1327978--3/23/2007--Dividend_Capital_Total_Realty_Trust

related topics

{investment, property, distribution}

{loan, real, estate}

{tax, income, asset}

{debt, indebtedness, cash}

{provision, law, control}

{operation, international, foreign}

{loss, insurance, financial}

{cost, regulation, environmental}

{stock, price, share}

{personnel, key, retain}

{cost, contract, operation}

{acquisition, growth, future}

{financial, litigation, operation}

RISKS RELATED TO OUR BUSINESS AND OUR CORPORATE STRUCTURE If we are delayed or unable to find suitable investments, we may not be able to achieve our investment objectives and make distributions to our stockholders. Our board of directors determines our major policies and operations which increases the uncertainties stockholders face as a stockholder. The availability and timing of cash distributions to our stockholders is uncertain. We may have difficulty funding our distributions with funds provided by our operations. We are uncertain of our sources for funding our future capital needs; if we cannot obtain debt or equity financing on acceptable terms, our ability to acquire new real properties and real estate securities and to expand our operations will be adversely affected. Maryland law and our organizational documents limit our stockholders right to bring claims against our officers and directors. The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may have benefited our stockholders. We may issue preferred stock or other classes of common stock, which issuance could adversely affect the holders of our common stock issued pursuant to our public offering. We may acquire co-ownership interests in real property that are subject to certain co-ownership agreements which may have an adverse effect on our results of operations, relative to if the co-ownership agreements did not exist. Our UPREIT structure may result in potential conflicts of interest with limited partners in the Operating Partnership whose interests may not be aligned with those of our stockholders. The Operating Partnership s private placements of tenancy-in-common interests in real properties could subject us to liabilities from litigation or otherwise. RISKS RELATED TO THE ADVISOR AND AFFILIATES We depend on the Advisor and its key personnel and if any such key personnel were to cease employment with the Advisor, our business could suffer. Our Advisor s product specialists may recommend that we enter into transactions with entities that have a relationship or affiliation with them, and our stockholders will not be able to assess the Advisor s product specialists qualifications when deciding whether to make an investment in shares of our common stock. We may compete with other Dividend Capital affiliated entities and DCT Industrial Trust for opportunities to acquire or sell investments, which may have an adverse impact on our operations. The time and resources that Dividend Capital affiliated entities devote to us may be diverted and we may face additional competition due to the fact that Dividend Capital affiliated entities are not prohibited from raising money for another entity that makes the same types of investments that we target. The Advisor and its affiliates, including our officers and some of our directors, will face conflicts of interest caused by compensation arrangements with us and other Dividend Capital affiliated entities, which could result in actions that are not in the best interests of our stockholders. The Advisor may have conflicting fiduciary obligations if we acquire properties with its affiliates or other related entities; as a result, in any such transaction we may not have the benefit of arm s length negotiations of the type normally conducted between unrelated parties. The fees we pay to affiliates in connection with our public offering and in connection with the acquisition and management of our investments were not determined on an arm s length basis and therefore we do not have the benefit of arm s length negotiations of the type normally conducted between unrelated parties. We may purchase real estate assets from third parties who have existing or previous business relationships with affiliates or other related entities of the Advisor; as a result, in any such transaction, we may not have the benefit of arm s length negotiations of the type normally conducted between unrelated parties. RISKS RELATED TO INVESTMENTS IN REAL PROPERTY Changes in global, national, regional or local economic, demographic, or real estate market conditions may adversely affect our results of operations and returns to our stockholders. Changes in supply of or demand for similar real properties in a particular area may increase the price of real property assets we seek to purchase. Our operating expenses may increase in the future and to the extent such increases cannot be passed on to tenants, our cash flow and our operating results would decrease. A real property that incurs a vacancy could be difficult to sell or re-lease. We are dependent on tenants for revenue and our inability to lease our real properties or to collect rent from our tenants may adversely affect our results of operations and returns to our stockholders. We may not have funding for future tenant improvements which may adversely affect the value of our assets, our results of operations and returns to our stockholders. Our real properties will be subject to property taxes that may increase in the future, which could adversely affect our cash flow. Uninsured losses or premiums for insurance coverage relating to real property may adversely affect our stockholders returns. We compete with numerous other parties or entities for real property investments and tenants and may not compete successfully. Delays in the acquisition, development and construction of real properties may have adverse effects on our results of operations and returns to our stockholders. Actions of joint venture partners could negatively impact our performance. Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high. The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders. Real properties are illiquid investments and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so. Real property investments made outside of the United States will be subject to currency rate exposure and risks associated with the uncertainty of foreign laws and markets. RISKS RELATED TO INVESTMENTS IN REAL ESTATE SECURITIES Our investments in real estate related common equity securities will be subject to specific risks relating to the particular issuer of the securities and may be subject to the general risks of investing in subordinated real estate securities. Our investments in real estate preferred equity securities involve a greater risk of loss than traditional debt financing. The mortgage loans in which we may invest and the mortgage loans underlying the mortgage backed securities in which we may invest will be subject to delinquency, foreclosure and loss, which could result in losses to us. The CMBS in which we may invest are subject to several types of risks. The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by income-producing real properties. We may make investments in non-U.S. dollar denominated securities, which will be subject to currency rate exposure and risks associated with the uncertainty of foreign laws and markets. We expect a portion of our real estate securities investments to be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions. Interest rate and related risks may cause the value of our real estate securities investments to be reduced. RISKS ASSOCIATED WITH DEBT FINANCING We will incur mortgage indebtedness and other borrowings, which may increase our business risks, could hinder our ability to make distributions and could decrease the value of our stockholders investment. Higher mortgage rates may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to our stockholders. Increases in interest rates could increase the amount of our debt payments and therefore negatively impact our operating results. Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders. If we enter into financing arrangements involving balloon payment obligations, it may adversely affect our ability to refinance or sell properties on favorable terms, and to make distributions to our stockholders. Our derivative financial instruments that we may use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on our stockholders investment. Failure to qualify as a REIT could adversely affect our operations and our ability to make distributions. To qualify as a REIT, we must meet annual distribution requirements, which may result in us distributing amounts that may otherwise be used for our operations. Recharacterization of sale-leaseback transactions may cause us to lose our REIT status. Our stockholders may have current tax liability on distributions if our stockholders elect to reinvest in shares of our common stock. Distributions payable by REITs do not qualify for the reduced tax rates that apply to other corporate distributions. In certain circumstances, we may be subject to federal and state income taxes as a REIT, which would reduce our cash available for distribution to our stockholders. Distributions to tax-exempt stockholders may be classified as unrelated business taxable income. Our investments in other REITs and real estate partnerships subject us to the tax risks associated with the tax status of such entities. Complying with the REIT requirements may cause us to forego otherwise attractive opportunities. Complying with the REIT requirements may force us to liquidate otherwise attractive investments. Liquidation of assets may jeopardize our REIT status. Legislative or regulatory action could adversely affect stockholders. Recharacterization of transactions under the Operating Partnership s intended private placements could result in a 100% tax on income from prohibited transactions, which would diminish our cash distributions to our stockholders. Foreign stockholders may be subject to FIRPTA on the sale of common shares if we are unable to qualify as a domestically controlled REIT. Maintenance of our Investment Company Act exemption imposes limits on our operations. If our assets are deemed to be ERISA plan assets, the Advisor and we may be exposed to liabilities under Title I of ERISA and the Internal Revenue Code. There are special considerations that apply to pension or profit sharing trusts or IRAs investing in our common stock.

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1327978--3/23/2007--Dividend_Capital_Total_Realty_Trust_Inc.