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, 2001
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
--------------------------
Commission File Number 1-13102
--------------------------
FIRST INDUSTRIAL REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 36-3935116
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices)
(312) 344-4300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /
Number of shares of Common Stock, $.01 par value, outstanding as of May 7, 2001:
39,451,428
2
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2001
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000............... 2
Consolidated Statements of Operations for the Three Months Ended March 31,
2001 and March 31, 2000.............................................................. 3
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
2001 and March 31, 2000.............................................................. 4
Notes to Consolidated Financial Statements .......................................... 5-13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................................... 14-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................... 21
PART II: OTHER INFORMATION
Item 1. Legal Proceedings .............................................................. 22
Item 2. Changes in Securities .......................................................... 22
Item 3. Defaults Upon Senior Securities................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders ............................ 22
Item 5. Other Information .............................................................. 22
Item 6. Exhibits and Report on Form 8-K................................................. 22
SIGNATURE ................................................................................ 24
EXHIBIT INDEX ............................................................................ 25
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
March 31, December 31,
2001 2000
-------------- -----------------
ASSETS
Assets:
Investment in Real Estate:
Land.................................................... $ 400,367 $ 397,624
Buildings and Improvements.............................. 1,995,029 1,989,034
Furniture, Fixtures and Equipment....................... 1,333 1,437
Construction in Progress................................ 65,767 52,715
Less: Accumulated Depreciation.......................... (226,071) (219,701)
---------------- ---------------
Net Investment in Real Estate........................ 2,236,425 2,221,109
Real Estate Held for Sale, Net of Accumulated Depreciation
and Amortization $30,911................................. 270,469 236,422
Cash and Cash Equivalents.................................. 13,363 7,731
Restricted Cash............................................ 4,317 24,215
Tenant Accounts Receivable, Net............................ 11,667 9,793
Investments in Joint Ventures.............................. 5,907 6,158
Deferred Rent Receivable................................... 14,691 14,790
Deferred Financing Costs, Net.............................. 13,608 12,154
Prepaid Expenses and Other Assets, Net..................... 71,252 86,121
---------------- ---------------
Total Assets......................................... $ 2,641,699 $ 2,618,493
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable, Net................................ $ 100,932 $ 102,575
Senior Unsecured Debt, Net................................. 1,148,200 948,781
Acquisition Facility Payable............................... 9,300 170,000
Accounts Payable and Accrued Expenses...................... 81,790 93,336
Rents Received in Advance and Security Deposits............ 23,432 20,104
Dividends/Distributions Payable............................ 38,748 38,492
---------------- ---------------
Total Liabilities.................................... 1,402,402 1,373,288
---------------- ---------------
Minority Interest............................................. 186,058 186,833
Commitments and Contingencies................................. --- ---
Stockholders' Equity:
Preferred Stock ($.01 par value, 10,000,000 shares authorized,
1,650,000, 40,000, 20,000, 50,000 and 30,000 shares of Series
A, B, C, D and E Cumulative Preferred Stock, respectively,
issued and outstanding at March 31, 2001 and December 31,
2000, having a liquidation preference of $25 per share
($41,250), $2,500 per share ($100,000), $2,500
per share ($50,000), $2,500 per share ($125,000) and
$2,500 per share ($75,000), respectively.................. 18 18
Common Stock ($.01 par value, 100,000,000 shares authorized,
39,286,641 and 38,844,086 shares issued and outstanding at
March 31, 2001 and December 31, 2000, respectively)....... 397 392
Additional Paid-in-Capital.................................... 1,214,776 1,205,052
Distributions in Excess of Accumulated Earnings............... (126,145) (126,962)
Unearned Value of Restricted Stock Grants..................... (10,256) (8,812)
Amortization of Stock Based Compensation...................... 744 383
Accumulated Other Comprehensive Loss.......................... (14,596) ---
Treasury Shares at Cost (394,300 shares)...................... (11,699) (11,699)
---------------- ---------------
Total Stockholders' Equity........................... 1,053,239 1,058,372
---------------- ---------------
Total Liabilities and Stockholders' Equity........... $ 2,641,699 $ 2,618,493
================ ===============
The accompanying notes are an integral part of the financial statements.
2
4
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31,2001 March 31,2000
---------------- -----------------
Revenues:
Rental Income....................................................... $ 74,458 $ 74,129
Tenant Recoveries and Other Income.................................. 24,955 21,019
---------------- -----------------
Total Revenues................................................. 99,413 95,148
---------------- -----------------
Expenses:
Real Estate Taxes................................................... 15,141 15,305
Repairs and Maintenance............................................. 5,727 4,554
Property Management................................................. 3,529 3,304
Utilities........................................................... 3,449 2,615
Insurance........................................................... 597 188
Other............................................................... 1,199 1,454
General and Administrative.......................................... 4,602 3,661
Interest Expense.................................................... 21,202 19,785
Amortization of Deferred Financing Costs............................ 442 428
Depreciation and Other Amortization................................. 17,354 17,621
---------------- -----------------
Total Expenses................................................. 73,242 68,915
---------------- -----------------
Income from Operations Before Equity in Income of Joint Ventures and
Income Allocated to Minority Interest .............................. 26,171 26,233
Equity in Income of Joint Ventures..................................... 186 31
Income Allocated to Minority Interest ................................. (5,034) (3,799)
---------------- -----------------
Income from Operations................................................. 21,323 22,465
Gain on Sale of Real Estate............................................ 13,876 5,874
---------------- -----------------
Net Income............................................................. 35,199 28,339
Less: Preferred Stock Dividends....................................... (8,211) (8,211)
---------------- -----------------
Net Income Available to Common Stockholders............................ $ 26,988 $ 20,128
================ =================
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ............................................................. $ .69 $ .52
================ =================
Diluted ........................................................... $ .69 $ .52
================ =================
Net Income............................................................. $ 35,199 $ 28,339
Other Comprehensive Income (Loss):
Cumulative Transition Adjustment................................... (14,920) ---
Settlement of Interest Rate Protection Agreement................... 371 ---
Mark-to-Market of Interest Rate Protection Agreement............... (137) ---
Amortization of Interest Rate Protection Agreements................ 90 ---
---------------- -----------------
Comprehensive Income................................................... $ 20,603 $ 28,339
================ =================
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, 2001 March 31, 2000
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 35,199 $ 28,339
Income Allocated to Minority Interest ..................... 5,034 3,799
-------------------- --------------------
Income Before Minority Interest............................ 40,233 32,138
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation........................................... 15,069 15,814
Amortization of Deferred Financing Costs............... 442 428
Other Amortization .................................... 3,753 2,045
Provision for Bad Debts................................ --- 50
Equity in Income of Joint Ventures..................... (186) (31)
Distributions from Joint Ventures...................... 186 31
Gain on Sale of Real Estate............................ (13,876) (5,874)
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net....................... (7,480) (12,325)
Increase in Deferred Rent Receivable................... (294) (403)
(Decrease) Increase in Accounts Payable and Accrued
Expenses and Rent Received in Advance and Security
Deposits............................................. (4,312) 10,649
(Increase) Decrease in Restricted Cash................. (104) 114
-------------------- --------------------
Net Cash Provided by Operating Activities......... 33,431 42,636
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate.... (106,825) (73,153)
Net Proceeds from Sales of Investment in Real Estate....... 56,360 52,976
Distributions from Joint Ventures.......................... 251 206
Repayment of Mortgage Loans Receivable..................... 3,381 1,179
Decrease (Increase) in Restricted Cash .................... 20,002 (4,496)
-------------------- --------------------
Net Cash Used in Investing Activities............. (26,831) (23,288)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Exercise of Employee Stock Options....... 5,060 996
Repurchase of Restricted Stock ............................ (1,588) ---
Purchase of U.S. Government Securities .................... (1,123) ---
Proceeds from Senior Unsecured Debt........................ 199,390 ---
Dividends/Distributions ................................... (30,275) (28,164)
Preferred Stock Dividends ................................. (8,211) (8,211)
Repayments on Mortgage Loans Payable....................... (1,625) (547)
Proceeds from Acquisition Facility Payable ................ 99,300 51,700
Repayments on Acquisition Facility Payable................. (260,000) (33,200)
Cost of Debt Issuance...................................... (1,896) (163)
-------------------- --------------------
Net Cash Used in Financing Activities............. (968) (17,589)
-------------------- --------------------
Net Increase in Cash and Cash Equivalents..................... 5,632 1,759
Cash and Cash Equivalents, Beginning of Period................ 7,731 2,609
-------------------- --------------------
Cash and Cash Equivalents, End of Period ..................... $ 13,363 $ 4,368
==================== ====================
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 SHARE AND PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF COMPANY
First Industrial Realty Trust, Inc. (the "Company") was organized in the
state of Maryland on August 10, 1993. The Company is a real estate investment
trust ("REIT") as defined in the Internal Revenue Code. The Company's operations
are conducted primarily through First Industrial, L.P. (the "Operating
Partnership") of which the Company is the sole general partner with an
approximate 84.3% ownership interest at March 31, 2001. As of March 31, 2001,
the Company owned 968 in-service properties located in 25 states, containing an
aggregate of approximately 68.2 million square feet of gross leasable area
("GLA"). Of the 968 in-service properties owned by the Company, 797 are held by
the Operating Partnership, 112 are held by limited partnerships in which the
Operating Partnership is the limited partner and wholly-owned subsidiaries of
the Company are the general partners, 52 are held by limited liability companies
of which the Operating Partnership is the sole member and seven are held by an
entity wholly-owned by the Operating Partnership. The Company, through
wholly-owned limited liability companies of which the Operating Partnership is
the sole member, also owns 10% equity interests in, and provides asset and
property management services to, two joint ventures which invest in industrial
properties (the "September 1998 Joint Venture" and the "September 1999 Joint
Venture"). Minority interest in the Company at March 31, 2001 represents the
approximate 15.7% aggregate partnership interest in the Operating Partnership
held by the limited partners thereof.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared
in accordance with the accounting policies described in the financial statements
and related notes included in the Company's 2000 Form 10-K and should be read in
conjunction with such financial statements and related notes. The following
notes to these interim financial statements highlight significant changes to the
notes included in the December 31, 2000 audited financial statements included in
the Company's 2000 Form 10-K and present interim disclosures as required by the
Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the Company's financial statements, is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of March 31,
2001 and December 31, 2000, and the reported amounts of revenues and expenses
for each of the three months ended March 31, 2001 and 2000. Actual results could
differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary for a fair statement of the financial position of the
Company as of March 31, 2001 and the results of its operations and its cash
flows for each of the three months ended March 31, 2001 and 2000.
Tenant Accounts Receivable, Net:
The Company provides an allowance for doubtful accounts against the portion
of tenants accounts receivable which is estimated to be uncollectible. Tenant
accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of approximately $2,050 as of March 31, 2001 and
December 31, 2000.
5
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recent Accounting Pronouncements
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), as
amended by Statement of Financial Accounting Standards No. 138, "Accounting for
Derivative Instruments and Hedging Activities- An Amendment of FAS Statement
133". FAS 133, as amended, establishes accounting and reporting standards for
derivative instruments. Specifically, FAS 133, as amended, requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and to measure those instruments at fair value. Additionally,
the fair value adjustment will affect either other comprehensive income
(shareholders' equity) or net income, depending on whether the derivative
instrument qualifies as a hedge for accounting purposes and, if so, the nature
of the hedging activity. FAS 133, as amended, also requires that any gains or
losses on derivative instruments that are reported independently as deferred
gains or losses (assets or liabilities) in the statement of financial position
at the date of initial application shall be derecognized and reported as a
cumulative transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of $14,920. The Company will amortize
approximately $244 into net income as an adjustment to interest expense in the
next twelve months relating to these interest rate protection agreements.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes (as defined in footnote 4), the Company settled this interest
rate protection agreement and received $371, which is shown in other
comprehensive income. The Company is amortizing this settlement amount into net
income as an adjustment to interest expense over the life of the 2011 Notes (as
defined in footnote 4). The Company will amortize approximately $37 into net
income as an adjustment to interest expense in the next twelve months relating
to this interest rate protection agreement.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. (as defined in footnote 4) in April 2001, the
Company settled this interest rate protection agreement for a payment of $562
which will be recognized as a component of the extraordinary loss the Company
will recognize in April 2001 relating to the retirement of the 2011 Drs. (as
defined in footnote 4). At March 31, 2001, the Company marked-to-market this
interest rate protection agreement and recognized $137 of an expense in other
comprehensive income.
The following is a rollforward of the accumulated other comprehensive loss
balance relating to these derivative transactions:
Balance at December 31, 2000.................... $ ---
Cumulative Transition Adjustment............. (14,920)
Settlement of Interest Rate Protection
Agreement.................................. 371
Mark-to-Market of Interest Rate Protection
Agreement.................................. (137)
Amortization of Interest Rate Protection
Agreements................................. 90
------------
Balance at March 31, 2001....................... $ (14,596)
============
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
3. INVESTMENTS IN JOINT VENTURES
During the three months ended March 31, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $619 in asset
management and property management fees from the September 1998 Joint Venture
and the September 1999 Joint Venture, collectively. The Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received distributions of approximately $420 and $17 from the
September 1998 Joint Venture and the September 1999 Joint Venture, respectively.
As of March 31, 2001, the September 1998 Joint Venture owned 135 industrial
properties comprising approximately 6.9 million square feet of GLA and the
September 1999 Joint Venture owned 39 industrial properties comprising
approximately 1.2 million square feet of GLA.
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE
Mortgage Loans Payable, Net
On December 29, 1995, the Company, through an entity in which the Operating
Partnership is the sole limited partner and a wholly-owned subsidiary of the
Company is the general partner (the "Mortgage Partnership"), entered into a
$40,200 mortgage loan (the "1995 Mortgage Loan"). In March 2001, the Company
purchased approximately $1.1 million of U.S. Government securities as substitute
collateral to execute a legal defeasance of approximately $1.1 million of the
1995 Mortgage Loan. The terms of the legal defeasance require the Mortgage
Partnership to use the gross proceeds from the maturities of the U.S. Government
securities to paydown and subsequently retire the defeased portion of the 1995
Mortgage Loan in January 2003. The Company is carrying the defeased portion of
the 1995 Mortgage Loan on its balance sheet until it pays down and retires the
defeased portion of the 1995 Mortgage Loan in January 2003. Upon the execution
of the legal defeasance, one of the 22 properties collateralizing the 1995
Mortgage Loan was released and subsequently sold.
Senior Unsecured Debt, Net
On March 19, 2001, the Company issued $200,000 of senior unsecured debt
which matures on March 15, 2011 and bears a coupon interest rate of 7.375% (the
"2011 Notes"). The issue price of the 2011 Notes was 99.695%. Interest is paid
semi-annually in arrears on September 15 and March 15. The Company also entered
into an interest rate protection agreement which was used to fix the interest
rate on the 2011 Notes prior to issuance. The Company settled the interest rate
protection agreement for $371 of proceeds which is included in other
comprehensive income. The debt issue discount and the settlement amount of the
interest rate protection agreement are being amortized over the life of the 2011
Notes as an adjustment to interest expense. The 2011 Notes contain certain
covenants including limitation on incurrence of debt and debt service coverage.
On March 31, 1998, the Company, through the Operating Partnership, issued
$100,000 of Dealer remarketable securities which mature on April 5, 2011 and
bear a coupon interest rate of 6.50% (the "2011 Drs."). The issue price of the
2011 Drs. was 99.753%. On April 5, 2001 the Company paid off and retired the
2011 Drs. for a payment of approximately $105,569. In conjunction with the
forecasted retirement of the 2011 Drs., the Company entered into an interest
rate protection agreement which fixed the retirement price of the 2011 Drs. On
April 2, 2001, this interest rate protection agreement was settled for a payment
of approximately $562. Due to the retirement of the 2011 Drs., the Company will
record an extraordinary loss of approximately $7 million in the second quarter
of 2001 comprised of the amount paid above the 2011 Drs. carrying value, the
write-off of unamortized deferred financing fees, the settlement of the interest
rate protection agreement, legal costs and other expenses.
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
The following table discloses certain information regarding the Company's
mortgage loans payable, senior unsecured debt and acquisition facility payable:
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT INTEREST RATE AT
----------------------------- --------------------------- ----------------
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, MATURITY
2001 2000 2001 2000 2001 DATE
------------- ------------- ------------ ------------ ---------- ----------
MORTGAGE LOANS PAYABLE, NET
1995 Mortgage Loan............. $ 38,463 (1) $ 38,604 $ 162 $ 163 7.220% 1/11/26
CIGNA Loan..................... 33,772 33,952 211 212 7.500% 4/01/03
Assumed Loans.................. 6,903 7,995 --- --- 9.250% 1/01/13
LB Mortgage Loan II........... 705 705 5 5 8.000% (2)
Acquisition Mortgage Loan I.... 3,216 3,294 --- --- 8.500% 8/01/08
Acquisition Mortgage Loan II... 7,380 7,432 --- --- 7.750% 4/01/06
Acquisition Mortgage Loan III.. 3,178 3,214 --- --- 8.875% 6/01/03
Acquisition Mortgage Loan IV... 2,341 2,364 --- 17 8.950% 10/01/06
Acquisition Mortgage Loan V.... 2,714 (3) 2,729 (3) --- --- 9.010% 9/01/06
Acquisition Mortgage Loan VI... 948 (3) 957 (3) --- --- 8.875% 11/01/06
Acquisition Mortgage Loan VII.. 1,312 (3) 1,329 (3) --- --- 9.750% 3/15/02
------------ ------------ ------------ -----------
Total.......................... $ 100,932 $ 102,575 $ 378 $ 397
============ ============ ============ ===========
SENIOR UNSECURED DEBT, NET
2005 Notes..................... $ 50,000 $ 50,000 $ 1,246 $ 383 6.900% 11/21/05
2006 Notes..................... 150,000 150,000 3,500 875 7.000% 12/01/06
2007 Notes..................... 149,968 (4) 149,966 (4) 4,307 1,457 7.600% 5/15/07
2011 PATS...................... 99,528 (4) 99,517 (4) 2,786 942 7.375% 5/15/11 (5)
2017 Notes..................... 99,840 (4) 99,838 (4) 2,500 625 7.500% 12/01/17
2027 Notes..................... 99,873 (4) 99,872 (4) 2,701 914 7.150% 5/15/27 (6)
2028 Notes..................... 199,785 (4) 199,783 (4) 3,209 7,009 7.600% 7/15/28
2011 Drs....................... 99,810 (4) 99,805 (4) 3,178 1,553 6.500% 4/05/11 (7)
2011 Notes..................... 199,396 (4) --- 492 --- 7.375% 3/15/11
------------ ------------ ------------ -----------
Total.......................... $ 1,148,200 $ 948,781 $ 23,919 $ 13,758
============ ============ ============ ===========
ACQUISITION FACILITY
PAYABLE
2000 Unsecured Acquisition
Facility.................... $ 9,300 $ 170,000 $ 990 $ 1,359 6.10% 6/30/03
============ ============ ============ ===========
(1) Approximately $2.4 million of this loan has been defeased and will be paid
in full in January 2003.
(2) The maturity date of the LB Mortgage Loan II is based on a contingent event
relating to the environmental status of the property collateralizing the
loan.
(3) At March 31, 2001, the Acquisition Mortgage Loan V, the Acquisition
Mortgage Loan VI and the Acquisition Mortgage Loan VII are net of
unamortized premiums of $210, $47 and $28, respectively. At December 31,
2000, the Acquisition Mortgage Loan V, the Acquisition Mortgage Loan VI and
the Acquisition Mortgage Loan VII are net of unamortized premiums of $219,
$49 and $35, respectively.
(4) At March 31, 2001, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028
Notes, 2011 Drs. and the 2011 Notes are net of unamortized discounts of
$32, $472, $160, $127, $215, $190 and $604, respectively. At December 31,
2000, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes and the
2011 Drs. are net of unamortized discounts of $34, $483, $162, $128, $217
and $195, respectively.
(5) The 2011 PATS are redeemable at the option of the holder thereof, on
May 15, 2004.
(6) The 2027 Notes are redeemable at the option of the holders thereof, on May
15, 2002.
(7) The Company paid off and retired the 2011 Drs. On April 5, 2001.
The following is a schedule of the stated maturities and scheduled
principal payments of the mortgage loans payable, senior unsecured debt and
acquisition facility payable for the next five years ending December 31, and
thereafter:
Amount
-------------
Remainder of 2001 $ 101,961
2002 4,038
2003 47,748
2004 2,122
2005 52,313
Thereafter 1,051,060
-------------
Total $ 1,259,242
=============
The maturity date of the LB Mortgage Loan II is based on a contingent
event. As a result, this loan is not included in the preceding table.
8
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FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
5. STOCKHOLDERS' EQUITY
Preferred Stock:
In 1995, the Company issued 1,650,000 shares of 9.5%, $ .01 par value,
Series A Cumulative Preferred Stock (the "Series A Preferred Stock") at an
initial offering price of $25 per share. On or after November 17, 2000, the
Series A Preferred Stock became redeemable for cash at the option of the
Company, in whole or in part, at $25 per share, or $41,250 in the aggregate,
plus dividends accrued and unpaid to the redemption date. On March 9, 2001, the
Company called for the redemption of all of the outstanding Series A Preferred
Stock at the price of $25 per share, plus accrued and unpaid dividends. The
Company redeemed the Series A Preferred Stock on April 9, 2001.
Restricted Stock:
During the three months ended March 31, 2001, the Company awarded 93,850
shares of restricted common stock to certain employees and 814 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3,026 on the date of grant. The
restricted common stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting period.
Non-Qualified Employee Stock Options:
During the three months ended March 31, 2001, the Company issued 960,900
non-qualified employee stock options to certain officers and employees of the
Company. These non-qualified employee stock options vest over three years, have
a strike price of $33.125 per share and expire ten years from the date of grant.
During the three months ended March 31, 2001, certain employees of the
Company exercised 189,485 non-qualified employee stock options. Gross proceeds
to the Company were approximately $5.1 million.
Dividends/Distributions:
The following table summarizes dividends/distributions for the three months
ended March 31, 2001.
COMMON STOCK/OPERATING PARTNERSHIP UNITS
Dividend/Distribution Total
Record Date Payable Date Per Share/Unit Dividend/Distribution
------------------ ------------------ ---------------------- ---------------------
Fourth Quarter 2000 December 31, 2000 January 22, 2001 $ .6575 $ 30,275
First Quarter 2001 March 31, 2001 April 23, 2001 $ .6575 $ 30,537
PREFERRED STOCK
First Quarter: Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------- ---------------------- ---------------------
Series A Preferred Stock March 15, 2001 March 31, 2001 $ .59375 $ 980
Series B Preferred Stock March 15, 2001 March 31, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock March 15, 2001 March 31, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock March 15, 2001 March 31, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock March 15, 2001 March 31, 2001 $ 49.37500 $ 1,480
9
11
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
6. ACQUISITION AND DEVELOPMENT OF REAL ESTATE
During the three months ended March 31, 2001, the Company acquired 27
industrial properties comprising, in the aggregate, approximately 1.4 million
square feet of GLA and several land parcels. The aggregate purchase price for
these acquisitions totaled approximately $73,294 excluding costs incurred in
conjunction with the acquisition of the properties. The Company also completed
the development of two industrial properties comprising approximately .2 million
square feet of GLA at a cost of approximately $10.0 million.
7. SALES OF REAL ESTATE AND REAL ESTATE HELD FOR SALE
During the three months ended March 31, 2001, the Company sold 24
industrial properties comprising approximately 1.2 million square feet of GLA
and several land parcels. Gross proceeds from these sales were approximately
$60,931. The gain on sale of real estate was approximately $13,876.
The Company has an active sales program through which it is continually
engaged in evaluating its current portfolio for potential sales candidates in
order to redeploy capital. At March 31, 2001, the Company had 106 industrial
properties comprising approximately 9.4 million square feet of GLA held for
sale. There can be no assurance that such properties held for sale will be sold.
The following table discloses certain information regarding the 106
industrial properties held for sale by the Company.
THREE MONTHS ENDED
MARCH 31,
------------------------------
2001 2000
------------ -------------
Total Revenues $ 10,831 $ 10,255
Operating Expenses (3,130) (2,938)
Depreciation and Amortization (421) (1,886)
------------- -------------
Income from Operations $ 7,280 $ 5,431
============= =============
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12
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Three Months Ended
-------------------------------------
March 31, March 31,
2001 2000
---------------- ----------------
Interest paid, net of capitalized interest .................. $ 11,429 $ 10,040
================ ================
Interest capitalized......................................... $ 1,973 $ 1,376
================ ================
Supplemental schedule of noncash investing and financing activities:
Distribution payable on common stock/units.................. $ 30,537 $ 28,462
================ ================
Distribution payable on preferred stock..................... $ 8,211 ---
================ ================
Issuance of units in exchange for property...................... $ 1,491 301
================ ================
Exchange of units for common shares:
Minority interest........................................... $ (2,512) $ ---
Common stock................................................ 1 ---
Additional paid-in capital.................................. 2,511 ---
---------------- ----------------
$ --- ---
================ ================
In conjunction with the property and land acquisitions, the following
assets and liabilities were assumed:
Purchase of real estate ..................................... $ 73,294 $ 31,598
Accrued real estate taxes and security deposits.............. (676) (201)
---------------- ----------------
$ 72,618 $ 31,397
================ ================
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13
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
9. EARNINGS PER SHARE
The computation of basic and diluted EPS is presented below:
Three Months Three Months
Ended Ended
March 31, March 31,
2000 2000
--------------- --------------
Numerator:
Net Income...................................... $ 35,199 $ 28,339
Less: Preferred Stock Dividends................. (8,211) (8,211)
--------------- --------------
Net Income Available to Common Stockholders
- For Basic and Diluted EPS................... $ 26,988 $ 20,128
=============== ==============
Denominator:
Weighted Average Shares - Basic................. 38,950,566 38,380,636
Effect of Dilutive Securities:
Employee and Director Common Stock Options... 416,657 159,712
--------------- --------------
Weighted Average Shares - Diluted............... 39,367,223 38,540,348
=============== ==============
Basic EPS:
Net Income Available to Common Stockholders..... $ .69 $ .52
=============== ==============
Diluted EPS:
Net Income Available to Common Stockholders..... $ .69 $ .52
=============== ==============
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal actions
arising from the operation of its properties. In management's opinion, the
liabilities, if any, that may ultimately result from such legal actions are not
expected to have a materially adverse effect on the consolidated financial
position, operations or liquidity of the Company.
The Company has committed to the construction of 26 development projects
totaling approximately 4.9 million square feet of GLA for an estimated
investment of approximately $225.4 million. Of this amount, approximately $117.6
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 18 of the 26
development projects, comprising approximately 3.7 million square feet of GLA at
an estimated investment of approximately $157.3 million, during the next twelve
months.
11. SUBSEQUENT EVENTS
From April 1, 2001 to May 7, 2001, the Company acquired 19 industrial
properties and several land parcels for an aggregate purchase price of
approximately $31,295, excluding costs incurred in conjunction with the
acquisition of these industrial properties and land parcels. The Company also
sold one industrial property for approximately $22,763 of gross proceeds.
12
14
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
11. SUBSEQUENT EVENTS, CONTINUED
On April 2, 2001, the Company paid first quarter preferred stock dividends
of $.59375 per share on its Series A Preferred Stock, $54.688 per share
(equivalent to $.54688 per Depositary Share) on its Series B Preferred Stock,
$53.906 per share (equivalent to $.53906 per Depositary Share) on its Series C
Preferred Stock, $49.687 per share (equivalent to $.49687 per Depositary Share)
on its Series D Preferred Stock and $49.375 per share (equivalent to $.49375 per
Depositary Share) on its Series E Preferred Stock. The preferred stock dividends
paid on April 2, 2001 totaled, in the aggregate, approximately $8,211.
On April 23, 2001, the Company and the Operating Partnership paid a first
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30,537.
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15
FIRST INDUSTRIAL REALTY TRUST, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of First Industrial Realty Trust,
Inc.'s (the "Company") financial condition and results of operations should be
read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-Q.
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
affect on the operations and future prospects of the Company on a consolidated
basis include, but are not limited to, changes in: economic conditions generally
and the real estate market specifically, legislative/regulatory changes
(including changes to laws governing the taxation of real estate investment
trusts), availability of capital, interest rates, competition, supply and demand
for industrial properties in the Company's current and proposed market areas and
general accounting principles, policies and guidelines applicable to real estate
investment trusts. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included herein and in the Company's other filings with
the Securities and Exchange Commission.
The Company was organized in the state of Maryland on August 10, 1993. The
Company is a real estate investment trust ("REIT") as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through First
Industrial, L.P. (the "Operating Partnership") of which the Company is the sole
general partner with an approximate 84.3% ownership interest at March 31, 2001.
As of March 31, 2001, the Company owned 968 in-service properties located in 25
states, containing an aggregate of approximately 68.2 million square feet of
gross leasable area ("GLA") and seven properties held for redevelopment. Of the
968 in-service properties owned by the Company, 797 are held by the Operating
Partnership, 112 are held by limited partnerships in which the Operating
Partnership is the limited partner and wholly-owned subsidiaries of the REIT are
the general partners, 52 are held by limited liability companies of which the
Operating Partnership is the sole member and seven are held by an entity
wholly-owned by the Operating Partnership. The Company, through wholly-owned
limited liability companies of which the Operating Partnership is the sole
member, also owns 10% equity interests in, and provides asset and property
management services to, two joint ventures which invest in industrial properties
(the "September 1998 Joint Venture" and the "September 1999 Joint Venture").
Minority interest in the Company at March 31, 2000 represents the approximate
15.7% aggregate partnership interest in the Operating Partnership held by the
limited partners thereof.
RESULTS OF OPERATIONS
At March 31, 2001, the Company owned 968 in-service properties with
approximately 68.2 million square feet of GLA, compared to 973 in-service
properties with approximately 68.0 million square feet of GLA at March 31, 2000.
During the period between April 1, 2000 and March 31, 2001, the Company acquired
101 in-service properties containing approximately 6.3 million square feet of
GLA, completed development of 21 properties and redevelopment of two properties
totaling approximately 3.0 million square feet of GLA and sold 121 in-service
properties totaling approximately 9.1 million square feet of GLA, one out of
service property and several land parcels. The Company also took 10 properties
out of service that are under redevelopment, comprising approximately .5 million
square feet of GLA and placed in service two properties comprising approximately
.5 million square feet of GLA.
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16
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 TO THREE MONTHS ENDED
MARCH 31, 2000
Rental income and tenant recoveries and other income increased by
approximately $4.3 million or 4.5% due primarily to an increase in tenant
recoveries related to an increase in property expenses (as discussed below) for
the three months ended March 31, 2001 as compared to the three months ended
March 31, 2000. Rental income and tenant recoveries and other income from
properties owned prior to January 1, 2000 increased by approximately $3.6
million or 4.8% due primarily to general rent increases and an increase in
tenant recoveries due to an increase in property expenses (as discussed below)
for the three months ended March 31, 2001 as compared to the three months ended
March 31, 2000.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $2.2 million or 8.1%. The increase in repairs and
maintenance is due to an increase in snow removal and related expenses for
properties located in certain of the Company's metropolitan areas. The increase
in utilities is due to general increases in gas and electricity expenses. The
increase in insurance is due to an increase in insurance premiums. Property
expenses from properties owned prior to January 1, 2000 increased by
approximately $1.7 million or 8.0% due primarily to the explanations discussed
above.
General and administrative expense increased by approximately $.9 million
due primarily to general increases in employee compensation.
Interest expense increased by approximately $1.4 million for the three
months ended March 31, 2001 compared to the three months ended March 31, 2000
due primarily to a higher average debt balance outstanding. This was slightly
offset by a decrease in the weighted average interest rate for the three months
ended March 31, 2001 (7.26%) compared to the three months ended March 31, 2000
(7.28%) and an increase in capitalized interest for the three months ended March
31, 2001 due to an increase in development activities. The average debt balance
outstanding for the three months ended March 31, 2001 and 2000 was approximately
$1,274.6 million and $1,170.1 million, respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization decreased by approximately $.3 million
due primarily to the Company ceasing depreciation and amortization on properties
it considers held for sale as well as due to properties sold subsequent to
December 31, 1999. This decrease is offset by depreciation and amortization
related to properties acquired or developed subsequent to December 31, 2000.
Equity in income of joint ventures remained relatively unchanged.
The $13.9 million gain on sale of real estate for the three months ended
March 31, 2001 resulted from the sale of 24 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $60.9 million.
The $5.9 million gain on sale of real estate for the three months ended
March 31, 2000 resulted from the sale of 11 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $55.1 million.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company's cash and cash equivalents was
approximately $13.4 million and restricted cash was approximately $4.3 million.
Included in restricted cash are approximately $1.3 million of cash reserves
required to be set aside under the Company's $40.0 million mortgage loan (the
"1995 Mortgage Loan") for payments of security deposit refunds, tenant
improvements, capital expenditures, interest, real estate taxes and insurance.
The portion of the cash reserve relating to payments for capital expenditures,
interest, real estate taxes and insurance for properties collateralizing the
1995 Mortgage Loan is established monthly, distributed to the Company as such
expenditures are made and is
15
17
replenished to a level adequate to make the next periodic payment of such
expenditures. The portion of the cash reserve relating to security deposit
refunds for the tenants occupying the properties collateralizing the 1995
Mortgage Loan is adjusted as tenants turn over. Also included in restricted cash
is approximately $3.0 million of gross proceeds from the sales of certain
properties. These sales proceeds will be disbursed as the Company exchanges into
properties under Section 1031 of the Internal Revenue Code.
THREE MONTHS ENDED MARCH 31, 2001
Net cash provided by operating activities of approximately $33.4 million
for the three months ended March 31, 2001 was comprised primarily of net income
before minority interest of approximately $40.2 million, adjustments for
non-cash items of approximately $5.0 million offset by the net change in
operating assets and liabilities of approximately $11.8 million. The adjustments
for the non-cash items of approximately $5.0 million are primarily comprised of
depreciation and amortization of approximately $19.2 million, offset by the gain
on sale of real estate of approximately $13.9 million and the effect of the
straight-lining of rental income of approximately $.3 million.
Net cash used in investing activities of approximately $26.8 million for
the three months ended March 31, 2001 was comprised primarily of the acquisition
of real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate, offset by a decrease in
restricted cash from sales proceeds deposited with an intermediary for Section
1031 exchange purposes, the net proceeds from the sale of real estate,
distributions from the Company's two industrial real estate joint ventures and
the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $1.0 million for the
three months ended March 31, 2001 was comprised primarily of repayments on
mortgage loans payable, the repurchase of restricted stock, the purchase of U.S.
Government securities used as substitute collateral to execute a legal
defeasance of a portion of the 1995 Mortgage Loan, common and preferred stock
dividends and unit distributions, debt issuance costs incurred in conjunction
with the 2011 Notes (defined below) and the net borrowings under the Company's
$300 million unsecured line of credit (the "2000 Unsecured Acquisition
Facility"), offset by the proceeds from the issuance of senior unsecured debt
and net proceeds from the exercise of employee stock options.
THREE MONTHS ENDED MARCH 31, 2000
Net cash provided by operating activities of approximately $42.6 million
for the three months ended March 31, 2000 was comprised primarily of net income
before minority interest of approximately $32.1 million and adjustments for
non-cash items of approximately $12.1 million, offset by the net change in
operating assets and liabilities of approximately $1.6 million. The adjustments
for the non-cash items of approximately $12.1 million are primarily comprised of
depreciation and amortization of approximately $18.3 million and a provision for
bad debts of approximately $.1 million, offset by the gain on sale of real
estate of approximately $5.9 million and the effect of the straight-lining of
rental income of approximately $.4 million.
Net cash used in investing activities of approximately $23.3 million for
the three months ended March 31, 2000 was comprised primarily of the acquisition
of real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate and an increase in restricted
cash from sales proceeds deposited with an intermediary for Section 1031
exchange purposes, offset by the net proceeds from the sales of real estate,
distributions from one of the Company's two industrial real estate joint
ventures and the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $17.6 million for
the three months ended March 31, 2000 was comprised primarily of repayments on
mortgage loans payable and common and preferred stock dividends and unit
distributions, offset by the net borrowings under the Company's line of credit
and proceeds from the exercise of employee stock options.
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18
INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE
During the three months ended March 31, 2001, the Company purchased 27
industrial properties comprising, in the aggregate, approximately 1.4 million
square feet of GLA and several land parcels, for an aggregate purchase price of
approximately $73.3 million, excluding costs incurred in conjunction with the
acquisition of the properties. The Company also completed the development of two
industrial properties comprising approximately .2 million square feet of GLA at
a cost of approximately $10.0 million.
During the three months ended March 31, 2001, the Company sold 24
industrial properties comprising approximately 1.2 million square feet of GLA
and several land parcels. Gross proceeds from these sales were approximately
$60.9 million.
The Company has committed to the construction of 26 development projects
totaling approximately 4.9 million square feet of GLA for an estimated
investment of approximately $225.4 million. Of this amount, approximately $117.6
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 18 of the 26
development projects, comprising approximately 3.7 million square feet of GLA at
an estimated investment of approximately $157.3 million, during the next twelve
months.
REAL ESTATE HELD FOR SALE
The Company plans on exiting the markets of Cleveland, Columbus, Dayton,
Des Moines, Grand Rapids, Long Island and New Orleans/Baton Rouge and
continually engages in evaluating its other real estate markets for potential
sales candidates. At March 31, 2001, the Company had 106 industrial properties
comprising approximately 9.4 million square feet of GLA held for sale. Income
from operations of the 106 industrial properties held for sale for the three
months ended March 31, 2001 and 2000 is approximately $7.3 million and $5.4
million, respectively. Net carrying value of the 106 industrial properties held
for sale at March 31, 2001 is approximately $270.5 million. There can be no
assurance that such properties held for sale will be sold.
INVESTMENTS IN JOINT VENTURES
During the three months ended March 31, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $.6 million in asset
management and property management fees from the September 1998 Joint Venture
and the September 1999 Joint Venture. The Company, through wholly-owned limited
liability companies in which the Operating Partnership is the sole member,
received, in the aggregate, distributions of approximately $.4 million from the
September 1998 Joint Venture and the September 1999 Joint Venture. As of March
31, 2001, the September 1998 Joint Venture owned 135 industrial properties
comprising approximately 6.9 million square feet of GLA and the September 1999
Joint Venture owned 39 industrial properties comprising approximately 1.2
million square feet of GLA. On or after October 2000, under certain
circumstances, the Company has the option of purchasing all of the properties
owned by the September 1998 Joint Venture at a price to be determined in the
future. The Company has not exercised this option.
MORTGAGE LOANS PAYABLE
In March 2001, the Company purchased approximately $1.1 million of U.S.
Government securities as substitute collateral to execute a legal defeasance of
approximately $1.1 million of the 1995 Mortgage Loan. The terms of the legal
defeasance
17
19
require the Mortgage Partnership to use the gross proceeds from the maturities
of the U.S. Government securities to paydown and subsequently retire the
defeased portion of the 1995 Mortgage Loan in January 2003. The Company is
carrying the defeased portion of the 1995 Mortgage Loan on its balance sheet
until it pays down and retires the defeased portion of the 1995 Mortgage Loan in
January 2003. Upon the execution of the legal defeasance, one of the 22
properties collateralizing the 1995 Mortgage Loan was released and subsequently
sold.
SENIOR UNSECURED DEBT
On March 19, 2001, the Company issued $200 million of senior unsecured debt
which matures on March 15, 2011 and bears a coupon interest rate of 7.375% (the
"2011 Notes"). The issue price of the 2011 Notes was 99.695%. Interest is paid
semi-annually in arrears on September 15 and March 15. The Company also entered
into an interest rate protection agreement which was used to fix the interest
rate on the 2011 Notes prior to issuance. The Company settled the interest rate
protection agreement for $.4 million of proceeds which is included in other
comprehensive income. The debt issue discount and the settlement amount of the
interest rate protection agreement are being amortized over the life of the 2011
Notes as an adjustment to interest expense. The 2011 Notes contain certain
covenants including limitation on incurrence of debt and debt service coverage.
On March 31, 1998, the Company, through the Operating Partnership, issued
$100 million of Dealer remarketable securities which mature on April 5, 2011 and
bear a coupon interest rate of 6.50% (the "2011 Drs."). The issue price of the
2011 Drs. was 99.753%. On April 5, 2001 the Company paid off and retired the
2011 Drs. for a payment of approximately $105.6 million. In conjunction with the
forecasted retirement of the 2011 Drs., the Company entered into an interest
rate protection agreement which fixed the retirement price of the 2011 Drs. On
April 2, 2001, this interest rate protection agreement was settled for a payment
of approximately $.6 million. Due to the retirement of the 2011 Drs., the
Company will record an extraordinary loss of approximately $7 million in the
second quarter of 2001 comprised of the amount paid above the 2011 Drs. carrying
value, the write-off of unamortized deferred financing fees, the settlement of
the interest rate protection agreement, legal costs and other expenses.
MARKET RISK
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.
This analysis presents the hypothetical gain or loss in earnings, cash
flows or fair value of the financial instruments and derivative instruments
which are held by the Company at March 31, 2001 that are sensitive to changes in
the interest rates. While this analysis may have some use as a benchmark, it
should not be viewed as a forecast.
In the normal course of business, the Company also faces risks that are
either non-financial or non-quantifiable. Such risks principally include credit
risk and legal risk and are not represented in the following analysis.
At March 31, 2001, $9.3 million (approximately .7% of total debt at March
31, 2001) of the Company's debt was variable rate debt (all of the variable rate
debt relates to the Company's 2000 Unsecured Acquisition Facility) and $1,249.1
million (approximately 99.3% of total debt at March 31, 2001) was fixed rate
debt. The Company also had outstanding a written put and a written call option
(collectively, the "Written Options") which were issued in conjunction with the
initial offering of two tranches of senior unsecured debt and an interest rate
protection agreement which fixed the retirement price on a forecasted retirement
of unsecured debt ("IRPA"). Currently, the Company does not enter into financial
instruments for trading or other speculative purposes.
For fixed rate debt, changes in interest rates generally affect the fair
value of the debt, but not earnings or cash flows of the Company. Conversely,
for variable rate debt, changes in the interest rate generally do
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20
not impact the fair value of the debt, but would affect the Company's future
earnings and cash flows. The interest rate risk and changes in fair market value
of fixed rate debt generally do not have a significant impact on the Company
until the Company is required to refinance such debt. See Note 4 to the
consolidated financial statements for a discussion of the maturity dates of the
Company's various fixed rate debt.
Based upon the amount of variable rate debt outstanding at March 31, 2001,
a 10% increase or decrease in the interest rate on the Company's variable rate
debt would decrease or increase, respectively, future net income and cash flows
by approximately $.06 million per year. A 10% increase in interest rates would
decrease the fair value of the fixed rate debt at March 31, 2001 by
approximately $54.0 million to $1,165.1 million. A 10% decrease in interest
rates would increase the fair value of the fixed rate debt at March 31, 2001 by
approximately $59.7 million to $1,278.8 million. A 10% increase in interest
rates would decrease the fair value of the Written Options at March 31, 2001 by
approximately $5.0 million to $8.5 million. A 10% decrease in interest rates
would increase the fair value of the Written Options at March 31, 2001 by
approximately $6.0 million to $19.5 million. At March 31, 2001, the IRPA had a
fair value of approximately $.1 million. This IRPA was settled for
approximately $.6 million on April 2, 2001.
ISSUANCE OF RESTRICTED STOCK AND EMPLOYEE STOCK OPTIONS
During the three months ended March 31, 2001, the Company awarded 93,850
shares of restricted common stock to certain employees and 814 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3.0 million on the date of grant. The
restricted common stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting period.
During the three months ended March 31, 2001, the Company issued 960,900
non-qualified employee stock options to certain officers and employees of the
Company. These non-qualified employee stock options vest over three years, have
a strike price of $33.125 per share and expire ten years from the date of grant.
COMMON STOCK
During the three months ended March 31, 2001, certain employees of the
Company exercised 189,485 non-qualified employee stock options. Gross proceeds
to the Company were approximately $5.1 million.
DIVIDENDS/DISTRIBUTIONS
On January 22, 2001, the Company and the Operating Partnership paid a
fourth quarter 2000 distribution of $.6575 per common share/Unit, totaling
approximately $30.3 million.
SUBSEQUENT EVENTS
From April 1, 2001 to May 7, 2001, the Company acquired 19 industrial
properties and several land parcels for an aggregate purchase price of
approximately $31.3 million, excluding costs incurred in conjunction with the
acquisition of these industrial properties and land parcels. The Company also
sold one industrial property for approximately $22.8 million of gross proceeds.
On April 2, 2001, the Company paid first quarter preferred stock dividends
of $.59375 per share on its Series A Preferred Stock, $54.688 per share
(equivalent to $.54688 per Depositary Share) on its Series B Preferred Stock,
$53.906 per share (equivalent to $.53906 per Depositary Share) on its Series C
Preferred Stock, $49.687 per share (equivalent to $.49687 per Depositary Share)
on its Series D Preferred Stock and $49.375 per share (equivalent to $.49375 per
Depositary Share) on its Series E Preferred Stock. The preferred stock dividends
paid on April 2, 2001 totaled, in the aggregate, approximately $8.2 million.
On April 23, 2001, the Company and the Operating Partnership paid a first
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.5 million.
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SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that its
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, developments, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through the disposition of select assets, long-term secured and
unsecured indebtedness and the issuance of additional equity securities. As of
March 31, 2001 and May 7, 2001, $589.2 million of common stock, preferred stock
and depositary shares and $100.0 million of debt securities were registered and
unissued under the Securities Act of 1933, as amended. The Company also may
finance the development or acquisition of additional properties through
borrowings under the 2000 Unsecured Acquisition Facility. At March 31, 2001,
borrowings under the 2000 Unsecured Acquisition Facility bore interest at a
weighted average interest rate of 6.1%. The 2000 Unsecured Acquisition Facility
bears interest at a floating rate of LIBOR plus .80%, or the Prime Rate, at the
Company's election. As of May 7, 2001, the Company had approximately $100.0
million available for additional borrowings under the 2000 Unsecured Acquisition
Facility.
OTHER
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), as
amended by Statement of Financial Accounting Standards No. 138, "Accounting for
Derivative Instruments and Hedging Activities- An Amendment of FAS Statement
133". FAS 133, as amended, establishes accounting and reporting standards for
derivative instruments. Specifically, FAS 133, as amended, requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and to measure those instruments at fair value. Additionally,
the fair value adjustment will affect either other comprehensive income
(shareholders' equity) or net income, depending on whether the derivative
instrument qualifies as a hedge for accounting purposes and, if so, the nature
of the hedging activity. FAS 133, as amended, also requires that any gains or
losses on derivative instruments that are reported independently as deferred
gains or losses (assets or liabilities) in the statement of financial position
at the date of initial application shall be derecognized and reported as a
cumulative transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of $14.9 million.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes, the Company settled this interest rate protection agreement
and received $.4 million, which is shown in other comprehensive income. The
Company is amortizing this settlement amount into net income as an adjustment to
interest expense over the life of the 2011 Notes.
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In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. in April 2001, the Company settled this interest
rate protection agreement for a payment of $.6 million which will be recognized
as a component of the extraordinary loss the Company will recognize in April
2001 relating to the retirement of the 2011 Drs. At March 31, 2001, the Company,
marked-to-market this interest rate protection agreement and recognized
$.1 million of an expense in other comprehensive income.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is included in Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" above.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
None.
(b) Report on Form 8-K and Form 8-K/A:
Report on Form 8-K filed January 12, 2001, dated January 12, 2001, as amended by
the report on Form 8-K/A No.1 filed March 8, 2001 relating to the acquisition of
81 industrial properties by the Company. The reports include Combined Historical
Statements of Revenues and Certain Expenses for the acquired properties and Pro
Forma Balance Sheet and Pro Forma Statements of Operations for the Company.
Report on Form 8-K filed March 16, 2001, dated March 16, 2001 reporting the
pricing of an offering by the Company's Operating Partnership of $200 million of
7.375% Senior Notes due 2011.
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The Company has prepared supplemental financial and operating information
which is available without charge upon request to the Company. Please direct
requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 4000
Chicago, IL 60606
Attention: Investor Relations
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Date: May 14, 2001 By: /s/ Michael
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Michael J.Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
None.
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