1327978--3/23/2010--Dividend_Capital_Total_Realty_Trust

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{investment, property, distribution}

{loan, real, estate}

{tax, income, asset}

{debt, indebtedness, cash}

{stock, price, share}

{provision, law, control}

{operation, international, foreign}

{personnel, key, retain}

{condition, economic, financial}

{loss, insurance, financial}

{cost, regulation, environmental}

{financial, litigation, operation}

{cost, contract, operation}

{capital, credit, financial}

RISKS RELATED TO ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS The adverse and severe changes in global economic and capital market conditions, exacerbated by generally deteriorating real estate industry fundamentals, may significantly affect our results of operations and returns to our stockholders. Recent market conditions and the risk of continued market deterioration have caused and may continue to cause the value of our CMBS and CRE-CDO investments and debt related investments to be reduced. Our investments in real estate preferred equity securities have been significantly impacted by recent adverse economic and real estate industry conditions and generally involve a greater risk of loss than traditional debt financing of the issuer. Continued uncertainty and volatility in the credit markets could affect our ability to obtain debt financing on reasonable terms, which could reduce the number of properties we may be able to acquire and the amount of cash distributions we can make to our stockholders. The failure of any banking institution in which we deposit our funds could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our stockholders. ADDITIONAL RISKS RELATED TO INVESTMENTS IN REAL PROPERTY 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. 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. Delays in the acquisition, development and construction of real properties may have adverse effects on portfolio diversification, results of operations and returns to our stockholders. A real property that incurs a vacancy could be difficult to sell or re-lease. General economic conditions and other events or occurrences that affect areas in which our properties are geographically concentrated may have a significant adverse impact on our financial results. 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. Actions of our joint venture partners could negatively impact our performance. Our operating expenses may increase in the future and to the extent such increases cannot be passed on to our tenants, our cash flow and our operating results would decrease. We compete with numerous other parties or entities for real property investments and tenants, and we may not compete successfully. Our real properties are 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 returns. 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. 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. 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. ADDITIONAL RISKS RELATED TO INVESTMENTS IN DEBT RELATED INVESTMENTS AND REAL ESTATE SECURITIES The mortgage loans in which we invest and the mortgage loans underlying the mortgage-backed securities in which we invest will be subject to delinquency, foreclosure and loss, which could result in losses to us. The mezzanine loans and B-notes in which we invest involve greater risks of loss than senior loans secured by income-producing real properties. The CMBS and CRE-CDOs in which we invest are subject to several types of general risks. Interest rate and related risks may cause the value of our real estate securities investments to be reduced. A portion of our debt related investments and real estate securities may be considered illiquid, and we may not be able to adjust our portfolio in response to changes in economic and other conditions. Investments in real estate common equity securities are 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. 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. RISKS ASSOCIATED WITH DEBT FINANCING We incur mortgage indebtedness and other borrowings, which may increase our business risks, and could hinder our ability to make distributions to our stockholders. Increases in interest rates could increase the amount of our debt payments and therefore negatively impact our operating results. Our derivative instruments used 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 investments. Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders. When 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. RISKS RELATED TO THE ADVISOR AND AFFILIATES We depend on the Advisor and its key personnel; if any of 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. Our Advisor s management personnel and product specialists face conflicts of interest relating to time management and there can be no assurance that the Advisor s management personnel and product specialists will devote adequate time to our business activities or that the Advisor will be able to hire adequate additional employees. The Advisor and its affiliates, including our officers and some of our directors, 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 our stockholders best interests. 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 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 and private offerings 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 compete with other Dividend Capital affiliated entities, including IIT, IPT and FundCore LLC, for opportunities to acquire or sell investments, which may have an adverse impact on our operations. We have and may in the future 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 OUR GENERAL BUSINESS OPERATIONS AND OUR CORPORATE STRUCTURE We sold shares of our common stock in a fixed price offering, and continue to sell shares pursuant to our DRIP Plan in a fixed price offering, and the fixed offering price may not accurately represent the current value of our assets at any particular time; therefore, the purchase price paid for shares of our common stock, particularly in light of the most recent economic recession, may be higher than the value of our assets per share of our common stock at the time of purchase or at any time in the future. There is very limited liquidity for our shares of common stock. If we do not effect a Liquidity Event, it will be very difficult for our stockholders to have liquidity for their investment in shares of our common stock. The availability and timing of cash distributions to our stockholders is uncertain and we may have difficulty funding our distributions with funds provided by our operations. Our board of directors determines our major policies and operations, which increases the uncertainties faced by our stockholders. Our stockholders are limited in their ability to sell our shares of common stock pursuant to our share redemption program, our stockholders may not be able to sell any of their shares of our common stock back to us and, if our stockholders do sell their shares, they may not receive the price they paid. 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. We currently own certain 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. The Operating Partnership s private placements of tenancy-in-common interests in real properties and beneficial interests in specific Delaware statutory trusts could subject us to liabilities from litigation or otherwise. Payments to the holder of the Special Units or cash redemptions to holders of OP Units will reduce cash available for distribution to our stockholders or to honor their redemption requests under our share redemption program. Maryland law and our organizational documents limit our stockholders right to bring claims against our officers and directors. 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 offerings. 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. RISKS RELATED TO OUR TAXATION AS A REIT Failure to qualify as a REIT could adversely affect our operations and our ability to make distributions. To continue 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 investors 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. The stock ownership limit imposed by the Internal Revenue Code for REITs and our charter may restrict our business combination opportunities. The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of syndicating and securitizing mortgage loans, that would be treated as sales for federal income tax purposes. The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT. Liquidation of assets may jeopardize our REIT status. Legislative or regulatory action could adversely affect investors. Recharacterization of transactions under the Operating Partnership s private placements could result in a 100% tax on income from prohibited transactions, which would diminish our cash distributions to our stockholders. Qualifying as a REIT involves highly technical and complex provisions of the Code. Foreign investors 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.

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1327978--3/23/2010--Dividend_Capital_Total_Realty_Trust_Inc.