.  OTHERINFORMATION**

        None.

##  

**ITEM6.  EXHIBITSAND REPORTS ON FORM 8-K**

**a.     Exhibits**

31.1                           Certificate ofChief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002.

31.2                           Certificate ofChief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002.

32                                    Certificate ofChief Executive Officer and Chief Financial Officer pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002.

**b.     Reportson Form 8-K**

**       **The followingreports that were filed relate to the period covered by this report:

        1. Report on Form 8-K filed August 5,2003.

Item2: Acquisitions or Dispositions of Assets

Item7:  Financial Statements and Exhibits

                2. Report on Form 8-K/A filedOctober 3, 2003

Item2: Acquisitions or Dispositions of Assets

Item7:  Financial Statements and Exhibits

 

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**SIGNATURES**

 

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

 

 
|                    |   | DIVIDEND CAPITAL TRUST  INC. |
|-------------------------|--------|------------------------------|
|                    |   |                         |
|                    |   |                         |
|                    |   |                         |
|                    |   |                         |
| Date: November 12, 2003 |   | */s/*Evan H.  Zucker         |
|                    |   | Evan H. Zucker               |
|                    |   | *Chief Executive Officer*    |
|                    |   |                         |
| Date: November 12, 2003 |   | */s/*James R.  Mulvihill     |
|                    |   | James R. Mulvihill           |
|                    |   | *Chief Financial Officer*    |
|                    |   |                         |

 

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