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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 MARCH 31, 1996
/ / 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.)
150 N. WACKER DRIVE, SUITE 150, CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(312) 704-9000
(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 May 10, 1996: 24,137,881.
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FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1996
INDEX
Part I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995....................................... 2
Consolidated Statements of Operations for the Three Month Periods Ended
March 31, 1996 and March 31, 1995........................................................................... 3
Consolidated Statements of Cash Flows for the Three Month Periods Ended
March 31, 1996 and March 31, 1995........................................................................... 4
Notes to Financial Statements............................................................................... 5-15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................................... 16-18
Part II: OTHER INFORMATION
Item 1. Legal Proceedings...................................................................................... 19
Item 2. Changes in Securities.................................................................................. 19
Item 3. Defaults Upon Senior Securities........................................................................ 19
Item 4. Submission of Matters to a Vote of Security Holders.................................................... 19
Item 5. Other Information...................................................................................... 19
Item 6. Exhibits and Reports on Form 8-K....................................................................... 19
SIGNATURE........................................................................................................... 20
EXHIBIT INDEX....................................................................................................... 21
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PART 1. FINANCIAL INFORMATION
ITEM 1.
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
March 31, December 31,
1996 1995
ASSETS --------------- ------------------
Assets:
Investment in Real Estate:
Land........................................................................... $ 127,845 $ 109,227
Buildings and Improvements..................................................... 750,531 645,872
Furniture, Fixtures and Equipment.............................................. 2,024 2,024
Construction in Progress....................................................... 709 393
Less Accumulated Depreciation.................................................. (74,293) (68,749)
--------------- ---------------
Net Investment in Real Estate............................................. 806,816 688,767
Cash and Cash Equivalents......................................................... 4,576 8,919
Restricted Cash................................................................... 10,329 11,732
Tenant Accounts Receivable, Net................................................... 3,407 2,561
Deferred Rent Receivable.......................................................... 7,938 7,676
Interest Rate Protection Agreement, Net........................................... 8,491 8,529
Deferred Financing Costs, Net..................................................... 8,917 9,422
Prepaid Expenses and Other Assets, Net............................................ 15,666 16,298
--------------- --------------
Total Assets................................................................ $ 866,140 $ 753,904
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable........................................................... $ 392,817 $ 346,850
Construction Loans Payable....................................................... --- 4,873
Acquisition Facilities Payable................................................... 4,000 48,235
Accounts Payable and Accrued Expenses............................................ 13,946 12,468
Rents Received in Advance and Security Deposits.................................. 4,835 4,124
Dividends/Distributions Payable.................................................. 12,477 10,422
--------------- --------------
Total Liabilities......................................................... 428,075 426,972
--------------- --------------
Minority Interest................................................................. 32,682 20,909
Commitments and Contingencies..................................................... --- ---
Stockholders' Equity:
Preferred Stock ($.01 par value, 10,000,000 shares authorized,
1,650,000 shares issued and outstanding)...................................... 17 17
Common Stock ($.01 par value, 100,000,000 shares authorized,
24,131,480 and 18,881,399 shares issued and outstanding at 241 190
March 31, 1996 and December 31, 1995, respectively)...........................
Additional Paid-in-Capital...................................................... 445,199 338,907
Distributions in Excess of Accumulated Earnings................................. (40,074) (33,091)
--------------- ---------------
Total Stockholders' Equity................................................ 405,383 306,023
--------------- ---------------
Total Liabilities and Stockholders' Equity................................ $ 866,140 $ 753,904
=============== ==============
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)
March 31, March 31,
1996 1995
-------------- -------------
Revenues:
Rental Income................................................................. $ 23,126 $ 19,790
Tenant Recoveries and Other Income............................................ 7,519 5,557
------------- -------------
Total Revenues............................................................ 30,645 25,347
------------- -------------
Expenses:
Real Estate Taxes............................................................. 5,146 4,036
Repairs and Maintenance....................................................... 1,419 949
Property Management........................................................... 1,059 867
Utilities..................................................................... 871 582
Insurance..................................................................... 201 218
Other......................................................................... 268 198
General and Administrative.................................................... 934 726
Interest...................................................................... 6,638 6,578
Amortization of Interest Rate Protection Agreements and Deferred Financing
Costs....................................................................... 775 1,478
Depreciation and Other Amortization........................................... 6,348 5,198
------------- ------------
Total Expenses.......................................................... 23,659 20,830
------------- ------------
Income Before Minority Interest and Extraordinary Loss........................ 6,986 4,517
Income Allocated to Minority Interest.......................................... 404 340
-------------- ------------
Income Before Extraordinary Loss.............................................. 6,582 4,177
Extraordinary Loss............................................................ 821 ---
------------- ------------
Net Income.................................................................... 5,761 4,177
Preferred Stock Dividends..................................................... 980 ---
------------- ------------
Net Income Available to Common Shareholders................................... $ 4,781 $ 4,177
============= ============
Net Income Available to Common Shareholders Before Extraordinary Loss Per
Weighted Average Common Share Outstanding (22,305,642 and 18,881,399 as
of March 31, 1996 and 1995, respectively).................................... .25 .22
============= ============
Extraordinary Loss Per Weighted Average Common Share Outstanding (22,305,642
and 18,881,399 as of March 31, 1996 and 1995, respectively).................. $ .04 $ .00
============= ============
Net Income Available to Common Shareholders Per Weighted Average Common Share
Outstanding (22,305,642 and 18,881,399 as of March 31, 1996 and 1995,
respectively)................................................................ $ .21 $ .22
============= ============
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)
March 31, March 31,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income...................................................................... $ 5,761 $ 4,177
Income Allocated to Minority Interest........................................... 404 340
---------------- ---------------
Income Before Minority Interest................................................. 6,165 4,517
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation.................................................................. 5,544 4,611
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs..................................................... 775 1,478
Other Amortization............................................................ 804 587
Extraordinary Loss............................................................ 821 ---
Provision for Bad Debts....................................................... 100 105
(Increase) in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets.................................................... (1,116) (2,638)
(Increase) in Deferred Rent Receivable........................................ (262) (521)
Increase in Accounts Payable and Accrued Expenses and Rents Received in
Advance and Security Deposits............................................... 1,876 1,280
Decrease in Restricted Cash.................................................. 788 ---
---------------- ---------------
Net Cash Provided by Operating Activities.................................. 15,495 9,419
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate.......................... (101,925) (29,483)
(Increase) Decrease in Restricted Cash.......................................... 615 (297)
----------------- ----------------
Net Cash Used in Investing Activities...................................... (101,310) (29,780)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock.............................................. 113,850 ---
Common Stock Underwriting Discounts/Offering Costs.............................. (6,957) ---
Preferred Stock Offering Costs.................................................. (408) ---
Proceeds from Acquisition Facilities Payable.................................... 10,348 31,350
Repayments on Acquisition Facilities Payable.................................... (54,583) ---
Proceeds from Mortgage Loans Payable............................................ 36,750 ---
Repayments on Mortgage Loans Payable............................................ (200) ---
Repayments on Construction Loans Payable........................................ (4,873) ---
Dividends/Distributions......................................................... (9,954) (9,648)
Preferred Stock Dividends....................................................... (1,448) ---
Debt Issuance Costs............................................................. (1,053) (1,277)
----------------- ----------------
Net Cash Provided by Financing Activities................................... 81,472 20,425
----------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents.............................. (4,343) 64
Cash and Cash Equivalents, Beginning of Period.................................... 8,919 9,117
----------------- ---------------
Cash and Cash Equivalents, End of Period.......................................... $ 4,576 $ 9,181
================= ===============
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, EXCEPT FOR PER SHARE DATA)
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 ("REIT") as defined in the Internal Revenue Code. The Company
is continuing and expanding the midwestern industrial property business of The
Shidler Group and the properties and businesses contributed by three other
contributing businesses (the "Contributing Businesses"). The Company's
operations are conducted primarily through First Industrial, L.P. (the
"Operating Partnership") of which the Company is the sole general partner. As
of March 31, 1996, the Company owned 314 in-service properties located in 15
states and containing an aggregate of approximately 27.7 million square feet of
gross leasable area. Of the 314 properties owned by the Company, 195 are held
by First Industrial Financing Partnership, L.P. (the "Financing Partnership"),
76 are held by the Operating Partnership or the Operating Partnership's
Pennsylvania subsidiaries, 19 are held by First Industrial Securities, L.P.
(the "Securities Partnership"), 23 are held by First Industrial Mortgage
Partnership, L.P. (the "Mortgage Partnership") and 1 is held by First
Industrial Indianapolis, L.P. (the "Indianapolis Partnership").
On June 30, 1994, the Company completed its initial public offering of
15,175,000 shares of $.01 par value common stock (the "Initial Offering") and,
in July 1994, issued an additional 1,400,000 shares pursuant to an
overallotment option. The price per share in the Initial Offering and the
over-allotment option was $23.50, resulting in gross offering proceeds of
approximately $389,512. Net of underwriters' discount and total offering
expenses, the Company received approximately $355,217 in proceeds from the
Initial Offering and the over-allotment option. On June 30, 1994, the Company
(through the Financing Partnership) borrowed $300,000 (the "1994 Mortgage
Loan") from an institutional lender. The net proceeds from the Initial
Offering and 1994 Mortgage Loan were used primarily to acquire properties,
repay indebtedness and pay certain fees and expenses. The Company began
operations on July 1, 1994.
On February 2, 1996, the Company issued an additional 5,175,000 shares of
$.01 par value common stock (the "1996 Equity Offering") inclusive of the
underwriters' overallotment option. The price per share in the 1996 Equity
Offering was $22, resulting in gross offering proceeds of $113,850. Net of
underwriters' discount and total offering expenses, the Company received
approximately $106,291. The net proceeds from the 1996 Equity Offering were
used to pay down the 1994 Acquisition Facility, 1995 Acquisition Facility and
Construction Loans (hereinafter defined) and fund properties subsequently
acquired.
2. BASIS OF PRESENTATION
First Industrial Realty Trust, Inc. is the sole general partner of the
Operating Partnership, with an approximate 92.2% ownership interest at March
31, 1996. First Industrial Realty Trust, Inc. is the sole stockholder of First
Industrial Finance Corporation, First Industrial Securities Corporation, First
Industrial Mortgage Corporation and First Industrial Indianapolis Corporation,
which are the sole general partners of the Financing Partnership, the
Securities Partnership, the Mortgage Partnership and the Indianapolis
Partnership, respectively. The Operating Partnership is the sole limited
partner of the Financing Partnership, the Securities Partnership, the Mortgage
Partnership and the Indianapolis Partnership. All significant intercompany
transactions have been eliminated in consolidation. Purchase accounting has
been applied when ownership interests in properties were acquired for cash,
whereas the historical cost basis of properties has been carried over when the
Contributing Businesses' ownership interests were exchanged for Operating
Partnership units.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of March 31, 1996 and the results of operations and cash flows
for the three months ended March 31, 1996 and 1995 have been included.
Minority interest in the Company at March 31, 1996 represents
approximately 7.8% of the aggregate limited partnership interest in the
Operating Partnership held by the limited partners thereof.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 March
31, 1996 and December 31, 1995, and the reported amounts of revenues and
expenses for the three months ended March 31, 1996 and 1995. Actual results
could differ from those estimates.
Revenue Recognition:
Rental income is recognized on a straight-line method under which
contractual rent increases are recognized evenly over the lease term. Tenant
recovery income includes payments from tenants for taxes, insurance and other
property operating expenses and is recognized as revenues in the same period
the related expenses are incurred by the Company.
The Company provides an allowance for doubtful accounts against the
portion of tenant accounts receivable which is estimated to be uncollectible.
Accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of $600 and $500 as of March 31, 1996 and
December 31, 1995, respectively.
Investment in Real Estate and Depreciation:
Real estate assets are carried at the lower of depreciated cost or fair
value as determined by the Company. The Company reviews its properties on a
quarterly basis for impairment and provides a provision if impairments are
determined. First, to determine if impairment may exist, the Company reviews
its properties and identifies those which have had either an event of change or
event of circumstances warranting further assessment of recoverability. Then,
the Company estimates the fair value of those properties on an individual basis
by capitalizing the expected net operating income and discounting the expected
cash flows of the properties. Such amounts are then compared to the property's
depreciated cost to determine whether an impairment exists. Interest expense,
real estate taxes and other directly related expenses incurred during
construction periods are capitalized and depreciated commencing with the date
placed in service, on the same basis as the related assets. Depreciation
expense is computed using the straight-line method based on the following
useful lives:
Years
------
Buildings and Improvements............................................ 31.5 to 40
Land Improvements..................................................... 15
Furniture, Fixtures and Equipment..................................... 5 to 10
Construction expenditures for tenant improvements and leasing commissions
are capitalized and amortized over the terms of each specific lease.
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are capitalized.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss.
Cash and Cash Equivalents:
Cash and Cash Equivalents include all cash and liquid investments with an
initial maturity of three months or less. The carrying amount approximates
fair value due to the short maturity of these investments.
Income Taxes:
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a
result, the Company generally is not subject to federal income taxation at the
corporate level to the extent it distributes annually at least 95% of its REIT
taxable income, as defined in the Code, to its stockholders and satisfies
certain other requirements. Accordingly, no provision has been made for
federal income taxes in the accompanying consolidated financial statements.
The Company and certain of its subsidiaries are subject to certain state
and local income, excise and franchise taxes. The provision for such state and
local taxes has been reflected in general and administrative expense in the
consolidated statement of operations and has not been separately stated due to
its insignificance.
For federal income tax purposes, the cash distributions paid to
stockholders may be characterized as ordinary income, return of capital
(generally non-taxable) or capital gains.
Fair Value of Financial Instruments:
The Company's financial instruments include short-term investments, tenant
accounts receivable, accounts payable, other accrued expenses and mortgage
loans payable. The fair values of these financial instruments were not
materially different from their carrying or contract values. The Company's
financial instruments also include interest rate protection agreements. See
Note 4 below.
Deferred Financing Costs:
Deferred financing costs include fees and costs incurred to obtain
long-term financing. These fees and costs are being amortized over the terms of
the respective loans. Accumulated amortization of deferred financing costs was
$4,313 and $3,593, at March 31, 1996 and December 31, 1995, respectively.
Unamortized deferred financing fees are written-off when debt is retired before
the maturity date.
Earnings Per Common Share:
Net income per share amounts are based on the weighted average of common
and common stock equivalent (stock options) shares outstanding. As of March
31, 1996 and 1995, the number of shares of common stock outstanding was
24,131,480 and 18,881,399, respectively.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
4. MORTGAGE LOANS, ACQUISITION FACILITIES AND CONSTRUCTION LOANS PAYABLE
Mortgage loans:
Concurrent with the Initial Offering, the Company (through the Financing
Partnership) borrowed $300,000 under a mortgage loan (the "1994 Mortgage
Loan"). The 1994 Mortgage Loan is cross-collateralized by, among other things,
first mortgage liens on the 195 properties owned by the Financing Partnership.
The 1994 Mortgage Loan will mature on June 30, 1999, unless extended by the
Company, subject to certain conditions, for an additional two-year period,
thereby maturing on June 30, 2001. The Operating Partnership has guaranteed
certain obligations of the Financing Partnership under the 1994 Mortgage Loan.
The 1994 Mortgage Loan provides for interest only payments which have been
effectively fixed at a rate of 6.97% through June 30, 2001. Interest payable
related to the 1994 Mortgage Loan was $1,734 and $1,905 at March 31, 1996 and
December 31, 1995, respectively. Payments (from) to the Company under the
interest rate protection agreements for the three months ended March 31, 1996
and 1995 totaled ($42) and $191, respectively, which have been included as a
component of interest expense.
In conjunction with obtaining the 1994 Mortgage Loan, the Company
purchased an interest rate protection agreement which effectively limited the
interest rate during the initial five-year term of the 1994 Mortgage Loan to
7.2% per annum. Prior to the subsequent replacement of this interest rate
protection agreement, its cost of $18,450 had been capitalized and was being
amortized over the five-year term of the agreement.
Effective July 1, 1995, the Company replaced such interest rate protection
agreement with new interest rate protection agreements and entered into
interest rate swap agreements, which together effectively fix the annual
interest rate on the 1994 Mortgage Loan at 6.97% for six years through June 30,
2001. As a result of the replacement of the interest rate protection
agreement, the Company incurred a one-time loss of $6.4 million, of which $6.3
million represents the difference between the unamortized cost of the replaced
interest rate protection agreement and the cost of the new agreements. In the
event that the Company does not exercise the two-year option to extend the 1994
Mortgage Loan, the risk associated with the interest rate protection agreements
is that the Company would be obligated to perform its obligations under the
terms or would either pay or receive cash to terminate the agreement. In
either event, the impact of such transaction would be reflected in the
Company's financial statements. The costs of the new interest rate protection
agreements have been capitalized and are being amortized over the respective
terms of the agreements. Under the terms of the new interest rate protection
agreements, certain collateral may be required to be set aside for amounts that
could become due under the agreements. At March 31, 1996 and December 31,
1995, cash collateral of $0 and $2,557, respectively, was included in
restricted cash. Accumulated amortization on the interest protection
agreements was $107 and $60 as of March 31, 1996 and December 31, 1995,
respectively.
At March 31, 1996, the fair market value of the interest rate protection
agreements was approximately $9,400, which exceeded the $8,491 net book value
by approximately $900. The fair market value was determined by a third party
evaluation and is based on estimated discounted future cash flows.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Under the terms of the 1994 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payments of tenant improvements,
capital expenditures, interest, real estate taxes, insurance and potential
environmental costs. The amount of cash reserves for payments of tenant
improvements, capital expenditures and potential environmental costs were
determined by the lender and were established at the closing of the 1994
Mortgage Loan. The amounts included in the cash reserves relating to payments
of interest, real estate taxes and insurance were determined by the lender and
approximate the next periodic payment of such item. At March 31, 1996 and
December 31, 1995, these reserves totaled $9,693 and $8,552, respectively, and
are included in Restricted Cash. Such cash reserves were invested in a money
market fund at March 31, 1996. The maturity of these investments is one day.
Accordingly, cost approximates fair market value.
On December 29, 1995 the Mortgage Partnership borrowed $40,200 under a
mortgage loan (the "1995 Mortgage Loan") from an institutional lender. In the
first quarter of 1996, the Company made a one time paydown of $200. The 1995
Mortgage Loan matures on January 11, 2026 and provides for interest only
payments through January 11, 1998, after which monthly principal and interest
payments are required based on a 28-year amortization schedule. The interest
rate under the 1995 Mortgage Loan is fixed at 7.22% per annum through January
11, 2003. After January 11, 2003, the interest rate adjusts through a
predetermined formula based on the applicable Treasury rate. Interest payable
related to the 1995 Mortgage Loan was $168 and $24 at March 31, 1996 and
December 31, 1995, respectively. The 1995 Mortgage Loan is collateralized by
23 properties held by the Mortgage Partnership.
Under the terms of the 1995 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payments of interest, real estate
taxes and insurance. The amounts included in the cash reserves relating to
payments of interest, real estate taxes and insurance were determined by the
lender and approximate the next periodic payment of such items. At March 31,
1996 and December 31, 1995, these reserves totaled $636 and $388, respectively,
and are included in Restricted Cash. Such cash reserves were invested in a
money market fund at March 31, 1996. The maturity of these investments is one
day. Accordingly, cost approximates fair market value.
On December 14, 1995, the Company, through First Industrial Harrisburg,
L.P., entered into a $6,650 mortgage loan (the "Harrisburg Mortgage Loan") that
is collateralized by three properties in Harrisburg, Pennsylvania. The
Harrisburg Mortgage Loan bears interest at a rate based on LIBOR plus 1.5% or
prime plus 2.25%, at the Company's option, and provides for interest only
payments through May 31, 1996, with monthly principal and interest payments
required subsequently based on a 26.5-year amortization schedule. At March 31,
1996, the interest rate was 6.97%. The Harrisburg Mortgage Loan will mature on
December 15, 2000.
On March 20, 1996, the Company, through the Operating Partnership and the
Indianapolis Partnership, entered into a $36,750 mortgage loan (the "CIGNA
Loan") that is collateralized by seven properties in Indianapolis, Indiana and
three properties in Cincinnati, Ohio. The CIGNA Loan bears interest at a fixed
interest rate of 7.5% and provides for monthly principal and interest payments
based on a 25-year amortization schedule. The CIGNA Loan will mature on April
1, 2003.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
On March 20, 1996, the Company, through the Operating Partnership assumed
a $6,424 mortgage loan and a $2,993 mortgage loan (together, the "Assumed
Loans") that are collateralized by 13 properties in Indianapolis, Indiana and
one property in Indianapolis, Indiana, respectively. The Assumed Loans bear
interest at a fixed rate of 9.25% and provide for monthly principal and
interest payments based on a 16.75-year amortization schedule. The Assumed
Loans will mature on January 1, 2013. Interest payable related to the Assumed
Loans was $33 at March 31, 1996.
Acquisition Facilities:
In connection with the Initial Offering, the Operating Partnership entered
into a three-year, $100,000 collateralized revolving credit facility (the "1994
Acquisition Facility"). During the quarter ended June 30, 1995, the capacity
of the 1994 Acquisition Facility was increased to $150,000. The Operating
Partnership may borrow under the facility to finance the acquisition of
additional properties and for other corporate purposes, including to obtain
additional working capital. The Company has guaranteed repayment of the 1994
Acquisition Facility. The 1994 Acquisition Facility will mature on June 29,
1997. As of March 31, 1996, borrowings under the 1994 Acquisition Facility
totaled $4,000. Borrowings under the 1994 Acquisition Facility bear interest
at a floating rate equal to LIBOR plus 2.0% or a "Corporate Base Rate" plus
.5%, at the Company's election. Under the 1994 Acquisition Facility, LIBOR
contracts are entered into by the Company as draws are made. At March 31,
1996, the weighted average interest rate was approximately 8.20%. Interest
payable related to the 1994 Acquisition Facility was $9 and $488 at March 31,
1996 and December 31, 1995, respectively. The borrowings under the 1994
Acquisition Facility are cross-collateralized by 22 properties held by the
Operating Partnership. The 1994 Acquisition Facility contains certain
financial covenants relating to debt service coverage, market value net worth,
dividend payout ratio, and total funded indebtedness.
In addition, in December 1995, the Operating Partnership entered into a
$24,219 collateralized revolving credit facility (the "1995 Acquisition
Facility") with a commercial bank. The 1995 Acquisition Facility was paid off
in full and retired in February 1996 with a portion of the proceeds of the 1996
Equity Offering. The 1995 Acquisition Facility was collateralized by six
properties held by the Operating Partnership and bore interest at a floating
rate of LIBOR plus 2.45%, and provides for interest only payments through March
31, 1996, with monthly principal and interest payments required subsequently
based on a 30-year amortization schedule. As of December 31, 1995, borrowings
under the 1995 Acquisition Facility were $11,294 and bore interest at a rate of
8.3%. Interest payable related to the 1995 Acquisition Facility was $27 at
December 31, 1995.
Construction Loans:
In 1995, the Operating Partnership entered into two construction loans
(together the "Construction Loans") with commercial banks providing total
funding commitments of $5,860. Both construction loans were paid off in full
and retired in February 1996 with a portion of the proceeds of the 1996 Equity
Offering. At December 31, 1995, the Operating Partnership had borrowed $4,873
under such construction loans which were collateralized by two properties held
by the Operating Partnership. Such borrowings bore interest at LIBOR plus 2.0%
and provide for interest only payments. The construction loans had maturity
dates of November 2 and December 21, 1996.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following is a schedule of maturities of the mortgage loans and
acquisition facilities for the next five years ending December 31, and
thereafter:
Amount
-----------
1996 $ 670
1997 5,060
1998 1,563
1999 301,710
2000 7,328
Thereafter 80,486
-----------
Total $ 396,817
===========
The $300,000 1994 Mortgage Loan maturing in 1999 may be extended at the
Company's option, subject to certain conditions, for an additional two years,
thereby maturing on June 30, 2001.
5. PREFERRED STOCK
In 1995, the Company issued 1.65 million shares of 9.5% Series A
Cumulative Preferred Stock (the "Series A Preferred Shares") at a purchase price
of $25 per share, and used the $41,250 of gross proceeds to pay down debt
outstanding under the 1994 Acquisition Facility. Dividends on the Series A
Preferred Shares are cumulative from the date of initial issuance and are
payable quarterly. The payment of dividends and amounts upon liquidation,
dissolution or winding-up ranks senior to the payments on the Company's common
stock. The Series A Preferred Shares are not redeemable prior to November 17,
2000. On or after November 17, 2000, the Series A Preferred Shares are
redeemable for cash at the option of the Company, in whole or in part, at $25.00
per share, or $41,250 in the aggregate, plus dividends accrued and unpaid to the
redemption date. The Series A Preferred Shares have no stated maturity and are
not convertible into any other securities of the Company.
The payment of dividends on, and payments on liquidation or redemption of,
the Series A Preferred Shares are guaranteed by the Securities Partnership (the
"Guarantor") pursuant to a Guarantee and Payment Agreement (the "Guarantee
Agreement"). The Series A Preferred Shares are the only securities of the
Company which have the benefit of such guarantee. To the extent the Company
fails to make any payment of dividend or pay any portion of the liquidation
preference on or the redemption price of any Series A Preferred Shares, the
Guarantor will be obligated to pay an amount to each holder of Series A
Preferred Shares equal to any such shortfall.
6. ACQUISITION OF REAL ESTATE
During the three months ended March 31, 1996, through the Operating
Partnership or a subsidiary thereof, the Company acquired 43 existing buildings
and one parcel of land on which one building is under construction. The
aggregate purchase price for these properties totaled approximately $114,284,
excluding development costs subsequent to the acquisition of the properties.
These acquisitions are as follows:
* On January 11, 1996, the Company purchased a 364,000 square foot
light industrial property located in suburban Chicago, Illinois
for approximately $4,950.
11
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
* On February 5, 1996, the Company purchased two light industrial
properties totaling 109,086 square feet located in suburban
Chicago, Illinois for approximately $2,519.
* On February 15, 1996, the Company purchased a 1,040,000 square
foot bulk warehouse property located in suburban Atlanta, Georgia
for approximately $19,581.
* On February 23, 1996, the Company purchased for approximately
$1,183 approximately 11.3 acres of land located in Atlanta,
Georgia where it is constructing a 180,000 square foot light
industrial facility.
* On February 29, 1996, the Company purchased ten light industrial
properties totaling 386,520 square feet located in suburban
Detroit, Michigan for approximately $12,897.
* On March 20, 1996, the Company purchased five bulk warehouse
properties totaling 1,331,633 square feet and 19 light industrial
properties totaling 697,820 square feet located in Indianapolis,
Indiana, three bulk warehouse properties totaling 951,080 square
feet located in Cincinnati, Ohio and one light industrial
property totaling 56,849 square feet located in Columbus, Ohio
for approximately $12,273 in cash, $46,167 in debt and 575,299
Operating Partnership units valued at $12,081.
* On March 22, 1996, the Company purchased a 151,469 square foot
bulk warehouse property located in suburban Chicago, Illinois for
approximately $3,080.
7. RELATED PARTY TRANSACTIONS
The Company leases office space in Chicago, Illinois from an affiliate of
The Shidler Group at an aggregate annual cost of approximately $131.
8. EMPLOYEE BENEFIT PLANS
The Stock Incentive Plan is administered by the Compensation Committee of
the Board of Directors. Only officers and other key employees of the Company
and its affiliates generally are eligible to participate in the Stock Incentive
Plan. However, independent Directors of the Company receive automatic annual
grants of options to purchase 7,500 shares at a per share exercise price equal
to the fair market value of a share on the date of grant.
The Stock Incentive Plan authorizes (i) the grant of stock options that
qualify as incentive stock options under Section 422 of the Code, (ii) the
grant of stock options that do not so qualify, (iii) restricted stock awards,
(iv) performance share awards and (v) dividend equivalent rights. The exercise
price of stock options will be determined by the Compensation Committee, but
may not be less than 100% of the fair market value of the shares on the date of
grant. Special provisions apply to awards granted under the Stock Incentive
Plan in the event of a change in control in the Company. The Company has
reserved 1,200,000 shares for issuance under the Stock Incentive Plan. At
March 31, 1996, options covering 840,000 shares had been granted, remained
outstanding and had not been exercised. During the three months ended March
31, 1996, options covering 12,000 shares were terminated and options covering
6,000 shares were exercised. Options covering 354,000 shares are available for
future grants. The following table details the outstanding options:
12
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Options Granted,
Unexpired and Not Exercise
Exercised at Options Price
Date of Grant March 31, 1996 Exercisable Per Share
------------- -------------- ----------- ---------
June 23, 1994 528,000 350,000 (1) $ 23.50
July 30, 1994 37,500 37,500 (2) 23.50
May 26, 1995 37,500 0 (3) 18.25
July 17, 1995 237,000 118,500 (4) 20.25
---------- --------
Total 840,000 506,000
========== ========
(1) Options not exercisable at December 31, 1995 will become exercisable on June 23, 1996.
(2) Options became exercisable on July 30, 1995.
(3) Options will become exercisable on May 26, 1996.
(4) Remaining options will become exercisable on July 17, 1996.
In 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). Under the
provisions of SFAS 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value based method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". SFAS 123 requires that companies electing to continue
using the intrinsic value value based method must make pro forma disclosures of
net income and earnings per share as if the fair-value-based method of
accounting had been applied.
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method. As such, SFAS 123 did not have
an impact on the Company's first quarter results of operations or financial
position. The pro-forma information required by SFAS 123 will be included in
the footnotes to the Company's 1996 year end consolidated financial statements.
In September 1994, the Board of Directors approved and the Company adopted
a 401(k)/Profit Sharing Plan. Under the Company's 401(k)/Profit Sharing Plan,
all eligible employees may participate by making voluntary contributions. The
Company may make, but is not required to make matching contributions. For the
three months ended March 31, 1996 and 1995, the Company did not make any
matching contributions. In March 1996, the Board of Directors approved and the
Company adopted a Deferred Income Plan (the "Plan"). Under the Plan, 138,500
unit awards were granted, providing the recipients with deferred income
benefits which vest in three equal annual installments.
13
15
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
9. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Three Months Ended
---------------------------------------
March 31, 1996 March 31, 1995
------------------- ------------------
Interest paid, net of capitalized interest........................... $ 7,078 $ 6,073
=================== ==================
Interest capitalized................................................. $ 42 $ 105
=================== ==================
Supplemental Schedule of Noncash Investing and
Financing Activities:
Distribution payable on common stock/units........................... $ 12,477 $ 9,648
In Conjunction with the Property Acquisitions, the Following
Liabilities Were Assumed and Operating Partnership Units
Exchanged:
Mortgage loans....................................................... 9,417 ---
Operating Partnership Units.......................................... 12,081 ---
--------------- ------------------
$ 21,498 $ ---
=============== ==================
10. EXTRAORDINARY ITEM
A portion of the net proceeds from the 1996 Equity Offering was used to
pay off in full and retire the Construction Loans and the 1995 Acquisition
Facility. The resulting write-off of unamortized deferred financing costs and
prepayment fee incurred to retire the 1995 Acquisition Facility and
Construction Loans are shown as an extraordinary loss in the consolidated
statement of operations for the three months ended March 31, 1996.
11. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal actions
arising from the ownership 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.
Seventeen properties have leases granting the tenants options to purchase
the property. Such options are exercisable at various times and at appraised
fair market value or at a fixed purchase price generally in excess of the
Company's purchase price. As of March 31, 1996, one tenant has given notice
that it is considering exercising its purchase option on a building in Grand
Rapids, Michigan.
The Company has committed to the construction of two build-to-suit light
industrial properties totaling 207,990 square feet. The estimated total
construction costs are approximately $7.2 million. The Company is not acting
as the general contractor for these construction projects.
12. SUBSEQUENT EVENTS
On April 4, 1996, the Operating Partnership sold a property located in
suburban Detroit, Michigan. Gross proceeds from the transaction were
approximately $645.
14
16
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
On April 26, 1996, the Operating Partnership sold a property located in
Huntsville, Alabama. Gross proceeds from the transaction were approximately
$10,977.
On April 10, 1996, the Operating Partnership purchased four light
industrial properties in St. Paul, Minnesota totaling 212,293 square feet for
approximately $12,735.
13. PRO FORMA FINANCIAL INFORMATION
Due to the acquisition of 60 properties between April 1, 1995 and March
31, 1996 and the 1996 Equity Offering, the historical results of operations are
not indicative of future results of operations. The following Pro Forma
Condensed Statements of Operations for the three months ended March 31, 1996
and 1995 are presented as if the property acquisitions and the 1996 Equity
Offering had occurred at January 1, 1995, and therefore include pro forma
information. The pro forma information is based upon historical information
and does not purport to present what actual results would have been had such
transactions, in fact, occurred at January 1, 1995, or to project results for
any future period.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
---------------------------------------------
March 31, 1996 March 31, 1995
--------------------- -------------------
Total Revenues................................. $ 33,673 $ 31,168
Property Expenses............................... 9,877 8,821
General and Administrative Expense.............. 934 726
Interest Expense................................ 7,085 7,410
Depreciation and Amortization................... 7,445 7,522
--------------------- ----------------
Income Before Minority Interest and Extraordinary
Loss........................................... 8,332 6,689
Income Allocated to Minority Interest............ 585 520
--------------------- ----------------
Income Before Extraordinary Loss................. 7,747 6,169
Extraordinary Loss............................... 821 ---
--------------------- ----------------
Net Income....................................... 6,926 6,169
Preferred Stock Dividends........................ 980 ---
--------------------- ----------------
Net Income Available to Common Stockholders...... $ 5,946 $ 6,169
===================== ================
Net Income Per Share............................. $ .25 $ .26
===================== ================
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 the Company's 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.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 TO THREE MONTHS ENDED MARCH 31,
1995
At March 31, 1996, the Company owned 314 in-service properties with
approximately 27.7 million square feet, compared to 254 in-service properties
with approximately 20.2 million square feet at March 31, 1995. The addition of
60 properties acquired or developed between April 1, 1995 and March 31, 1996
included the acquisitions of 55 properties comprising approximately 6.9 million
square feet and the completed construction of five build-to-suit properties
containing a total of approximately .5 million square feet. One expansion
comprised of approximately .1 million square feet was also completed between
April 1, 1995 and March 31, 1996.
Revenues increased by $5.3 million or 20.9%, due primarily to the
properties acquired or developed after March 31, 1995. Revenues from
properties owned prior to January 1, 1995, increased by approximately $1.2
million or 4.8% due to general rent increases and additional tenant recovery
income charges for additional property expenses incurred for the three months
ended March 31, 1996.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $2.1 million or 30.9% due primarily to the properties acquired or
developed after March 31, 1995. Expenses from properties owned prior to
January 1, 1995, increased by approximately $.7 million or 10.6% due to
additional snow removal expenses incurred in the Minneapolis and Harrisburg
metropolitan areas and general real estate tax increases.
General and administrative expense increased by $.2 million due primarily
to the additional expenses associated with managing the Company's growing
operations (including additional professional fees relating to additional
properties owned and personnel to manage and expand the Company's business).
Interest expense remained unchanged at $6.6 million for the three month
periods March 31, 1996 and March 31, 1995. The average outstanding debt
balance was higher during the three months ended March 31, 1996, due to the
additional properties acquired after March 31, 1995, however, the impact on
interest expense was partially offset by lower interest rates on the 1994
Mortgage Loan.
Depreciation and other amortization increased by $1.1 million due
primarily to the additional depreciation and amortization related to the
properties acquired after March 31, 1995.
The $.8 million extraordinary item in 1996 represents the write-off of
unamortized deferred financing costs and a prepayment fee for loans that were
paid off in full and retired in 1996.
16
18
Liquidity and Capital Resources
At March 31, 1996, the Company's unrestricted cash and cash equivalents
was $4.6 million and restricted cash was $10.3 million. Restricted cash
includes reserves required to be set aside under certain of the Company's loans
for payments of tenant improvements, capital expenditures, interest, real
estate taxes, insurance and potential environmental costs. The portion of the
cash reserve relating to payments for tenant improvements, capital expenditures
and potential environmental costs was established at the closings of the $300
million mortgage loan (the "1994 Mortgage Loan") and the $40 million mortgage
loan (the "1995 Mortgage Loan"), is distributed to the Company as such
expenditures are made, and is not required to be replenished. The portion of
the cash reserve relating to payments for interest, real estate taxes and
insurance 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.
Net cash provided by operating activities was $15.5 million for the three
months ended March 31, 1996 compared to $9.4 million for the three months ended
March 31,1995. This increase is due primarily to the operations from the
acquisition or development of properties between April 1, 1995 and March 31,
1996.
Net cash used in investing activities increased to $101.3 million from
$29.8 million due to an increase in the acquisition of properties. Net cash
provided by financing activities increased to $81.5 million from $20.4 million
primarily due to the Company's issuance of 5,175,000 shares of $.01 par value
common stock in February 1996 (the "1996 Equity Offering").
Funds from operations for the three months ended March 31, 1996 were $12.3
million, as compared to $9.7 million for the three months ended March 31, 1995,
as a result of the factors discussed in the analysis of operating results
above. Management considers funds from operations to be one measure of the
financial performance of an equity REIT that provides a relevant basis for
comparison among REITs and it is presented to assist investors to analyzing the
performance of the Company. Funds from operations is equal to net income,
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization, excluding amortization of deferred financing
costs and interest rate protection agreements, and after adjustments for
unconsolidated partnerships and joint ventures. Funds from operations does not
represent cash generated from operating activities in accordance with generally
accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs, including the payment of dividends and
distributions. Funds from operations should not be considered as a substitute
for net income as a measure of results of operations or for cash flow from
operating activities calculated in accordance with generally accepted
accounting principles as a measure of liquidity.
On January 22, 1996, the Company and Operating Partnership paid a fourth
quarter 1995 distribution of 48.75 cents per common share/unit. In addition,
the Company and Operating Partnership paid a first quarter 1996 distribution of
48.75 cents per common share/unit on April 22, 1996. The total distributions
paid to the Company's common stockholders and the Operating Partnership's
limited partners for the first quarter 1996 was $12.5 million. On January 2,
1996, the Company paid a preferred stock dividend of 28.37 cents per share,
totaling approximately $.5 million. On March 29, 1996, the Company paid a
preferred stock dividend of 59.375 cents per share, totaling approximately $1.0
million.
Between January 1, 1996 and March 31, 1996, the Company purchased 43
industrial properties comprising approximately 5.1 million square feet and one
11.3 acre parcel of land for an aggregate purchase price of approximately $114.3
million. The Company also continued or began construction on two build-to-suit
properties comprising 207,990 square feet. The acquisitions and development
activity were financed with proceeds from the 1996 Equity Offering, borrowings
under the Company's $150 million collateralized acquisition facility ("1994
Acquisition Facility") and $46.2 million of indebtedness incurred or assumed in
connection with property acquisitions.
17
19
The Company has considered its short-term 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 principal 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 liquidity requirements such as
property acquisitions, scheduled debt maturities, major renovations, expansions
and other nonrecurring capital improvements through long-term secured and
unsecured indebtedness and the issuance of additional equity securities. The
Company may finance the development or acquisition of additional properties
through borrowings under the 1994 Acquisition Facility. At March 31, 1996,
borrowings under the 1994 Acquisition Facility bore interest at a weighted
average interest rate of 7.4%. As of May 10, 1995, including properties in the
process of being added to the collateral base, the Company had approximately $67
million available in additional borrowings under the 1994 Acquisition Facility.
While the Company may sell properties if property or market conditions make it
desirable, the Company does not expect to sell assets in the foreseeable future
to satisfy its liquidity requirements.
18
20
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
None.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
----------- -----------
10 Deferred Income Plan
27 Financial Data Schedule
19
21
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: May 10, 1996 By: /s/ Michael J. Havala .
------------------------------------------------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
20
22
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
10 Deferred Income Plan
27 Financial Data Schedule
21
1
EXHIBIT 10
================================================================================
FIRST INDUSTRIAL REALTY TRUST, INC.
DEFERRED INCOME PLAN
================================================================================
2
FIRST INDUSTRIAL REALTY TRUST, INC.
DEFERRED INCOME PLAN
1. PURPOSE
The purpose of the First Industrial Realty Trust, Inc. Deferred Income
Plan (the "Plan") is to enable key officers and employees of First Industrial
Realty Trust, Inc. and any affiliates (the "Company"), to receive deferred
income on account of service with the Company. The Plan is intended as a means
of maximizing the effectiveness and flexibility of the compensation
arrangements to employees of the Company and affiliates, and as an aid in
attracting and retaining individuals of outstanding abilities and specialized
skills for service.
2. EFFECTIVE DATE
Upon approval of this Plan by the Compensation Committee of the Board
of Directors of the Company (the "Committee"), the Plan shall be effective as
of January 1, 1996 (the "Effective Date").
3. PLAN ADMINISTRATION
The Plan will be administered by the Committee and/or officer(s) duly
authorized by the Committee. Reference herein to the Committee shall include
reference to any committee and/or officer so authorized by the Committee. Full
power to implement, interpret and construe the provisions of the Plan shall,
except as otherwise provided in the Plan, be vested in the Committee, which may
adopt, alter, amend or revoke rules for such purpose. The expense of
administering the Plan shall be borne by the Company and shall not be charged
against benefits payable hereunder.
4. ELIGIBILITY
Any key officer or employee of the Company designated by the Committee
is eligible to participate in the Plan. Any such officer or employee shall be
a "Participant" as of the date designated by the Committee, and his or her
status as a Participant shall continue until the earlier of termination of
service or the tenth anniversary of the Effective Date.
3
5. DEFERRED INCOME BENEFITS
The Committee may grant deferred income benefits to Participants. The
deferred income benefits shall be based upon units granted under the Plan by
the Committee. The deferred income benefit will be the crediting of an amount
equivalent to the dividend paid with respect to a share of Company common stock
for each unit granted. No deferred income benefit will be credited for any
calendar year in which dividends paid do not equal or exceed the base dividend
amount indicated in the grant. Deferred income benefit amounts credited will
be deemed to be reinvested in additional units at the then current price of
Company common stock, and such additional units shall also be eligible for
crediting of deferred income benefits.
6. RECORD AND CREDITING OF DEFERRED INCOME BENEFITS
(a) Deferred Income Benefits. The Company shall credit the amount
of any deferred income benefits to a memorandum account for the benefit of the
Participant (the "Deferred Income Benefit Account") no later than the last day
of the calendar quarter in which a dividend is paid.
(b) Value and Statement of Account. The Company shall provide
each Participant with a statement of the value of his or her Deferred Income
Benefit Account at least annually.
7. VESTING OF DEFERRED INCOME BENEFIT
Each deferred income benefit will vest pro rata over a three year
period, such period beginning on the date such benefit is credited. (As
illustrated in Exhibit A attached hereto). The Committee in its sole
discretion may accelerate the vesting of any grant hereunder.
8. TERMINATION FOR CAUSE
If any Participant's service with the Company is terminated for Cause
(as defined below), any deferred income benefit hereunder held by such
Participant shall immediately terminate and be of no further force and effect.
"Cause" shall mean and be limited to a vote of the Committee to the effect that
the Participant should be dismissed as a result of: (i) any material breach
by the Participant of any agreement to which the Participant and the Company
are parties; (ii) any act (other than retirement) or omission to act by the
Participant, including without limitation, the commission of any crime (other
than ordinary traffic violations), which may have a
2
4
material and adverse effect on the business of the Company or on the
Participant's ability to perform services for the Company; or (iii) any
material misconduct or neglect of duties by the Participant in connection with
the business or affairs of the Company.
9. PAYMENT OF DEFERRED INCOME BENEFIT
(a) In General. No withdrawals or payment shall be made from the
Participant's Deferred Income Benefit Account except as provided in this
Section 9.
(b) Payment Event. A Participant's deferred income benefit shall
be paid no later than January 31 following the calendar year in which such
benefit vests under Section 7.
(c) Death of Participant. In the event that a Participant shall
die at any time prior to complete distribution of amounts payable to him or her
under the provisions of the Plan, the unpaid vested balance of the
Participant's Deferred Income Account shall be paid in the January following
such death, or as soon as reasonably possible thereafter, to the Participant's
beneficiary or beneficiaries.
(d) Form of Payment. The Committee in its sole discretion may
elect to pay the value of a Participant's vested Deferred Income Benefit
Account in cash or Company common stock with the equivalent market value on the
payment date.
10. DESIGNATION OF BENEFICIARY
Participants shall designate in writing, in accordance with such rules
and procedures as the Committee may prescribe, the beneficiary or beneficiaries
who are to receive the Participant's Deferred Income Benefit Account in the
event of the Participant's death.
11. UNSECURED OBLIGATIONS
The obligation of the Company to make payments under the Plan shall be
a general obligation of the Company, and such payments shall be made from
general assets and property of the Company. The Participant's relationship to
the Company under the Plan shall be only that of a general unsecured creditor
and neither this Plan nor any agreement entered into hereunder or action taken
pursuant hereto shall create or be construed to create a trust or fiduciary
relationship of any kind. The Company may establish an irrevocable grantor
trust for purposes of holding and investing the Deferred Income Benefit Account
balances, but such establishment shall not create any rights in or against any
amount so held.
3
5
12. AMENDMENT AND TERMINATION
This Plan may be amended in whole or in part, suspended or terminated
by the Committee at any time, provided, however, that no amendment, suspension
or termination shall, without the consent of a Participant, adversely affect
such Participant's rights to his or her deferred income benefits. This Plan
will automatically terminate on the tenth anniversary of the Effective Date;
any deferred income benefits outstanding at such termination date will continue
to vest and be paid in accordance with the terms of the Plan.
13. EFFECT OF TRANSFER
In the event that all or substantially all of the assets of the
Company shall be transferred by way of a sale, merger, consolidation or other
means, or in the event of a change of control (as herein defined), the entire
unpaid balance of each Deferred Income Benefit Account shall be paid in a lump
sum to the Participant as of the effective date thereof.
For purposes of this Agreement, "change of control" shall mean, the
occurrence of any one of the following events:
(i) any "person", as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Act") (other than the Company, any of its Subsidiaries,
any trustee, fiduciary or other person or entity holding
securities under any employee benefit plan of the Company or
any of its Subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under
the Act) of such person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company
representing 40% or more of either: (A) the combined voting
power of the Company's then outstanding securities having the
right to vote in an election of the Company's Board of
Directors ("Voting Securities"); or (B) the then outstanding
shares of the Company common stock (in either such case other
than as a result of acquisition of securities directly from
the Company); or
(ii) persons who, as of the date of the closing of the
Company's initial public offering, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any
reason, including without limitation, as a result of a tender
offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the board, provided that
4
6
any person becoming a director of the Company subsequent to
the closing of the Company's initial public offering whose
election or nomination for election was approved by a vote of
at least a majority of the Incumbent Directors shall, for
purposes of this Plan, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve: (A)
any consolidation or merger of the Company or any Subsidiary
where the stockholders of the Company, immediately prior to
the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 50% or more of the voting
stock of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent
corporation, if any); (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company; or (C) any
plan or proposal for the liquidation or dissolution of the
Company;
Notwithstanding the foregoing, a "change of control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Company common stock or other Voting Securities
outstanding, increases (x) the proportionate number of shares of Company common
stock beneficially owned by any person to 40% or more of the shares of Company
common stock then outstanding or (y) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 40% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (x) or (y) of this sentence
shall thereafter become the beneficial owner of any additional shares of
Company common stock or other Voting Securities (other than pursuant to a stock
split, stock dividend, or similar transaction), then a "change of control"
shall be deemed to have occurred for purposes of the foregoing clause (i).
14. NON-ASSIGNABILITY
No right to receive payments under the provisions of this Plan shall
be transferable or assignable by a Participant, except by will or by the laws
of descent and distribution.
15. BINDING PROVISIONS
5
7
All of the provisions of this Plan shall be binding upon all persons
who shall be entitled to any benefits hereunder and their heirs and personal
representatives.
16. CLAIMS PROCEDURE
(a) Claim. Any person claiming a benefit, requesting an
interpretation or ruling under the Plan, or requesting information under the
Plan shall present the request in writing to the Committee which shall respond
in writing as soon as practicable.
(b) Denial of Claim. If the claim or request is denied, the
written notice of denial should state:
(i) The reason for denial, with specific reference to the
Plan provisions on which the denial is based.
(ii) A description of any additional material or
information required and an explanation of why it is
necessary.
(iii) An explanation of the Plan's claims review procedure.
(c) Review of Claim. Any person whose claim or request is denied
or who has not received a response within thirty (30) days may request a review
by notice given in writing to the Committee. The claim or request shall be
reviewed by the Committee who may, but shall not be required to, grant the
claimant a hearing. On review, the claimant may have representation, examine
pertinent documents, and submit issues and comments in writing.
(d) Final Decision. The decision on review shall normally be made
within sixty (60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and the time limit
shall be one hundred and twenty (120) days. The decision on review shall be in
writing and shall state the reason and the relevant Plan provisions. All
decisions on review shall be final and bind all parties concerned.
6
8
FIRST INDUSTRIAL REALTY TRUST, INC.
DEFERRED INCOME PLAN
Exhibit A
Assumptions:
Annual Dividend = $2.00/share
Options granted to optionholder = 10,000 in year 1
Stock Prices = $22/share in year 1
$24/share in year 2
$27/share in years 3-5
$30/share in years 6 and 7
$32/share in years 8-10
Benefit Paid
Results: Benefit ---------------------------
- - ------- Units Accrual Current Cumulative
--------- ----------- ---------------------------
Year 1 Option Issuance 10,000 $ -
First Year Dividend 941 20,692
First Year Vested Benefit Payment (314) (6,897)
--------- -----------
10,627 13,795 $ 6,897 $ 6,897
Year 2 Second Year Dividend 914 21,928
Second Year Vested Benefit Payment (592) (14,207)
--------- -----------
10,949 21,516 14,207 21,104
Year 3 Third Year Dividend 834 22,513
Third Year Vested Benefit Payment (804) (21,711)
--------- -----------
10,978 22,318 21,711 42,815
Year 4 Fourth Year Dividend 836 22,574
Fourth Year Vested Benefit Payment (827) (22,338)
--------- -----------
10,987 (22,554) 22,338 65,153
Year 5 Fifth Year Dividend 837 22,592
Fifth Year Vested Benefit Payment (836) (22,560)
--------- -----------
10,988 22,586 22,560 87,713
Year 6 Sixth Year Dividend 751 22,532
Sixth Year Vested Benefit Payment (752) (22,566)
--------- -----------
10,987 22,552 22,566 110,280
Year 7 Seventh Year Dividend 751 22,530
Seventh Year Vested Benefit Payment (752) (22,552)
--------- -----------
10,987 22,531 22,552 132,831
Year 8 Eighth Year Dividend 703 22,493
Eighth Year Vested Benefit Payment (704) (22,519)
--------- -----------
10,986 22,506 22,519 155,350
Year 9 Ninth Year Dividend 703 22,492
Ninth Year Vested Benefit Payment (703) (22,505)
--------- -----------
10,985 22,492 22,505 177,855
Year 10 Tenth Year Dividend 703 22,491
Tenth Year Vested Benefit Payment (703) (22,492)
--------- -----------
10,985 22,491 22,492 200,347
Year 11 Eleventh Year Vested Benefit Payment (14,994)
-----------
7,497 14,994 215,341
Year 12 Twelfth Year Vested Benefit Payment (7,497)
-----------
0 $ 7,497 $ 222,838
===========
5
1,000
3-MOS
DEC-31-1995
JAN-01-1996
MAR-31-1996
4,576
0
4,007
(600)
0
7,983
881,109
(74,293)
866,140
31,258
396,817
241
0
17
405,125
866,140
30,645
30,645
0
0
16,921
100
6,638
6,582
0
6,582
0
821
0
5,761
.21
.21
