UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 1-13102
Date of Report (date of earliest event reported): April 27, 2007
FIRST INDUSTRIAL, L.P.
(Exact name of Registrant as specified in its Charter)
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| Delaware | | 39-3924586 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| o | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| o | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| o | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 OTHER EVENTS
Property Acquisitions
First Industrial, L.P. (the “Operating Partnership”) acquired 57 operating industrial properties from unrelated parties during the period January 1, 2006 through December 31, 2006. The combined purchase price of the 57 operating industrial properties acquired totaled approximately $331.1 million, excluding closing costs incurred in conjunction with the acquisition of the industrial properties. The 57 operating industrial properties acquired are described below. The acquisitions were funded with proceeds from property sales, borrowings under the Operating Partnership’s $500.0 million unsecured revolving credit facility and/or working capital. The Operating Partnership will operate the facilities as industrial rental property.
Properties Acquired by the Operating Parnership:
| • | | On January 5, 2006, the Operating Partnership purchased five light industrial properties and one regional warehouse totaling 101,746 square feet, in the aggregate, located in the metropolitan area of San Diego, CA. The aggregate purchase price was $13.4 million. The properties were purchased from Wells Fargo Bank, N.A., as Trustee of the Harold F. Hutton Trust. |
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| • | | On January 11, 2006, the Operating Partnership purchased two bulk warehouses totaling 396,639 square feet, in the aggregate, located in the metropolitan areas of Indianapolis, IN and Denver, CO. The aggregate purchase price for the properties was approximately $11.2 million. The properties were purchased from SNKTW, LLC, a Colorado limited liability company. |
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| • | | On January 12, 2006, the Operating Partnership purchased a 150,000 square feet light industrial property located in the metropolitan area of Los Angeles, CA. The purchase price for the property was approximately $14.0 million. The property was purchased from Saul Leasing, LP. |
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| • | | On January 19, 2006, the Operating Partnership purchased a 117,483 square feet bulk warehouse located in the metropolitan area of Chicago, IL. The purchase price for the property was approximately $3.8 million. The property was purchased from Dennis Investments, Inc., a Delaware Corporation. |
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| • | | On January 20, 2006, the Operating Partnership purchased a 60,500 square feet regional warehouse located in the metropolitan area of St. Paul, MN. The purchase price for the property was approximately $2.1 million. The property was purchased from 316 Lake Hazeltine Drive Limited Partnership. |
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| • | | On January 31, 2006, the Operating Partnership purchased a 84,026 square feet light industrial property located in the metropolitan area of North, NJ. The purchase price for the property was approximately $1.8 million. The property was purchased from Robert Mark, Associates. |
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| • | | On February 1, 2006, the Operating Partnership purchased a 498,145 square feet bulk warehouse located in the metropolitan area of Dallas, TX. The purchase price for the property was approximately $41.8 million. The property was purchased from U.S. Distribution Center, LLC, Dillon Drive Associates, LLC, Plainview Columbia, LLC, Colorado Briargate Associates, LLC, and Pueblo Investment Properties #1, LLC. |
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| • | | On February 28, 2006, the Operating Partnership purchased a 133,237 square feet bulk warehouse located in the metropolitan area of Los Angeles, CA. The purchase price for the property was approximately $10.0 million. The property was purchased from Feed The Children California, Inc. |
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| • | | On March 2, 2006, the Operating Partnership purchased a 44,000 square feet light industrial property located in the metropolitan area of North, NJ. The purchase price for the property was approximately $1.5 million. The property was purchased from EHL Holdings, LLC. |
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| • | | On March 17, 2006, the Operating Partnership purchased a 90,089 square feet regional warehouse located in the metropolitan area of Milwaukee, WI. The purchase price for the property was approximately $3.2 million. The property was purchased from New Berlin Property, LLC. |
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| • | | On April 12, 2006, the Operating Partnership purchased a 77,011 square feet manufacturing property located in the metropolitan area of Detroit, MI. The purchase price for the property was approximately $4.2 million. The property was purchased from RDM Holdings, Ltd, a Michigan corporation. |
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| • | | On April 20, 2006, the Operating Partnership purchased seventeen R&D/Flex properties totaling 395,922 square feet, in the aggregate, located in the metropolitan area of Tampa, FL. The aggregate purchase price was approximately $31.7 million. The properties were purchased from Bryan Dairy FlexxSpace, Ltd., Cross Bayou FlexxSpace, Ltd., Pinebrook FlexxSpace, Ltd., and Joel Levy, as Successor Trustee of Land Trust Number one under Unrecorded Land Trust Agreement dated November 29, 1999. |
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| • | | On May 8, 2006, the Operating Partnership purchased a 355,964 square feet bulk warehouse located in the metropolitan area of Omaha, NE. The purchase price for the property was approximately $11.0 million. The property was purchased from Firstar Fiber, Inc. |
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| • | | On May 12, 2006, the Operating Partnership purchased a 56,626 square feet R&D/Flex property located in the metropolitan area of Denver, CO. The purchase price for the property was approximately $3.7 million. The property was purchased from Colorado Industrial Portfolio, LLC, a Colorado limited liability company. |
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| • | | On May 12, 2006, the Operating Partnership purchased a 128,600 square feet light industrial property located in the metropolitan area of St. Louis, MO. The purchase price for the property was approximately $3.7 million. The property was purchased from SLT Development Corporation. |
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| • | | On July 24, 2006, the Operating Partnership purchased six bulk warehouses totaling 1,060,799 square feet, in the aggregate, located in the metropolitan area of Cleveland, OH. The aggregate purchase price was approximately $50.6 million. The properties were purchased from Duke Realty Ohio, an Indiana general partnership. |
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| • | | On September 7, 2006, the Operating Partnership purchased a 67,528 square feet light industrial property located in the metropolitan area of Los Angeles, CA. The purchase price for the property was approximately $7.9 million. The property was purchased from Vector Associates, LLC. |
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| • | | On September 28, 2006, the Operating Partnership purchased two regional warehouses totaling 192,000 square feet, in the aggregate, located in the metropolitan area of Atlanta, GA. The aggregate purchase price was approximately $7.8 million. The properties were purchased from Real Estate Exchange Services, Inc. |
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| • | | On October 3, 2006, the Operating Partnership purchased three bulk warehouses totaling 472,685 square feet, in the aggregate, located in the metropolitan area of Salt Lake City, UT. The aggregate purchase price was approximately $22.6 million. The properties were purchased from Ninigret Park Development, LC, a Utah limited company. |
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| • | | On October 5, 2006, the Operating Partnership purchased a 153,600 square feet bulk warehouse located in the metropolitan area of Phoenix, AZ. The purchase price for the property was approximately $8.1 million. The property was purchased from Roosevelt Business Park, LLC. |
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| • | | On October 10, 2006, the Operating Partnership purchased a 59,492 square feet regional warehouse located in the metropolitan area of Minneapolis, MN. The purchase price for the property was approximately $4.1 million. The property was purchased from South North Plymouth, LLC. |
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| • | | On October 10, 2006, the Operating Partnership purchased a 1,057,823 square feet bulk warehouse located in the metropolitan area of Chicago, IL. The purchase price for the property was approximately $39.0 million. The property was purchased from Lanter Company. |
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| • | | On October 19, 2006, the Operating Partnership purchased a 56,817 square feet regional warehouse located in the metropolitan area of Phoenix, AZ. The purchase price for the property was approximately $4.3 million. The property was purchased from O. Glen Klemp. |
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| • | | On October 24, 2006, the Operating Partnership purchased a 125,541 square feet bulk warehouse located in the metropolitan area of Los Angeles, CA. The purchase price for the property was approximately $10.5 million. The property was purchased from Scott Valencia Property, CO. |
4
| • | | On November 30, 2006, the Operating Partnership purchased a 101,436 square feet bulk warehouse and a 8,125 square feet light industrial property located in the metropolitan area of Los Angeles, CA. The aggregate purchase price was approximately $10.5 million. The property was purchased from Arthur Hale. |
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| • | | On November 30, 2006, the Operating Partnership purchased a 207,827 square feet bulk warehouse located in the metropolitan area of Cincinnati, OH. The purchase price for the property was approximately $8.6 million. The property was purchased from 2150 Investment, Co. |
The Operating Partnership also acquired 22 operating industrial properties from unrelated parties during the period January 1, 2006 through December 31, 2006, which are not included in the above list as the properties were vacant upon purchase, leased back to the seller(s) upon purchase or subsequently sold before December 31, 2006. The combined purchase price of the 22 operating industrial properties acquired totaled approximately $197.3 million.
Risk Factor
The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the “Company”). The Company is a real estate investment trust (“REIT”) as defined in the Internal Revenue code.
The following reflects changes to a risk factor previously disclosed in the Operating Partnership’s Form 10-K for the year ended December 31, 2006:
If the IRS were to disagree with our characterization of certain arrangements entered into by the Company as reimbursements or the timing of certain assignments of contracts by the Company, the Company could be subject to a penalty tax or fail to remain qualified as a REIT.
The Company believes that it has operated and intends to continue to operate so as to qualify as a REIT under the Code. Although the Company believes that it is organized and has operated in a manner so as to qualify as a REIT, qualification as a REIT involves the satisfaction of numerous requirements, some of which must be met on a recurring basis. These requirements are established under highly technical and complex Code provisions of which there are only limited judicial or administrative interpretations and involve the determination of various factual matters and circumstances not entirely within the Operating Partnership’s control.
The Operating Partnership (through one of its subsidiary partnerships) entered into certain development agreements in 2000 through 2003, the performance of which has been completed. Under these agreements, the Operating Partnership provided services to unrelated third parties and certain payments were made by the unrelated third parties for services provided by certain contractors hired by the Operating Partnership. The Company believes that these payments were properly characterized by it as reimbursements for costs incurred by it on behalf of the third parties and do not constitute gross income and did not prevent the Company from satisfying the gross income requirements of the REIT provisions (the “gross income tests”). The Company brought this matter to the attention of the Internal Revenue Service (the “IRS”). The IRS did not challenge or express any interest in challenging the Company’s view on this matter.
Employees of the Operating Partnership, a subsidiary partnership of the Company (the “Service Employees”), were providing certain acquisition and disposition services since 2004 and certain leasing and property management services since 1997 to one of the Company’s taxable REIT subsidiaries (the “TRS”), and have also been providing certain of these services (or similar services) to joint ventures in which Operating Partnership owns a minority interest or to unrelated parties. In determining whether it satisfied the gross income tests for certain years, the Company has taken and intends to take the position that the costs of the Service Employees should be shared between the Operating Partnership and the TRS and that no fee income should be imputed to the Company as a result of such arrangement. However, because certain of these services (or similar services) have also been performed for the joint ventures or unrelated parties described above, there can be no assurance that the IRS will not successfully challenge this position. First Industrial, L.P. believes that it has taken appropriate steps to address this issue going forward, but there can be no assurance that such steps will adequately resolve this issue.
During 2006, the Company determined that the Operating Partnership’s fee income to be derived in 2006 and subsequent years from joint ventures with third parties (“joint venture fee income”) might materially exceed joint venture fee income in prior years. If steps were not taken, this increased fee income might have caused the Company to violate the gross income tests in 2006 and subsequent years. The Company decided to address this issue by transferring employees providing the services, and assigning the service contracts giving rise to the fee income, from the Operating Partnership to the TRS. The Company believes that these transfers were completed early enough in 2006 to have avoided this potential gross income issue for 2006. The employees were transferred promptly to the TRS. However, the documentation for the assignment of the service contracts was completed later because changes were required to the transaction documentation for each of the joint ventures involved and, in some cases, consent of the respective joint venture partner was needed. It is therefore possible that the IRS could raise an issue as to when the service activity generating the joint venture fee income shifted to the TRS for U.S. federal income tax purposes. In light of this possibility, the Company presently intends to seek clarification from the IRS in the form of a private letter ruling or closing agreement. The Company intends to ask the IRS to confirm that (i) the transfers were made early enough in 2006 to have avoided any potential violation of the gross income tests or alternatively, that (ii) if the transfers occurred later in 2006 than the Company intended, the gross income tests were satisfied in any event.
If the IRS were to challenge either of the positions described in the second and third paragraphs and were successful, or the IRS were unwilling to provide the clarification described in the fourth paragraph, the Company could be found not to have satisfied the gross income tests in one or more of its taxable years. If the Company were found not to have satisfied the gross income tests, it could be subject to a penalty tax as a result of any such violations, but the Company does not believe that any such penalty tax would be material. However, such noncompliance should not adversely affect the Company’s qualification as a REIT as long as such noncompliance was due to reasonable cause and not to willful neglect and certain other requirements were met. The Company believes that, in all three situations, any such noncompliance was due to reasonable cause and not willful neglect and that such other requirements will have been met.
If the Company were to fail to qualify as a REIT in any taxable year, it would be subject to federal income tax, including any applicable alternative minimum tax, on its taxable income at corporate rates. This could result in a discontinuation or substantial reduction in dividends to unitholders and in cash to pay interest and principal on debt securities that the Operating Partnership issues. Unless entitled to relief under certain statutory provisions, the Company would be disqualified from electing treatment as a REIT for the four taxable years following the year during which it failed to qualify as a REIT.
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Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS
| (a) | | Financial Statements: |
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| | | Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition A Properties (Unaudited). |
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| | | Historical Summary of Gross Income and Direct Operating Expenses for the 2006 Acquisition I Property and Notes thereto with Independent Auditors report dated January 19, 2007. |
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| | | Historical Summary of Gross Income and Direct Operating Expenses for the 2006 Acquisition II Property and Notes thereto with Independent Auditors report dated January 10, 2007. |
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| | | Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition III Property and Notes thereto with Independent Auditors report dated April 9, 2007. |
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| | | Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition IV Properties and Notes thereto with Independent Auditors report dated March 19, 2007. |
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| | | Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition VI Properties and Notes thereto with Independent Auditors report dated March 8, 2007. |
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| | | Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition VII Property and Notes thereto with Independent Auditors report dated April 18, 2007. |
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| | | Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition VIII Property and Notes thereto with Independent Auditors report dated January 23, 2007. |
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| | | Combined Historical Summaries of Gross Income and Direct Operating Expenses for the
2006 Acquisition IX Properties and Notes thereto with Independent Auditors report dated January 19, 2007. |
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| | | Historical Summaries of Gross Income and Direct Operating Expenses for the
2006 Acquisition X Property and Notes thereto with Independent Auditors report dated March 5, 2007. |
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| (b) | | Pro Forma Financial Information (Unaudited): |
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| | | Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2006. |
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| | | Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2005. |
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| (d) | | Exhibit. |
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| Exhibit No. | | Description |
| 23.1 | | Consent of PricewaterhouseCoopers LLP |
6
INDEX TO FINANCIAL STATEMENTS
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| | | PAGE | |
2006 Acquisition A Properties | | | | |
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| Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition A Properties for the Years Ended December 31, 2006 (Unaudited) and 2005 (Unaudited) | | | 9 | |
| | | | | |
2006 Acquisition I Property | | | | |
| | | | | |
| Report of Independent Auditors | | | 10 | |
| | | | | |
| Historical Summary of Gross Income and Direct Operating Expenses for the 2006 Acquisition I Property for the Year Ended December 31, 2005 | | | 11 | |
| | | | | |
| Notes to Historical Summary of Gross Income and Direct Operating Expenses | | | 12 | |
| | | | | |
2006 Acquisition II Property | | | | |
| | | | | |
| Report of Independent Auditors | | | 14 | |
| | | | | |
| Historical Summary of Gross Income and Direct Operating Expenses for the 2006 Acquisition II Property for the Year Ended December 31, 2005 | | | 15 | |
| | | | | |
| Notes to Historical Summary of Gross Income and Direct Operating Expenses | | | 16 | |
| | | | | |
2006 Acquisition III Property | | | | |
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| Report of Independent Auditors | | | 18 | |
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| Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition III Property for the Three Months Ended March 31, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 19 | |
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| Notes to Historical Summaries of Gross Income and Direct Operating Expenses | | | 20 | |
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2006 Acquisition IV Properties | | | | |
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| Report of Independent Auditors | | | 22 | |
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| Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition IV Properties for the Six Months Ended June 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 23 | |
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| Notes to Combined Historical Summaries of Gross Income and Direct Operating Expenses | | | 24 | |
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2006 Acquisition VI Properties | | | | |
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| Report of Independent Auditors | | | 26 | |
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| Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition VI Properties for the Nine Months Ended September 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 27 | |
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| Notes to Combined Historical Summaries of Gross Income and Direct Operating Expenses | | | 28 | |
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2006 Acquisition VII Property | | | | |
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| Report of Independent Auditors | | | 30 | |
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| Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 | | | | |
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| Acquisition VII Property for the Nine Months Ended September 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 31 | |
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| Notes to Historical Summaries of Gross Income and Direct Operating Expenses | | | 32 | |
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2006 Acquisition VIII Property | | | | |
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| Report of Independent Auditors | | | 34 | |
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| Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 | | | | |
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| Acquisition VIII Property for the Nine Months Ended September 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 35 | |
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| Notes to Historical Summaries of Gross Income and Direct Operating Expenses | | | 36 | |
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2006 Acquisition IX Properties | | | | |
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| Report of Independent Auditors | | | 38 | |
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| Combined Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition IX Properties for the Nine Months Ended September 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 39 | |
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| Notes to Combined Historical Summaries of Gross Income and Direct Operating Expenses | | | 40 | |
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2006 Acquisition X Property | | | | |
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| Report of Independent Auditors | | | 42 | |
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| Historical Summaries of Gross Income and Direct Operating Expenses for the 2006 Acquisition X Property for the Nine Months Ended September 30, 2006 (Unaudited) and the Year Ended December 31, 2005 | | | 43 | |
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| Notes to Historical Summaries of Gross Income and Direct Operating Expenses | | | 44 | |
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Pro Forma Financial Information (Unaudited) | | | | |
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| Pro Forma Financial Information | | | 46 | |
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| Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2006 | | | 47 | |
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| Notes to Pro Forma Financial Statements | | | 49 | |
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| Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2005 | | | 52 | |
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| Notes to Pro Forma Financial Statement | | | 54 | |
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2006 ACQUISITION A PROPERTIES
Combined Historical Summaries of Gross Income and Direct Operating Expenses
For the Years Ended December 31, 2006 and 2005
(Unaudited, Dollars in thousands)
The Combined Historical Summaries of Gross Income and Direct Operating Expenses as shown below, present the summarized results of operations of 41 of 57 operating industrial properties acquired during the period January 1, 2006 through December 31, 2006 (the “2006 Acquisition A Properties”) by First Industrial, L.P. (the “Operating Partnership”). The Combined Historical Summary of Gross Income and Direct Operating Expenses for the Year Ended December 31, 2006 include operations only for the periods for which the 2006 Acquisition A Properties were not owned by the Operating Partnership. These statements are exclusive of one operating industrial property (the “2006 Acquisition I Property”), one operating industrial property (the “2006 Acquisition II Property”), one operating industrial property (the “2006 Acquisition III Property”), six operating industrial properties (the “2006 Acquisition IV Properties”), two operating industrial properties (the “2006 Acquisition VI Properties”), one operating industrial property (the “2006 Acquisition VII Property”), one operating industrial property (the “2006 Acquisition VIII Property”), two operating industrial properties (the “2006 Acquisition IX Properties”) and one operating industrial property (the “2006 Acquisition X Property”) acquired by the Operating Partnership during the period January 1, 2006 through December 31, 2006 which have been audited and are included elsewhere in this Form 8-K.
The 2006 Acquisition A Properties were acquired for an aggregate purchase price of approximately $128.8 million and have an aggregate gross leasable area of 2,269,961 square feet (unaudited). A description of each property is included in Item 8.01.
| | | | | | | | | |
| | | For the | | | For the | |
| | | Year Ended | | | Year Ended | |
| | | December 31, 2006 | | | December 31, 2005 | |
| | | (Unaudited) | | | (Unaudited) | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 3,383 | | | $ | 9,604 | |
| Tenant Recoveries and Other Income | | | 169 | | | | 2,648 | |
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| Total Gross Income | | | 3,552 | | | | 12,252 | |
| | | | | | | |
| | | | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 495 | | | | 2,677 | |
| Repairs and Maintenance | | | 170 | | | | 426 | |
| Utilities | | | 70 | | | | 291 | |
| Insurance | | | 72 | | | | 216 | |
| Other | | | 232 | | | | 1,378 | |
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| Total Direct Operating Expenses | | | 1,039 | | | | 4,988 | |
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| Gross Income in Excess of Direct Operating Expenses | | $ | 2,513 | | | $ | 7,264 | |
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9
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition I Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition I Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition I Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition I Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 19, 2007
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2006 ACQUISITION I PROPERTY (201 Manville)
Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
| | | | | |
| Gross Income: | | | | |
| Rental Income | | $ | 826 | |
| Tenant Recoveries | | | 96 | |
| | | | |
| Total Gross Income | | | 922 | |
| | | | |
| | | | | |
| Direct Operating Expenses: | | | | |
| Real Estate Taxes | | | 85 | |
| | | | |
| Total Direct Operating Expenses | | | 85 | |
| | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 837 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
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2006 ACQUISITION I PROPERTY (201 Manville)
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
1. Basis of Presentation.
The Historical Summary of Gross Income and Direct Operating Expenses present the results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on January 12, 2006 (the “2006 Acquisition I Property”).
The 2006 Acquisition I Property was acquired for a purchase price of approximately $14.0 million.
| | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Los Angeles, CA | | | 1 | | | | 150,000 | | | January 12, 2006 |
The Historical Summary has been prepared on the accrual basis of accounting. The Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summary is not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition I Property. The Historical Summary excludes certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition I Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summary, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition I Property and include real estate taxes that are expected to continue in the ongoing operation of the 2006 Acquisition I Property. Expenditures for maintenance and repairs, utilities, and insurance are paid directly by the tenant.
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2006 ACQUISITION I PROPERTY (201 Manville)
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
3. Future Rental Revenues.
The 2006 Acquisition I Property is leased to a tenant under a net operating lease. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under the noncancelable operating lease in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition I | |
| | | Amount | |
| 2006 | | | 858 | |
| 2007 | | | — | |
| 2008 | | | — | |
| 2009 | | | — | |
| 2010 | | | — | |
| Thereafter | | | — | |
| | | | |
| Total | | $ | 858 | |
| | | | |
Federal Express Corporation is the sole tenant, occupying 100% of the Property, and therefore represents 100% of the total gross income reported.
4. Subsequent Event.
On November 30, 2006 Federal Express Corporation renewed their lease for a portion of the premise. Federal Express Corporation will occupy 62,250 square feet (unaudited) during the period from February 1, 2007 through November 30, 2011. Annual base rent over the new lease term will be $653,640.
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REPORT OF INDEPENDENT AUDITORS
| | |
To the Partners of
First Industrial, L.P. |
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition II Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition II Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition II Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition II Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 10, 2007
14
2006 ACQUISITION II PROPERTY (5801 Martin Luther King Boulevard)
Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
| | | | | |
| Gross Income: | | | | |
| Rental Income | | $ | 3,929 | |
| Tenant Recoveries | | | 535 | |
| | | | |
| Total Gross Income | | | 4,464 | |
| | | | |
| | | | | |
| Direct Operating Expenses: | | | | |
| Real Estate Taxes | | | 535 | |
| Insurance | | | 5 | |
| | | | |
| Total Direct Operating Expenses | | | 540 | |
| | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 3,924 | |
| | | | |
The accompanying notes are an integral part of the financial statements.
15
2006 ACQUISITION II PROPERTY (5801 Martin Luther King Boulevard)
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
1. Basis of Presentation.
The Historical Summary of Gross Income and Direct Operating Expenses present the 2005 results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on February 1, 2006 (the “2006 Acquisition II Property”).
The 2006 Acquisition II Property was acquired for an aggregate purchase price of approximately $41.8 million.
| | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Dallas, TX | | | 1 | | | | 498,145 | | | February 1, 2006 |
The Historical Summary has been prepared on the accrual basis of accounting. The Historical Summary has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summary is not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition II Property. The Historical Summary excludes certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition II Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summary, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rent concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes and other property expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition II Property and include real estate taxes and insurance that are expected to continue in the ongoing operation of the 2006 Acquisition II Property. Expenditures for maintenance and repairs and utilities are paid directly by the tenant.
16
2006 ACQUISITION II PROPERTY (5801 Martin Luther King Boulevard)
Notes to Historical Summary of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 2005
(Dollars in thousands)
3. Future Rental Revenues.
The 2006 Acquisition II Property is leased to a tenant under a net operating lease. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under the noncancelable operating lease in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition II | |
| | | Amount | |
| 2006 | | | 3,453 | |
| 2007 | | | 3,453 | |
| 2008 | | | 3,453 | |
| 2009 | | | 3,482 | |
| 2010 | | | 3,988 | |
| Thereafter | | | 41,781 | |
| | | | |
| Total | | $ | 59,610 | |
| | | | |
Llano Logistics, Inc. is the sole tenant, occupying 100% of the Property, and therefore, represents 100% of the total gross income reported.
17
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition III Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition III Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition III Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition III Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
April 9, 2007
18
2006 ACQUISITION III PROPERTY (10330 I Street)
Historical Summaries of Gross Income and Direct Operating Expenses
For the Three Months Ended March 31, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Three | | | For the | |
| | | Months Ended | | | Year Ended | |
| | | March 31, 2006 | | | December 31, 2005 | |
| | | (Unaudited) | | | | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 220 | | | $ | 714 | |
| Tenant Recoveries | | | 45 | | | | 86 | |
| | | | | | | |
| Total Gross Income | | | 265 | | | | 800 | |
| | | | | | | |
| | | | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 43 | | | | 170 | |
| Repairs And Maintenance | | | 2 | | | | 7 | |
| Utilities | | | 20 | | | | 137 | |
| Insurance | | | 4 | | | | 20 | |
| Other | | | — | | | | 19 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 69 | | | | 353 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 196 | | | $ | 447 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
19
2006 ACQUISITION III PROPERTY (10330 I Street)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Three Months Ended March 31, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
1. Basis of Presentation.
The Historical Summaries of Gross Income and Direct Operating Expenses present the results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on May 8, 2006 (the “2006 Acquisition III Property”).
The 2006 Acquisition III Property was acquired for a purchase price of approximately $11.0 million.
| | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Omaha, Nebraska | | | 1 | | | | 355,964 | | | May 8, 2006 |
The Historical Summaries have been prepared on the accrual basis of accounting. The Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition III Property. The Historical Summaries exclude certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition III Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition III Property and include real estate taxes, repairs and maintenance, utilities, and insurance expense that are expected to continue in the ongoing operation of the 2006 Acquisition III Property. Expenditures for maintenance and repairs are charged to operations as incurred.
20
2006 ACQUISITION III PROPERTY (10330 I Street)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Three Months Ended March 31, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
| 3. | | Future Rental Revenues. |
The 2006 Acquisition III Property is leased to a tenant under a gross operating lease. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition III | |
| | | Amount | |
| 2006 | | | 865 | |
| 2007 | | | 841 | |
| 2008 | | | 841 | |
| 2009 | | | 374 | |
| 2010 | | | 374 | |
| Thereafter | | | 3,362 | |
| | | | |
| Total | | $ | 6,657 | |
| | | | |
The following three tenants represent more than 10% of the gross income for the year ended December 31, 2005:
| | | | | |
| | | % Gross Income | |
| | | Year ended | |
| Tenant | | December 31, 2005 | |
| Firstar Fiber, Inc | | | 52.14% | |
| Tra-Mel Leasing | | | 18.13% | |
| Lovebox Company | | | 24.10% | |
The following two tenants represent more than 10% of the gross income for the three months ended March 31, 2006 (Unaudited):
| | | | | |
| | | % Gross Income | |
| | | Three months ended | |
| Tenant | | March 31, 2006
(Unaudited) | |
| Powermate Corp. | | | 52.63% | |
| Firstar Fiber, Inc | | | 42.05% | |
4. Related Party Transactions.
In 2005 Firstar Fiber, Inc and Tra-Mel Leasing each owned 55% and 45% respectively of the membership interest in Central Omaha Real Estate L.L.C., the owner of the property. During 2005, Firstar Fiber, Inc acquired Tra-Mel Leasing’s ownership in Central Omaha Real Estate L.L.C. At time of sale, Firstar Fiber, Inc was the owner of 100% of the membership interest in Central Omaha Real Estate L.L.C.
| 5. | | Historical Summary of Gross Income and Direct Operating Expenses for the Three Months Ended March 31, 2006 (Unaudited). |
The Historical Summary of Gross Income and Direct Operating Expenses for the three months ended March 31, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the historical summary for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year for the operations of the Property.
21
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Combined Historical Summary”) of the 2006 Acquisition IV Properties as described in Note 1 for the year ended December 31, 2005. This Combined Historical Summary is the responsibility of the 2006 Acquisition IV Properties’ management. Our responsibility is to express an opinion on this Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition IV Properties’ revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition IV Properties for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 19, 2007
22
2006 ACQUISITION IV PROPERTIES (Duke Industrial Portfolio)
Combined Historical Summaries of Gross Income and Direct Operating Expenses
For the Six Months Ended June 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Six | | | For the | |
| | | Months Ended | | | Year Ended | |
| | | June 30, 2006 | | | December 31, 2005 | |
| | | (Unaudited) | | | | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 2,157 | | | $ | 3,529 | |
| Tenant Recoveries | | | 530 | | | | 705 | |
| | | | | | | |
| Total Gross Income | | | 2,687 | | | | 4,234 | |
| | | | | | | |
| | | | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 200 | | | | 457 | |
| Repairs and Maintenance | | | 223 | | | | 366 | |
| Utilities | | | 101 | | | | 123 | |
| Insurance | | | 29 | | | | 38 | |
| Other Expenses | | | 9 | | | | 40 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 562 | | | | 1,024 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 2,125 | | | $ | 3,210 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
23
2006 ACQUISITION IV PROPERTIES (Duke Industrial Portfolio)
Notes to Combined Historical Summaries of Gross Income and
Direct Operating Expenses
For the Six Months Ended June 30, 2006 (unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
1. Basis of Presentation.
The Combined Historical Summaries of Gross Income and Direct Operating Expenses combine the results of operations of six operating industrial properties acquired by First Industrial, L.P. (the “Operating Partnership”) on July 24, 2006 (the “2006 Acquisition IV Properties”).
The 2006 Acquisition IV Properties were acquired for an aggregate purchase price of approximately $50.6 million.
| | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Cleveland, OH | | | 6 | | | | 1,060,799 | | | July 24, 2006 |
The Combined Historical Summaries have been prepared on the accrual basis of accounting. The Combined Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Combined Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition IV Properties. The Combined Historical Summaries exclude certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition IV Properties that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to these properties which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Combined Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the 2006 Acquisition IV Properties.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition IV Properties and include real estate taxes, utilities, insurance, and other expenses that are expected to continue in the ongoing operation of the 2006 Acquisition IV Properties. Expenditures for repairs and maintenance are charged to operations as incurred.
24
2006 ACQUISITION IV PROPERTIES (Duke Industrial Portfolio)
Notes to Combined Historical Summaries of Gross Income and
Direct Operating Expenses
For the Six Months Ended June 30, 2006 (unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
3. Future Rental Revenues.
The 2006 Acquisition IV Properties are leased to tenants under net and gross operating leases. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition IV | |
| | | Amount | |
| 2006 | | | 4,458 | |
| 2007 | | | 4,073 | |
| 2008 | | | 3,755 | |
| 2009 | | | 3,307 | |
| 2010 | | | 3,073 | |
| Thereafter | | | 5,469 | |
| | | | |
| Total | | $ | 24,135 | |
| | | | |
The following three tenants represent more than 10% of the total gross income reported for the six months ended June 30, 2006 (unaudited) and year ended December 31, 2005:
| | | | | | | | | |
| | | % Gross Income | | | |
| | | Six months ended | | | % Gross Income | |
| | | June 30, 2006 | | | Year ended | |
| Tenant | | (Unaudited) | | | December 31, 2005 | |
| Best Buy Stores | | | 33% | | | | 39% | |
| Stride Tool | | | 14% | | | | 18% | |
| The Home Depot | | | 16% | | | | 4% | |
4. Combined Historical Summary of Gross Income and Direct Operating Expenses for the Six Months Ended June 30, 2006 (Unaudited).
The Combined Historical Summary of Gross Income and Direct Operating Expenses for the six months ended June 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the combined historical summary for the interim period have been included. The combined results of operations for the interim period are not necessarily indicative of the combined results of operations to be expected for a full year for the operations of the Properties.
25
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Combined Historical Summary”) of the 2006 Acquisition VI Properties as described in Note 1 for the year ended December 31, 2005. This Combined Historical Summary is the responsibility of the 2006 Acquisition VI Properties’ management. Our responsibility is to express an opinion on this Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition VI Properties’ revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition VI Properties for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 8, 2007
26
2006 ACQUISITION VI PROPERTIES (Ninigret IX — AB & C)
Combined Historical Summaries of Gross Income and
Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Nine | | | | |
| | | Months Ended | | | For the | |
| | | September 30, 2006 | | | Year Ended | |
| | | (Unaudited) | | | December 31, 2005 | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 1,023 | | | $ | 1,173 | |
| Tenant Recoveries and Other Income | | | 232 | | | | 217 | |
| | | | | | | |
| Total Gross Income | | | 1,255 | | | | 1,390 | |
| | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 130 | | | | 129 | |
| Repairs and Maintenance | | | 74 | | | | 70 | |
| Utilities | | | 21 | | | | 41 | |
| Insurance | | | 47 | | | | 53 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 272 | | | | 293 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 983 | | | $ | 1,097 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
27
2006 ACQUISITION VI PROPERTIES (Ninigret IX — AB & C)
Notes to Combined Historical Summaries of Gross Income
and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| 1. | | Basis of Presentation. |
The Combined Historical Summaries of Gross Income and Direct Operating Expenses present the results of operations of two operating industrial properties acquired by First Industrial, L.P. (the “Operating Partnership”) on October 3, 2006 (the “2006 Acquisition VI Properties”).
The 2006 Acquisition VI Properties were acquired for an aggregate purchase price of approximately $18.7 million.
| | | | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Salt Lake City, UT | | | 2 | | | | 389,981 | | | October 3, 2006 |
The Combined Historical Summaries have been prepared on the accrual basis of accounting. The Combined Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Combined Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition VI Properties. The Combined Historical Summary excludes certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition VI Properties that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Combined Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Properties.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition VI Properties and include real estate taxes, repairs and maintenance, utilities, and insurance expenses that are expected to continue in the ongoing operation of the 2006 Acquisition VI Properties.
28
2006 ACQUISITION VI PROPERTIES (Ninigret IX — AB & C)
Notes to Combined Historical Summaries of Gross Income
and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| 3. | | Future Rental Revenues. |
The 2006 Acquisition VI Properties are leased to tenants under gross operating leases. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition VI | |
| | | Amount | |
| 2006 | | | 1,283 | |
| 2007 | | | 1,364 | |
| 2008 | | | 1,083 | |
| 2009 | | | 591 | |
| 2010 | | | 389 | |
| Thereafter | | | 849 | |
| | | | |
| Total | | $ | 5,559 | |
| | | | |
The following three tenants represent more than 10% of the total gross income reported for the nine months ended September 30, 2006 (unaudited) and year ended December 31, 2005:
| | | | | | | | | |
| | | % Gross Income | |
| | | Nine Months ended | | % Gross Income |
| | | September 30, 2006 | | Year ended |
| Tenant | | (Unaudited) | | December 31, 2005 |
| United Stationers | | | 37.43 | % | | | 39.96 | % |
| Inline Plastic | | | 13.74 | % | | | 17.95 | % |
| Black Diamond | | | 13.62 | % | | | 13.72 | % |
| 4. | | Combined Historical Summary of Gross Income and Direct Operating Expenses for the Nine Months Ended September 30, 2006 (Unaudited) |
The Combined Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the combined historical summary for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year for the operations of the Properties.
29
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition VII Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition VII Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition VII Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition VII Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
April 18, 2007
30
2006 ACQUISITION VII PROPERTY (7102 W. Roosevelt)
Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Nine | | | | |
| | | Months Ended | | | For the | |
| | | September 30, 2006 | | | Year Ended | |
| | | (Unaudited) | | | December 31, 2005 | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 225 | | | $ | 258 | |
| | | | | | | |
| Total Gross Income | | | 225 | | | | 258 | |
| | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 103 | | | | 134 | |
| Repairs and Maintenance | | | 13 | | | | 19 | |
| Utilities | | | 15 | | | | 17 | |
| Insurance | | | 9 | | | | 16 | |
| Other Expenses | | | 13 | | | | 18 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 153 | | | | 204 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 72 | | | $ | 54 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
31
2006 ACQUISITION VII PROPERTY (7102 W. Roosevelt)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
| 1. | | Basis of Presentation. |
The Historical Summaries of Gross Income and Direct Operating Expenses present the results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on October 5, 2006 (the “2006 Acquisition VII Property”).
The 2006 Acquisition VII Property was acquired for a purchase price of approximately $8.1 million.
| | | | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Phoenix, AZ | | | 1 | | | | 153,600 | | | October 5, 2006 |
The Historical Summaries have been prepared on the accrual basis of accounting. The Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition VII Property. The Historical Summaries exclude certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition VII Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
| 2. | | Summary of Significant Accounting Policies. |
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition VII Property and include real estate taxes, repairs and maintenance, utilities, insurance, and other property expenses that are expected to continue in the ongoing operation of the 2006 Acquisition VII Property. Expenditures for maintenance and repairs are charged to operations as incurred.
| 3. | | Future Rental Revenues. |
The 2006 Acquisition VII Property was leased to a tenant under a gross operating lease. Minimum lease payments receivable under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
32
2006 ACQUISITION VII PROPERTY (7102 W. Roosevelt)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and the
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | |
| | | 2006 | |
| | | Acquisition VII | |
| | | Amount | |
| 2006 | | | 250 | |
| 2007 | | | — | |
| 2008 | | | — | |
| 2009 | | | — | |
| 2010 | | | — | |
| Thereafter | | | — | |
| | | | |
| Total | | $ | 250 | |
| | | | |
CSK Auto, Inc. was the sole tenant through November 5, 2006 and therefore represented 100% of the total gross income reported.
| 4. | | Historical Summary of Gross Income and Direct Operating Expenses for the Nine Months Ended September 30, 2006 (Unaudited). |
The Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the historical summary for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year for the operations of the Property.
33
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition VIII Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition VIII Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition VIII Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition VIII Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 23, 2007
34
2006 ACQUISITION VIII PROPERTY (21-25 Gateway Commerce Center)
Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Nine | | | | |
| | | Months Ended | | | For the | |
| | | September 30, 2006 | | | Year Ended | |
| | | (Unaudited) | | | December 31, 2005 | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 1,950 | | | $ | 2,008 | |
| Tenant Recoveries | | | 459 | | | | 594 | |
| | | | | | | |
| Total Gross Income | | | 2,409 | | | | 2,602 | |
| | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 459 | | | | 594 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 459 | | | | 594 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 1,950 | | | $ | 2,008 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
35
2006 ACQUISITION VIII PROPERTY (21-25 Gateway Commerce Center)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| 1. | | Basis of Presentation. |
The Historical Summaries of Gross Income and Direct Operating Expenses present the results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on October 10, 2006 (the “2006 Acquisition VIII Property”).
The 2006 Acquisition VIII Property was acquired for an aggregate purchase price of approximately $39.0 million.
| | | | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Chicago, IL | | | 1 | | | | 1,057,823 | | | October 10, 2006 |
The Historical Summaries have been prepared on the accrual basis of accounting. The Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition VIII Property. The Historical Summary excludes certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition VIII Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
| 2. | | Summary of Significant Accounting Policies. |
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition VIII Property and include real estate taxes that are expected to continue in the ongoing operation of the 2006 Acquisition VIII Property. Expenditures for maintenance and repairs, utilities, and insurance are paid directly by the tenant.
36
2006 ACQUISITION VIII PROPERTY (21-25 Gateway Commerce Center)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
3. Future Rental Revenues.
The 2006 Acquisition VIII Property is leased to a tenant under a net operating lease. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition VIII | |
| | | Amount | |
| 2006 | | | 1,879 | |
| 2007 | | | 1,989 | |
| 2008 | | | 1,989 | |
| 2009 | | | 1,989 | |
| 2010 | | | 1,989 | |
| Thereafter | | | 6,453 | |
| | | | |
| Total | | $ | 16,288 | |
| | | | |
Ozburn-Hessey Logistics, LLC is the sole tenant and therefore represents 100% of the total gross income reported for the year ended December 31, 2005 and nine months ended September 30, 2006 (unaudited). During 2006, construction was completed on the expansion of the property for an additional 409,948 square feet (unaudited). Ozburn-Hessey executed a three year lease which commenced on June 1, 2006 for the additional 409,948 square feet (unaudited).
| 4. | | Historical Summary of Gross Income and Direct Operating Expenses for the Nine Months Ended September 30, 2006 (Unaudited). |
The Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the historical summary for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year for the operations of the Property.
37
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Combined Historical Summary”) of the 2006 Acquisition IX Properties as described in Note 1 for the year ended December 31, 2005. This Combined Historical Summary is the responsibility of the 2006 Acquisition IX Properties’ management. Our responsibility is to express an opinion on this Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Combined Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Combined Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Combined Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition IX Properties’ revenues and expenses.
In our opinion, the Combined Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating described in Note 1 of the 2006 Acquisition IX Properties for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 19, 2007
38
2006 ACQUISITION IX PROPERTIES (2610 & 2660 Columbia and 433 Alaska)
Combined Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Nine | | | | |
| | | Months Ended | | | For the | |
| | | September 30, 2006 | | | Year Ended | |
| | | (Unaudited) | | | December 31, 2005 | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 466 | | | $ | 613 | |
| Tenant Recoveries | | | 86 | | | | 109 | |
| | | | | | | |
| Total Gross Income | | | 552 | | | | 722 | |
| | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 68 | | | | 85 | |
| Insurance | | | 18 | | | | 24 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 86 | | | | 109 | |
| | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 466 | | | $ | 613 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
39
2006 ACQUISITION IX PROPERTIES (2610 & 2660 Columbia and 433 Alaska)
Notes to Combined Historical Summaries of Gross Income and
Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| 1. | | Basis of Presentation. |
The Combined Historical Summaries of Gross Income and Direct Operating Expenses combine the results of operations of two operating industrial properties acquired by First Industrial, L.P. (the “Operating Partnership”) on November 30, 2006 (the “2006 Acquisition IX Properties”).
The 2006 Acquisition IX Properties were acquired for an aggregate purchase price of approximately $10.5 million.
.
| | | | | | | | | | | | | |
| | | | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Los Angeles, CA | | | 2 | | | | 109,561 | | | November 30, 2006 |
The Combined Historical Summaries have been prepared on the accrual basis of accounting. The Combined Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Combined Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition IX Properties. The Combined Historical Summaries exclude certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition IX Properties that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to these properties which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Combined Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
40
2006 ACQUISITION IX PROPERTIES (2610 & 2660 Columbia and 433 Alaska)
Notes to Combined Historical Summaries of Gross Income and
Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| 2. | | Summary of Significant Accounting Policies. |
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition IX Properties and include real estate taxes and insurance expenses that are expected to continue in the ongoing operation of the 2006 Acquisition IX Properties. Expenditures for maintenance and repairs and utilities are paid directly by the tenant.
| 3. | | Future Rental Revenues. |
The 2006 Acquisition IX Properties are leased to tenants under net operating leases. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition IX | |
| | | Amount | |
| 2006 | | | 625 | |
| 2007 | | | 249 | |
| 2008 | | | 62 | |
| 2009 | | | 63 | |
| 2010 | | | — | |
| Thereafter | | | — | |
| | | | |
| Total | | $ | 999 | |
| | | | |
Severn Trent Services accounts for approximately 90% of rental income for the year ended December 31, 2005 and nine months ended September 30, 2006 (unaudited).
| 4. | | Combined Historical Summary of Gross Income and Direct Operating Expenses for the Nine Months Ended September 30, 2006 (Unaudited). |
The Combined Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the combined historical summary for the interim period have been included. The combined results of operations for the interim period are not necessarily indicative of the combined results of operations to be expected for a full year for the operations of the Properties.
41
REPORT OF INDEPENDENT AUDITORS
To the Partners of
First Industrial, L.P.
We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the 2006 Acquisition X Property as described in Note 1 for the year ended December 31, 2005. This Historical Summary is the responsibility of the 2006 Acquisition X Property’s management. Our responsibility is to express an opinion on this Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying with certain rules and regulations of the Securities and Exchange Commission as described in Note 1 and is not intended to be a complete presentation of the 2006 Acquisition X Property’s revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in Note 1 of the 2006 Acquisition X Property for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 5, 2007
42
2006 ACQUISITION X PROPERTY (4600 South Hamilton)
Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
| | | | | | | | | |
| | | For the Nine | | | For the | |
| | | Months Ended | | | Year Ended | |
| | | September 30, 2006 | | | December 31, 2005 | |
| | | (Unaudited) | | | | |
| | | | | | | | | |
| Gross Income: | | | | | | | | |
| Rental Income | | $ | 624 | | | $ | 833 | |
| Tenant Recoveries | | | 15 | | | | 20 | |
| | | | | | | |
| Total Gross Income | | | 639 | | | | 853 | |
| | | | | | | |
| | | | | | | | | |
| Direct Operating Expenses: | | | | | | | | |
| Real Estate Taxes | | | 15 | | | | 20 | |
| | | | | | | |
| Total Direct Operating Expenses | | | 15 | | | | 20 | |
| | | | | | | |
| | | | | | | | | |
| Gross Income in Excess of Direct Operating Expenses | | $ | 624 | | | $ | 833 | |
| | | | | | | |
The accompanying notes are an integral part of the financial statements.
43
2006 ACQUISITION X PROPERTY (4600 South Hamilton)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
1. Basis of Presentation.
The Historical Summaries of Gross Income and Direct Operating Expenses present the results of operations of one operating industrial property acquired by First Industrial, L.P. (the “Operating Partnership”) on November 30, 2006 (the “2006 Acquisition X Property”).
The 2006 Acquisition X Property was acquired for an aggregate purchase price of approximately $8.6 million.
| | | | | | | |
| | | | | Square | | |
| | | # of | | Feet | | Date |
| Metropolitan Area | | Properties | | (Unaudited) | | Acquired |
| Cincinnati, OH | | 1 | | 207,827 | | November 30, 2006 |
The Historical Summaries have been prepared on the accrual basis of accounting. The Historical Summaries have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in this current report on Form 8-K of the Operating Partnership and future registration statements filed by the Operating Partnership. The Historical Summaries are not intended to be a complete presentation of the revenues and expenses of the 2006 Acquisition X Property. The Historical Summary excludes certain expenses such as interest, depreciation and amortization, professional fees, and other costs not directly related to the future operations of the 2006 Acquisition X Property that may not be comparable to the expenses expected to be incurred in future operations. Management is not aware of any material factors relating to this property which would cause the reported financial information not to be necessarily indicative of future operating results.
Use of Estimates
In order to conform with generally accepted accounting principles, management, in preparation of the Historical Summaries, is required to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from these estimates.
2. Summary of Significant Accounting Policies.
Revenue and Expense Recognition
Rental income is recorded when due from tenants based upon lease terms. The effects of scheduled rent increases and rental concessions, if any, are recognized on a straight-line basis over the term of the tenant’s lease. Tenant recovery income includes payments from tenants for real estate taxes, insurance and other property operating expenses, if applicable, and is recognized as revenue in the same period the related expenses are incurred by the Property.
Direct operating expenses represent the direct expenses of operating the 2006 Acquisition X Property and include real estate taxes that are expected to continue in the ongoing operation of the 2006 Acquisition X Property. Expenditures for maintenance and repairs, utilities, and insurance are paid directly by the tenant.
44
2006 ACQUISITION X PROPERTY (4600 South Hamilton)
Notes to Historical Summaries of Gross Income and Direct Operating Expenses
For the Nine Months Ended September 30, 2006 (Unaudited) and
Year Ended December 31, 2005
(Dollars in thousands)
3. Future Rental Revenues.
The 2006 Acquisition X Property is leased to a tenant under a net operating lease. Minimum lease payments receivable, excluding tenant reimbursement of expenses, under noncancelable operating leases in effect as of December 31, 2005 are approximately as follows:
| | | | | |
| | | 2006 | |
| | | Acquisition X | |
| | | Amount | |
| 2006 | | | 833 | |
| 2007 | | | 833 | |
| 2008 | | | 833 | |
| 2009 | | | 833 | |
| 2010 | | | 833 | |
| Thereafter | | | 4,094 | |
| | | | |
| Total | | $ | 8,259 | |
| | | | |
Sofa Express, Inc. is the sole tenant and therefore represents 100% of the total gross income reported for the year ended December 31, 2005 and nine months ended September 30, 2006 (unaudited).
4. Historical Summary of Gross Income and Direct Operating Expenses for the Nine Months Ended September 30, 2006 (Unaudited).
The Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the historical summary for the interim period have been included. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year for the operations of the Property.
45
First Industrial, L.P.
Pro Forma Financial Information
(Unaudited)
Background
First Industrial, L.P. was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner is First Industrial Realty Trust, Inc. (the “Company”) with an approximate 87.3% and 86.8% ownership interest at December 31, 2006 and 2005, respectively. The limited partners of the Operating Partnership owned approximately a 12.7% and 13.2% interest in the Operating Partnership at December 31, 2006 and 2005, respectively. The Company is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code. The Company’s operations are conducted primarily through the Operating Partnership.
The Operating Partnership acquired 57 operating industrial properties from unrelated parties during the period January 1, 2006 through December 31, 2006. The combined purchase price of the 57 operating industrial properties acquired totaled approximately $331.1 million, excluding closing costs incurred in conjunction with the acquisition of the industrial properties. The 57 operating industrial properties acquired were funded with proceeds from property sales, borrowings under the Operating Partnership’s $500 million unsecured revolving credit facility (the “Unsecured Line of Credit”) and/or working capital. The Operating Partnership will operate the facilities as industrial rental property. The Operating Partnership also acquired 22 operating industrial properties from unrelated parties during the period January 1, 2006 through December 31, 2006, which are not included in the accompanying unaudited pro forma statements of operations for the years ended December 31, 2006 and 2005, as the properties were vacant upon purchase, leased back to the seller(s) upon purchase or subsequently sold before December 31, 2006. The combined purchase price of the 22 operating industrial properties acquired totaled approximately $197.3 million.
The accompanying unaudited pro forma statement of operations for the year ended December 31, 2006 reflects the historical operations of the Operating Partnership for the period January 1, 2006 through December 31, 2006, adjusted by the operations from the acquisition of 41 industrial properties (the “2006 Acquisition A Properties), one operating industrial property (the “2006 Acquisition I Property”), one operating industrial property (the “2006 Acquisition II Property”), one operating industrial property (the “2006 Acquisition III Property”), six operating industrial properties (the “2006 Acquisition IV Properties”), two operating industrial properties (the “2006 Acquisition VI Properties”), one operating industrial property (the “2006 Acquisition VII Property”), one operating industrial property (the “2006 Acquisition VIII Property”), two operating industrial properties (the “2006 Acquisition IX Properties”), and one operating industrial property (the “2006 Acquisition X Property”), collectively referred to as the “2006 Acquisition Properties”, during the period January 1, 2006 through December 31, 2006.
The accompanying unaudited pro forma statement of operations for the year ended December 31, 2005 reflects the historical operations of the Operating Partnership for the period January 1, 2005 through December 31, 2005, adjusted by the operations from the acquisition of the 2006 Acquisition Properties during the period January 1, 2006 through December 31, 2006.
The accompanying unaudited pro forma statements of operations for the year ended December 31, 2006 and the year ended December 31, 2005 have been prepared as if the following transactions that occurred subsequent to December 31, 2005; (i) the acquisition of real estate properties, (ii) the receipt of net proceeds from the disposition of real estate (offset by any provided seller financing), (iii) the issuance of preferred stock and (iv) the issuance of debt, had occurred on January 1, 2005.
The unaudited pro forma information is not necessarily indicative of the Operating Partnership’s consolidated results that would have occurred if the transactions and adjustments reflected therein had been consummated in the period or on the date presented, or on any particular date in the future, nor does it purport to present the Operating Partnership’s financial position, results of operations or cash flows for future periods.
46
FIRST INDUSTRIAL, L.P.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2006
(Unaudited, Dollars in thousands, except unit and per unit data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | First | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | | | | | | |
| | | Industrial, | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Other | | | First | |
| | | L.P. | | | A | | | I | | | II | | | III | | | IV | | | VI | | | VII | | | VIII | | | IX | | | X | | | Pro Forma | | | Industrial, | |
| | | (Historical) | | | Properties | | | Property | | | Property | | | Property | | | Properties | | | Properties | | | Property | | | Property | | | Properties | | | Property | | | Adjustments | | | L.P. | |
| | | Note 1 (a) | | | Note 1 (b) | | | Note 1 (c) | | | Note 1 (d) | | | Note 1 (e) | | | Note 1 (f) | | | Note 1 (g) | | | Note 1 (h) | | | Note 1 (i) | | | Note 1 (j) | | | Note 1 (k) | | | Note 1 (l) | | | Pro Forma | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| REVENUES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rental Income | | $ | 234,941 | | | $ | 3,383 | | | $ | 27 | | | $ | 334 | | | $ | 313 | | | $ | 2,443 | | | $ | 1,034 | | | $ | 233 | | | $ | 2,021 | | | $ | 570 | | | $ | 763 | | | $ | 440 | | | $ | 246,502 | |
| Tenant Recoveries and Other Income | | | 101,008 | | | | 169 | | | | 3 | | | | 45 | | | | 64 | | | | 600 | | | | 235 | | | | — | | | | 476 | | | | 105 | | | | 18 | | | | — | | | | 102,723 | |
| Revenues from Build to Suit Development for Sale | | | 10,540 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,540 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Revenues | | | 346,489 | | | | 3,552 | | | | 30 | | | | 379 | | | | 377 | | | | 3,043 | | | | 1,269 | | | | 233 | | | | 2,497 | | | | 675 | | | | 781 | | | | 440 | | | | 359,765 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EXPENSES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property Expenses | | | 115,644 | | | | 1,039 | | | | 3 | | | | 45 | | | | 98 | | | | 637 | | | | 275 | | | | 157 | | | | 476 | | | | 105 | | | | 18 | | | | — | | | | 118,497 | |
| General and Administrative | | | 76,631 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 76,631 | |
| Amortization of Deferred Financing Costs | | | 2,664 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,664 | |
| Depreciation and Other Amortization | | | 126,264 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,048 | | | | 135,312 | |
| Expenses from Build to Suit Development for Sale | | | 10,263 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10,263 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Expenses | | | 331,466 | | | | 1,039 | | | | 3 | | | | 45 | | | | 98 | | | | 637 | | | | 275 | | | | 157 | | | | 476 | | | | 105 | | | | 18 | | | | 9,048 | | | | 343,367 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER INCOME/EXPENSE: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Income | | | 947 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9 | | | | 956 | |
| Mark-to-Market/(Loss) Gain on Settlement of Interest Rate Protection Agreements | | | (3,112 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (3,112 | ) |
| Interest Expense | | | (121,130 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,718 | | | | (99,412 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Other Income/ Expense | | | (123,295 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,727 | | | | (101,568 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) Income from Continuing Operations Before Equity in Income of Other Real Estate Partnerships, Equity in Income of Joint Ventures, Gain on Sale of Real Estate and Income Tax Benefit | | | (108,272 | ) | | | 2,513 | | | | 27 | | | | 334 | | | | 279 | | | | 2,406 | | | | 994 | | | | 76 | | | | 2,021 | | | | 570 | | | | 763 | | | | 13,119 | | | | (85,170 | ) |
| Equity in Income of Other Real Estate Partnerships | | | 33,531 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,531 | |
| Equity in Income of Joint Ventures | | | 30,671 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,671 | |
| Gain on Sale of Real Estate | | | 6,195 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,195 | |
| Income Tax Benefit (Expense) Allocable to Continuing Operations | | | 6,801 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (11,652 | ) | | | (4,851 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) Income from Continuing Operations | | | (31,074 | ) | | | 2,513 | | | | 27 | | | | 334 | | | | 279 | | | | 2,406 | | | | 994 | | | | 76 | | | | 2,021 | | | | 570 | | | | 763 | | | | 1,467 | | | | (19,624 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less: Preferred Unit Distributions | | | (21,424 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,668 | ) | | | (24,092 | ) |
| Less: Redemption of Preferred Units | | | (672 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (672 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) Income from Continuing Operations Available to Unitholders | | $ | (53,170 | ) | | | 2,513 | | | | 27 | | | | 334 | | | | 279 | | | | 2,406 | | | | 994 | | | | 76 | | | | 2,021 | | | | 570 | | | | 763 | | | | (1,201 | ) | | $ | (44,388 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
FIRST INDUSTRIAL, L.P.
Notes to Pro Forma Financial Statements
(Unaudited, Dollars in thousands, except unit and per unit data)
| 1. | | Statement of Operations Pro Forma Assumptions and Adjustments — For the Twelve Months Ended December 31, 2006 |
| | (a) | | Reflects the operations of the Operating Partnership for the period January 1, 2006 through December 31, 2006 as reported in the Operating Partnership’s Form 10-K filed March 1, 2007. |
| |
| | (b) | | Reflects the operations of the 2006 Acquisition A Properties for the period January 1, 2006 through each of the property’s respective acquisition dates. |
| |
| | (c) | | Reflects the operations of the 2006 Acquisition I Property for the period January 1, 2006 through January 12, 2006, its acquisition date. |
| |
| | (d) | | Reflects the operations of the 2006 Acquisition II Property for the period January 1, 2006 through February 1, 2006, its acquisition date. |
| |
| | (e) | | Reflects the operations of the 2006 Acquisition III Property for the period January 1, 2006 through May 8, 2006, its acquisition date. |
| |
| | (f) | | Reflects the operations of the 2006 Acquisition IV Properties for the period January 1, 2006 through July 24, 2006, their acquisition date. |
| |
| | (g) | | Reflects the operations of the 2006 Acquisition VI Properties for the period January 1, 2006 through October 3, 2006, their acquisition date. |
| |
| | (h) | | Reflects the operations of the 2006 Acquisition VII Property for the period January 1, 2006 through October 5, 2006, its acquisition date. |
| |
| | (i) | | Reflects the operations of the 2006 Acquisition VIII Property for the period January 1, 2006 through October 10, 2006, its acquisition date. |
| |
| | (j) | | Reflects the operations of the 2006 Acquisition IX Properties for the period January 1, 2006 through November 30, 2006, their acquisition date. |
| |
| | (k) | | Reflects the operations of the 2006 Acquisition X Property for the period January 1, 2006 through November 30, 2006, its acquisition date. |
| |
| | (l) | | Pursuant to the purchase price allocations for all 2006 Acquisition Properties, the depreciation and amortization adjustment is the incremental depreciation and amortization expense that would have been recorded for the year ended December 31, 2006 if the 2006 Acquisition Properties were purchased on January 1, 2005. The rental income adjustment relates to the incremental amortization of above and below market lease intangibles that would have been recorded for the year ended December 31, 2006 if the 2006 Acquisition Properties were purchased on January 1, 2005. The following table sets forth the purchase price allocations (building and other costs includes amounts allocated to above-market lease intangible assets and below-market lease intangible liabilities): |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Building and | | | | | | | Depreciation and | | | Above (Below) | |
| | | Acquisition Date | | | Land | | | Other Costs | | | Total Costs | | | Amortization | | | Market Rent | |
| |
| Acquisition I Property | | January 12, 2006 | | | 7,639 | | | | 6,361 | | | | 14,000 | | | | (47 | ) | | | 7 | |
| Acquisition II Property | | February 1, 2006 | | | 1,119 | | | | 40,631 | | | | 41,750 | | | | (142 | ) | | | (7 | ) |
| Acquisition III Property | | May 8, 2006 | | | 1,988 | | | | 9,053 | | | | 11,041 | | | | (280 | ) | | | 24 | |
| Acquisition IV Properties | | July 24, 2006 | | | 4,803 | | | | 45,823 | | | | 50,626 | | | | (1,784 | ) | | | 76 | |
| Acquisition VI Properties | | October 3, 2006 | | | 2,611 | | | | 16,039 | | | | 18,650 | | | | (789 | ) | | | 142 | |
| Acquisition VII Property | | October 5, 2006 | | | 1,613 | | | | 6,451 | | | | 8,064 | | | | (193 | ) | | | — | |
| Acquisition VIII Property | | October 10, 2006 | | | 1,874 | | | | 37,126 | | | | 39,000 | | | | (1,773 | ) | | | 49 | |
| Acquisition IX Properties | | November 30, 2006 | | | 3,689 | | | | 6,811 | | | | 10,500 | | | | (1,369 | ) | | | 125 | |
| Acquisition X Property | | November 30, 2006 | | | 681 | | | | 7,919 | | | | 8,600 | | | | (355 | ) | | | (11 | ) |
| Acquisition A Properties | | Various | | | 33,110 | | | | 95,719 | | | | 128,829 | | | | (2,316 | ) | | | 35 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 59,127 | | | | 271,933 | | | | 331,060 | | | | (9,048 | ) | | | 440 | |
49
| | | | The preferred unit distributions adjustment reflects an increase in preferred unit distributions assuming the Company had issued the 6,000,000 Depositary Shares, each representing 1/10,000th of a share of the Company’s 7.25%, $.01 par value, Series J Cumulative Redeemable Preferred Stock (the “Series J Preferred Stock”) and the 2,000,000 Depositary Shares, each representing 1/10,000th of a share of the Company’s 7.25%, $.01 par value, Series K Flexible Cumulative Redeemable Preferred Stock (the “Series K Preferred Stock”) on January 1, 2005 and the net proceeds from the issuances were contributed to the Operating Partnership in exchange for Series J Cumulative Preferred Units (the “Series J Preferred Units”) and Series K Cumulative Preferred Units (the “Series K Preferred Units”), respectively. |
| |
| | | | The interest expense adjustment reflects an overall reduction in interest expense due to the following interest expense adjustments: |
| | • | | an increase in interest expense of $1.2 million due to $29.1 million in mortgages assumed (weighted average interest rate of 5.88%) relating to certain 2006 Acquisition Properties as if the mortgages were assumed on January 1, 2005; |
| |
| | • | | an increase in interest expense of $7.5 million assuming the Operating Partnership had borrowed on the Unsecured Line of Credit on January 1, 2006 related to property acquisitions that occurred from January 1, 2006 through December 31, 2006 as if the acquisitions occurred on January 1, 2005; |
| |
| | • | | an increase in interest expense of $0.3 million assuming the Operating Partnership had issued the $200.0 million of senior unsecured debt which matures on January 15, 2016 and bears interest at a rate of 5.75% (the “2016 Notes”) on January 1, 2005; |
| |
| | • | | an increase in interest expense of $6.8 million assuming the Operating Partnership had issued the $200.0 million of senior unsecured debt which matures on September 15, 2011 (unless previously redeemed or repurchased by the Operating Partnership or exchanged in accordance with their terms prior to such date) and bears interest at a rate of 4.625% (the “2011 Exchangeable Notes”) on January 1, 2005; |
| |
| | • | | a decrease in interest expense of $26.5 million related to the assumed repayment of the Unsecured Line of Credit borrowings on January 1, 2006 from the proceeds from the sale of industrial properties (net of seller financing provided by the Operating Partnership) that occurred from January 1, 2006 through December 31, 2006 as if the sales occurred on January 1, 2005; |
| |
| | • | | a decrease in interest expense of $11.0 million related to the assumed repayment of the Unsecured Line of Credit borrowings from the proceeds from the issuance of the 2016 Notes, the 2011 Exchangeable Notes, the Series J Preferred Units, and the Series K Preferred Units as if the issuances occurred on January 1, 2005. |
| | | | The interest income adjustment reflects an increase in interest income from seller financing provided by the Operating Partnership on property sales that occurred from January 1, 2006 through December 31, 2006 as if the seller financing occurred on January 1, 2005. |
50
| | (n) | | The calculation of basic and diluted Loss from Continuing Operations per unit is presented below: |
| | | | | | | | | |
| | | Year Ended | |
| | | (Historical) | | | (Pro Forma) | |
| | | December 31, | | | December 31, | |
| | | 2006 | | | 2006 | |
| Numerator: | | | | | | | | |
| Loss from Continuing Operations | | $ | (31,074 | ) | | $ | (19,624 | ) |
| Less: Preferred Unit Distributions | | | (21,424 | ) | | | (24,092 | ) |
| Less: Redemption of Preferred Units | | | (672 | ) | | | (672 | ) |
| | | | | | | |
| Loss from Continuing Operations Available to Unitholders — For Basic and Diluted EPU | | | (53,170 | ) | | | (44,388 | ) |
| | | | | | | |
| Denominator: | | | | | | | | |
| Weighted Average Units — Basic | | | 50,703,004 | | | | 50,703,004 | |
| Weighted Average Units — Diluted | | | 50,703,004 | | | | 50,703,004 | |
| | | | | | | | | |
| Basic EPU: | | | | | | | | |
| Loss from Continuing Operations Available to Unitholders | | $ | (1.05 | ) | | $ | (0.88 | ) |
| | | | | | | |
| Diluted EPU: | | | | | | | | |
| Loss from Continuing Operations Available to Unitholders | | $ | (1.05 | ) | | $ | (0.88 | ) |
| | | | | | | |
51
FIRST INDUSTRIAL, L.P.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2005
(Unaudited, Dollars in thousands, except unit and per unit data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | 2006 | | | | | | | | |
| | | First Industrial, | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Acquisition | | | Other | | | | |
| | | L.P. | | | A | | | I | | | II | | | III | | | IV | | | VI | | | VII | | | VIII | | | IX | | | X | | | Pro Forma | | | First Industrial, | |
| | | (Historical) | | | Properties | | | Property | | | Property | | | Property | | | Properties | | | Properties | | | Property | | | Property | | | Properties | | | Property | | | Adjustments | | | L.P. | |
| | | Note 1 (a) | | | Note 1 (b) | | | Note 1 (c) | | | Note 1 (d) | | | Note 1 (e) | | | Note 1 (f) | | | Note 1 (g) | | | Note 1 (h) | | | Note 1 (i) | | | Note 1 (j) | | | Note 1 (k) | | | Note 1 (l) | | | Pro Forma | |
| REVENUES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Rental Income | | $ | 192,856 | | | $ | 9,604 | | | $ | 826 | | | $ | 3,929 | | | $ | 714 | | | $ | 3,529 | | | $ | 1,173 | | | $ | 258 | | | $ | 2,008 | | | $ | 613 | | | $ | 833 | | | $ | (1,088 | ) | | $ | 215,255 | |
| Tenant Recoveries and Other Income | | | 77,556 | | | | 2,648 | | | | 96 | | | | 535 | | | | 86 | | | | 705 | | | | 217 | | | | — | | | | 594 | | | | 109 | | | | 20 | | | | — | | | | 82,566 | |
| Revenues from Build to Suit Development for Sale | | | 16,241 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,241 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Revenues | | | 286,653 | | | | 12,252 | | | | 922 | | | | 4,464 | | | | 800 | | | | 4,234 | | | | 1,390 | | | | 258 | | | | 2,602 | | | | 722 | | | | 853 | | | | (1,088 | ) | | | 314,062 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| EXPENSES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property Expenses | | | 96,283 | | | | 4,988 | | | | 85 | | | | 540 | | | | 353 | | | | 1,024 | | | | 293 | | | | 204 | | | | 594 | | | | 109 | | | | 20 | | | | — | | | | 104,493 | |
| General and Administrative | | | 54,846 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 54,846 | |
| Amortization of Deferred Financing Costs | | | 2,122 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,122 | |
| Depreciation and Other Amortization | | | 92,853 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 21,831 | | | | 114,684 | |
| Expenses from Build to Suit Development for Sale | | | 15,574 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,574 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Expenses | | | 261,678 | | | | 4,988 | | | | 85 | | | | 540 | | | | 353 | | | | 1,024 | | | | 293 | | | | 204 | | | | 594 | | | | 109 | | | | 20 | | | | 21,831 | | | | 291,719 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER INCOME/EXPENSE: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Income | | | 1,075 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 852 | | | | 1,927 | |
| Mark-to-Market/(Loss) Gain on Settlement of Interest Rate Protection Agreements | | | 811 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 811 | |
| Gain From Early Retirement of Debt | | | 82 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 82 | |
| Interest Expense | | | (108,164 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 47,608 | | | | (60,556 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Other Income/ Expense | | | (106,196 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 48,460 | | | | (57,736 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) Income from Continuing Operations Before Equity in Income of Other Real Estate Partnerships, Equity in Income of Joint Ventures, Gain on Sale of Real Estate and Income Tax Benefit | | | (81,221 | ) | | | 7,264 | | | | 837 | | | | 3,924 | | | | 447 | | | | 3,210 | | | | 1,097 | | | | 54 | | | | 2,008 | | | | 613 | | | | 833 | | | | 25,541 | | | | (35,393 | ) |
| Equity in Income of Other Real Estate Partnerships | | | 48,212 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 48,212 | |
| Equity in Income of Joint Ventures | | | 3,698 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 3,698 | |
| Gain on Sale of Real Estate | | | 28,686 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 28,686 | |
| Income Tax Benefit (Expense) Allocable to Continuing Operations | | | 3,151 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (23,274 | ) | | | (20,123 | ) |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Loss) Income from Continuing Operations | | | 2,526 | | | | 7,264 | | | | 837 | | | | 3,924 | | | | 447 | | | | 3,210 | | | | 1,097 | | | | 54 | | | | 2,008 | | | | 613 | | | | 833 | | | | 2,267 | | | | 25,080 | |
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| Less: Preferred Unit Distributions | | | (10,688 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (14,500 | ) | | | (25,188 | ) |
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| (Loss) Income from Continuing Operations Available to Unitholders | | $ | (8,162 | ) | | $ | 7,264 | | | $ | 837 | | | $ | 3,924 | | | $ | 447 | | | $ | 3,210 | | | $ | 1,097 | | | $ | 54 | | | $ | 2,008 | | | $ | 613 | | | $ | 833 | | | $ | (12,233 | ) | | $ | (108 | ) |
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FIRST INDUSTRIAL, L.P.
Notes to Pro Forma Financial Statements
(Unaudited, Dollars in thousands, except unit and per unit data)
| 1. | | Statement of Operations Pro Forma Assumptions and Adjustments — For the Twelve Months Ended December 31, 2005 |
| | (a) | | Reflects the operations of the Operating Partnership for the period January 1, 2005 through December 31, 2005 as reported in the Operating Partnership’s Form 10-K filed March 1, 2007. |
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| | (b) | | Reflects the operations of the 2006 Acquisition A Properties for the period January 1, 2005 through December 31, 2005. |
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| | (c) | | Reflects the operations of the 2006 Acquisition I Property for the period January 1, 2005 through December 31, 2005. |
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| | (d) | | Reflects the operations of the 2006 Acquisition II Property for the period January 1, 2005 through December 31, 2005. |
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| | (e) | | Reflects the operations of the 2006 Acquisition III Property for the period January 1, 2005 through December 31, 2005. |
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| | (f) | | Reflects the operations of the 2006 Acquisition IV Properties for the period January 1, 2005 through December 31, 2005. |
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| | (g) | | Reflects the operations of the 2006 Acquisition VI Properties for the period January 1, 2005 through December 31, 2005. |
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| | (h) | | Reflects the operations of the 2006 Acquisition VII Property for the period January 1, 2005 through December 31, 2005. |
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| | (i) | | Reflects the operations of the 2006 Acquisition VIII Property for the period January 1, 2005 through December 31, 2005. |
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| | (j) | | Reflects the operations of the 2006 Acquisition IX Properties for the period January 1, 2005 through December 31, 2005. |
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| | (k) | | Reflects the operations of the 2006 Acquisition X Property for the period January 1, 2005 through December 31, 2005. |
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| | (l) | | Pursuant to the purchase price allocations for all 2006 Acquisition Properties, the depreciation and amortization adjustment is the incremental depreciation and amortization expense that would have been recorded for the year ended December 31, 2005 if the 2006 Acquisition Properties were purchased on January 1, 2005. The rental income adjustment relates to the incremental amortization of above and below market lease intangibles that would have been recorded for the year ended December 31, 2005 if the 2006 Acquisition Properties were purchased on January 1, 2005. The following table sets forth the purchase price allocations (building and other costs includes amounts allocated to above-market lease intangible assets and below-market lease intangible liabilities): |
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| | | | | | | | | | | Building and | | | | | | | Depreciation and | | | Above (Below) | |
| | | Acquisition Date | | | Land | | | Other Costs | | | Total Costs | | | Amortization | | | Market Rent | |
| |
| Acquisition I Property | | January 12, 2006 | | | 7,639 | | | | 6,361 | | | | 14,000 | | | | (1,422 | ) | | | 226 | |
| Acquisition II Property | | February 1, 2006 | | | 1,119 | | | | 40,631 | | | | 41,750 | | | | (1,700 | ) | | | (81 | ) |
| Acquisition III Property | | May 8, 2006 | | | 1,988 | | | | 9,053 | | | | 11,041 | | | | (842 | ) | | | 73 | |
| Acquisition IV Properties | | July 24, 2006 | | | 4,803 | | | | 45,823 | | | | 50,626 | | | | (3,077 | ) | | | 132 | |
| Acquisition VI Properties | | October 3, 2006 | | | 2,611 | | | | 16,039 | | | | 18,650 | | | | (1,051 | ) | | | 189 | |
| Acquisition VII Property | | October 5, 2006 | | | 1,613 | | | | 6,451 | | | | 8,064 | | | | (258 | ) | | | — | |
| Acquisition VIII Property | | October 10, 2006 | | | 1,874 | | | | 37,126 | | | | 39,000 | | | | (2,364 | ) | | | 66 | |
| Acquisition IX Properties | | November 30, 2006 | | | 3,689 | | | | 6,811 | | | | 10,500 | | | | (1,642 | ) | | | 149 | |
| Acquisition X Property | | November 30, 2006 | | | 681 | | | | 7,919 | | | | 8,600 | | | | (426 | ) | | | (13 | ) |
| Acquisition A Properties | | Various | | | 33,110 | | | | 95,719 | | | | 128,829 | | | | (9,049 | ) | | | (1,829 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 59,127 | | | | 271,933 | | | | 331,060 | | | | (21,831 | ) | | | (1,088 | ) |
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| | | | The preferred unit distributions adjustment reflects an increase in preferred unit distributions assuming the Company had issued the Series J Preferred Stock and the Series K Preferred Stock on January 1, 2005 and the net proceeds from the issuance were contributed to the Operating Partnership in exchange for Series J Preferred Units and Series K Preferred Units. |
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| | | | The interest expense adjustment reflects an overall reduction in interest expense due to the following interest expense adjustments: |
| | • | | an increase in interest expense of $1.7 million due to $29.1 million in mortgages assumed (weighted average interest rate of 5.88%) relating to certain 2006 Acquisition Properties as if the mortgages were assumed on January 1, 2005; |
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| | • | | an increase in interest expense of $18.1 million assuming the Operating Partnership had borrowed on the Unsecured Line of Credit on January 1, 2006 related to property acquisitions that occurred from January 1, 2006 through December 31, 2006 as if the acquisitions occurred on January 1, 2005; |
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| | • | | an increase in interest expense of $11.5 million assuming the Operating Partnership had issued the $200.0 million of senior unsecured debt which matures on January 15, 2016 and bears interest at a rate of 5.75% (the “2016 Notes”) on January 1, 2005; |
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| | • | | an increase in interest expense of $9.3 million assuming the Operating Partnership had issued the $200.0 million of senior unsecured debt which matures on September 15, 2011 (unless previously redeemed or repurchased by the Operating Partnership or exchanged in accordance with their terms prior to such date) and bears interest at a rate of 4.625% (the “2011 Exchangeable Notes”) on January 1, 2005; |
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| | • | | a decrease in interest expense of $53.2 million related to the assumed repayment of the Unsecured Line of Credit borrowings on January 1, 2006 from the proceeds from the sale of industrial properties (net of seller financing provided by the Operating Partnership) that occurred from January 1, 2006 through December 31, 2006 as if the sales occurred on January 1, 2005; |
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| | • | | a decrease in interest expense of $35.0 million related to the assumed repayment of the Unsecured Line of Credit borrowings from the proceeds from the issuance of the 2016 Notes, the 2011 Exchangeable Notes, the Series J Preferred Units, and the Series K Preferred Units as if the issuances occurred on January 1, 2005. |
| | | | The interest income adjustment reflects an increase in interest income from seller financing provided by the Operating Partnership on property sales that occurred from January 1, 2005 through December 31, 2005 as if the seller financing occurred on January 1, 2005. |
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| | (n) | | The calculation of basic and diluted Loss from Continuing Operations per unit is presented below: |
| | | | | | | | | |
| | | Twelve Months Ended | |
| | | (Historical) | | | (Pro Forma) | |
| | | December 31, | | | December 31, | |
| | | 2005 | | | 2005 | |
| Numerator: | | | | | | | | |
| Income from Continuing Operations | | $ | 2,526 | | | $ | 25,080 | |
| Less: Preferred Unit Distributions | | | (10,688 | ) | | | (25,188 | ) |
| | | | | | | |
| Loss from Continuing Operations Available to Unitholders — For Basic and Diluted EPU | | | (8,162 | ) | | | (108 | ) |
| | | | | | | |
| Denominator: | | | | | | | | |
| Weighted Average Units — Basic | | | 48,968,191 | | | | 48,968,191 | |
| Weighted Average Units — Diluted | | | 48,968,191 | | | | 48,968,191 | |
| | | | | | | | | |
| Basic EPU: | | | | | | | | |
| Loss from Continuing Operations Available to Unitholders | | $ | (0.17 | ) | | $ | (0.00 | ) |
| | | | | | | |
| Diluted EPU: | | | | | | | | |
| Loss from Continuing Operations Available to Unitholders | | $ | (0.17 | ) | | $ | (0.00 | ) |
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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.
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| | | FIRST INDUSTRIAL, L.P. | | |
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| April 30, 2007 | | By: | | /s/ Scott A. Musil | | |
| | | | | | | |
| | | | | Scott A. Musil | | |
| | | | | | | Chief Accounting Officer | | |
| | | | | | | (Principal Accounting Officer) | | |
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EXHIBIT INDEX
| | | | | |
| Exhibit No. | | Description |
| | 23.1 | | | Consent of PricewaterhouseCoopers LLP |
58
