1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
--------------------------
Commission File Number 1-13102
--------------------------
FIRST INDUSTRIAL REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 36-3935116
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices)
(312) 344-4300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Number of shares of Common Stock, $.01 par value, outstanding as of August 3,
2001: 39,587,783
2
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2001
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 ......................... 2
Consolidated Statements of Operations for the Six Months Ended June 30, 2001
and June 30, 2000 ............................................................................. 3
Consolidated Statements of Operations for the Three Months Ended June 30, 2001
and June 30, 2000 ............................................................................. 4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001
and June 30, 2000 ............................................................................. 5
Notes to Consolidated Financial Statements .................................................... 6-15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................................... 16-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................... 25
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ........................................................................ 26
Item 2. Changes in Securities .................................................................... 26
Item 3. Defaults Upon Senior Securities .......................................................... 26
Item 4. Submission of Matters to a Vote of Security Holders ...................................... 26
Item 5. Other Information ........................................................................ 26
Item 6. Exhibits and Report on Form 8-K .......................................................... 26
SIGNATURE .......................................................................................... 28
EXHIBIT INDEX ...................................................................................... 29
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
June 30, December 31,
2001 2000
----------- -------------
ASSETS
Assets:
Investment in Real Estate:
Land ............................................................................. $ 409,813 $ 397,624
Buildings and Improvements ....................................................... 2,002,631 1,989,034
Furniture, Fixtures and Equipment ................................................ 1,333 1,437
Construction in Progress ......................................................... 90,899 52,715
Less: Accumulated Depreciation ................................................... (235,019) (219,701)
----------- -----------
Net Investment in Real Estate ................................................ 2,269,657 2,221,109
Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $24,013 at June 30, 2001 and $26,318 at
December 31, 2000 ................................................................ 176,946 236,422
Cash and Cash Equivalents ......................................................... 8,699 7,731
Restricted Cash ................................................................... 52,192 24,215
Tenant Accounts Receivable, Net ................................................... 9,704 9,793
Investments in Joint Ventures ..................................................... 5,992 6,158
Deferred Rent Receivable .......................................................... 14,646 14,790
Deferred Financing Costs, Net ..................................................... 12,550 12,154
Prepaid Expenses and Other Assets, Net ............................................ 66,533 86,121
----------- -----------
Total Assets ................................................................. $ 2,616,919 $ 2,618,493
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable, Net ....................................................... $ 89,807 $ 102,575
Senior Unsecured Debt, Net ........................................................ 1,048,423 948,781
Acquisition Facility Payable ...................................................... 141,000 170,000
Accounts Payable and Accrued Expenses ............................................. 71,606 93,336
Rents Received in Advance and Security Deposits ................................... 23,374 20,104
Dividends/Distributions Payable ................................................... 37,899 38,492
----------- -----------
Total Liabilities ............................................................ 1,412,109 1,373,288
----------- -----------
Minority Interest ................................................................... 183,473 186,833
Commitments and Contingencies........................................................ -- --
Stockholders' Equity:
Preferred Stock ($.01 par value, 10,000,000 shares authorized, 40,000, 20,000,
50,000 and 30,000 shares of Series B, C, D and E Cumulative Preferred Stock,
respectively, issued and outstanding at June 30, 2001 and December 31, 2000,
having a liquidation preference of $2,500 per share ($100,000), $2,500 per
share ($50,000), $2,500 per share ($125,000) and $2,500 per share ($75,000),
respectively, and 1,650,000 shares of Series A Cumulative Preferred Stock
issued and outstanding at December 31, 2000, having a liquidation preference
of $25 per share ($41,250) ........................................................ 1 18
Common Stock ($.01 par value, 100,000,000 shares authorized, 39,928,952 and
39,238,386 shares issued and 39,534,652 and 38,844,086 shares outstanding at
June 30, 2001 and December 31, 2000, respectively) ................................ 400 392
Additional Paid-in-Capital .......................................................... 1,188,652 1,205,052
Distributions in Excess of Accumulated Earnings ..................................... (135,742) (126,962)
Unearned Value of Restricted Stock Grants ........................................... (8,981) (8,812)
Amortization of Stock Based Compensation ............................................ 959 383
Accumulated Other Comprehensive Loss ................................................ (12,253) --
Treasury Shares at Cost (394,300 shares) ............................................ (11,699) (11,699)
----------- -----------
Total Stockholders' Equity .................................................. 1,021,337 1,058,372
----------- -----------
Total Liabilities and Stockholders' Equity .................................. $ 2,616,919 $ 2,618,493
=========== ===========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Six Months Six Months
Ended Ended
June 30, 2001 June 30, 2000
------------- -------------
Revenues:
Rental Income ............................................................. $ 149,839 $ 148,636
Tenant Recoveries and Other Income ........................................ 47,039 40,778
--------- ---------
Total Revenues .................................................. 196,878 189,414
--------- ---------
Expenses:
Real Estate Taxes ......................................................... 29,974 29,436
Repairs and Maintenance ................................................... 10,452 8,829
Property Management ....................................................... 6,971 7,133
Utilities ................................................................. 5,751 4,929
Insurance ................................................................. 1,209 621
Other ..................................................................... 2,356 3,078
General and Administrative ................................................ 9,653 8,229
Interest Expense .......................................................... 42,633 40,076
Amortization of Deferred Financing Costs .................................. 898 899
Depreciation and Other Amortization ....................................... 34,474 35,162
--------- ---------
Total Expenses ................................................. 144,371 138,392
--------- ---------
Income from Operations Before Equity in Income of Joint Ventures and
Income Allocated to Minority Interest ..................................... 52,507 51,022
Equity in Income of Joint Ventures ........................................... 436 119
Income Allocated to Minority Interest ........................................ (8,824) (8,109)
--------- ---------
Income from Operations ....................................................... 44,119 43,032
Gain on Sale of Real Estate .................................................. 29,698 15,931
--------- ---------
Income Before Extraordinary Loss ............................................. 73,817 58,963
Extraordinary Loss ........................................................... (10,309) --
--------- ---------
Net Income ................................................................... 63,508 58,963
Less: Preferred Stock Dividends ............................................. (15,539) (16,422)
--------- ---------
Net Income Available to Common Stockholders .................................. $ 47,969 $ 42,541
========= =========
Net Income Available to Common Stockholders Before Extraordinary Loss
Per Weighted Average Common Share Outstanding:
Basic ............................................................ $ 1.45 $ 1.10
========= =========
Diluted .......................................................... $ 1.43 $ 1.10
========= =========
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ............................................................ $ 1.22 $ 1.10
========= =========
Diluted .......................................................... $ 1.21 $ 1.10
========= =========
Net Income ................................................................... $ 63,508 $ 58,963
Other Comprehensive Income (Loss):
Cumulative Transition Adjustment .......................................... (14,920) --
Settlement of Interest Rate Protection Agreements ......................... (191) --
Write-off of Unamortized Interest Rate Protection Agreement Due to the
Early Retirement of Debt ........................................... 2,156 --
Amortization of Interest Rate Protection Agreements ....................... 702 --
--------- ---------
Comprehensive Income ......................................................... $ 51,255 $ 58,963
========= =========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Three Months
Ended Ended
June 30, 2001 June 30, 2000
------------- -------------
Revenues:
Rental Income .............................................................. $ 75,381 $ 74,507
Tenant Recoveries and Other Income ......................................... 22,084 19,759
-------- --------
Total Revenues ................................................... 97,465 94,266
-------- --------
Expenses:
Real Estate Taxes .......................................................... 14,833 14,131
Repairs and Maintenance .................................................... 4,725 4,275
Property Management ........................................................ 3,442 3,829
Utilities .................................................................. 2,302 2,314
Insurance .................................................................. 612 433
Other ...................................................................... 1,157 1,624
General and Administrative ................................................. 5,051 4,568
Interest Expense ........................................................... 21,431 20,291
Amortization of Deferred Financing Costs ................................... 456 471
Depreciation and Other Amortization ........................................ 17,120 17,541
-------- --------
Total Expenses ................................................... 71,129 69,477
-------- --------
Income from Operations Before Equity in Income of Joint Ventures and
Income Allocated to Minority Interest ...................................... 26,336 24,789
Equity in Income of Joint Ventures ............................................ 250 88
Income Allocated to Minority Interest ......................................... (3,790) (4,310)
-------- --------
Income from Operations ........................................................ 22,796 20,567
Gain on Sale of Real Estate ................................................... 15,822 10,057
-------- --------
Income Before Extraordinary Loss .............................................. 38,618 30,624
Extraordinary Loss ............................................................ (10,309) --
-------- --------
Net Income .................................................................... 28,309 30,624
Less: Preferred Stock Dividends .............................................. (7,328) (8,211)
-------- --------
Net Income Available to Common Stockholders ................................... $ 20,981 $ 22,413
======== ========
Net Income Available to Common Stockholders Before Extraordinary Loss Per
Weighted Average Common Share Outstanding:
Basic ............................................................. $ .75 $ .58
======== ========
Diluted ........................................................... $ .75 $ .58
======== ========
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ............................................................. $ .53 $ .58
======== ========
Diluted ........................................................... $ .53 $ .58
======== ========
Net Income .................................................................... $ 28,309 $ 30,624
Other Comprehensive Income (Loss):
Settlement of Interest Rate Protection Agreement, Net ............. (425) --
Write-off of Interest Rate Protection Agreement Due to the Early
Retirement of Debt ........................................... 2,156 --
Amortization of Interest Rate Protection Agreements ............... 612 --
-------- --------
Comprehensive Income .......................................................... $ 30,652 $ 30,624
======== ========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................... $ 63,508 $ 58,963
Income Allocated to Minority Interest ........................ 8,824 8,109
--------- ---------
Income Before Minority Interest .............................. 72,332 67,072
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation ............................................. 29,887 31,693
Amortization of Deferred Financing Costs ................. 898 899
Other Amortization ....................................... 7,313 4,831
Equity in Income of Joint Ventures ....................... (436) (119)
Distributions from Joint Ventures ........................ 436 119
Gain on Sale of Real Estate .............................. (29,698) (15,931)
Extraordinary Loss ....................................... 10,309 --
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net ......................... (4,556) (17,511)
Increase in Deferred Rent Receivable ..................... (1,244) (766)
Decrease in Accounts Payable and Accrued Expenses and
Rents Received in Advance and Security Deposits ........ (10,291) (1,449)
(Increase)Decrease in Restricted Cash .................... (94) 53
--------- ---------
Net Cash Provided by Operating Activities ........... 74,856 68,891
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate ...... (204,365) (176,636)
Net Proceeds from Sales of Investment in Real Estate ......... 212,445 125,421
Contributions to and Investments in Joint Ventures ........... -- (37)
Distributions from Joint Ventures ............................ 166 367
Repayment of Mortgage Loans Receivable ....................... 4,429 14,564
Increase in Restricted Cash .................................. (27,883) (25,958)
--------- ---------
Net Cash Used in Investing Activities .............. (15,208) (62,279)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Exercise of Employee Stock Options ......... 13,936 6,667
Repurchase of Restricted Stock ............................... (1,638) --
Purchase of Treasury Shares .................................. -- (477)
Purchase of U.S. Government Securities ....................... (1,123) (1,244)
Proceeds from Senior Unsecured Debt .......................... 199,390 --
Repayments of Senior Unsecured Debt .......................... (100,000) --
Redemption of Preferred Stock ................................ (41,295) --
Dividends/Distributions ...................................... (60,812) (56,625)
Preferred Stock Dividends .................................... (16,519) (16,422)
Repayments on Mortgage Loans Payable ......................... (12,731) (1,130)
Proceeds from Acquisition Facility Payable ................... 297,300 111,000
Repayments on Acquisition Facility Payable ................... (326,300) (43,200)
Cost of Debt Issuance and Prepayment Fees .................... (8,888) (2,281)
--------- ---------
Net Cash Used in Financing Activities ............. (58,680) (3,712)
--------- ---------
Net Increase in Cash and Cash Equivalents ....................... 968 2,900
Cash and Cash Equivalents, Beginning of Period .................. 7,731 2,609
--------- ---------
Cash and Cash Equivalents, End of Period ........................ $ 8,699 $ 5,509
========= =========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND FORMATION OF COMPANY
First Industrial Realty Trust, Inc. (the "Company") was organized in the
state of Maryland on August 10, 1993. The Company is a real estate investment
trust as defined in the Internal Revenue Code. The Company's operations are
conducted primarily through First Industrial, L.P. (the "Operating Partnership")
of which the Company is the sole general partner with an approximate 84.8%
ownership interest at June 30, 2001. As of June 30, 2001, the Company owned 947
in-service properties located in 24 states, containing an aggregate of
approximately 65.8 million square feet of gross leasable area ("GLA"). Of the
947 in-service properties owned by the Company, 770 are held by the Operating
Partnership, 109 are held by limited partnerships in which the Operating
Partnership is the limited partner and wholly-owned subsidiaries of the Company
are the general partners, 52 are held by limited liability companies of which
the Operating Partnership is the sole member and 16 are held by an entity
wholly-owned by the Operating Partnership. The Company, through wholly-owned
limited liability companies of which the Operating Partnership is the sole
member, also owns 10% equity interests in, and provides asset and property
management services to, two joint ventures which invest in industrial properties
(the "September 1998 Joint Venture" and the "September 1999 Joint Venture").
Minority interest in the Company at June 30, 2001 represents the approximate
15.2% aggregate partnership interest in the Operating Partnership held by the
limited partners thereof.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared
in accordance with the accounting policies described in the financial statements
and related notes included in the Company's 2000 Form 10-K/A No. 1 and should be
read in conjunction with such financial statements and related notes. The
following notes to these interim financial statements highlight significant
changes to the notes included in the December 31, 2000 audited financial
statements included in the Company's 2000 Form 10-K/A No.1 and present interim
disclosures as required by the Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the Company's financial statements, is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of June 30,
2001 and December 31, 2000, and the reported amounts of revenues and expenses
for each of the six and three months ended June 30, 2001 and 2000. Actual
results could differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary for a fair statement of the financial position of the
Company as of June 30, 2001 and the results of its operations for each of the
six months and three months ended June 30, 2001 and 2000 and its cash flows for
the six months ended June 30, 2001 and 2000.
Tenant Accounts Receivable, Net:
The Company provides an allowance for doubtful accounts against the portion
of tenants accounts receivable which is estimated to be uncollectible. Tenant
accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of approximately $2,050 as of June 30, 2001 and
December 31, 2000.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recent Accounting Pronouncements:
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"), as amended by
Statement of Financial Accounting Standards No. 138, "Accounting for Derivative
Instruments and Hedging Activities- An Amendment of FAS Statement 133". FAS 133,
as amended, establishes accounting and reporting standards for derivative
instruments. Specifically, FAS 133, as amended, requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. Additionally, the fair
value adjustment will affect either other comprehensive income (shareholders'
equity) or net income, depending on whether the derivative instrument qualifies
as a hedge for accounting purposes and, if so, the nature of the hedging
activity. FAS 133, as amended, also requires that any gains or losses on
derivative instruments that are reported independently as deferred gains or
losses (assets or liabilities) in the statement of financial position at the
date of initial application shall be derecognized and reported as a cumulative
transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of approximately $14,920. The Company
will amortize approximately $214 into net income as an adjustment to interest
expense in the next twelve months relating to these interest rate protection
agreements.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes (as defined in footnote 4), the Company settled this interest
rate protection agreement and received approximately $371, which is shown in
other comprehensive income. The Company is amortizing this settlement amount
into net income as an adjustment to interest expense over the life of the 2011
Notes (as defined in footnote 4). The Company will amortize approximately $37
into net income as an adjustment to interest expense in the next twelve months
relating to this interest rate protection agreement.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. (as defined in footnote 4) in April 2001, the
Company settled this interest rate protection agreement for a payment of
approximately $562 which is a component of the extraordinary loss the Company
has recognized relating to the retirement of the 2011 Drs. (as defined in
footnote 4).
The following is a roll-forward of the accumulated other comprehensive loss
balance relating to these derivative transactions:
Balance at December 31, 2000 ............................................................. $ --
Cumulative Transition Adjustment .................................................... (14,920)
Settlement of Interest Rate Protection Agreements ................................... (191)
Write-off of Unamortized Interest Rate Protection Agreement
Due to The Early Retirement of Debt ............................................... 2,156
Amortization of Interest Rate Protection Agreements ................................. 702
--------
Balance at June 30, 2001 ................................................................. $(12,253)
========
Reclassification:
Certain 2000 items have been reclassified to conform to the 2001
presentation.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN JOINT VENTURES
During the six months ended June 30, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $1,238 in asset
management and property management fees from the September 1998 Joint Venture
and the September 1999 Joint Venture, collectively. The Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received distributions of approximately $544 and $58 from the
September 1998 Joint Venture and the September 1999 Joint Venture, respectively.
As of June 30, 2001, the September 1998 Joint Venture owned 121 industrial
properties comprising approximately 6.3 million square feet of GLA and the
September 1999 Joint Venture owned 39 industrial properties comprising
approximately 1.2 million square feet of GLA.
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE
Mortgage Loans Payable, Net:
On December 29, 1995, the Company, through an entity in which the Operating
Partnership is the sole limited partner and a wholly-owned subsidiary of the
Company is the general partner (the "Mortgage Partnership"), entered into a
$40,200 mortgage loan (the "1995 Mortgage Loan"). In March 2001, the Company
purchased approximately $1.1 million of U.S. Government securities as substitute
collateral to execute a legal defeasance of approximately $1.1 million of the
1995 Mortgage Loan. The terms of the legal defeasance require the Mortgage
Partnership to use the gross proceeds from the maturities of the U.S. Government
securities to paydown and subsequently retire the defeased portion of the 1995
Mortgage Loan in January 2003. The Company is carrying the defeased portion of
the 1995 Mortgage Loan on its balance sheet until it pays down and retires the
defeased portion of the 1995 Mortgage Loan in January 2003. Upon the execution
of the legal defeasance, one of the 22 properties collateralizing the 1995
Mortgage Loan was released and subsequently sold.
On October 23, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $4,153 (the "Acquisition Mortgage Loan
I") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan I was collateralized by a property in Bensenville,
Illinois, bore interest at a fixed rate of 8.5% and provided for monthly
principal and interest payments based upon a 15-year amortization schedule. On
May 31, 2001, the Company, through the Operating Partnership, paid off and
retired the Acquisition Mortgage Loan I. Due to the retirement of the
Acquisition Mortgage Loan I, the Company has recorded an extraordinary loss of
approximately $128 due to a prepayment fee.
On December 9, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $7,997 (the "Acquisition Mortgage Loan
II") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan II was collateralized by ten properties in St.
Charles, Louisiana, bore interest at a fixed rate of 7.75% and provided for
monthly principal and interest payments based upon a 22-year amortization
schedule. On June 27, 2001, the Company, through the Operating Partnership, paid
off and retired the Acquisition Mortgage Loan II. Due to the retirement of the
Acquisition Mortgage Loan II, the Company has recorded an extraordinary loss of
approximately $936 due to a prepayment fee.
8
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
Senior Unsecured Debt, Net:
On March 19, 2001, the Company, through the Operating Partnership, issued
$200,000 of senior unsecured debt which matures on March 15, 2011 and bears a
coupon interest rate of 7.375% (the "2011 Notes"). The issue price of the 2011
Notes was 99.695%. Interest is paid semi-annually in arrears on September 15 and
March 15. The Company also entered into an interest rate protection agreement
which was used to fix the interest rate on the 2011 Notes prior to issuance. The
Company settled the interest rate protection agreement for approximately $371 of
proceeds which is included in other comprehensive income. The debt issue
discount and the settlement amount of the interest rate protection agreement are
being amortized over the life of the 2011 Notes as an adjustment to interest
expense. The 2011 Notes contain certain covenants including limitations on
incurrence of debt and debt service coverage.
On March 31, 1998, the Company, through the Operating Partnership, issued
$100,000 of Dealer remarketable securities which were to mature on April 5, 2011
and bore a coupon interest rate of 6.50% (the "2011 Drs."). The issue price of
the 2011 Drs. was 99.753%. On April 5, 2001 the Company paid off and retired the
2011 Drs. for a payment of approximately $105,569. In conjunction with the
forecasted retirement of the 2011 Drs., the Company entered into an interest
rate protection agreement which fixed the retirement price of the 2011 Drs. On
April 2, 2001, this interest rate protection agreement was settled for a payment
of approximately $562. Due to the retirement of the 2011 Drs., the Company has
recorded an extraordinary loss of approximately $9,245 comprised of the amount
paid above the 2011 Drs. carrying value, the write-off of unamortized deferred
financing fees, the write-off of the unamortized portion of an interest rate
protection agreement which was used to fix the interest rate on the 2011 Drs.
prior to issuance, the settlement of the interest rate protection agreement as
discussed above, legal costs and other expenses.
9
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
The following table discloses certain information regarding the Company's
mortgage loans payable, senior unsecured debt and acquisition facility payable:
ACCRUED INTEREST INTEREST
OUTSTANDING BALANCE AT PAYABLE AT RATE AT
---------------------------- ------------------------ --------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, MATURITY
2001 2000 2001 2000 2001 DATE
----------- ------------- -------- ------------ -------- --------
MORTGAGE LOANS PAYABLE, NET
- ----------------------------
1995 Mortgage Loan .................. $ 38,335 (1) $ 38,604 $ 154 $ 163 7.220% 1/11/26
CIGNA Loan .......................... 33,590 33,952 210 212 7.500% 4/01/03
Assumed Loans ....................... 6,781 7,995 -- -- 9.250% 1/01/13
LB Mortgage Loan II ................ 705 705 5 5 8.000% (2)
Acquisition Mortgage Loan I.......... -- 3,294 -- -- 8.500% 8/01/08 (7)
Acquisition Mortgage Loan II......... -- 7,432 -- -- 7.750% 4/01/06 (7)
Acquisition Mortgage Loan III........ 3,141 3,214 -- -- 8.875% 6/01/03
Acquisition Mortgage Loan IV......... 2,323 2,364 -- 17 8.950% 10/01/06
Acquisition Mortgage Loan V.......... 2,697 (3) 2,729 (3) -- -- 9.010% 9/01/06
Acquisition Mortgage Loan VI......... 939 (3) 957 (3) -- -- 8.875% 11/01/06
Acquisition Mortgage Loan VII........ 1,296 (3) 1,329 (3) -- -- 9.750% 3/15/02
---------- -------- ------- -------
Total ............................... $ 89,807 $102,575 $ 369 $ 397
========== ======== ======= =======
SENIOR UNSECURED DEBT, NET
- --------------------------
2005 Notes........................... $ 50,000 $ 50,000 $ 383 $ 383 6.900% 11/21/05
2006 Notes........................... 150,000 150,000 875 875 7.000% 12/01/06
2007 Notes........................... 149,969 (4) 149,966 (4) 1,457 1,457 7.600% 5/15/07
2011 PATS............................ 99,540 (4) 99,517 (4) 942 942 7.375% 5/15/11 (5)
2017 Notes........................... 99,843 (4) 99,838 (4) 625 625 7.500% 12/01/17
2027 Notes........................... 99,874 (4) 99,872 (4) 914 914 7.150% 5/15/27 (6)
2028 Notes........................... 199,787 (4) 199,783 (4) 7,009 7,009 7.600% 7/15/28
2011 Drs............................. -- 99,805 (4) -- 1,553 6.500% 4/05/11 (7)
2011 Notes........................... 199,410 (4) -- 4,179 -- 7.375% 3/15/11
---------- -------- ------- -------
Total................................ $1,048,423 $948,781 $16,384 $13,758
========== ======== ======= =======
ACQUISITION FACILITY PAYABLE
- ----------------------------
2000 Unsecured Acquisition
Facility.......................... $ 141,000 $170,000 $ 797 $ 1,359 4.800% 6/30/03
========== ======== ======= =======
(1) Approximately $2.4 million of this loan has been defeased and will be paid
in full in January 2003.
(2) The maturity date of the LB Mortgage Loan II is based on a contingent event
relating to the environmental status of the property collateralizing the
loan.
(3) At June 30, 2001, the Acquisition Mortgage Loan V, the Acquisition Mortgage
Loan VI and the Acquisition Mortgage Loan VII are net of unamortized
premiums of $200, $45 and $21, respectively. At December 31, 2000, the
Acquisition Mortgage Loan V, the Acquisition Mortgage Loan VI and the
Acquisition Mortgage Loan VII are net of unamortized premiums of $219, $49
and $35, respectively.
(4) At June 30, 2001, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028
Notes and the 2011 Notes are net of unamortized discounts of $31, $460,
$157, $126, $213 and $590, respectively. At December 31, 2000, the 2007
Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs. are
net of unamortized discounts of $34, $483, $162, $128, $217 and $195,
respectively.
(5) The 2011 PATS are redeemable at the option of the holder thereof, on May
15, 2004.
(6) The 2027 Notes are redeemable at the option of the holders thereof, on May
15, 2002.
(7) The Company paid off and retired the 2011 Drs. on April 5, 2001, the
Acquisition Mortgage Loan I on May 31, 2001, and the Acquisition Mortgage
Loan II on June 27, 2001.
The following is a schedule of the stated maturities and scheduled
principal payments of the mortgage loans payable, senior unsecured debt and
acquisition facility payable for the next five years ending December 31, and
thereafter:
Amount
-------------
Remainder of 2001 $ 1,049
2002 3,456
2003 179,848
2004 1,418
2005 51,548
Thereafter 1,042,517
-----------
Total $ 1,279,836
===========
The maturity date of the LB Mortgage Loan II is based on a contingent event. As
a result, this loan is not included in the preceding table.
10
12
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. STOCKHOLDERS' EQUITY
Preferred Stock:
In 1995, the Company issued 1,650,000 shares of 9.5%, $ .01 par value,
Series A Cumulative Preferred Stock (the "Series A Preferred Stock") at an
initial offering price of $25 per share. On or after November 17, 2000, the
Series A Preferred Stock became redeemable for cash at the option of the
Company, in whole or in part, at $25 per share, or $41,250 in the aggregate,
plus dividends accrued and unpaid to the redemption date. On March 9, 2001, the
Company called for the redemption of all of the outstanding Series A Preferred
Stock at the price of $25 per share, plus accrued and unpaid dividends. The
Company redeemed the Series A Preferred Stock on April 9, 2001 and paid a
prorated second quarter dividend of $.05872 per share, totaling approximately
$97.
Restricted Stock:
During the six months ended June 30, 2001, the Company awarded 94,450
shares of restricted common stock to certain employees and 1,762 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3,074 on the date of grant. The
restricted common stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting period.
Non-Qualified Employee Stock Options:
During the six months ended June 30, 2001, the Company issued 1,030,900
non-qualified employee stock options to certain officers, Directors and
employees of the Company. These non-qualified employee stock options vest over
periods from one to three years, have a strike price of $31.05 - 33.125 per
share and expire ten years from the date of grant.
During the six months ended June 30, 2001, certain employees of the Company
exercised 523,048 non-qualified employee stock options. Gross proceeds to the
Company were approximately $13,936.
Dividends/Distributions:
The following table summarizes dividends/distributions for the six months
ended June 30, 2001.
COMMON STOCK/OPERATING PARTNERSHIP UNITS
Dividend/Distribution Total
Record Date Payable Date Per Share/Unit Dividend/Distribution
------------------ ------------------ ---------------------- ---------------------
Fourth Quarter 2000 December 31, 2000 January 22, 2001 $ .6575 $ 30,275
First Quarter 2001 March 31, 2001 April 23, 2001 $ .6575 $ 30,537
Second Quarter 2001 June 29, 2001 July 23, 2001 $ .6575 $ 30,668
PREFERRED STOCK
First Quarter: Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------- ---------- ---------------
Series A Preferred Stock March 15, 2001 March 31, 2001 $ .59375 $ 980
Series B Preferred Stock March 15, 2001 March 31, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock March 15, 2001 March 31, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock March 15, 2001 March 31, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock March 15, 2001 March 31, 2001 $ 49.37500 $ 1,480
Second Quarter: Redemption/ Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------- ---------- -----------------
Series A Preferred Stock April 9, 2001 April 9, 2001 $ .05872 $ 97
Series B Preferred Stock June 15, 2001 June 30, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock June 15, 2001 June 30, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock June 15, 2001 June 30, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock June 15, 2001 June 30, 2001 $ 49.37500 $ 1,480
11
13
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
6. ACQUISITION AND DEVELOPMENT OF REAL ESTATE
During the six months ended June 30, 2001, the Company acquired 51
industrial properties comprising, in the aggregate, approximately 2.4 million
square feet of GLA and several land parcels. The aggregate purchase price for
these acquisitions totaled approximately $124,361, excluding costs incurred in
conjunction with the acquisition of the properties. Two of the 51 industrial
properties acquired, comprising approximately .1 million square feet of GLA,
were acquired from the 1998 Joint Venture for an aggregate purchase price of
approximately $5,845, excluding costs incurred in conjunction with the
acquisition of the properties. The Company also completed the development of
five industrial properties comprising approximately 1.0 million square feet of
GLA at a cost of approximately $36.2 million.
7. SALES OF REAL ESTATE AND REAL ESTATE HELD FOR SALE
During the six months ended June 30, 2001, the Company sold 69 industrial
properties comprising approximately 5.1 million square feet of GLA and several
land parcels. Gross proceeds from these sales were approximately $226,395. The
Company also recognized a gain on a sale that was deferred. The gain on sale of
real estate was approximately $29,698.
The Company has an active sales program through which it is continually
engaged in evaluating its current portfolio for potential sales candidates in
order to redeploy capital. At June 30, 2001, the Company had 65 industrial
properties comprising approximately 7.1 million square feet of GLA held for
sale. There can be no assurance that such properties held for sale will be sold.
The following table discloses certain information regarding the 65
industrial properties held for sale by the Company.
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------
Total Revenues $ 14,347 $ 14,680 $ 7,019 $ 7,273
Operating Expenses (3,934) (4,022) (1,794) (1,988)
Depreciation and Amortization (168) (2,600) (84) (1,320)
-------- -------- -------- --------
Income from Operations $ 10,245 $ 8,058 $ 5,141 $ 3,965
======== ======== ======== ========
12
14
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Six Months Ended
----------------------
June 30, June 30,
2001 2000
--------- ---------
Interest paid, net of capitalized interest .............................. $ 40,597 $ 40,716
========= =========
Interest capitalized .................................................... $ 4,297 $ 2,747
========= =========
Supplemental schedule of noncash investing and financing activities:
Distribution payable on common stock/units .............................. $ 30,668 $ 28,601
========= =========
Distribution payable on preferred stock ................................. $ 7,231 $ --
========= =========
Issuance of units in exchange for property ................................. $ 1,491 $ 869
========= =========
Exchange of units for common shares:
Minority interest ...................................................... $ (4,213) $ (2,488)
Common stock ........................................................... 2 1
Additional paid-in capital ............................................. 4,211 2,487
--------- ---------
$ -- $ --
========= =========
In conjunction with the property and land acquisitions,
the following assets and liabilities were assumed:
Purchase of real estate ................................................. $ 124,361 100,200
Accrued real estate taxes and security deposits ......................... (1,072) $ (1,014)
--------- ---------
$ 123,289 $ 99,186
========= =========
In conjunction with certain property sales, the Company provided seller
financing:
Notes receivable ........................................................ $ -- $ 5,149
========= =========
13
15
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
9. EARNINGS PER SHARE
The computation of basic and diluted EPS is presented below:
Six Months Ended Three Months Ended
------------------------------- ------------------------------
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
-------------- ------------- ------------- -------------
Numerator:
Net Income Before Extraordinary Loss .............................. $ 73,817 $ 58,963 $ 38,618 $ 30,624
Less: Preferred Stock Dividends ................................... (15,539) (16,422) (7,328) (8,211)
Less: Minority Interest Allocable to Extraordinary Loss ........... (1,597) -- (1,597) --
------------ ------------ ------------ ------------
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest
-For Basic and Diluted EPS .................................... 56,681 42,541 29,693 22,413
Extraordinary Loss, net of Minority Interest....................... (8,712) -- (8,712) --
------------ ------------ ------------ ------------
Net Income Available to Common Stockholders
-For Basic and Diluted EPS ........................................ $ 47,969 $ 42,541 $ 20,981 $ 22,413
============ ============ ============ ============
Denominator:
Weighted Average Shares - Basic .................................. 39,196,852 38,558,694 39,440,432 38,736,752
Effect of Dilutive Securities:
Employee and Director Common Stock Options ....................... 373,698 194,828 289,465 231,926
------------ ------------ ------------ ------------
Weighted Average Shares- Diluted ................................. 39,570,550 38,753,522 39,729,897 38,968,678
============ ============ ============ ============
Basic EPS:
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest .................. $ 1.45 $ 1.10 $ .75 $ .58
Extraordinary Loss, net of Minority Interest ............... (.22) -- (.22) --
------------ ------------ ------------ ------------
Net Income Available to Common Stockholders ...................... $ 1.22 $ 1.10 $ .53 $ .58
============ ============ ============ ============
Diluted EPS:
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest .................. $ 1.43 $ 1.10 $ .75 $ .58
Extraordinary Loss, net of Minority Interest .............. (.22) -- (.22) --
------------ ------------ ------------ ------------
Net Income Available to Common Stockholders ...................... $ 1.21 $ 1.10 $ .53 $ .58
============ ============ ============ ============
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal actions
arising from the operation of its properties. In management's opinion, the
liabilities, if any, that may ultimately result from such legal actions are not
expected to have a materially adverse effect on the consolidated financial
position, operations or liquidity of the Company.
The Company has committed to the construction of 31 development projects
totaling approximately 6.6 million square feet of GLA for an estimated
investment of approximately $289.0 million. Of this amount, approximately $159.6
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 24 of the 31
development projects, comprising approximately 5.1 million square feet of GLA at
an estimated investment of approximately $215.2 million, during the next twelve
months.
14
16
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
11. SUBSEQUENT EVENTS
From July 1, 2001 to August 3, 2001, the Company acquired six industrial
properties for an aggregate purchase price of approximately $16,705, excluding
costs incurred in conjunction with the acquisition of these industrial
properties. The Company also sold 20 industrial properties and several land
parcels for approximately $42,347 of gross proceeds.
On July 2, 2001, the Company paid second quarter preferred stock dividends
of $54.688 per share (equivalent to $.54688 per Depositary Share) on its Series
B Preferred Stock, $53.906 per share (equivalent to $.53906 per Depositary
Share) on its Series C Preferred Stock, $49.687 per share (equivalent to $.49687
per Depositary Share) on its Series D Preferred Stock and $49.375 per share
(equivalent to $.49375 per Depositary Share) on its Series E Preferred Stock.
The preferred stock dividends paid on July 2, 2001 totaled, in the aggregate,
approximately $7,231.
On July 23, 2001, the Company and the Operating Partnership paid a second
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30,668.
15
17
FIRST INDUSTRIAL REALTY TRUST, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of First Industrial Realty Trust,
Inc.'s (the "Company") financial condition and results of operations should be
read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-Q.
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
affect on the operations and future prospects of the Company on a consolidated
basis include, but are not limited to, changes in: economic conditions generally
and the real estate market specifically, legislative/regulatory changes
(including changes to laws governing the taxation of real estate investment
trusts), availability of capital, interest rates, competition, supply and demand
for industrial properties in the Company's current and proposed market areas and
general accounting principles, policies and guidelines applicable to real estate
investment trusts. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included herein and in the Company's other filings with
the Securities and Exchange Commission.
The Company was organized in the state of Maryland on August 10, 1993. The
Company is a real estate investment trust ("REIT") as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through First
Industrial, L.P. (the "Operating Partnership") of which the Company is the sole
general partner with an approximate 84.8% ownership interest at June 30, 2001.
As of June 30, 2001, the Company owned 947 in-service properties located in 24
states, containing an aggregate of approximately 65.8 million square feet of
gross leasable area ("GLA") and 14 properties held for redevelopment. Of the 947
in-service properties owned by the Company, 770 are held by the Operating
Partnership, 109 are held by limited partnerships in which the Operating
Partnership is the limited partner and wholly-owned subsidiaries of the Company
are the general partners, 52 are held by limited liability companies of which
the Operating Partnership is the sole member and 16 are held by an entity
wholly-owned by the Operating Partnership. The Company, through wholly-owned
limited liability companies of which the Operating Partnership is the sole
member, also owns 10% equity interests in, and provides asset and property
management services to, two joint ventures which invest in industrial properties
(the "September 1998 Joint Venture" and the "September 1999 Joint Venture").
Minority interest in the Company at June 30, 2001 represents the approximate
15.2% aggregate partnership interest in the Operating Partnership held by the
limited partners thereof.
RESULTS OF OPERATIONS
At June 30, 2001, the Company owned 947 in-service properties with
approximately 65.8 million square feet of GLA, compared to 975 in-service
properties with approximately 68.3 million square feet of GLA at June 30, 2000.
During the period between July 1, 2000 and June 30, 2001, the Company acquired
105 in-service properties containing approximately 5.6 million square feet of
GLA, completed development of 18 properties and redevelopment of two properties
totaling approximately 2.8 million square feet of GLA and sold 142 in-service
properties totaling approximately 10.7 million square feet of GLA, one out of
service property and several land parcels. The Company also took 14 properties
out of service that are under redevelopment, comprising approximately .8 million
square feet of GLA and placed in service three properties comprising
approximately .6 million square feet of GLA.
16
18
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2001 TO SIX MONTHS ENDED JUNE 30, 2000
Rental income and tenant recoveries and other income increased by
approximately $7.5 million or 3.9% due primarily to general rent increases and
an increase in tenant recoveries related to an increase in property expenses (as
discussed below) for the six months ended June 30, 2001 as compared to the six
months ended June 30, 2000. Rental income and tenant recoveries and other income
from properties owned prior to January 1, 2000 increased by approximately $4.5
million or 3.3% due primarily to general rent increases and an increase in
tenant recoveries due to an increase in property expenses (as discussed below)
for the six months ended June 30, 2001 as compared to the six months ended June
30, 2000.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $2.7 million or 5.0%. The increase in repairs and
maintenance is due to an increase in snow removal and related expenses. The
increase in utilities is due to increases in gas and electricity expenses. The
increase in insurance is due to an increase in insurance premiums. Property
expenses from properties owned prior to January 1, 2000 increased by
approximately $2.3 million or 5.9% due primarily to the explanations discussed
above.
General and administrative expense increased by approximately $1.4 million
due primarily to general increases in employee compensation and the write-off of
the Company's technology initiative investment.
Interest expense increased by approximately $2.6 million for the six months
ended June 30, 2001 compared to the six months ended June 30, 2000 due primarily
to a higher average debt balance outstanding. This was slightly offset by a
decrease in the weighted average interest rate for the six months ended June 30,
2001 (7.19%) compared to the six months ended June 30, 2000 (7.29%) and an
increase in capitalized interest for the six months ended June 30, 2001 due to
an increase in development activities. The average debt balance outstanding for
the six months ended June 30, 2001 and 2000 was approximately $1,310.5 million
and $1,183.0 million, respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization decreased by approximately $.7 million
due primarily to the Company ceasing depreciation and amortization on properties
it considers held for sale and due to properties sold subsequent to December 31,
1999. This decrease is offset by depreciation and amortization related to
properties acquired or developed subsequent to December 31, 2000.
Equity in income of joint ventures increased by approximately $.3 million
due primarily due to an increase in gain on sale of real estate.
The $29.7 million gain on sale of real estate for the six months ended June
30, 2001 resulted from the sale of 69 industrial properties and several land
parcels. Gross proceeds from these sales were approximately $226.4 million.
The $15.9 million gain on sale of real estate for the six months ended June
30, 2000 resulted from the sale of 35 industrial properties and several land
parcels. Gross proceeds from these sales were approximately $136.2 million.
The $10.3 million extraordinary loss for the six months ended June 30, 2001
is due to the early retirement of senior unsecured debt and various mortgage
loans. The extraordinary loss is comprised of the amount paid above the carrying
amount of the senior unsecured debt, the write-off of unamortized deferred
financing fees, the write-off of the unamortized portion of an interest rate
protection agreement which was used to fix the interest rate on the senior
unsecured debt, the settlement of an interest rate protection agreement used to
fix the retirement price of the senior unsecured debt, prepayment fees, legal
costs and other expenses.
17
19
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2001 TO THREE MONTHS ENDED JUNE 30,
2000
Rental income and tenant recoveries and other income increased by
approximately $3.2 million or 3.4% due primarily to general rent increases and
an increase in tenant recoveries related to an increase in property expenses (as
discussed below) for the three months ended June 30, 2001 as compared to the
three months ended June 30, 2000. Rental income and tenant recoveries and other
income from properties owned prior to January 1, 2000 increased by approximately
$2.2 million or 3.1% due primarily to general rent increases and an increase in
tenant recoveries due to an increase in property expenses (as discussed below)
for the three months ended June 30, 2001 as compared to the three months ended
June 30, 2000.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $.5 million or 1.8%. The increase in real estate tax
expense is due to an increase in real estate taxes in many of the Company's
markets. The increase in repairs and maintenance is due to an increase in snow
removal and related expenses. The increase in insurance is due to an increase in
insurance premiums. This is offset by a decrease in property management fees and
a decrease in other expense. Property expenses from properties owned prior to
January 1, 2000 increased by approximately $.7 million or 3.5% due primarily to
the explanations discussed above.
General and administrative expense increased by approximately $.5 million
due primarily to general increases in employee compensation and the write-off of
the Company's technology initiative investment.
Interest expense increased by approximately $1.1 million for the three
months ended June 30, 2001 compared to the three months ended June 30, 2000 due
primarily to a higher average debt balance outstanding. This was slightly offset
by a decrease in the weighted average interest rate for the three months ended
June 30, 2001 (7.12%) compared to the three months ended June 30, 2000 (7.30%)
and an increase in capitalized interest for the three months ended June 30, 2001
due to an increase in development activities. The average debt balance
outstanding for the three months ended June 30, 2001 and 2000 was approximately
$1,332.1 million and $1,196.1 million, respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization decreased by approximately $.4 million
due primarily to the Company ceasing depreciation and amortization on properties
it considers held for sale and due to properties sold subsequent to December 31,
1999. This decrease is offset by depreciation and amortization related to
properties acquired or developed subsequent to December 31, 2000.
Equity in income of joint ventures increased by approximately $.2 million
due primarily to an increase in gain on sale of real estate.
The $15.8 million gain on sale of real estate for the three months ended
June 30, 2001 resulted from the sale of 45 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $165.5 million.
The $10.1 million gain on sale of real estate for the three months ended
June 30, 2000 resulted from the sale of 24 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $81.1 million.
The $10.3 million extraordinary loss for the three months ended June 30,
2001 is due to the early retirement of senior unsecured debt and various
mortgage loans. The extraordinary loss is comprised of the amount paid above the
carrying amount of the senior unsecured debt, the write-off of unamortized
deferred financing fees, the write-off of the unamortized portion of an interest
rate protection agreement which was used to fix the interest rate on the senior
unsecured debt, the settlement of an interest rate protection agreement used to
fix the retirement price of the senior unsecured debt, prepayment fees, legal
costs and other expenses.
18
20
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company's cash and cash equivalents was approximately
$8.7 million and restricted cash was approximately $52.2 million. Included in
restricted cash are approximately $1.3 million of cash reserves required to be
set aside under the Company's $40.0 million mortgage loan (the "1995 Mortgage
Loan") for payments of security deposit refunds, tenant improvements, capital
expenditures, interest, real estate taxes and insurance. The portion of the cash
reserve relating to payments for capital expenditures, interest, real estate
taxes and insurance for properties collateralizing the 1995 Mortgage Loan is
established monthly, distributed to the Company as such expenditures are made
and is replenished to a level adequate to make the next periodic payment of such
expenditures. The portion of the cash reserve relating to security deposit
refunds for the tenants occupying the properties collateralizing the 1995
Mortgage Loan is adjusted as tenants turn over. Also included in restricted cash
is approximately $50.9 million of gross proceeds from the sales of certain
properties. These sales proceeds will be disbursed as the Company exchanges
properties under Section 1031 of the Internal Revenue Code.
SIX MONTHS ENDED JUNE 30, 2001
Net cash provided by operating activities of approximately $74.9 million
for the six months ended June 30, 2001 was comprised primarily of net income
before minority interest of approximately $72.3 million and adjustments for
non-cash items of approximately $17.5 million, offset by the net change in
operating assets and liabilities of approximately $14.9 million. The adjustments
for the non-cash items of approximately $17.5 million are primarily comprised of
depreciation and amortization of approximately $38.1 million and an
extraordinary loss of approximately $10.3 million from the early retirement of
debt, offset by the gain on sale of real estate of approximately $29.7 million
and the effect of the straight-lining of rental income of approximately $1.2
million.
Net cash used in investing activities of approximately $15.2 million for
the six months ended June 30, 2001 was comprised primarily of the acquisition of
real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate and an increase in restricted
cash from sales proceeds deposited with an intermediary for Section 1031
exchange purposes, offset by the net proceeds from the sale of real estate,
distributions from the Company's two industrial real estate joint ventures and
the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $58.7 million for
the six months ended June 30, 2001 was comprised primarily of repayments on
mortgage loans payable, the repurchase of restricted stock, the purchase of U.S.
Government securities used as substitute collateral to execute a legal
defeasance of a portion of the 1995 Mortgage Loan, common and preferred stock
dividends and unit distributions, debt issuance costs incurred in conjunction
with the 2011 Notes (defined below), repayment of senior unsecured debt and
prepayment fees incurred in the early retirement of the Acquisition Mortgage
Loan I (defined below) and the Acquisition Mortgage Loan II (defined below),
redemption of the Company's Series A Preferred Stock (defined below), and
the net repayments under the Company's $300 million unsecured line of credit
(the "2000 Unsecured Acquisition Facility"), offset by the proceeds from the
issuance of senior unsecured debt and net proceeds from the exercise of employee
stock options.
SIX MONTHS ENDED JUNE 30, 2000
Net cash provided by operating activities of approximately $68.9 million
for the six months ended June 30, 2000 was comprised primarily of net income
before minority interest of approximately $67.1 million and adjustments for
non-cash items of approximately $20.7 million, offset by the net change in
operating assets and liabilities of approximately $18.9 million. The adjustments
for the non-cash items of approximately $20.7 million are primarily comprised of
depreciation and amortization of approximately $37.4 million, offset by the gain
on sale of real estate of approximately $15.9 million and the effect of the
straight-lining of rental income of approximately $.8 million.
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Net cash used in investing activities of approximately $62.3 million for
the six months ended June 30, 2000 was comprised primarily of the acquisition of
real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate and an increase in restricted
cash from sales proceeds deposited with an intermediary for Section 1031
exchange purposes, offset by the net proceeds from the sale of real estate,
distributions from one of the Company's two industrial real estate joint
ventures and the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $3.7 million for the
six months ended June 30, 2000 was comprised primarily of repayments on mortgage
loans payable, the purchase of treasury shares, the purchase of U.S. Government
securities used as substitute collateral to execute a legal defeasance of a
portion of the 1995 Mortgage Loan, common and preferred stock dividends and unit
distributions and debt issuance costs incurred in conjunction with the 2000
Unsecured Acquisition Facility, offset by the net borrowings under the Company's
lines of credit and net proceeds from the exercise of employee stock options.
INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE
During the six months ended June 30, 2001, the Company purchased 51
industrial properties comprising, in the aggregate, approximately 2.4 million
square feet of GLA and several land parcels, for an aggregate purchase price of
approximately $124.4 million, excluding costs incurred in conjunction with the
acquisition of the properties. Two of the 51 industrial properties acquired,
comprising approximately .1 million square feet of GLA, were acquired from the
1998 Joint Venture for an aggregate purchase price of approximately $5.8
million, excluding costs incurred in conjunction with the acquisition of the
properties. The Company also completed the development of five industrial
properties comprising approximately 1.0 million square feet of GLA at a cost of
approximately $36.2 million.
During the six months ended June 30, 2001, the Company sold 69 industrial
properties comprising approximately 5.1 million square feet of GLA and several
land parcels. Gross proceeds from these sales were approximately $226.4 million.
The Company has committed to the construction of 31 development projects
totaling approximately 6.6 million square feet of GLA for an estimated
investment of approximately $289.0 million. Of this amount, approximately $159.6
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 24 of the 31
development projects, comprising approximately 5.1 million square feet of GLA at
an estimated investment of approximately $215.2 million, during the next twelve
months.
REAL ESTATE HELD FOR SALE
The Company plans on exiting the markets of Cleveland, Columbus, Dayton,
Des Moines, Grand Rapids and Long Island and continually engages in evaluating
its other real estate markets for potential sales candidates. At June 30, 2001,
the Company had 65 industrial properties comprising approximately 7.1 million
square feet of GLA held for sale. Income from operations of the 65 industrial
properties held for sale for the six months ended June 30, 2001 and 2000 is
approximately $10.2 million and $8.1 million, respectively. Income from
operations of the 65 industrial properties held for sale for the three months
ended June 30, 2001 and 2000 is approximately $5.1 million and $4.0 million,
respectively. Net carrying value of the 65 industrial properties held for sale
at June 30, 2001 is approximately $176.9 million. There can be no assurance that
such properties held for sale will be sold.
INVESTMENTS IN JOINT VENTURES
During the six months ended June 30, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $1.2 million in asset
management and property management fees from the September 1998
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Joint Venture and the September 1999 Joint Venture, collectively. The Company,
through wholly-owned limited liability companies in which the Operating
Partnership is the sole member, received, in the aggregate, distributions of
approximately $.6 million from the September 1998 Joint Venture and the
September 1999 Joint Venture. As of June 30, 2001, the September 1998 Joint
Venture owned 121 industrial properties comprising approximately 6.3 million
square feet of GLA and the September 1999 Joint Venture owned 39 industrial
properties comprising approximately 1.2 million square feet of GLA.
MORTGAGE LOANS PAYABLE
In March 2001, the Company purchased approximately $1.1 million of U.S.
Government securities as substitute collateral to execute a legal defeasance of
approximately $1.1 million of the 1995 Mortgage Loan. The terms of the legal
defeasance require the Mortgage Partnership to use the gross proceeds from the
maturities of the U.S. Government securities to paydown and subsequently retire
the defeased portion of the 1995 Mortgage Loan in January 2003. The Company is
carrying the defeased portion of the 1995 Mortgage Loan on its balance sheet
until it pays down and retires the defeased portion of the 1995 Mortgage Loan in
January 2003. Upon the execution of the legal defeasance, one of the 22
properties collateralizing the 1995 Mortgage Loan was released and subsequently
sold.
On October 23, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $4.2 million (the "Acquisition Mortgage
Loan I") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan I was collateralized by a property in Bensenville,
Illinois, bore interest at a fixed rate of 8.5% and provided for monthly
principal and interest payments based upon a 15-year amortization schedule. On
May 31, 2001, the Company, through the Operating Partnership, paid off and
retired the Acquisition Mortgage Loan I. Due to the retirement of the
Acquisition Mortgage Loan I, the Company has recorded an extraordinary loss of
approximately $.1 million due to a prepayment fee.
On December 9, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $8.0 million (the "Acquisition Mortgage
Loan II") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan II was collateralized by ten properties in St.
Charles, Louisiana, bore interest at a fixed rate of 7.75% and provided for
monthly principal and interest payments based upon a 22-year amortization
schedule. On June 27, 2001, the Company, through the Operating Partnership, paid
off and retired the Acquisition Mortgage Loan II. Due to the retirement of the
Acquisition Mortgage Loan II, the Company has recorded an extraordinary loss of
approximately $.9 million due to a prepayment fee.
SENIOR UNSECURED DEBT
On March 19, 2001, the Company, through the Operating Partnership, issued
$200 million of senior unsecured debt which matures on March 15, 2011 and bears
a coupon interest rate of 7.375% (the "2011 Notes"). The issue price of the 2011
Notes was 99.695%. Interest is paid semi-annually in arrears on September 15 and
March 15. The Company also entered into an interest rate protection agreement
which was used to fix the interest rate on the 2011 Notes prior to issuance. The
Company settled the interest rate protection agreement for approximately $.4
million of proceeds which is included in other comprehensive income. The debt
issue discount and the settlement amount of the interest rate protection
agreement are being amortized over the life of the 2011 Notes as an adjustment
to interest expense. The 2011 Notes contain certain covenants including
limitations on incurrence of debt and debt service coverage.
On March 31, 1998, the Company, through the Operating Partnership, issued
$100 million of Dealer remarketable securities which were to mature on April 5,
2011 and bore a coupon interest rate of 6.50% (the "2011 Drs."). The issue price
of the 2011 Drs. was 99.753%. On April 5, 2001 the Company paid off and retired
the 2011 Drs. for a payment of approximately $105.6 million. In conjunction with
the forecasted retirement of the 2011 Drs., the Company entered into an interest
rate protection agreement which fixed the retirement price of the 2011 Drs. On
April 2, 2001, this interest rate protection agreement was settled for a payment
of approximately $.6 million. Due to the retirement of the 2011 Drs., the
Company
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has recorded an extraordinary loss of approximately $9.2 million comprised of
the amount paid above the 2011 Drs. carrying value, the write-off of unamortized
deferred financing fees, the write-off of the unamortized portion of an interest
rate protection agreement which was used to fix the interest rate on the 2011
Drs. prior to issuance, the settlement of the interest rate protection agreement
as discussed above, legal costs and other expenses.
PREFERRED STOCK
In 1995, the Company issued 1,650,000 shares of 9.5%, $ .01 par value,
Series A Cumulative Preferred Stock (the "Series A Preferred Stock") at an
initial offering price of $25 per share. On or after November 17, 2000, the
Series A Preferred Stock became redeemable for cash at the option of the
Company, in whole or in part, at $25 per share, or $41.3 million in the
aggregate, plus dividends accrued and unpaid to the redemption date. On March 9,
2001, the Company called for the redemption of all of the outstanding Series A
Preferred Stock at the price of $25 per share, plus accrued and unpaid
dividends. The Company redeemed the Series A Preferred Stock on April 9, 2001
and paid a prorated second quarter dividend of $.05872 per share, totaling
approximately $.1 million.
MARKET RISK
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.
This analysis presents the hypothetical gain or loss in earnings, cash
flows or fair value of the financial instruments and derivative instruments
which are held by the Company at June 30, 2001 that are sensitive to changes in
the interest rates. While this analysis may have some use as a benchmark, it
should not be viewed as a forecast.
In the normal course of business, the Company also faces risks that are
either non-financial or non-quantifiable. Such risks principally include credit
risk and legal risk and are not represented in the following analysis.
At June 30, 2001, $141.0 million (approximately 11% of total debt at June
30, 2001) of the Company's debt was variable rate debt (all of the variable rate
debt relates to the Company's 2000 Unsecured Acquisition Facility) and $1,138.2
million (approximately 89% of total debt at June 30, 2001) was fixed rate debt.
The Company also has outstanding a written put option (the "Written Option")
which was issued in conjunction with the initial offering of one tranche of
senior unsecured debt. Currently, the Company does not enter into financial
instruments for trading or other speculative purposes.
For fixed rate debt, changes in interest rates generally affect the fair
value of the debt, but not earnings or cash flows of the Company. Conversely,
for variable rate debt, changes in the interest rate generally do not impact the
fair value of the debt, but would affect the Company's future earnings and cash
flows. The interest rate risk and changes in fair market value of fixed rate
debt generally do not have a significant impact on the Company until the Company
is required to refinance such debt. See Note 4 to the consolidated financial
statements for a discussion of the maturity dates of the Company's various fixed
rate debt.
Based upon the amount of variable rate debt outstanding at June 30, 2001, a
10% increase or decrease in the interest rate on the Company's variable rate
debt would decrease or increase, respectively, future net income and cash flows
by approximately $.7 million per year. A 10% increase in interest rates would
decrease the fair value of the fixed rate debt at June 30, 2001 by approximately
$53.6 million to $1,056.3 million. A 10% decrease in interest rates would
increase the fair value of the fixed rate debt at June 30, 2001 by approximately
$59.2 million to $1,169.1 million. A 10% increase in interest rates would
decrease the fair value of the Written Option at June 30, 2001 by approximately
$1.6 million to $4.0 million. A 10%
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decrease in interest rates would increase the fair value of the Written Option
at June 30, 2001 by approximately $2.0 million to $7.6 million.
ISSUANCE OF RESTRICTED STOCK AND EMPLOYEE STOCK OPTIONS
During the six months ended June 30, 2001, the Company awarded 94,450
shares of restricted common stock to certain employees and 1,762 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3.1 million on the date of grant. The
restricted common stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting period.
During the six months ended June 30, 2001, the Company issued 1,030,900
non-qualified employee stock options to certain officers, Directors and
employees of the Company. These non-qualified employee stock options vest over
periods from one to three years, have a strike price of $31.05-33.125 per share
and expire ten years from the date of grant.
COMMON STOCK
During the six months ended June 30, 2001, certain employees of the Company
exercised 523,048 non-qualified employee stock options. Gross proceeds to the
Company were approximately $13.9 million.
DIVIDENDS/DISTRIBUTIONS
On January 2, 2001 and April 2, 2001, the Company paid quarterly preferred
stock dividends of $.59375 per share on its Series A Preferred Stock, $54.688
per share (equivalent to $.54688 per Depositary Share) on its Series B Preferred
Stock, $53.906 per share (equivalent to $.53906 per Depositary Share) on its
Series C Preferred Stock, $49.687 per share (equivalent to $.49687 per
Depositary Share) on its Series D Preferred Stock and $49.375 per share
(equivalent to $.49375 per Depositary Share) on its Series E Preferred Stock.
The preferred stock dividends paid on January 2, 2001 and April 2, 2001 totaled,
in the aggregate, approximately $8.2 million per quarter.
On January 22, 2001, the Company and the Operating Partnership paid a
fourth quarter 2000 distribution of $.6575 per common share/Unit, totaling
approximately $30.3 million.
On April 9, 2001, the Company paid a prorated second quarter dividend of
$.05872 per share, totaling approximately $.1 million, on its Series A Preferred
Stock.
On April 23, 2001, the Company and the Operating Partnership paid a first
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.5 million.
SUBSEQUENT EVENTS
From July 1, 2001 to August 3, 2001, the Company acquired six industrial
properties for an aggregate purchase price of approximately $16.7 million,
excluding costs incurred in conjunction with the acquisition of these industrial
properties. The Company also sold 20 industrial properties and several land
parcels for approximately $42.3 million of gross proceeds.
On July 2, 2001, the Company paid second quarter preferred stock dividends
of $54.688 per share (equivalent to $.54688 per Depositary Share) on its Series
B Preferred Stock, $53.906 per share (equivalent to $.53906 per Depositary
Share) on its Series C Preferred Stock, $49.687 per share (equivalent to $.49687
per Depositary Share) on its Series D Preferred Stock and $49.375 per share
(equivalent to $.49375 per Depositary Share) on its Series E Preferred Stock.
The preferred stock dividends paid on July 2, 2001 totaled, in the aggregate,
approximately $7.2 million.
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On July 23, 2001, the Company and the Operating Partnership paid a second
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.7 million.
SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that its
principle short-term liquidity needs are to fund normal recurring expenses, debt
service requirements and the minimum distribution required to maintain the
Company's REIT qualification under the Internal Revenue Code. The Company
anticipates that these needs will be met with cash flows provided by operating
activities.
The Company expects to meet long-term (greater than one year) liquidity
requirements such as property acquisitions, developments, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through the disposition of select assets, long-term secured and
unsecured indebtedness and the issuance of additional equity securities. As of
June 30, 2001, $589.2 million of common stock, preferred stock and depositary
shares and $100.0 million of debt securities were registered and unissued under
the Securities Act of 1933, as amended. As of August 3, 2001, $589.2 million of
common stock, preferred stock and depositary shares and $500.0 million of debt
securities were registered and unissued under the Securities Act of 1933, as
amended. The Company also may finance the development or acquisition of
additional properties through borrowings under the 2000 Unsecured Acquisition
Facility. At June 30, 2001, borrowings under the 2000 Unsecured Acquisition
Facility bore interest at a weighted average interest rate of 4.8%. The 2000
Unsecured Acquisition Facility bears interest at a floating rate of LIBOR plus
.80%, or the Prime Rate, at the Company's election. As of August 3, 2001, the
Company had approximately $148.3 million available for additional borrowings
under the 2000 Unsecured Acquisition Facility.
OTHER
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"), as amended by
Statement of Financial Accounting Standards No. 138, "Accounting for Derivative
Instruments and Hedging Activities- An Amendment of FAS Statement 133". FAS 133,
as amended, establishes accounting and reporting standards for derivative
instruments. Specifically, FAS 133, as amended, requires an entity to recognize
all derivatives as either assets or liabilities in the statement of financial
position and to measure those instruments at fair value. Additionally, the fair
value adjustment will affect either other comprehensive income (shareholders'
equity) or net income, depending on whether the derivative instrument qualifies
as a hedge for accounting purposes and, if so, the nature of the hedging
activity. FAS 133, as amended, also requires that any gains or losses on
derivative instruments that are reported independently as deferred gains or
losses (assets or liabilities) in the statement of financial position at the
date of initial application shall be derecognized and reported as a cumulative
transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of approximately $14.9 million.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes, the Company settled this interest rate protection agreement
and received approximately $.4 million, which is shown in other comprehensive
income. The
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Company is amortizing this settlement amount into net income as an adjustment to
interest expense over the life of the 2011 Notes.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. in April 2001, the Company settled this interest
rate protection agreement for a payment of approximately $.6 million which is a
component of the extraordinary loss the Company has recognized relating to the
retirement of the 2011 Drs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is included in Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" above.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 16, 2001, First Industrial Realty Trust, Inc. ("the Company") held its
Annual Meeting of Stockholders. At the meeting, three Class I directors of
the Company were elected to serve until the 2004 Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified. The votes cast for each director were as follows:
For election of Jay H. Shidler
Votes for: 32,481,392
Votes withheld: 1,444,310
For election of John L. Lesher
Votes for: 33,659,106
Votes withheld: 266,596
For election of J. Steven Wilson
Votes for: 33,669,366
Votes withheld: 256,336
The Company's 2001 Stock Incentive Plan was approved at the meeting with
18,024,569 shares voting in favor, 6,379,886 shares voting against, 352,182
shares abstaining and 9,169,065 broker non-votes.
In addition, the appointment of PricewaterhouseCoopers LLP, as independent
auditors of the Company for the fiscal year ending December 31, 2001 was
ratified at the meeting with 33,516,272 shares voting in favor, 79,634 shares
voting against and 329,796 shares abstaining.
Michael W. Brennan, Michael G. Damone and Kevin W. Lynch continue to serve as
Class II directors until their present terms expire in 2002 and their
successors are duly elected. John Rau, Robert J. Slater and W. Ed Tyler
continue to serve as Class III directors until their present terms expire in
2003 and their successors are duly elected.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
a) Exhibits:
None.
b) Report on Form 8-K:
Report on Form 8-K filed April 10, 2001, dated April 10, 2001 reporting
the redemption of all of the Company's outstanding 9 1/2 % Series A
Cumulative Preferred Stock.
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The Company has prepared supplemental financial and operating
information which is available without charge upon request to the Company.
Please direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 4000
Chicago, IL 60606
Attention: Investor Relations
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Date: August 10, 2001 By: /s/ Michael J. Havala
--------------------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
None.
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