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 MARCH 31, 1997
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
--------------------------
Commission File Number 1-13102
--------------------------
FIRST INDUSTRIAL REALTY TRUST, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 36-3935116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 N. WACKER DRIVE, SUITE 150, CHICAGO, ILLINOIS 60606
(Address of principal executive offices)
(312) 704-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No
Number of shares of Common Stock, $.01 par value, outstanding as of May 12,
1997: 30,130,617.
2
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1997
INDEX
-----
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996......... 2
Consolidated Statements of Operations for the Three Months Ended March 31, 1997
and March 31, 1996............................................................. 3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997
and March 31, 1996............................................................. 4
Notes to Financial Statements.................................................. 5-10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 11-14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings........................................................ 15
Item 2. Changes in Securities.................................................... 15
Item 3. Defaults Upon Senior Securities.......................................... 15
Item 4. Submission of Matters to a Vote of Security Holders...................... 15
Item 5. Other Information........................................................ 15
Item 6. Exhibits and Reports on Form 8-K......................................... 15
SIGNATURE........................................................................... 16
EXHIBIT INDEX....................................................................... 17
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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)
March 31, December 31,
1997 1996
------------ ------------
ASSETS
Assets:
Investment in Real Estate:
Land......................................................... $ 181,484 $ 153,390
Buildings and Improvements................................... 1,049,160 880,924
Furniture, Fixtures and Equipment............................ 1,662 1,662
Construction in Progress..................................... 6,688 14,803
Less: Accumulated Depreciation............................... (99,166) (91,457)
---------- ----------
Net Investment in Real Estate............................ 1,139,828 959,322
Cash and Cash Equivalents..................................... 1,633 7,646
Restricted Cash............................................... 15,400 11,837
Tenant Accounts Receivable, Net............................... 5,524 4,667
Deferred Rent Receivable...................................... 8,637 8,290
Interest Rate Protection Agreements, Net...................... 8,338 8,376
Deferred Financing Costs, Net................................. 7,255 7,442
Prepaid Expenses and Other Assets, Net........................ 21,565 15,020
---------- ----------
Total Assets............................................. $1,208,180 $1,022,600
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable........................................ $ 396,326 $ 392,082
Acquisition Facility Payable.................................. 148,100 4,400
Promissory Notes Payable...................................... --- 9,919
Accounts Payable and Accrued Expenses......................... 19,220 18,374
Rents Received in Advance and Security Deposits............... 7,285 6,122
Dividends/Distributions Payable............................... 16,904 16,281
---------- ----------
Total Liabilities........................................ 587,835 447,178
---------- ----------
Minority Interest.............................................. 89,469 42,861
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,
30,081,117 and 29,939,417 shares issued and outstanding at
March 31, 1997 and December 31, 1996, respectively).......... 301 299
Additional Paid-in-Capital..................................... 586,661 584,009
Distributions in Excess of Accumulated Earnings................ (56,103) (51,764)
---------- ----------
Total Stockholders' Equity............................... 530,876 532,561
---------- ----------
Total Liabilities and Stockholders' Equity............... $1,208,180 $1,022,600
========== ==========
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 Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
Revenues:
Rental Income................................................. $ 35,418 $ 23,126
Tenant Recoveries and Other Income............................ 10,725 7,519
-------- --------
Total Revenues........................................... 46,143 30,645
-------- --------
Expenses:
Real Estate Taxes............................................. 7,547 5,146
Repairs and Maintenance....................................... 2,662 1,419
Property Management........................................... 1,678 1,059
Utilities..................................................... 1,610 871
Insurance..................................................... 139 201
Other......................................................... 509 268
General and Administrative.................................... 1,264 934
Interest...................................................... 8,331 6,638
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs..................................... 596 775
Depreciation and Other Amortization........................... 8,617 6,348
-------- --------
Total Expenses........................................... 32,953 23,659
-------- --------
Income Before Minority Interest and Extraordinary Loss......... 13,190 6,986
Income Allocated to Minority Interest.......................... (1,356) (404)
-------- --------
Income Before Extraordinary Loss............................... 11,834 6,582
Extraordinary Loss............................................. --- (821)
-------- --------
Net Income..................................................... 11,834 5,761
Less: Preferred Stock Dividends............................... (980) (980)
-------- --------
Net Income Available to Common Stockholders................... $ 10,854 $ 4,781
======== ========
Net Income Available to Common Stockholders Before
Extraordinary Loss Per Weighted Average Common
Share Outstanding (30,028,238 and 22,305,642 as of
March 31, 1997 and 1996, respectively)........................ $ .36 $ .25
======== ========
Extraordinary Loss Per Weighted Average Common Share
Outstanding (30,028,238 and 22,305,642 as of March 31, 1997
and 1996, respectively)....................................... $ --- $ .04
======== ========
Net Income Available to Common Stockholders Per Weighted
Average Common Share Outstanding (30,028,238 and
22,305,642 as of March 31, 1997 and 1996, respectively)....... $ .36 $ .21
======== ========
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)
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................... $ 11,834 $ 5,761
Income Allocated to Minority Interest......................... 1,356 404
--------- ---------
Income Before Minority Interest............................... 13,190 6,165
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation................................................ 7,709 5,544
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs................................... 596 775
Other Amortization.......................................... 908 804
Extraordinary Loss.......................................... --- 821
Provision for Bad Debts..................................... 150 100
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets................................. (8,444) (1,116)
Increase in Deferred Rent Receivable........................ (347) (262)
Increase in Accounts Payable and Accrued Expenses
and Rents Received in Advance and Security
Deposits................................................... 488 245
Organization Costs.......................................... (20) ---
(Increase) Decrease in Restricted Cash...................... (3,875) 788
--------- ----------
Net Cash Provided by Operating Activities............... 10,355 13,864
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and Additions to Investment in Real Estate.......... (132,024) (100,294)
Decrease in Restricted Cash................................... 312 615
--------- ---------
Net Cash Used in Investing Activities................... (131,712) (99,679)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock............................ --- 113,850
Proceeds from Exercise of Employee Stock Options.............. 137 ---
Common Stock Underwriting Discounts/Offering Costs......... (682) (6,957)
Preferred Stock Offering Costs................................ --- (408)
Proceeds from Acquisition Facilities Payable.................. 143,700 10,348
Repayments on Acquisition Facilities Payable.................. --- (54,583)
Proceeds from Mortgage Loans Payable.......................... --- 36,750
Repayments on Mortgage Loans Payable.......................... (261) (200)
Repayments on Construction Loans Payable...................... --- (4,873)
Repayment of Promissory Notes Payable......................... (9,919) ---
Dividends/Distributions....................................... (16,281) (9,954)
Preferred Stock Dividends..................................... (980) (1,448)
Debt Issuance Costs........................................... (370) (1,053)
--------- ---------
Net Cash Provided by Financing Activities............... 115,344 81,472
--------- ---------
Net Decrease in Cash and Cash Equivalents...................... (6,013) (4,343)
Cash and Cash Equivalents, Beginning of Period................. 7,646 8,919
--------- ---------
Cash and Cash Equivalents, End of Period....................... $ 1,633 $ 4,576
========= =========
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 March 31, 1997, the Company owned 430 in-service properties located in 16
states, containing an aggregate of approximately 37.4 million square feet of
gross leasable area. Of the 430 properties owned by the Company, 195 are held
by First Industrial Financing Partnership, L.P.(the "Financing Partnership"),
184 are held by the Operating Partnership, 19 are held by First Industrial
Securities, L.P., 23 are held by First Industrial Mortgage Partnership, L.P.,
4 are held by First Industrial Pennsylvania Partnership, L.P., 4 are held by
First Industrial Harrisburg, L.P., and 1 is held by First Industrial
Indianapolis, L.P. First Industrial Realty Trust, Inc. is the sole general
partner of the Operating Partnership, with an approximate 88.3% ownership
interest at March 31, 1997. Minority interest in the Company at March 31,
1997 represents the approximate 11.7% aggregate partnership interest in the
Operating Partnership held by the limited partners thereof.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim financial statements have been prepared in
accordance with the accounting policies described in the financial statements
and related notes included in the Company's 1996 Form 10-K. These interim
financial statements should be read in conjunction with the December 31, 1996
audited financial statements and notes thereto included in the Company's 1996
Form 10-K. The following notes to these interim financial statements highlight
significant changes to the notes included in the December 31, 1996 audited
financial statements included in the Company's 1996 Form 10-K and present
interim disclosures as required by the Securities and Exchange Commission.
Tenant Accounts Receivable, net:
The Company provides an allowance for doubtful accounts against the
portion of tenants accounts receivable which is estimated to be uncollectible.
Accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of $750 and $600 as of March 31, 1997 and
December 31, 1996, respectively.
Earning Per Common Share:
Earnings per share amounts are based on the weighted average amount of
common stock and common stock equivalents (employee stock options) outstanding.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128 ("FAS 128"), "Earnings per
Share", effective for financial statements issued after December 15, 1997. The
Company intends to adopt FAS 128 in fiscal year 1997 and will include the
disclosure of earnings per share in accordance with FAS 128 in the 1997 year
end financial statements. The Company has determined the financial impact
to be immaterial for each of the three month periods ended March 31, 1997 and
1996.
Reclassification:
Certain 1996 items have been reclassified to conform to the 1997
presentation.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
In order to conform with generally accepted accounting principles,
management, in preparation of the Company's financial statements, is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of March
31, 1997 and December 31 1996, and the reported amounts of revenues and
expenses for the three months ended March 31, 1997 and 1996. Actual results
could differ from those estimates.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of March 31, 1997 and the results of operations and cash flows
for the three months ended March 31, 1997 and 1996 have been included.
3. MORTGAGE LOANS, ACQUISITION FACILITIES AND PROMISSORY NOTES PAYABLE
In conjunction with an acquisition of a portfolio of properties on January
31, 1997, the Company assumed two mortgage loans in the amount of $3,800 (the
"Lazarus Burman Mortgage Loan - I") and $705 (the "Lazarus Burman Mortgage Loan
- - II") which are each collateralized by a property located in Long Island, New
York. The Lazarus Burman Mortgage Loan - I bears interest at a fixed interest
rate of 10%, provides for interest only payments prior to maturity and matures
on July 11, 1998. The Lazarus Burman Mortgage Loan - II is interest free until
February 1998 at which time the mortgage loan bears interest at 8% and provides
for interest only payments prior to maturity. The Lazarus Burman Mortgage
Loan - II matures 180 days after the completion of a contingent event relating
to the environmental status of the property collateralizing the loan.
The following table discloses certain information regarding the Company's
mortgage loans, acquisition facility and promissory notes payable:
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT INTEREST RATE AT
------------------------ --------------------------- ----------------
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, MATURITY
1997 1996 1997 1996 1997 DATE
---------- ------------- --------- ------------- ---------------- --------
MORTGAGE LOANS PAYABLE
1994 Mortgage Loan.................. $300,000 $300,000 $1,766 $1,750 6.97% (1) 6/30/99 (1)
1995 Mortgage Loan.................. 40,000 40,000 168 168 7.22% 1/11/26
Harrisburg Mortgage Loan............ 6,441 6,504 37 39 7.06% 12/15/00
CIGNA Loan.......................... 36,230 36,363 --- --- 7.50% 4/1/03
Assumed Loans....................... 9,150 9,215 --- --- 9.25% 1/1/13
Lazarus Burman Mortgage
Loan- I............................. 3,800 --- 61 --- 10.00% 7/11/98
Lazarus Burman Mortgage
Loan - II........................... 705 --- --- --- (2) (2)
Total $396,326 $392,082 $2,032 $1,957
======== ======== ====== ======
ACQUISITION FACILITY PAYABLE
1996 Unsecured Acquisition
Facility............................ $148,100 $ 4,400 $ 680 $ 3 6.61% 4/1/00
======== ======== ====== ======
PROMISSORY NOTES PAYABLE
Promissory Notes.................... $ -- $ 9,919 $ -- $ 68 8.00% 1/6/97
======== ======== ====== ======
(1) The interest rate on the 1994 Mortgage Loan has been effectively fixed
through the use of interest rate protection agreements. In April 1997,
the Financing Partnership executed a legal defeasance of the 1994 Mortgage
Loan (See Note 7).
(2) The Lazarus Burman Mortgage Loan - II is interest free until February
1998 at which time the mortgage loan bears interest at 8%. The maturity
date is dependent on a contingent event.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
3. MORTGAGE LOANS, ACQUISITION FACILITIES AND PROMISSORY NOTES PAYABLE,
CONTINUED
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
------
1997 $ 735
1998 5,363
1999 301,710
2000 155,428
2001 1,683
Thereafter 78,802
--------
Total $543,721
========
$300 million of the debt maturing in 1999 was legally defeased in April
1997 (See Note 7).
The maturity date of the Lazarus Burman Mortgage Loan - II is based on a
contingent event. As a result, this loan is not included in the above table.
4. ACQUISITION OF REAL ESTATE
During the three months ended March 31, 1997, the Company acquired 48
existing industrial properties. The aggregate purchase price for these
properties totaled approximately $176.0 million, excluding costs incurred in
connection with the acquisition of the properties.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
5. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Three Months Ended
-----------------------------------------------
March 31, 1997 March 31, 1996
---------------------- -----------------------
Interest paid, net of capitalized interest............................ $ 7,615 $ 7,078
===================== ======================
Interest capitalized.................................................. $ 193 $ 42
===================== ======================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Distribution payable on common stock/units........................... $ 16,904 $ 12,477
IN CONJUNCTION WITH THE PROPERTY ACQUISITIONS, THE FOLLOWING
ASSETS AND LIABILITIES WERE ASSUMED AND OPERATING
PARTNERSHIP UNITS EXCHANGED:
Purchase of real estate............................................. $ 175,995 $ 113,547
Accrued real estate taxes and security deposits..................... (1,753) (1,631)
Mortgage loans...................................................... (4,505) (9,417)
Operating Partnerships units........................................ ( 49,483) (12,081)
--------------------- ----------------------
$ 120,254 $ 90,418
===================== ======================
6. 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.
The Company has committed to the construction of one light industrial and
three bulk warehouse properties totaling approximately .5 million square feet.
The estimated total construction costs are approximately $12.1 million. The
Company is not acting as the general contractor for these construction
projects.
7. SUBSEQUENT EVENTS
On April 3, 1997, the Company purchased a 49,190 square foot light
industrial property in Eden Prairie, Minnesota for approximately $2.1 million.
On April 4, 1997, the Company purchased a 243,000 square foot bulk
warehouse located in Columbus, Ohio for approximately $5.4 million.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
7. SUBSEQUENT EVENTS, CONTINUED
On April 4, 1997, the Company, through the Operating Partnership,
borrowed $309.8 million from an institutional lender (the "Defeasance Loan").
The Defeasance Loan is unsecured, bears interest at LIBOR plus 1% and matures
July 1, 1999, unless extended by the Operating Partnership, subject to certain
conditions, for an additional two-year period, therefore maturing July 1, 2001.
The gross proceeds from the Defeasance Loan were contributed to the Financing
Partnership, which used the gross proceeds to execute a legal defeasance of
the 1994 Mortgage Loan. The terms of the legal defeasance require the
Financing Partnership to pay down and retire the 1994 Mortgage Loan at the end
of 1997. As a result, the Company will record an extraordinary loss in the
second quarter of 1997 due to the prepayment of the 1994 Mortgage Loan. The
extraordinary loss will consist of a prepayment fee, the unamortized deferred
financing fees related to the period subsequent to the prepayment, legal costs
and other expenses incurred in retiring the 1994 Mortgage Loan.
On April 21, 1997, the Company paid a distribution of $.505 per common
share/unit to shareholders of record on March 31, 1997.
On May 13, 1997, the Operating Partnership issued $150 million (the "2007
Notes") and $100 million (the "2027 Notes") of senior unsecured debt which
mature on May 15, 2007 and May 15, 2027, respectively. The 2027 Notes are
redeemable, at the option of the holders thereof, on May 15, 2002. The 2007
Notes and the 2027 Notes bear interest at 7.60% and 7.15%, respectively. The
issue prices of the 2007 Notes and the 2027 Notes were 99.965% and 99.854%,
respectively. The Company also entered into interest rate protection agreements
which were used to hedge the interest rate on the 2007 Notes and the 2027
Notes. Due to the offering discount and the interest rate protection
agreements, the Company's effective interest rates on the 2007 Notes and the
2027 Notes are 7.61% and 7.04%, respectively. The net proceeds of
approximately $247.4 million were used as follows: $210 million to pay down
the Defeasance Loan and the remaining $37.4 million to pay down the 1996
Unsecured Acquisition Facility.
On May 14, 1997, the Company issued 4,000,000 depositary shares, each
representing 1/100 of a share of the Company's 8.75% Series B Cumulative
Preferred Stock. The net proceeds of approximately $96.1 million were used to
pay down the 1996 Unsecured Acquisition Facility.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
8. PRO FORMA FINANCIAL INFORMATION
Due to the acquisition of 160 properties between January 1, 1996 and March
31, 1997 and the issuance of 5,175,000 shares of $.01 par value common stock on
February 2, 1996 (the "February 1996 Equity Offering") and the issuance of
5,750,000 shares of $.01 par value common stock on October 25, 1996 (the
"October 1996 Equity Offering"), the historical results of operations are not
indicative of future results of operations. The following Pro Forma Condensed
Statements of Operations for the three months ended March 31, 1997 and 1996 are
presented as if such property acquisitions, the February 1996 Equity Offering
and the October 1996 Equity Offering had occurred at January 1, 1996, 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, 1996, or
to project results for any future period.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
---------------------------------------------
March 31, 1997 March 31, 1996
-------------------- --------------------
Total Revenues.......................................... $ 48,595 $ 44,401
Property Expenses....................................... 14,967 13,354
General and Administrative Expense...................... 1,264 934
Interest Expense........................................ 9,204 9,665
Depreciation and Amortization........................... 9,544 9,030
-------- --------
Income Before Minority Interest and Extraordinary
Item.................................................. 13,616 11,418
Income Allocated to Minority Interest................... (1,607) (1,396)
-------- --------
Income Before Extraordinary Item........................ 12,009 10,022
Preferred Stock Dividends............................... (980) (980)
-------- --------
Income Before Extraordinary Item Available to Common
Stockholders.......................................... $ 11,029 $ 9,042
======== ========
Income Before Extraordinary Item Available to Common
Stockholders Per Share................................ $ .37 $ .30
======== ========
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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 March 31, 1997, the Company owned 430 in-service properties with
approximately 37.4 million square feet of gross leasable area ("GLA"), compared
to 314 in-service properties with approximately 27.7 million square feet of GLA
at March 31, 1996. The addition of 122 properties acquired or developed
between April 1, 1996 and March 31, 1997 included the acquisitions of 117
properties comprising approximately 9.4 million square feet and the completed
construction of five build-to-suit properties containing a total of
approximately .7 million square feet. The sales of six properties comprised of
approximately .4 million square feet were also completed between April 1, 1996
and March 31, 1997.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED
MARCH 31, 1996
Revenues increased by $15.5 million or 51% due primarily to the
properties acquired or developed after March 31, 1996. Revenues from
properties owned prior to January 1, 1996, increased by approximately $1.2
million or 4% due to general rent increases and additional tenant recovery
income charges for additional property expenses incurred for the three months
ended March 31, 1997.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $5.2 million or 58% due primarily to the properties acquired or
developed after March 31, 1996. Expenses from properties owned prior to
January 1, 1996, increased by approximately $.7 million or 9% due to additional
snow removal expenses incurred in the Minneapolis metropolitan area and general
real estate tax increases incurred in the majority of the Company's
geographical markets.
General and administrative expense increased by $.3 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 $1.7 million for the three months ended
March 31, 1997 compared to the three months ended March 31, 1996 due primarily
to a higher average debt balance to fund the acquisition of additional
properties. The average outstanding debt balance was $107.2 million higher
during the three months ended March 31, 1997.
Amortization of interest rate protection agreements and deferred financing
costs decreased by $.2 million due primarily to a decrease in deferred
financing costs related to the loans in place during the three months ended
March 31, 1997 compared to the loans that were in place during the three months
ended March 31, 1996.
Depreciation and other amortization increased by $2.3 million due
primarily to the additional depreciation and amortization related to the
properties acquired after March 31, 1996.
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.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company's unrestricted cash and cash equivalents
was $1.6 million and restricted cash was $15.4 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 $10.4 million for the three
months ended March 31, 1997 compared to $13.9 million for the three months
ended March 31, 1996. This decrease is due primarily to an increase in tenant
accounts receivable, prepaid expenses, other assets and restricted cash which
was partially offset by an increase in net operating income due to the
operations of properties acquired or developed between April 1, 1996 and
March 31, 1997.
Net cash used in investing activities increased to $131.7 million from
$99.7 million due primarily to an increase in the acquisition of properties.
Net cash provided by financing activities increased to $115.3 million for
the three months ended March 31, 1997 from $81.5 million for the three months
ended March 31, 1996 due to an increase in borrowings under the
Company's $200 million revolving credit facility (the "1996 Unsecured
Acquisition Facility") during the three months ended March 31, 1997 which were
partially offset by an increase in dividends and distributions for the three
months ended March 31, 1997 due to the issuance of additional common shares and
Operating Partnership units in 1996 and 1997 as well as increases in per
common share/unit distributions.
Funds from operations for the three months ended March 31, 1997 were $20.8
million, as compared to $12.3 million for the three months ended March 31,
1996, 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. In accordance with the National Association of
Real Estate Investment Trusts' definition of funds from operations, the Company
calculates funds from operations to be 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. Funds from operations as calculated by the Company may
not be comparable to similarly titled, but differently calculated, measures of
other REITs. The following is a reconciliation of net income to funds from
operations:
12
14
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ -------------------
Net Income Available to
Common Stockholders............ $ 10,854 $ 4,781
Adjustments:
Depreciation and Other
Amortization................... 8,575 6,316
Extraordinary Items.............. --- 821
Minority Interest................ 1,356 404
-------- -------
Funds From Operations.......... $ 20,785 $12,322
======== =======
The ratio of earnings to fixed charges and preferred stock dividends was
2.19 for the three months ended March 31, 1997 compared to 1.71 for the three
months ended March 31, 1996. The increase is primarily due to increased net
operating income as discussed in the "Results of Operations" above.
Between January 1, 1997 and March 31, 1997, the Company purchased 48
industrial properties comprising approximately 4.2 million square feet, for an
aggregate purchase price of approximately $176.0 million. The acquisitions
activity were financed with borrowings under the 1996 Unsecured Acquisition
Facility, the issuance of 1,653,314 Operating Partnership Units and $4.5
million of indebtedness assumed in connection with property acquisitions.
The Company has committed to the construction of one light industrial and
three bulk warehouse properties totaling approximately .5 million square feet.
The estimated total construction costs are approximately $12.1 million. These
developments are expected to be funded with cash flow from operations as well
as borrowings under the Company's 1996 Unsecured Acquisition Facility.
On January 20, 1997, the Company and the Operating Partnership paid a
fourth quarter 1996 distribution of 50.5 cents per common share/unit, totaling
approximately $16.3 million. On April 21, 1997, the Company and Operating
Partnership paid a first quarter 1997 distribution of 50.5 cents per common
share/unit, totaling approximately $16.9 million. On March 31, 1997, the
Company paid a first quarter preferred stock dividend of 59.375 cents per
share, totaling approximately $1.0 million.
The Company has considered its short-term (less than one year) 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 (greater than one year) 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 1996 Unsecured Acquisition
Facility. At March 31, 1997, borrowings under the 1996 Unsecured Acquisition
Facility bore interest at a weighted average interest rate of 6.61%. As of
March 31, 1997, the Company had approximately $51.9 million available in
additional borrowings under the 1996 Unsecured 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.
13
15
In April 1997, First Industrial, L.P. (the "Operating Partnership")
borrowed $309.8 million from an institutional lender (the "Defeasance Loan").
The gross proceeds from the Defeasance Loan were contributed to the Financing
Partnership, which used the gross proceeds to execute a legal defeasance of
the 1994 Mortgage Loan. The terms of the legal defeasance require the Financing
Partnership to pay down and retire the 1994 Mortgage Loan at the end of 1997.
As a result, the Company will record an extraordinary loss in the second quarter
of 1997 due to the prepayment of the 1994 Mortgage Loan. The extraordinary
loss will consist of a prepayment fee, the unamortized deferred financing fees
related to the period subsequent to the prepayment, legal costs and other
expenses incurred in retiring the 1994 Mortgage Loan.
On May 13, 1997, the Operating Partnership issued $250 million of
senior unsecured debt. The net proceeds of approximately $247.4 million were
used as follows: $210 million to pay down the Defeasance Loan and the remaining
$37.4 million to pay down the 1996 Unsecured Acquisition Facility.
On May 14, 1997, the Company issued 4,000,000 depositary shares, each
representing 1/100 of a share of the Company's 8.75% Series B Cumulative
Preferred Stock. The net proceeds of approximately $96.1 million were used to
pay down the 1996 Unsecured Acquisition Facility.
OTHER
In February of 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings per
Share", effective for financial statements issued after December 15, 1997. The
Company intends to adopt FAS 128 in fiscal year 1997 and will include the
disclosure of earnings per share in accordance with FAS 128 in the 1997 year
end financial statements. The Company has determined the financial impact to
be immaterial for each of the three month periods ended March 31, 1997 and
1996.
14
16
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
----------- -----------
27 Financial Data Schedule
Reports on Form 8-K and Form 8-K/A:
Report on Form 8-K dated February 12, 1997, as amended by the report on
Form 8-K/A No. 1 filed April 10, 1997, relating to the acquisition of 104
industrial properties and four land parcels for future development. The
reports included Combined Historical Statements of Revenues and Certain
Expenses for the acquired properties and Pro Forma Statements of
Operations for First Industrial Realty Trust, Inc.
================================================================================
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
15
17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Date: May 14, 1997 By: /s/ Michael J. Havala
---------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
16
18
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
17
5
1
U.S. DOLLARS
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
1
17,033
0
6,274
(750)
0
7,157
1,238,994
(99,166)
1,208,180
19,220
544,426
0
317
301
530,558
1,208,180
0
46,143
0
14,145
10,477
0
8,331
10,854
0
10,854
0
0
0
10,854
.36
.36
