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 SEPTEMBER 30, 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 November 6,
1996: 29,887,881.
2
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 1996
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995........... 2
Consolidated Statements of Operations for the Nine Month Periods Ended
September 30, 1996 and September 30, 1995............................................ 3
Consolidated Statements of Operations for the Three Month Periods Ended
September 30, 1996 and September 30, 1995............................................ 4
Consolidated Statements of Cash Flows for the Nine Month Periods Ended
September 30, 1996 and September 30, 1995............................................ 5
Notes to Financial Statements........................................................ 6-18
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 19-22
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 23
Item 2. Changes in Securities.......................................................... 23
Item 3. Defaults Upon Senior Securities................................................ 23
Item 4. Submission of Matters to a Vote of Security Holders............................ 23
Item 5. Other Information.............................................................. 23
Item 6. Exhibits and Reports on Form 8-K............................................... 23
SIGNATURE.................................................................................. 24
EXHIBIT INDEX.............................................................................. 25
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
September 30, December 31,
1996 1995
------------- ------------
ASSETS
Assets:
Investment in Real Estate:
Land.............................................................................. $ 141,405 $ 109,227
Buildings and Improvements........................................................ 806,073 645,872
Furniture, Fixtures and Equipment................................................. 1,662 2,024
Construction in Progress.......................................................... 15,581 393
Less: Accumulated Depreciation.................................................... (85,018) (68,749)
------------- ------------
Net Investment in Real Estate............................................... 879,703 688,767
Cash and Cash Equivalents........................................................... 4,552 8,919
Restricted Cash..................................................................... 9,567 11,732
Tenant Accounts Receivable, Net..................................................... 4,938 2,561
Deferred Rent Receivable............................................................ 8,416 7,676
Interest Rate Protection Agreements, Net............................................ 8,415 8,529
Deferred Financing Costs, Net....................................................... 8,091 9,422
Prepaid Expenses and Other Assets, Net.............................................. 15,782 16,298
------------- ------------
Total Assets................................................................ $ 939,464 $ 753,904
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable.............................................................. $ 392,338 $ 346,850
Construction Loans Payable.......................................................... --- 4,873
Acquisition Facilities Payable...................................................... 62,310 48,235
Promissory Notes Payable............................................................ 9,919 ---
Accounts Payable and Accrued Expenses............................................... 21,041 12,468
Rents Received in Advance and Security Deposits..................................... 4,894 4,124
Dividends/Distributions Payable..................................................... 12,802 10,422
------------- ------------
Total Liabilities........................................................... 503,304 426,972
------------- ------------
Minority Interest................................................................... 35,530 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,
24,137,881 and 18,950,216 shares issued and outstanding at
September 30, 1996 and December 31, 1995, respectively)............................ 241 190
Additional Paid-in-Capital........................................................... 445,402 338,907
Distributions in Excess of Accumulated Earnings...................................... (45,030) (33,091)
------------- ------------
Total Stockholders' Equity................................................... 400,630 306,023
------------- ------------
Total Liabilities and Stockholders' Equity................................... $ 939,464 $ 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)
Nine Months Nine Months
Ended Ended
------------------ ------------------
September 30, September 30,
1996 1995
------------------ ------------------
Revenues:
Rental Income....................................................... $ 78,054 $ 61,680
Tenant Recoveries and Other Income.................................. 23,545 16,860
--------- ---------
Total Revenues.................................................... 101,599 78,540
--------- ---------
Expenses:
Real Estate Taxes................................................... 17,061 12,563
Repairs and Maintenance............................................. 4,231 2,953
Property Management................................................. 3,657 2,563
Utilities........................................................... 2,758 1,567
Insurance........................................................... 824 676
Other............................................................... 736 573
General and Administrative.......................................... 2,899 2,254
Interest............................................................ 21,600 21,109
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs.......................................... 2,412 3,684
Depreciation and Other Amortization................................. 20,458 16,320
Disposition of Interest Rate Protection Agreement................... ---- 6,410
--------- ---------
Total Expenses.................................................. 76,636 70,672
--------- ---------
Income Before Gain on Sales of Properties, Minority Interest
and Extraordinary Loss............................................ 24,963 7,868
Gain on Sales of Properties......................................... 4,320 ---
--------- ---------
Income Before Minority Interest and Extraordinary Loss............. 29,283 7,868
Income Allocated to Minority Interest.............................. (2,164) (593)
--------- ---------
Income Before Extraordinary Loss................................... 27,119 7,275
Extraordinary Loss................................................. (821) ---
--------- ---------
Net Income......................................................... 26,298 7,275
Less: Preferred Stock Dividends................................... (2,939) ---
--------- --------
Net Income Available to Common Stockholders....................... $ 23,359 $ 7,275
======== ========
Net Income Available to Common Stockholders Before
Extraordinary Loss Per Weighted Average Common
Share Outstanding (23,529,280 and 18,881,399 as of
September 30, 1996 and 1995, respectively)...................... $ 1.03 $ .39
======== ========
Extraordinary Loss Per Weighted Average Common Share
Outstanding (23,529,280 and 18,881,399 as of September 30,
1996 and 1995, respectively).................................... $ (.04) $ ---
======== ========
Net Income Available to Common Stockholders Per Weighted
Average Common Share Outstanding (23,529,280 and
18,881,399 as of September 30, 1996 and 1995, respectively)..... $ .99 $ .39
======== ========
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
-------------- ------------------
September 30, September 30,
1996 1995
-------------- ------------------
Revenues:
Rental Income............................................ $ 28,173 $ 21,403
Tenant Recoveries and Other Income....................... 8,002 5,660
-------------- ------------------
Total Revenues......................................... 36,175 27,063
-------------- ------------------
Expenses:
Real Estate Taxes........................................ 6,156 4,385
Repairs and Maintenance.................................. 1,372 997
Property Management...................................... 1,330 927
Utilities................................................ 940 484
Insurance................................................ 286 230
Other.................................................... 187 228
General and Administrative............................... 998 789
Interest................................................. 7,603 7,344
Amortization of Interest Rate Protection Agreements
and Deferred Financing Costs.......................... 838 705
Depreciation and Other Amortization..................... 7,046 5,564
Disposition of Interest Rate Protection Agreement....... ---- 6,410
-------------- ------------------
Total Expenses...................................... 26,756 28,063
-------------- ------------------
Income (Loss) Before Minority Interest.................. 9,419 (1,000)
Income (Loss) Allocated to Minority Interest............ (759) 75
-------------- ------------------
Net Income (Loss)....................................... 8,660 (925)
Less: Preferred Stock Dividends........................ (980) ---
-------------- ------------------
Net Income (Loss) Available to Common Stockholders...... $ 7,680 $ (925)
============== ===================
Net Income (Loss) Available to Common Stockholders
Per Weighted Average Common Share Outstanding
(24,137,881 and 18,881,399 as of September 30, 1996
and 1995, respectively).............................. $ .32 $ (.05)
============== ===================
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)
Nine Months Nine Months
Ended Ended
---------------- ----------------
September 30, September 30,
1996 1995
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income..................................................... $ 26,298 $ 7,275
Income Allocated to Minority Interest.......................... 2,164 593
--------- --------------
Income Before Minority Interest................................ 28,462 7,868
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation................................................. 17,888 14,355
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs................................... 2,412 3,684
Other Amortization........................................... 2,570 1,965
Gain on Sales of Properties.................................. (4,320) ---
Extraordinary Loss........................................... 821 ---
Provision for Bad Debts...................................... 200 93
Loss from Disposition of Interest Rate Protection Agreement --- 6,410
(Increase) in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets................................ (4,536) (1,173)
(Increase) in Deferred Rent Receivable...................... (740) (1,341)
Increase (Decrease) in Accounts Payable and Accrued
Expenses and Rents Received in Advance and
Security Deposits......................................... 4,536 (2,033)
Organization Costs.......................................... (30) (117)
(Increase) Decrease in Restricted Cash.................... 926 (1,268)
---------- --------------
Net Cash Provided by Operating Activities............... 48,189 28,443
---------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and Additions to Investment in Real Estate.......... (177,269) (71,987)
Proceeds from Sales of Investment in Real Estate.............. 12,119 ---
Decrease in Restricted Cash................................... 1,239 3,108
---------- --------------
Net Cash Used in Investing Activities................... (163,911) (68,879)
---------- --------------
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.................. 75,197 60,800
Repayments on Acquisition Facilities Payable.................. (61,121) ---
Proceeds from Disposition of Interest Rate Protection
Agreement................................................... --- 12,852
Purchase of Interest Rate Protection Agreements............... --- (12,852)
Proceeds from Mortgage Loans Payable.......................... 36,750 9,040
Repayments on Mortgage Loans Payable.......................... (679) ---
Repayments on Construction Loans Payable...................... (4,873) ---
Dividends/Distributions....................................... (35,190) (28,944)
Preferred Stock Dividends..................................... (3,408) ---
Debt Issuance Costs........................................... (1,806) (2,149)
---------- -------------
Net Cash Provided by Financing Activities............... 111,355 38,747
---------- -------------
Net (Decrease) in Cash and Cash Equivalents..................... (4,367) (1,689)
Cash and Cash Equivalents, Beginning of Period.................. 8,919 9,117
---------- -------------
Cash and Cash Equivalents, End of Period........................ $ 4,552 $ 7,428
========== =============
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)
(UNAUDITED)
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 September 30, 1996, the Company owned 328 in-service properties located in
14 states, containing an aggregate of approximately 29.9 million square feet of
gross leasable area. Of the 328 properties owned by the Company, 195 are held
by First Industrial Financing Partnership, L.P. (the "Financing Partnership"),
90 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
over-allotment 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' over-allotment 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 91.8% ownership interest at
September 30, 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. The historical cost basis of properties has been
carried over when the Contributing Businesses' ownership interests were
exchanged for Operating Partnership units and purchase accounting has been used
for all other properties that were acquired 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)
(UNAUDITED)
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 September 30, 1996 and the results of operations and cash
flows for the nine months ended September 30, 1996 and 1995, and for the three
months ended September 30, 1996 and 1995, have been included.
Minority interest in the Company at September 30, 1996 represents the
approximately 8.2% aggregate 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
September 30, 1996 and December 31, 1995, and the reported amounts of revenues
and expenses for the nine months ended September 30, 1996 and 1995, and for the
three months ended September 30, 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 $700 and $500 as of September 30, 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
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
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.
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, mortgage loans
payable and acquisition facilities 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).
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
$5,892 and $3,593, at September 30, 1996 and December 31, 1995, respectively.
Unamortized deferred financing fees are written-off when debt is retired before
the maturity date (see Note 11).
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
September 30, 1996 and 1995, the number of shares of common stock outstanding
was 24,137,881 and 18,950,216, respectively.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
4. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND
PROMISSORY NOTES 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 by certain interest
rate protection agreements. Interest payable related to the 1994 Mortgage Loan
was $1,705 and $1,905 at September 30, 1996 and December 31, 1995,
respectively. Payments to (from) the Company under the interest rate
protection agreements for the nine months ended September 30, 1996 and 1995
totaled ($224) and $691, respectively, and for the three months ended September
30, 1996 and 1995 totaled ($81) and $285, 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 September 30, 1996 and December 31,
1995, cash collateral of $0 and $2,557, respectively, was included in
restricted cash. Accumulated amortization on the interest rate protection
agreements was $184 and $60 as of September 30, 1996 and December 31, 1995,
respectively.
At September 30, 1996, the fair market value of the interest rate
protection agreements was approximately $11,665, which exceeded the $8,415 net
book value by approximately $3,250. The fair market value was determined by a
third party evaluation and is based on estimated discounted future cash flows.
9
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
Under the terms of the 1994 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payment of tenant improvements,
capital expenditures, interest, real estate taxes, insurance and potential
environmental costs. The amount of cash reserves for payment of potential
environmental costs was determined by the lender and was established at the
closing of the 1994 Mortgage Loan. The amounts included in the cash reserves
relating to payments of tenant improvements, capital expenditures, interest,
real estate taxes and insurance were determined by the lender and approximate
the next periodic payment of such items. At September 30, 1996 and December
31, 1995, these reserves totaled $8,180 and $8,552, respectively, and are
included in Restricted Cash. Such cash reserves were invested in a money
market fund at September 30, 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 on the 1995
Mortgage Loan decreasing the outstanding balance to $40,000. 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 September 30, 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 security deposits,
capital expenditures, interest, real estate taxes and insurance. The amount of
cash reserves segregated for security deposits is adjusted as tenants turn
over. The amounts included in the cash reserves relating to payments of capital
expenditures, interest, real estate taxes and insurance were determined by the
lender and approximate the next periodic payment of such items. At September
30, 1996 and December 31, 1995, these reserves totaled $1,387 and $388,
respectively, and are included in Restricted Cash. Such cash reserves were
invested in a money market fund at September 30, 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 provided 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 September
30, 1996, the interest rate was 7.0%. The Harrisburg Mortgage Loan will mature
on December 15, 2000. Interest payable related to the Harrisburg Mortgage Loan
was $36 and $0 at September 30, 1996 and December 31, 1995, respectively.
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. Interest payable related to the CIGNA Loan was $0 at September 30,
1996.
10
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
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 $0 at September 30, 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 September 30, 1996, borrowings under the 1994 Acquisition Facility
totaled $62,310. Borrowings under the 1994 Acquisition Facility bore interest
at a floating rate equal to LIBOR plus 2.0% or a "Corporate Base Rate" plus
.5%, at the Company's election. Effective July 12, 1996, the lenders reduced
the interest rate to LIBOR plus 1.75%. Under the 1994 Acquisition Facility,
LIBOR contracts are entered into by the Company as draws are made. At
September 30, 1996, the weighted average interest rate was approximately 7.5%.
Interest payable related to the 1994 Acquisition Facility was $227 and $488 at
September 30, 1996 and December 31, 1995, respectively. The borrowings under
the 1994 Acquisition Facility are cross-collateralized by 26 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%. 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.
In May 1996, the Operating Partnership entered into a $10,000
collateralized revolving credit facility (the "1996 Credit Line") with a
commercial bank. The 1996 Credit Line is collateralized by three properties
held by the Operating Partnership. The Company has guaranteed repayment of the
1996 Credit Line. Borrowings under the 1996 Credit Line bear interest at a
floating rate from LIBOR plus 2.45% to LIBOR plus 2.75%, depending on the term
of the interest rate option. The 1996 Credit Line will mature on December 14,
1998. As of September 30, 1996, borrowings under the 1996 Credit Line totaled
$0.
11
13
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
In September 1996, the Operating Partnership entered into a $40,000
revolving credit facility ("1996 Acquisition Facility"). 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 the repayment of the
1996 Acquisition Facility. The 1996 Acquisition Facility will mature on March
31, 1997. As of September 30, 1996, borrowings under the 1996 Acquisition
Facility totaled $0. Borrowings under the 1996 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. Interest payable related to the 1996
Acquisition Facility was $0 at September 30, 1996. The borrowings under the
1996 Acquisition Facility are cross-collateralized by 17 properties held by the
Operating Partnership. The 1996 Acquisition Facility contains certain
financial covenants relating to debt service coverage, market value net worth,
dividend payout ratio and total funded indebtedness.
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 provided for interest only payments.
Promissory Notes Payable:
On September 30, 1996, the Company, through the Operating Partnership,
entered into a $6,489 promissory note and a $3,430 promissory note
(collectively referred to as "Promissory Notes") as partial consideration for
the purchase of two properties in Columbus, Ohio (See Note 6). The $6,489
promissory note is collateralized by a letter of credit pledged by the Company
in the amount of $2,715. The $3,430 promissory note is collaterialized by a
letter of credit pledged by the Company in the amount of $967. Both promissory
notes bear interest at 8% and mature on January 6, 1997. Interest payable
related to both promissory notes was $0 at September 30, 1996.
The following is a schedule of maturities of the mortgage loans,
acquisition facilities, and promissory notes for the next five years ending
December 31, and thereafter:
Amount
---------
1996 $ 191
1997 73,289
1998 1,563
1999 301,710
2000 7,328
Thereafter 80,486
---------
Total $ 464,567
=========
The 1994 Mortgage Loan matures in 1999 but may be extended at the
Company's option, subject to certain conditions, for an additional two years,
thereby maturing on June 30, 2001.
12
14
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
5. PREFERRED STOCK
In 1995, the Company issued 1.65 million shares of 9.5% Series A
Cumulative Preferred Stock (the "Series A Preferred Stock") 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 Stock 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 Stock are not redeemable prior to November 17,
2000. On or after November 17, 2000, the Series A Preferred Stock is
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 Stock has no stated
maturity and is 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 Stock are guaranteed by the Securities Partnership (the
"Guarantor") pursuant to a Guarantee and Payment Agreement (the "Guarantee
Agreement"). The Series A Preferred Stock is the only class of 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 shares of Series A
Preferred Stock, the Guarantor will be obligated to pay an amount to each
holder of Series A Preferred Stock equal to any such shortfall.
6. ACQUISITION OF REAL ESTATE
During the three months ended September 30, 1996, through the Operating
Partnership or a subsidiary thereof, the Company acquired 8 existing buildings
and one land parcel. The aggregate purchase price for these properties totaled
approximately $39,448, excluding costs incurred subsequent to the acquisition
of the properties. These acquisitions are as follows:
* On July 9, 1996, the Operating Partnership purchased a 125,950
square foot bulk warehouse property located in Bloomington, Minnesota
for approximately $3,512.
* On July 10, 1996, the Operating Partnership purchased for
approximately $2,700 approximately 10.7 acres of land in suburban
Detroit, Michigan where it is constructing a 140,365 square foot bulk
warehouse facility.
* On July 24, 1996, the Operating Partnership purchased a 70,560
square foot light industrial property located in Indianapolis, Indiana
for approximately $1,410.
* On August 16, 1996, the Operating Partnership purchased a 42,300
square foot light industrial property located in Plymouth Township,
Michigan for approximately $1,700.
* On September 12, 1996, the Operating Partnership purchased a 84,000
square foot light industrial property located in Dayton, Ohio for
approximately $1,115 in cash and 29,056 Operating Partnership units
valued at $689 in the aggregate ($23.72 per unit).
* On September 30, 1996, the Operating Partnership purchased a 97,770
square foot light industrial property located in Plymouth, Minnesota
for approximately $2,970.
13
15
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
* On September 30, 1996, the Operating Partnership purchased a 83,189
square foot light industrial property located in Eden Prairie,
Minnesota for approximately $3,500.
* On September 30, 1996, the Operating Partnership purchased two bulk
warehouse properties totaling 1,110,300 square feet located in
Columbus, Ohio for approximately $11,309 in cash, $9,919 in Promissory
Notes, and 24,789 Operating Partnership units valued at $624 in the
aggregate ($25.18 per unit).
7. SALES OF REAL ESTATE
On April 4, 1996, the Operating Partnership sold a property located in
suburban Detroit, Michigan. Gross proceeds from the transaction were
approximately $616. The gain on the sale was approximately $186.
On April 26, 1996, the Operating Partnership sold three properties located
in Huntsville, Alabama. Gross proceeds from the transaction were approximately
$10,025. The gain on the sale was approximately $4,105.
On May 31, 1996, the Operating Partnership sold a property located in
Grand Rapids, Michigan. Gross proceeds from the transaction were approximately
$1,478. The gain on the sale was approximately $29.
8. 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.
9. EMPLOYEE BENEFIT PLANS
The Company maintains a Stock Incentive Plan which 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
September 30, 1996, options covering 1,103,500 shares had been granted,
remained outstanding and had not been exercised. During the nine months ended
September 30, 1996, options covering 263,500 shares were granted, options
covering 12,000 shares were terminated and options covering 6,000 shares were
exercised. Options covering 90,500 shares are available for future grants.
The following table details the outstanding options as of September 30, 1996:
14
16
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
Options Granted, Exercise
Unexpired and Options Price
Date of Grant Not Exercised Exercisable Per Share
------------- ---------------- ----------- ---------
June 23, 1994 528,000 528,000 (1) $23.50
July 30, 1994 37,500 37,500 (2) 23.50
May 26, 1995 37,500 37,500 (3) 18.25
July 17, 1995 237,000 237,000 (4) 20.25
May 22, 1996 37,500 --- (5) 23.50
July 11, 1996 218,500 --- (6) 22.75
September 23, 1996 7,500 --- (7) 25.63
--------- =======
Total 1,103,500 840,000
========= =======
(1) Options became exercisable in three equal installments
on December 31, 1994, June 23, 1995 and June 23, 1996.
(2) Options became exercisable on July 30, 1995.
(3) Options became exercisable on May 26, 1996.
(4) Options became exercisable in two equal installments on January 17,
1996 and July 17, 1996.
(5) Options will become exercisable on May 22, 1997.
(6) Options will become exercisable in two equal installments on
January 11, 1997 and July 11, 1997.
(7) Options will become exercisable in two equal installments on
March 23, 1997 and September 23, 1997.
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 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 year to date or third 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
nine months ended September 30, 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.
15
17
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
10. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Nine Months Ended
------------------------------
September 30, September 30,
1996 1995
----------- -----------
Interest paid, net of capitalized interest......... $ 21,812 $ 20,540
=========== ===========
Interest capitalized............................... $ 251 $ 294
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Distribution payable on common stock/units......... $ 12,802 $ 9,648
IN CONJUNCTION WITH THE PROPERTY ACQUISITIONS, THE
FOLLOWING LIABILITIES WERE ASSUMED AND OPERATING
PARTNERSHIP UNITS EXCHANGED:
Mortgage loans..................................... 9,417 ---
Promissory Notes................................... 9,919 ---
Operating Partnership units........................ 15,398 ---
----------- -----------
$ 34,734 $ ---
=========== ===========
11. EXTRAORDINARY ITEM
A portion of the net proceeds from the 1996 Equity Offering was used to
pay off in full and retire the 1995 Acquisition Facility and the Construction
Loans. 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 nine months ended September 30, 1996.
12. 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.
The Company has committed to the construction of two light industrial and
four bulk warehouse properties totaling approximately 1,045,769 square feet.
The estimated total construction costs are approximately $31.6 million. The
Company is not acting as the general contractor for these construction
projects.
16
18
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
13. SUBSEQUENT EVENTS
On October 4, 1996, the Operating Partnership purchased a 187,777 square
foot light industrial property located in Eden Prairie, Minnesota for
approximately $7,450.
On October 8, 1996, the Operating Partnership purchased a 102,500 square
foot light industrial property located in Cleveland, Ohio for approximately
$3,650.
On October 28, 1996, the Operating Partnership purchased three bulk
warehouse properties located in Portland, Tennessee for approximately $12,819.
On October 28, 1996, the Operating Partnership purchased a light
industrial property located in Wauwatosa, Wisconsin for approximately $1,999.
On October 30, 1996, the Operating Partnership purchased five light
industrial properties located in Indianapolis, Indiana for approximately
$7,930.
On October 25, 1996, the Company issued 5,750,000 shares of common stock
at $25.50 per share, resulting in $146.6 million in gross proceeds. Of the
gross proceeds, $84.2 million was used to pay down to zero the 1994 and 1996
Acquisition Facilities.
In accordance with Accounting Principles Board Opinion No. 15 "Earnings
Per Share" when a portion of the proceeds of a common stock offering have been
used to retire debt, supplemental earnings per share data is required to be
furnished to show what earnings per share would have been for the latest
interim period if the retirement of debt had taken place at the beginning of the
fiscal year. Earnings per share would have been $1.02 per share for the nine
months ended September 30, 1996 if the $84.2 million of outstanding borrowings
were retired on January 1, 1996.
14. PRO FORMA FINANCIAL INFORMATION
Due to the acquisition of 82 properties between January 1, 1995 and
September 30, 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 nine months ended
September 30, 1996 and 1995 are presented as if such 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.
17
19
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended
--------------------------------
Sept 30, 1996 Sept 30, 1995
------------- -------------
Total Revenues........................................... $ 109,046 $ 99,386
Property Expenses......................................... (31,245) (27,359)
General and Administrative Expense........................ (2,899) (2,254)
Interest Expense.......................................... (24,422) (25,453)
Depreciation and Amortization............................. (23,807) (23,154)
Disposition of interest rate protection agreement......... --- (6,410)
------------- -------------
Income Before Gain on Sales of Properties,
Minority Interest and Extraordinary Loss.................. 26,673 14,756
Gain on Sales of Properties............................... 4,320 ---
------------- -------------
Income Before Minority Interest and Extraordinary Loss.... 30,993 14,756
Income Allocated to Minority Interest..................... (2,294) (1,121)
------------- -------------
Income Before Extraordinary Loss.......................... 28,699 13,635
Extraordinary Loss........................................ (821) ---
------------- -------------
Net Income................................................ 27,878 13,635
Preferred Stock Dividends................................. (2,939) ---
------------- -------------
Net Income Available to Common Stockholders............... $ 24,939 $ 13,635
============== =============
Net Income Per Share...................................... $ 1.03 $ 0.56
============== =============
18
20
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.
RESULTS OF OPERATIONS
At September 30, 1996, the Company owned 328 in-service properties with
approximately 29.9 million square feet of gross leasable area ("GLA"), compared
to 266 in-service properties with approximately 21.8 million square feet of GLA
at September 30, 1995. The addition of 67 properties acquired or developed
between October 1, 1995 and September 30, 1996 included the acquisitions of 65
properties comprising approximately 8.1 million square feet and the completed
construction of 2 build-to-suit properties containing a total of approximately
.3 million square feet. The sale of five properties comprised of approximately
.3 million square feet were also completed between October 1, 1995 and
September 30, 1996.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenues increased by $23.1 million or 29.4%, due primarily to the
properties acquired or developed after September 30, 1995. Revenues from
properties owned prior to January 1, 1995, increased by approximately $2.7
million or 3.8% due to general rent increases and additional tenant recovery
income charges for additional property expenses incurred for the nine months
ended September 30, 1996.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $8.4 million or 40.1% due primarily to the properties acquired or
developed after September 30, 1995. Expenses from properties owned prior to
January 1, 1995, increased by approximately $2.1 million or 11.0% due to
additional snow removal expenses incurred in the Minneapolis and Harrisburg
metropolitan areas, additional repair and maintenance expenses incurred in the
Chicago metropolitan area and general real estate tax increases.
General and administrative expense increased by $.6 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 increased by $.5 million for the nine month period ended
September 30, 1996 compared to the nine month period ended September 30, 1995.
The average outstanding debt balance was $19.3 million higher during the nine
months ended September 30, 1996, however, the impact on interest expense was
partially offset by lower interest rates on the 1994 Mortgage Loan as a result
of certain interest rate protection agreements entered into July 1995 (the "Rate
Agreements").
Amortization of interest rate protection agreements and deferred financing
costs decreased by $1.3 million due primarily to lower amortization of the Rate
Agreements compared to the amortization of the replaced interest rate
protection agreement.
Depreciation and other amortization increased by $4.1 million due
primarily to the additional depreciation and amortization related to the
properties acquired after September 30, 1995.
19
21
The $6.4 million loss from disposition of interest rate protection
agreement in 1995 resulted from the replacement of the Company's interest rate
protection agreement entered into in connection with the $300 million mortgage
loan ("1994 Mortgage Loan") with the Rate Agreements. The loss represents the
difference between the unamortized cost of the replaced interest rate
protection agreement and the cost of the Rate Agreements.
The $4.3 million gain on sales of properties in 1996 resulted from the
sale of three properties located in Huntsville, Alabama; one property located
in Detroit, Michigan and one property located in Grand Rapids, Michigan. Gross
proceeds for all sales totaled $12.1 million.
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.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Revenues increased by $9.1 million or 33.7%, due primarily to the
properties acquired or developed after September 30, 1995. Revenues from
properties owned prior to July 1, 1995, increased by approximately $1.6 million
or 6.2% due to general rent increases and additional tenant recovery income
charges for additional property expenses incurred for the three months ended
September 30, 1996.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $3.0 million or 41.7% due primarily to the properties acquired or
developed after September 30, 1995. Expenses from properties owned prior to
July 1, 1995, increased by approximately $.8 million or 11.5% due to 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 increased by $.3 million for the three month period ended
September 30, 1996 compared to the three month period ended September 30, 1995.
The average outstanding debt balance was $23.5 million higher during the three
months ended September 30, 1996, however, the impact on interest expense was
partially offset by lower interest rates on the 1994 Mortgage Loan as a result
of the Rate Agreements.
Amortization of interest rate protection agreements and deferred financing
costs increased $.1 million due to additional deferred financing costs
amortization resulting from an increase in deferred financing costs.
Depreciation and other amortization increased by $1.5 million due
primarily to the additional depreciation and amortization related to the
properties acquired after September 30, 1995.
The $6.4 million loss from disposition of interest rate protection
agreement in 1995 resulted from the replacement of the Company's interest rate
protection agreement entered into in connection with the 1994 Mortgage Loan
with the Rate Agreements. The loss represents the difference between the
unamortized cost of the replaced interest rate protection agreement and the
cost of the Rate Agreements.
20
22
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company's unrestricted cash and cash
equivalents was $4.6 million and restricted cash was $9.6 million. Restricted
cash includes reserves required to be set aside under certain of the Company's
loans for payments of security deposit refunds, tenant improvements, capital
expenditures, interest, real estate taxes, insurance and potential
environmental costs. A portion of the cash reserve relating to payments for
potential environmental costs was established at the closing of the $300
million mortgage loan (the "1994 Mortgage Loan") and is distributed to the
Company as such expenditures are made, and is not required to be replenished to
its original level. The portion of the cash reserve on the 1994 Mortgage Loan
relating to payments for tenant improvements, capital expenditures, 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. The portion of the cash
reserve relating to security deposit refunds on the $40 million mortgage loan
("1995 Mortgage Loan") is adjusted as tenants turn over. The portion of the
cash reserve relating to payments for capital expenditures, interest, real
estate taxes and insurance on 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.
Net cash provided by operating activities was $48.2 million for the nine
months ended September 30, 1996 compared to $28.4 million for the nine months
ended September 30, 1995. This increase is due primarily to the operations of
properties acquired or developed between October 1, 1995 and September 30,
1996.
Net cash used in investing activities increased to $163.9 million from
$68.9 million due to an increase in the acquisition of properties. Net cash
provided by financing activities increased to $111.4 million from $38.7 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"), the consummation of
a $36.7 million mortgage loan offset by a net decrease in acquisition line
borrowings and an increase in common and preferred stock dividends.
Funds from operations for the nine months ended September 30, 1996 were
$42.4 million, as compared to $30.5 million for the nine months ended September
30, 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 in 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.
21
23
On January 22, 1996, the Company and Operating Partnership paid a fourth
quarter 1995 distribution of 48.75 cents per common share/unit, totaling
approximately $10.0 million. On April 22, 1996, the Company and Operating
Partnership paid a first quarter 1996 distribution of 48.75 cents per
share/unit, totaling approximately $12.5 million. On July 22, 1996, the
Company and Operating Partnership paid a second quarter 1996 distribution of
48.75 cents per common share/unit, totaling approximately $12.8 million. On
October 21, 1996, the Company and Operating Partnership paid a third quarter
1996 distribution of 48.75 cents per common share/unit, totaling approximately
$12.8 million. On January 2, 1996, the Company paid a preferred stock dividend
of 28.37 cents per share, totaling approximately $.5 million. On each of March
29, 1996, June 28, 1996, and September 30, 1996, the Company paid a preferred
stock dividend of 59.375 cents per share, totaling approximately $1.0 million.
Between January 1, 1996 and September 30, 1996, the Company purchased 62
industrial properties comprising approximately 7.6 million square feet, one
11.3 acre parcel of land and one 10.7 acre parcel of land for an aggregate
purchase price of approximately $182.7 million. The Company also sold 5
properties comprising approximately .3 million square feet and continued or
began construction on two light industrial and four bulk warehouse properties
comprising 1.0 million 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.
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 and the Company's $40
million collateralized acquisition facility ("1996 Acquisition Facility"). At
September 30, 1996, borrowings under the 1994 Acquisition Facility bore
interest at a weighted average interest rate of 7.5%. As of September 30,
1996, including properties in the process of being added to the collateral
base, the Company had approximately $45.5 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.
22
24
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
Exhibits
--------
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Bylaws of First Industrial Realty
Trust, Inc. (incorporated by referenced to Exhibit 4.2 to
the Company's Registration Statement on Form S-3,
file no. 333-13225)
10.1 Fourth Amendment to Second Amended & Restated Limited
Partnership Agreement of First Industrial, L.P.
10.2 Fifth Amendment to Second Amended & Restated Limited
Partnership Agreement of First Industrial, L.P.
10.3 Fourth Amendment to Second Amended and Restated Revolving
Credit Agreement , dated as of May 12, 1995, by and among
First Industrial, L.P., First Industrial Pennsylvania,
L.P., First Industrial Realty Trust, Inc., the First
National Bank of Chicago and the other financial
institutions party thereto.
27 Financial Data Schedule
Reports on Form 8-K and Form 8-K/A:
-----------------------------------
None.
===============================================================================
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.
150 N. Wacker, Suite 150
Chicago, IL 60606
Attention: Investor Relations
23
25
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: November 8, 1996 By: /s/ Michael J. Havala
---------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
24
26
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
Ex-3.1 Amended and Restated Bylaws of First Industrial Realty Trust, Inc.
(incorporated by referenced to Exhibit 4.2 to the Company's
Registration Statement on Form S-3, file no. 333-13225)
Ex-10.1 Fourth Amendment to Second Amended & Restated Limited Partnership
Agreement of First Industrial, L.P.
Ex-10.2 Fifth Amendment to Second Amended & Restated Limited Partnership
Agreement of First Industrial, L.P.
Ex-10.3 Fourth Amendment to Second Amended and Restated Revolving Credit
Agreement , dated as of May 12, 1995, by and among First
Industrial, L.P., First Industrial Pennsylvania, L.P., First
Industrial Realty Trust, Inc., the First National Bank of Chicago
and the other financial institutions party thereto.
Ex-27 Financial Data Schedule
25
1
Exhibit 10.1
FOURTH AMENDMENT TO
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
FIRST INDUSTRIAL, L.P.
The undersigned, being the sole general partner of First Industrial, L.P.
(the "Partnership"), a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act and pursuant to the terms of that certain
Second Amended and Restated Limited Partnership Agreement dated June 30, 1994
(as amended by amendments thereto dated November 17, 1995, March 20, 1996 and
June 28, 1996, the "Partnership Agreement"), does hereby amend the Partnership
Agreement as follows:
Capitalized terms used but not defined in this Fourth Amendment shall have
the same meanings that are ascribed to them in the Partnership Agreement.
1. Additional Limited Partners. The Persons identified on Schedule 1
hereto are hereby admitted to the Partnership as Additional Limited Partners
owning the number of Units and having made the Capital Contributions set forth
on such Schedule 1. Such persons hereby adopt the Partnership Agreement. The
General Partner hereby consents to the assignment of all Units of the
Additional Limited Partners identified as transferors on Schedule 2 hereto to
their equity owners identified as transferees and in the amounts set forth on
such Schedule 2, and to the admission to the Partnership as Substituted Limited
Partners of such transferees, and such transferees are hereby admitted to the
Partnership as Substituted Limited Partners.
2. Schedule of Partners. Exhibit 1B to the Partnership Agreement is
hereby deleted in its entirety and replaced by Exhibit 1B hereto which
identifies the Partners following consummation of the transactions referred to
in Section 1 hereof.
3. Ratification. Except as expressly modified by this Fourth Amendment,
all of the provisions of the Partnership Agreement are affirmed and ratified
and remain in full force and effect.
Dated: September 13, 1996
FIRST INDUSTRIAL REALTY TRUST, INC.,
as sole General Partner of the
Partnership
By: /s/ Johannson L. Yap
-----------------------------------------
Johannson L. Yap,
Senior Vice President/Acquisitions
2
EXHIBIT 1B
SCHEDULE OF PARTNERS
--------------------
GENERAL PARTNER NUMBER OF UNITS
- ----------------------------------- ---------------
First Industrial Realty Trust, Inc. 24,137,881
LIMITED PARTNERS
- ----------------
Daniel R. Andrew, TR of the Daniel R.
Andrew Trust UA Dec 29 92 137,489
Robert W. Bennett 36,476
John E. de B Blockey, TR of the John E.
De B Blockey Trust 8,187
Michael W. Brennan 7,587
Henry D. Bullock & Terri D. Bullock &
Shawn Stevenson TR of the Bullock Childrens
Education Trust UA Dec 20 94
FBO Benjamin Dure Bullock 770
Henry D. Bullock & Terri D. Bullock &
Shawn Stevenson TR of the Bullock Childrens
Education Trust UA Dec 20 94
FBO Christine Laurel Bullock 770
Edward Burger 9,261
Henry D. Bullock & Terri D. Bullock TR
of the Henry D. & Terri D. Bullock
Trust UA Aug 28 92 12,611
Michael G Damone, TR of the Michael G.
Damone Trust UA Nov 4 69 144,296
Robert L. Denton 6,286
Henry E. Dietz Trust UA Jan 16 81 36,476
- 1 -
3
LIMITED PARTNERS NUMBER OF UNITS
- ---------------- ---------------
W. Allen Doane TR of the W. Allen
Doane Trust UA May 31, 91 4,416
Timothy Donohue 2,000
Farlow Road Associates Limited Partnership 2,751
Thelma C. Gretzinger Trust 450
Clay Hamlin & Lynn Hamlin JT TEN WROS 15,159
Highland Associates Limited Partnership 69,039
Robert W. Holman Jr. 150,134
Steven B. Hoyt 250,000
Frederick K. Ito 3,880
Michael W. Jenkins 8,831
Peter Kepic 9,261
Paul T. Lambert 39,737
Lambert Investment Corporation 13,606
LGR Investment Fund Ltd 22,556
Duane Lund 13,617
Eileen Millar 2,880
Linda Miller 2,000
Peter Murphy 56,184
Anthony Muscatello 81,654
North Star Associates Limited Partnership 19,333
Arden O'Connor 63,845
-2 -
4
LIMITED PARTNERS NUMBER OF UNITS
- ---------------- ---------------
Peter O'Connor 118,281
Shidler Equities LP 254,541
Eduardo Paneque 2,000
Partridge Road Associates Limited Partnership 2,751
James C. Reynolds 38,697
Shadeland Associates Limited Partnership 42,976
Shadeland Corporation 4,442
Jay H. Shidler 65,118
Jay H. Shidler & Wallette A. Shidler
TEN ENT 1,223
Michael B. Slade 2,829
Kevin Smith 13,571
Robert Stein 56,778
S. Larry Stein 56,778
Jonathan Stott 182,126
Michael T. Tomasz 23,868
Mark S. Whiting 25,206
Holman/Shidler Investment Corporation 22,079
-3 -
5
SCHEDULE 1
Additional
Limited Partners Number of Units Capital Contribution
- -------------------- --------------- --------------------
TROTWOOD INDUSTRIAL
PARK 29,056 $689,221.75
6
SCHEDULE 2
Transferor Transferee Number of Units
- ---------- ---------- ---------------
TROTWOOD INDUSTRIAL
PARK ROBERT STEIN 14,528
TROTWOOD INDUSTRIAL
PARK S. LARRY STEIN 14,528
1
EXHIBIT 10.2
FIFTH AMENDMENT TO
SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
FIRST INDUSTRIAL, L.P.
The undersigned, being the sole general partner of First Industrial, L.P.
(the "Partnership"), a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act and pursuant to the terms of that certain
Second Amended and Restated Limited Partnership Agreement dated June 30, 1994
(as amended by amendments thereto dated November 17, 1995, March 20, 1996, June
28, 1996 and September 13, 1996, the "Partnership Agreement"), does hereby
amend the Partnership Agreement as follows:
Capitalized terms used but not defined in this Fifth Amendment shall have
the same meanings that are ascribed to them in the Partnership Agreement.
1. Additional Limited Partners. The Person identified on Schedule 1
hereto is hereby admitted to the Partnership as an Additional Limited Partner
owning the number of Units and having made the Capital Contribution set forth
on such Schedule 1.
2. Schedule of Partners. Exhibit 1B to the Partnership Agreement is
hereby deleted in its entirety and replaced by Exhibit 1B hereto which
identifies the Partners following consummation of the transactions referred to
in Section 1 hereof.
3. Ratification. Except as expressly modified by this Fifth Amendment,
all of the provisions of the Partnership Agreement are affirmed and ratified
and remain in full force and effect.
Dated: September 30, 1996
FIRST INDUSTRIAL REALTY TRUST, INC.,
as sole General Partner of the
Partnership
By: /s/ Johannson L. Yap
------------------------------------
Johannson L. Yap,
Senior Vice President/Acquisitions
2
EXHIBIT 1B
SCHEDULE OF PARTNERS
--------------------
GENERAL PARTNER NUMBER OF UNITS
- ----------------------------------- ---------------
First Industrial Realty Trust, Inc. 24,137,881
LIMITED PARTNERS
- ----------------
Daniel R. Andrew, TR of the Daniel R.
Andrew Trust UA Dec 29 92 137,489
Robert W. Bennett 36,476
BK Columbus Venture, an Illinois
general partnership 24,789
John E. de B Blockey, TR of the John E.
De B Blockey Trust 8,187
Michael W. Brennan 7,587
Henry D. Bullock & Terri D. Bullock &
Shawn Stevenson TR of the Bullock Childrens
Education Trust UA Dec 20 94
FBO Benjamin Dure Bullock 770
Henry D. Bullock & Terri D. Bullock &
Shawn Stevenson TR of the Bullock Childrens
Education Trust UA Dec 20 94
FBO Christine Laurel Bullock 770
Edward Burger 9,261
Henry D. Bullock & Terri D. Bullock TR
of the Henry D. & Terri D. Bullock
Trust UA Aug 28 92 12,611
Michael G. Damone, TR of the Michael G.
Damone Trust UA Nov 4 69 144,296
Robert L. Denton 6,286
-1 -
3
LIMITED PARTNERS NUMBER OF UNITS
- ------------------------------- ---------------
Henry E. Dietz Trust UA Jan 16 81 36,476
W. Allen Doane TR of the W. Allen
Doane Trust UA May 31, 91 4,416
Timothy Donohue 2,000
Farlow Road Associates Limited Partnership 2,751
Thelma C. Gretzinger Trust 450
Clay Hamlin & Lynn Hamlin JT TEN WROS 15,159
Highland Associates Limited Partnership 69,039
Robert W. Holman Jr. 150,134
Steven B. Hoyt 250,000
Frederick K. Ito 3,880
Michael W. Jenkins 8,831
Peter Kepic 9,261
Paul T. Lambert 39,737
Lambert Investment Corporation 13,606
LGR Investment Fund Ltd 22,556
Duane Lund 13,617
Eileen Millar 2,880
Linda Miller 2,000
Peter Murphy 56,184
Anthony Muscatello 81,654
North Star Associates Limited Partnership 19,333
2 -
4
LIMITED PARTNERS NUMBER OF UNITS
- ---------------- ---------------
Arden O'Connor 63,845
Peter O'Connor 118,281
Shidler Equities LP 254,541
Eduardo Paneque 2,000
Partridge Road Associates Limited Partnership 2,751
James C. Reynolds 38,697
Shadeland Associates Limited Partnership 42,976
Shadeland Corporation 4,442
Jay H. Shidler 65,118
Jay H. Shidler & Wallette A. Shidler
TEN ENT 1,223
Michael B. Slade 2,829
Kevin Smith 13,571
Robert Stein 56,778
S. Larry Stein 56,778
Jonathan Stott 182,126
Michael T. Tomasz 23,868
Mark S. Whiting 25,206
Holman/Shidler Investment Corporation 22,079
-3 -
1
Exhibit 10.3
FOURTH AMENDMENT TO
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This Fourth Amendment to Second Amended and Restated Revolving Credit
Agreement ("Amendment") is made as of July 12, 1996 by and among FIRST
INDUSTRIAL, L.P., a Delaware limited partnership ("FILP"), FIRST INDUSTRIAL
PENNSYLVANIA, L.P., a Delaware limited partnership ("FILP-PA"; FILP and FILP-PA
are sometimes collectively referred to herein as "Borrower"), FIRST INDUSTRIAL
REALTY TRUST, INC., a Maryland corporation ("General Partner"), THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association ("First Chicago"), in
First Chicago's capacity as a Lender (as defined in the Credit Agreement
described below), UNION BANK OF SWITZERLAND, NEW YORK BRANCH ("UBS"), SOCIETE
GENERALE, SOUTHWEST AGENCY ("Societe Generale"), COMERICA ("Comerica"), THE
NORTHERN TRUST COMPANY ("Northern Trust"), SIGNET BANK/VIRGINIA ("Signet"), and
BHF-BANK AKTIENGESELLSCHAFT (formerly known as Berliner Handles-und Frankfurter
Bank, New York Branch) ("BHF"), and First Chicago, as Agent ("Agent") for the
Lenders (as defined in the Credit Agreement described below).
RECITALS
A. First Chicago, UBS, Societe Generale, Comerica, NBD Bank ("NBD"),
Signet, Borrower, General Partner and Agent entered into a Second Amended and
Restated Revolving Credit Agreement dated as of May 12, 1995, as amended by (i)
a First Amendment to Second Amended and Restated Revolving Credit Agreement
dated as of June 12, 1995 (which amendment, among other things, added BHF as a
"Lender"), (ii) a Second Amendment to Second Amended and Restated Revolving
Credit Agreement dated as of October 31, 1995, and (iii) a Third Amendment to
Second Amended and Restated Revolving Credit Agreement dated as of December 27,
1995 (collectively, the "Credit Agreement"). All capitalized terms used in
this Amendment and not otherwise defined shall have the meanings ascribed to
such terms in the Credit Agreement.
B. Pursuant to an Assignment Agreement dated as of June 11, 1996 NBD
assigned to Northern Trust all of NBD's right, title, interest and obligations
under the Facility, the Credit Agreement and the other Loan Documents.
C. The parties to the Credit Agreement now desire to amend certain terms
contained in the Credit Agreement, all as more particularly set forth below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENTS
2
1. The foregoing Recitals and Exhibits to this Amendment hereby are
incorporated into and made a part of this Amendment.
2. The reference to "two percent (2.0%)" contained in the definition of
"Adjusted LIBOR Rate" (as set forth in Section 1.1 of the Credit Agreement) is
hereby deleted from the Credit Agreement, and the percentage "one and
seventy-five one hundredths percent (1.75%)" is substituted in lieu thereof.
3. The definition of "Commitment Fee" (as set forth in Section 1.1 of the
Credit Agreement) is hereby deleted from the Credit Agreement, and the
following is hereby substituted in lieu thereof:
"'Commitment Fee' means a fee payable quarterly in arrears by
Borrower to the Lenders in accordance with Section 2.4(b) hereof accruing
at a rate equal to one-quarter of one percent (0.25%) per annum on the
average available but unborrowed portion of the Aggregate Commitment
(subject, however, to the provisions of Section 5.3 hereof) and
calculated at the end of each calendar quarter based on the average
available but unborrowed portion of the Aggregate Commitment for such
quarter. If any Commitment Fee is payable for any quarter where a
Defaulting Lender was in existence for all or a portion of such quarter,
then such Commitment Fee shall be calculated as if the Defaulting Lender
had made disbursements of its Percentage of all Advances requested by the
Borrower (and approved by the Lenders) during such quarter."
4. The definition of "Implied Capitalization Value" (as set forth in
Section 1.1 of the Credit Agreement) is hereby deleted from the Credit
Agreement, and the following is hereby substituted in lieu thereof:
"'Implied Capitalization Value' means for any Person for any
quarter, the sum of (i) the quotient of (x) the Adjusted EBITDA for such
Person during such quarter (which Adjusted EBITDA shall be annualized as
described in the definition of "Funds From Operations", but shall exclude
any Adjusted EBITDA attributable to Preleased Assets Under Development),
and (y) the then most recent "Average Residual Cap Rate for National
Industrial Markets", as published in the Korpacz Real Estate Investor
Survey, plus (ii) an amount equal to fifty percent (50%) of the Book
Value (as defined in the definition of "Preleased Assets Under
Development") of all Preleased Assets Under Development, provided that in
no event shall the aggregate amount added to Implied Capitalization Value
pursuant to this clause (ii) exceed $50,000,000. For purposes of
computing the Implied Capitalization Value, (A) Adjusted EBITDA may be
increased
-2-
3
from quarter to quarter by the amount of net cash flow from new leases of
space at the Properties approved by Agent (where such net cash flow has
not then been included in EBITDA) which have a minimum term of one year,
and (B) properties which either (i) were acquired during the quarter
and/or (ii) were previously assets under development under GAAP but which
have been completed during the quarter and have at least some tenants in
possession of the respective leased spaces and conducting business
operations therein each will be included in the calculation of Implied
Capitalization Value using Pro Forma EBITDA for the quarter, so long as a
"new acquisition/opening summary" form is submitted to, and approved by,
Agent for each new acquisition or newly-opened property during such
quarter. In no event shall the "Residual Cap Rate for Industrial
Markets" used to calculate the Implied Capitalization Value be less than
9% or greater than 10.5%."
5. The reference to "one hundred fifty percent (150%)" contained in clause
(a)(ii) of the definition of "Implied Debt Service Coverage Amount" (as set
forth in Section 1.1 of the Credit Agreement) is hereby deleted from the Credit
Agreement, and the percentage "one hundred forty percent (140%)" is substituted
in lieu thereof.
6. The following definition is hereby added to Section 1.1 of the Credit
Agreement:
"'Preleased Assets Under Development' means, as of any date of
determination, any bulk warehouse or light industrial property owned by
Borrower or any of their respective Subsidiaries which (i) is under
construction and then treated as an asset under development under GAAP,
and (ii) has, as of such date, at least fifty percent (50%) of its
projected total rentable area leased at market rates to third party
tenants similar to those at Borrower's other properties, both such land
and improvements under construction to be valued for purposes of this
Agreement at then-current book value, as determined in accordance with
GAAP ("Book Value"); provided, however, in no event shall Preleased
Assets Under Development include any property for more than 270 days from
the date such Property is initially so designated under GAAP."
7. Section 9.5 of the Credit Agreement is hereby amended by deleting the
"." and the end of such section and inserting the following in lieu thereof:
"; provided, however, that for purposes of computing the foregoing ratio
"EBITDA" shall not be calculated using Pro Forma EBITDA as a component
thereof.".
-3-
4
8. The text of Section 9.9 of the Credit Agreement is hereby deleted in
its entirety and the following is substituted in lieu thereof:
"At any time during the term of the Facility, permit the
Consolidated Operating Partnership to maintain a Market Value Net Worth
of less than the sum of (i) $350,000,000, plus (ii) seventy-five (75%) of
the aggregate proceeds received by Borrower and/or General Partner, as
the case may be (net of customary related fees and expenses), in
connection with any offering of (x) partnership interests of Borrower
and/or (y) stock or other equity interests in General Partner which
occurs after the date of the Fourth Amendment to this Agreement."
9. The reference to the number ".160" set forth in Section 9.12 of the
Credit Agreement is hereby deleted, and the number ".150" is substituted in
lieu thereof.
10. The following is hereby added as the last sentence of Section 13.3.1
of the Credit Agreement:
"An assignment fee of $3,500 will be paid to Agent by each assignee at
the time of each assignment."
11. All of the obligations of the parties to the Credit Agreement, as
amended hereby, are hereby ratified and confirmed. All references in the Loan
Documents to the "Credit Agreement" or the "Revolving Credit Agreement"
henceforth shall be deemed to refer to the Credit Agreement as amended by this
Amendment.
12. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be effective when it has been executed by Borrower, General
Partner, Agent, and the Lenders and each party has notified Agent by telecopy
or telephone that it has taken such action.
-4-
5
IN WITNESS WHEREOF, the Borrower, General Partner, First Chicago, UBS,
Societe Generale, Comerica, Northern Trust, Signet, BHF and Agent have executed
this Amendment as of the date first above written.
FIRST INDUSTRIAL, L.P.
By: First Industrial Realty Trust,
Inc., its general partner
By: Michael J. Havala
-----------------------------------------
Title: CFO
--------------------------------------
FIRST INDUSTRIAL PENNSYLVANIA, L.P.
By: First Industrial Pennsylvania
Corporation, its general partner
By: Michael J. Havala
---------------------------------------
Title: CFO
------------------------------------
FIRST INDUSTRIAL REALTY TRUST, INC., as
Guarantor and as General Partner
By: Michael J. Havala
---------------------------------------
Title: CFO
------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO, as
Lender
By: Rebecca McCloskey
--------------------------------------
Title: Vice President
-----------------------------------
-5-
6
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
By:
---------------------------------------
Title:
------------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
COMERICA
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
THE NORTHERN TRUST COMPANY
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
SIGNET BANK/VIRGINIA
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
BHF-BANK AKTIENGESELLSCHAFT
By: Signature
---------------------------------------
Title: Vice President
------------------------------------
5
1
U.S. DOLLARS
9-MOS
DEC-31-1996
JAN-01-1996
SEP-30-1996
1
4,552
0
5,638
(700)
0
9,490
964,721
(85,018)
939,464
21,041
464,567
241
0
17
400,372
939,464
101,599
101,599
0
29,267
25,769
0
21,600
27,119
0
27,119
0
(821)
0
26,298
.99
.99
