First Industrial 10Q 2007 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2007
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission filenumber 333-21873

First Industrial, L.P.

(Exact Name of Registrant as Specified in its Charter)


Delaware		36-3924586
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

311 S. Wacker Drive, Suite 4000, Chicago, Illinois 60606

(Address of Principal Executive Offices)

(312) 344-4300

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

FIRST INDUSTRIAL, L.P.

Form 10-Q

For the Period Ended March 31, 2007

INDEX


			Page


PART I: FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006	3
		Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and March 31, 2006	4
		Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2007 and March 31, 2006	5
		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007, and March 31, 2006	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4.	Controls and Procedures	28

PART II: OTHER INFORMATION
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3.	Defaults Upon Senior Securities	29
	Item 4.	Submission of Matters to a Vote of Security Holders	29
	Item 5.	Other Information	29
	Item 6.	Exhibits	30
SIGNATURE			31
EXHIBIT INDEX			32
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification of PEO and PFO Pursuant to Section 906

PART I: FINANCIAL INFORMATION


Item 1.	*Financial Statements*

FIRST INDUSTRIAL, L.P.

CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2007			2006
	(Unaudited)
	(Dollars in thousands,
	except unit data)

ASSETS
Assets:
Investment in Real Estate:
Land	$	531,741		$	498,025
Buildings and Improvements		2,282,684			2,297,988
Construction in Progress		48,584			30,575
Less: Accumulated Depreciation		(413,468	)		(402,497	)

Net Investment in Real Estate		2,449,541			2,424,091

Real Estate Held for Sale, Net of Accumulated Depreciation and Amortization of $6,646 and $9,688 at March 31, 2007 and December 31, 2006, respectively		79,329			115,961
Investments in and Advances to Other Real Estate Partnerships		393,105			371,390
Cash and Cash Equivalents		2,292			15,124
Restricted Cash		267			15,970
Tenant Accounts Receivable, Net		8,153			6,571
Investments in Joint Ventures		53,135			55,614
Deferred Rent Receivable, Net		25,375			24,721
Deferred Financing Costs, Net		14,441			15,210
Deferred Leasing Intangibles, Net		82,616			75,958
Prepaid Expenses and Other Assets, Net		123,605			114,756

Total Assets	$	3,231,859		$	3,235,366


LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	94,866		$	77,926
Senior Unsecured Debt, Net		1,550,134			1,549,732
Unsecured Line of Credit		199,000			207,000
Accounts Payable, Accrued Expenses and Other Liabilities, Net		118,272			128,691
Deferred Leasing Intangibles, Net		17,417			17,402
Rents Received in Advance and Security Deposits		27,325			26,097
Leasing Intangibles Held for Sale, Net of Accumulated Amortization of $152 and $183 at March 31, 2007 and December 31, 2006, respectively		1,111			2,310
Distributions Payable		44,034			42,548

Total Liabilities		2,052,159			2,051,706

Commitments and Contingencies		—			—
Partners’ Capital:
General Partner Preferred Units (21,550 units issued and outstanding at March 31, 2007 and December 31, 2006) with a liquidation preference of $325,000		314,208			314,208
General Partner Units (45,375,913 and 45,010,630 units issued and outstanding at March 31, 2007 and December 31, 2006, respectively)		727,600			730,493
Limited Partners’ Units (6,550,492 and 6,558,442 units issued and outstanding at March 31, 2007 and December 31, 2006, respectively)		150,129			150,758
Accumulated Other Comprehensive Loss		(12,237	)		(11,799	)

Total Partners’ Capital		1,179,700			1,183,660

Total Liabilities and Partners’ Capital	$	3,231,859		$	3,235,366

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006
	(Unaudited)
	(Dollars in thousands,
	except unit and per unit data)

Revenues:
Rental Income	$	65,990		$	53,159
Tenant Recoveries and Other Income		31,111			22,600
Revenues from Build to Suit Development for Sale		3,207			733
Contractor Revenues		5,040			—

Total Revenues		105,348			76,492

Expenses:
Property Expenses		30,708			27,276
General and Administrative		22,930			17,383
Depreciation and Other Amortization		34,615			28,569
Expenses from Build to Suit Development for Sale		3,201			666
Contractor Expenses		4,836			—

Total Expenses		96,290			73,894

Other Income/Expense:
Interest Income		217			229
Interest Expense		(29,901	)		(29,476	)
Amortization of Deferred Financing Costs		(820	)		(618	)
Mark-to-Market/Loss on Settlement of Interest Rate Protection Agreement		—			(170	)
Loss From Early Retirement of Debt		(146	)		—

Total Other Income/Expense		(30,650	)		(30,035	)
Loss from Continuing Operations Before Equity in Income of Other Real Estate Partnerships, Equity in Income (Loss) of Joint Ventures and Income Tax Benefit		(21,592	)		(27,437	)
Equity in Income of Other Real Estate Partnerships		5,520			4,888
Equity in Income (Loss) of Joint Ventures		5,631			(35	)
Income Tax Benefit		1,472			5,929

Loss from Continuing Operations		(8,969	)		(16,655	)
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $55,370 and $54,082 for the Three Months Ended March 31, 2007 and March 31, 2006, respectively)		57,691			56,695
Provision for Income Taxes Allocable to Discontinued Operations (Including $10,133 and $14,840 allocable to Gain on Sale of Real Estate for the Three Months Ended March 31, 2007 and March 31, 2006, respectively)		(10,777	)		(15,224	)

Income Before Gain on Sale of Real Estate		37,945			24,816
Gain on Sale of Real Estate		2,029			1,075
Provision for Income Taxes Allocable to Gain on Sale of Real Estate		(768	)		(92	)

Net Income		39,206			25,799
Less: Preferred Unit Distributions		(5,935	)		(5,019	)
Less: Preferred Unit Redemptions		—			(672	)

Net Income Available to Unitholders	$	33,271		$	20,108

Basic Earnings Per Unit:
Loss from Continuing Operations	$	(0.27	)	$	(0.42	)

Income From Discontinued Operations	$	0.92		$	0.82

Net Income Available to Unitholders	$	0.65		$	0.40

Weighted Average Units Outstanding		50,966			50,644

Diluted Earnings Per Unit:
Loss from Continuing Operations	$	(0.27	)	$	(0.42	)

Income From Discontinued Operations	$	0.92		$	0.82

Net Income Available to Unitholders	$	0.65		$	0.40

Weighted Average Units Outstanding		50,966			50,644

Net Income Available to Unitholders Attributable to:
General Partners	$	29,059		$	17,455
Limited Partners		4,212			2,653

Net Income Available to Unitholders	$	33,271		$	20,108

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006
	(Unaudited)
	(Dollars in thousands)

Net Income	$	39,206		$	25,799
Mark-to-Market of Interest Rate Protection Agreements		(142	)		1,415
Settlement of Interest Rate Protection Agreements		—			(1,729	)
Amortization of Interest Rate Protection Agreements		(296	)		(230	)

Comprehensive Income	$	38,768		$	25,255

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006
	(Unaudited)
	(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	39,206		$	25,799
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		26,215			26,477
Amortization of Deferred Financing Costs		820			618
Other Amortization		11,754			8,570
Provision for Bad Debt		26			266
Equity in (Income) Loss of Joint Ventures		(5,631	)		35
Distributions from Joint Ventures		5,808			603
Gain on Sale of Real Estate		(57,399	)		(55,157	)
Loss on Early Retirement of Debt		146			—
Mark to Market of Interest Rate Protection Agreement		—			(16	)
Equity in Income of Other Real Estate Partnerships		(5,520	)		(4,888	)
Distributions from Investment in Other Real Estate Partnerships		5,520			4,888
(Increase) Decrease in Developments for Sale Costs		(5,132	)		16,241
(Increase) Decrease in Tenant Accounts Receivable and Prepaid Expenses and Other Assets, Net		(2,813	)		16,790
Increase in Deferred Rent Receivable		(2,488	)		(2,171	)
Decrease in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits		(11,835	)		(14,594	)
Increase in Restricted Cash		(103	)		—

Net Cash (Used In) Provided by Operating Activities		(1,426	)		23,461

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate		(148,733	)		(217,864	)
Net Proceeds from Sales of Investments in Real Estate		213,712			275,818
Investments in and Advances to Other Real Estate Partnerships		(35,226	)		(4,797	)
Distributions from Other Real Estate Partnerships in Excess of Equity in Income		13,511			29,107
Contributions to and Investments in Joint Ventures		(4,165	)		(3,382	)
Distributions from Joint Ventures		5,198			2,881
Funding of Notes Receivable		(8,385	)		—
Repayment of Notes Receivable		8,385			11,200
Decrease (Increase) in Restricted Cash		15,824			(8,493	)

Net Cash Provided by Investing Activities		60,121			84,470

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the Issuance of Preferred Units		—			144,765
Unit Contributions		174			689
Unit Distributions		(36,613	)		(35,751	)
Preferred Unit Distributions		(4,703	)		(8,777	)
Redemption of Preferred Units		—			(182,156	)
Repurchase of Restricted Units		(3,707	)		(2,650	)
Net Proceeds from Senior Unsecured Debt		—			197,617
Other Costs of Senior Unsecured Debt		—			(1,729	)
Repayments on Mortgage Loans Payable		(21,469	)		(1,710	)
Debt Issuance Costs and Prepayment Penalty		(155	)		—
Proceeds from Unsecured Line of Credit		179,000			202,500
Repayments on Unsecured Line of Credit		(187,000	)		(429,000	)
Cash Book Overdraft		2,946			1,460

Net Cash Used in Financing Activities		(71,527	)		(114,742	)

Net Decrease in Cash and Cash Equivalents		(12,832	)		(6,811	)
Cash and Cash Equivalents, Beginning of Period		15,124			6,811

Cash and Cash Equivalents, End of Period	$	2,292		$	—

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per Unit data)

(Unaudited)


1.	Organization and Formation of Partnership

First Industrial, L.P. (the “Operating Partnership”) 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 87.4% and 86.9% ownership interest at March 31, 2007 and March 31, 2006, respectively. The limited partners of the Operating Partnership own approximately a 12.6% and 13.1% interest in the Operating Partnership at March 31, 2007 and March 31, 2006, respectively. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $325,000 at March 31, 2007. 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 is the sole member of several limited liability companies (the “L.L.C.s”), the sole stockholder of First Industrial Investment, Inc. (the Company’s taxable REIT subsidiary (the “TRS”)), and holds at least a 99% limited partnership interest in each of eight limited partnerships (together, the “Other Real Estate Partnerships”).

The general partners of the Other Real Estate Partnerships are separate corporations, each with at least a .01% general partnership interest in the Other Real Estate Partnerships for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of the Company.

The financial statements of the Operating Partnership report the L.L.C.s and the TRS (the “Consolidated Operating Partnership”) on a consolidated basis. As of March 31, 2007, the Consolidated Operating Partnership owned 857 industrial properties (inclusive of developments in process) containing an aggregate of approximately 66.8 million square feet of gross leasable area (“GLA”). On a combined basis, as of March 31, 2007, the Other Real Estate Partnerships owned 102 industrial properties containing an aggregate of approximately 10.0 million square feet of GLA.

The Operating Partnership or the TRS, through separate wholly-owned limited liability companies of which it is the sole member, also owns minority equity interests in, and provides various services to, five joint ventures which invest in industrial properties (the “May 2003 Joint Venture”, the “March 2005 Joint Venture”, the “September 2005 Joint Venture”, the “March 2006 Co-Investment Program” and the “July 2006 Joint Venture”; together the “Joint Ventures”). The Operating Partnership or the TRS, through separate wholly-owned limited liability companies of which it is the sole member, also owns economic interests in and provided various services to a sixth joint venture, the September 1998 Joint Venture. On January 31, 2007, the Consolidated Operating Partnership purchased the 90% equity interest from the institutional investor in the September 1998 Joint Venture. Effective January 31, 2007, the assets and liabilities and results of operations of the September 1998 Joint Venture are consolidated with the Consolidated Operating Partnership since the Consolidated Operating Partnership effectively owns 100% of the equity interest. Prior to January 31, 2007, the September 1998 Joint Venture was accounted for under the equity method of accounting.

The Other Real Estate Partnerships and the Joint Ventures are accounted for under the equity method of accounting. The operating data of the Other Real Estate Partnerships and the Joint Ventures is not consolidated with that of the Consolidated Operating Partnership as presented herein.


2.	Summary of Significant Accounting Policies

The accompanying unaudited interim financial statements have been prepared in accordance with the accounting policies described in the financial statements and related notes included in the Consolidated Operating Partnership’s 2006Form 10-K and should be read in conjunction with such financial statements and related notes. The following notes to these interim financial statements highlight significant changes to the notes included in the

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2006 audited financial statements included in the Consolidated Operating Partnership’s 2006Form 10-K and present interim disclosures as required by the Securities and Exchange Commission.

In order to conform with generally accepted accounting principles, management, in preparation of the Consolidated Operating Partnership’s financial statements, is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of March 31, 2007 and December 31, 2006, and the reported amounts of revenues and expenses for each of the three months ended March 31, 2007 and March 31, 2006. Actual results could differ from those estimates.

In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments necessary for a fair statement of the financial position of the Consolidated Operating Partnership as of March 31, 2007 and December 31, 2006 and the results of its operations and comprehensive income for each of the three months ended March 31, 2007 and March 31, 2006, and its cash flows for each of the three months ended March 31, 2007 and March 31, 2006, and all adjustments are of a normal recurring nature.

Deferred Leasing Intangibles

Deferred Leasing Intangibles, exclusive of Deferred Leasing Intangibles held for sale, included in the Consolidated Operating Partnership’s total assets consist of the following:


	March 31,			December 31,
	2007			2006

In-Place Leases	$	77,433		$	73,341
Less: Accumulated Amortization		(15,973	)		(13,832	)

	$	61,460		$	59,509

Above Market Leases	$	5,616		$	5,049
Less: Accumulated Amortization		(1,758	)		(1,680	)

	$	3,858		$	3,369

Tenant Relationship	$	18,922		$	14,080
Less: Accumulated Amortization		(1,624	)		(1,000	)

	$	17,298		$	13,080

Deferred Leasing Intangibles, exclusive of Deferred Leasing Intangibles held for sale, included in the Consolidated Operating Partnership’s total liabilities consist of the following:


	March 31,			December 31,
	2007			2006

Below Market Leases	$	23,160		$	22,873
Less: Accumulated Amortization		(5,743	)		(5,471	)

	$	17,417		$	17,402

The fair value of in-place leases, above market leases, tenant relationships and below market leases recorded due to real estate acquisitions during the three months ended March 31, 2007 was $7,604, $855, $4,544 and $(1,065), respectively. The fair value of in-place leases, above market leases, tenant relationships and below market leases recorded due to real estate acquisitions during the three months ended March 31, 2006 was $8,468, $242, $4,355 and $(3,268), respectively.

Amortization expense related to deferred leasing intangibles, was $3,980 and $1,963 for the three months ended March 31, 2007 and 2006, respectively.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Build to Suit for Sale and General Contractor Revenues and Expenses

During 2006, the Consolidated Operating Partnership entered into contracts with third parties to construct industrial properties. Thebuild-to-suit for sale contracts require the purchase price to be paid at closing. The Consolidated Operating Partnership uses thepercentage-of-completion contract method of accounting in accordance withSOP 81-1 “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”). During the period of performance, costs are accumulated on the balance sheet in Prepaid Expenses and Other Assets ($15,494 at March 31, 2007 and $10,263 at December 31, 2006) and revenues and expenses are recognized in continuing operations.

During 2007, the Operating Partnership, through the TRS, acted as general contractor to construct industrial properties for the September 2005 Joint Venture. The Operating Partnership uses the percentage-of-completion contract method of accounting in accordance with SOP 81-1. During the period of performance, costs are accumulated on the balance sheet in Prepaid Expenses and Other Assets ($4,392 at March 31, 2007). The Operating Partnership uses the gross method of presenting revenues and expenses in accordance withEITF 99-19, “Reporting Revenues Gross as a Principal Versus Net as an Agent.”

Recent Accounting Pronouncements

The Operating Partnership adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes(“FIN 48”),on January 1, 2007. The adoption of FIN 48 had no affect on the Operating Partnership’s financial statements. As of the adoption date, the Operating Partnership had approximately $1.4 million of gross unrecognized tax benefits. The entire amount (with no federal effect) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. This entire amount relates to a single tax position regarding business loss carryforwards which the Operating Partnership is currently litigating with the State of Michigan. During 2006, the Operating Partnership paid the $1.4 million, representing taxes and interest in dispute in order to pursue a full recovery of the amount paid through litigation. It is anticipated that this litigation will be resolved sometime during 2007. It is the Operating Partnership’s policy to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of January 1, 2007 and for the three months ended March 31, 2007, no interest or penalties have been accrued or incurred. The Operating Partnership and its subsidiaries file U.S. federal income tax returns, as well as filing various returns in states and applicable localities where it holds properties. With few exceptions, its filed income tax returns are no longer subject to examination by taxing authorities for years before 2003.

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” which established a common definition of fair value, established a framework for measuring fair value, and expanded disclosure about such fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007. The Operating Partnership does not expect that the implementation of this statement will have a material effect on the Operating Partnership’s consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159,“The Fair Value Opinion for Financial Assets and Financial Liabilities” which permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The Operating Partnership does not expect that the implementation of this statement will have a material effect on the Operating Partnership’s consolidated financial position or results of operations.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Investments in and Advances to Other Real Estate Partnerships

The investments in and advances to Other Real Estate Partnerships reflects the Operating Partnership’s limited partnership equity interests in the entities referred to in Note 1 to these financial statements.

Summarized combined condensed financial information as derived from the financial statements of the Other Real Estate Partnerships is presented below:

Condensed Combined Balance Sheets:


	March 31,		December 31,
	2007		2006

ASSETS
Assets:
Investment in Real Estate, Net	$	367,832	$	330,223
Other Assets, Net		47,569		59,363

Total Assets	$	415,401	$	389,586


LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Other Liabilities	$	19,093	$	15,024
Partners’ Capital		396,308		374,562

Total Liabilities and Partners’ Capital	$	415,401	$	389,586

Condensed Combined Statements of Operations:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006

Total Revenues, Including Interest Income	$	13,601		$	12,540
Property Expenses		(4,166	)		(4,097	)
Interest Expense		—			(11	)
Amortization of Deferred Financing Costs		—			(2	)
Depreciation and Other Amortization		(5,411	)		(4,088	)
Income Tax Provision		(6	)		—

Income from Continuing Operations		4,018			4,342
Income from Discontinued Operations (Including Loss on Sale of Real Estate of $60 for the Three Months Ended March 31, 2006)		—			590
Gain on Sale of Real Estate		1,545			—

Net Income	$	5,563		$	4,932

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


4.	Investments in Joint Ventures

At March 31, 2007, the May 2003 Joint Venture owned 11 industrial properties comprising approximately 5.1 million square feet of GLA, the March 2005 Joint Venture owned 42 industrial properties comprising approximately 4.1 million square feet of GLA and several land parcels, the September 2005 Joint Venture owned 132 industrial properties comprising approximately 9.4 million square feet of GLA and several land parcels, the March 2006 Co-Investment Program owned 13 industrial properties comprising approximately 5.9 million square feet of GLA (of which the Consolidated Operating Partnership has an equity interest in 12 industrial properties comprising approximately 5.0 million square feet of GLA) and the July 2006 Joint Venture owned several land parcels.

On January 31, 2007, the Consolidated Operating Partnership purchased the 90% equity interest from the institutional investor in the September 1998 Joint Venture. The Consolidated Operating Partnership paid $18,458 in cash and assumed $30,340 in mortgage loans payable.

On February 27, 2007, the Consolidated Operating Partnership redeemed the 85% equity interest in one property from the institutional investor in the May 2003 Joint Venture. In connection with the redemption, the Consolidated Operating Partnership assumed $8,250 in mortgage loans payable and $2,951 in other liabilities.

At March 31, 2007 and December 31, 2006, the Consolidated Operating Partnership has a receivable from the Joint Ventures of $11,719 and $7,967, respectively, which mainly relate to development, leasing, property management and asset management fees due to the Consolidated Operating Partnership from the Joint Ventures and reimbursement for development expenditures made by a wholly owned subsidiary of the Consolidated Operating Partnership who is acting in the capacity of the general contractor for five development projects for the March 2005 Joint Venture.

During the three months ended March 31, 2007 and 2006, the Consolidated Operating Partnership invested the following amounts in its joint ventures as well as received distributions and recognized fees from acquisition, disposition, leasing, development, general contractor, incentive, property management and asset management services in the following amounts:


	For the Three
	Months Ended
	March 31,		March 31,
	2007		2006

Contributions	$	4,165	$	3,168
Distributions	$	11,006	$	3,484
Fees	$	5,702	$	4,509

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Line of Credit

The following table discloses certain information regarding the Consolidated Operating Partnership’s mortgage loans payable, senior unsecured debt and unsecured line of credit:


								Effective
	Outstanding						Interest	Interest
	Balance at						Rate at	Rate at
	March 31,			December 31,			March 31,	March 31,
	2007			2006			2007	2007	Maturity Date

Mortgage Loans Payable, Net	$	94,866		$	77,926		5.35% - 9.25%	4.58% - 9.25%	December 2007 - September 2024
Unamortized Premiums		(2,739	)		(2,919	)

Mortgage Loans Payable, Gross	$	92,127		$	75,007

Senior Unsecured Debt, Net
2007 Notes	$	149,999		$	149,998		7.600%	7.61%	05/15/07
2016 Notes		199,390			199,372		5.750%	5.91%	01/15/16
2017 Notes		99,898			99,895		7.500%	7.52%	12/01/17
2027 Notes		15,055			15,055		7.150%	7.11%	05/15/27
2028 Notes		199,833			199,831		7.600%	8.13%	07/15/28
2011 Notes		199,761			199,746		7.375%	7.39%	03/15/11
2012 Notes		199,304			199,270		6.875%	6.85%	04/15/12
2032 Notes		49,441			49,435		7.750%	7.87%	04/15/32
2009 Notes		124,904			124,893		5.250%	4.10%	06/15/09
2014 Notes		112,549			112,237		6.420%	6.54%	06/01/14
2011 Exchangeable Notes		200,000			200,000		4.625%	4.63%	09/15/11

Subtotal	$	1,550,134		$	1,549,732

Unamortized Discounts		14,936			15,338

Senior Unsecured Notes, Gross	$	1,565,070		$	1,565,070

Unsecured Line of Credit Total	$	199,000		$	207,000		6.056%	6.056%	09/28/08

During January 2007, in connection with the Consolidated Operating Partnership’s purchase of the 90% equity interest from the institutional investor of the September 1998 Joint Venture, the Consolidated Operating Partnership assumed a mortgage loan payable of $30,340. In March 2007, the Consolidated Operating Partnership paid off and retired $12,406 of this assumed mortgage loan payable. In February 2007, the Consolidated Operating Partnership assumed a mortgage loan payable of $8,250 in connection with the 85% equity interest held by an institutional investor in a joint venture entity of the May 2003 Joint Venture that owned one property. The Consolidated Operating Partnership also paid down and retired this mortgage loan payable in February 2007. In connection with the retirement of the mortgage loans payable discussed above, the Consolidated Operating Partnership incurred prepayment penalties and a write-off of unamortized deferred financing fees totaling $146.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a schedule of the stated maturities and scheduled principal payments of the mortgage loans, senior unsecured debt and unsecured line of credit, exclusive of premiums and discounts, for the next five years ending December 31, and thereafter:


	Amount

Remainder of 2007	$	170,004
2008		202,111
2009		133,001
2010		15,545
2011		407,360
Thereafter		928,176

Total	$	1,856,197

Other Comprehensive Income:

In April 2006, the Consolidated Operating Partnership entered into two interest rate protection agreements which fixed the interest rate on forecasted offerings of unsecured debt which it designated as cash flow hedges. The interest rate protection agreements each have a notional value of $72,900 and are effective from November 28, 2006 through November 28, 2016 (the “April 2006 Agreements”). The April 2006 Agreements fixed the LIBOR rate at 5.537%. Included in accumulated other comprehensive income at March 31, 2007, is $4,357 of loss related to themark-to-market of the April 2006 Agreements (see Note 14).

In conjunction with certain issuances of senior unsecured debt, the Consolidated Operating Partnership entered into interest rate protection agreements to fix the interest rate on anticipated offerings of senior unsecured debt. In the next 12 months, the Consolidated Operating Partnership will amortize approximately $1,179 into net income by decreasing interest expense.


6.	Partners’ Capital

The Operating Partnership has issued general partnership units, limited partnership units (together, the “Units”) and preferred general partnership units. The general partnership units resulted from capital contributions from the Company. The limited partnership units are issued in conjunction with the acquisition of certain properties. Subject tolock-up periods and certain adjustments, limited partnership units are convertible into common stock, $.01 par value, of the Company on aone-for-one basis or cash at the option of the Company. The preferred general partnership units resulted from preferred capital contributions from the Company. The Operating Partnership will be required to make all required distributions on the preferred general partnership units prior to any distribution of cash or assets to the holders of the general and limited partnership units except for distributions required to enable the Company to maintain its qualification as a REIT.

Unit Contributions:

During the three months ended March 31, 2007, certain employees exercised 9,100 non-qualified employee stock options. Net proceeds to the Company were approximately $174. The Company contributed the net proceeds to the Consolidated Operating Partnership and the Consolidated Operating Partnership, through the Operating Partnership, issued Units to the Company in the same amount.

During the three months ended March 31, 2007, the Company awarded 442,008 shares of restricted common stock to certain employees and 1,598 shares of restricted common stock to certain directors. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of approximately $20,955 on the date of approval. The restricted common stock awarded to employees generally vests over a three year period and the restricted common stock awarded to directors generally vests over a

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

three to ten year period. Compensation expense will be charged to earnings over the respective vesting period for the shares expected to vest.

Distributions:

The following table summarizes distributions accrued during the three months ended March 31, 2007:


	Three Months Ended
	March 31, 2007
	Distribution		Total
	per Unit		Distribution

Operating Partnership Units	$	0.7100	$	36,867
Series C Preferred Units	$	53.9060	$	1,078
Series F Preferred Units	$	1,559.0000	$	780
Series G Preferred Units	$	1,809.0000	$	452
Series J Preferred Units	$	4,531.3000	$	2,719
Series K Preferred Units	$	4,531.3000	$	906


7.	Acquisition of Real Estate

During the three months ended March 31, 2007, the Consolidated Operating Partnership acquired 58 industrial properties comprising approximately 2.8 million square feet of GLA and several land parcels, including 41 industrial properties comprising approximately 1.3 million square feet of GLA in connection with the purchase of the 90% equity interest from the institutional investor of the September 1998 Joint Venture and one industrial property comprising 0.3 million square feet of GLA in connection with the redemption of the 85% equity interest in one property from the institutional investor in the May 2003 Joint Venture (see Note 4). The purchase price of these acquisitions totaled approximately $144,707, excluding costs incurred in conjunction with the acquisition of the industrial properties and land parcels.


8.	Sale of Real Estate, Real Estate Held for Sale and Discontinued Operations

During the three months ended March 31, 2007, the Consolidated Operating Partnership sold 35 industrial properties comprising approximately 4.0 million square feet of GLA and several land parcels. Gross proceeds from the sales of the 35 industrial properties and several land parcels were approximately $223,107. The gain on sale of real estate, net of income taxes was approximately $46,498. The 35 sold industrial properties meet the criteria established by FAS 144 to be included in discontinued operations. Therefore, in accordance with FAS 144, the results of operations and gain on sale of real estate, net of income taxes, for the 35 sold industrial properties are included in discontinued operations. The results of operations and gain on sale of real estate, net of income taxes, for the several land parcels do not meet the criteria established by FAS 144 and are included in continuing operations.

At March 31, 2007, the Consolidated Operating Partnership had 19 industrial properties comprising approximately 1.7 million square feet of GLA held for sale. In accordance with FAS 144, the results of operations of the 19 industrial properties held for sale at March 31, 2007 are included in discontinued operations. There can be no assurance that such industrial properties held for sale will be sold.

Income from discontinued operations, net of income taxes, for the three months ended March 31, 2006 reflects the results of operations of the 35 industrial properties that were sold during the three months ended March 31, 2007, the results of operations of 109 industrial properties that were sold during the year ended December 31, 2006, the results of operations of the 19 industrial properties identified as held for sale at March 31, 2007 and the gain on sale of real estate relating to 24 industrial properties that were sold during the three months ended March 31, 2006.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table discloses certain information regarding the industrial properties included in discontinued operations by the Consolidated Operating Partnership, for the three months ended March 31, 2007 and March 31, 2006:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006

Total Revenues	$	5,148		$	12,074
Property Expenses		(1,606	)		(4,097	)
Depreciation and Amortization		(1,221	)		(5,364	)
Provision for Income Taxes Allocable to Operations		(644	)		(384	)
Gain on Sale of Real Estate		55,370			54,082
Provision for Income Taxes Allocable to Gain on Sale of Real Estate		(10,133	)		(14,840	)

Income from Discontinued Operations	$	46,914		$	41,471


9.	Supplemental Information to Statement of Cash Flows

Supplemental disclosure of cash flow information:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006

Interest paid, net of capitalized interest	$	29,144		$	19,466

Interest capitalized	$	1,374		$	1,376

Supplemental schedule of non-cash investing and financing activities:
Distribution payable on units	$	36,867		$	36,015

Distribution payable on preferred units	$	5,935		$	—

Exchange of limited partnership units for general partnership units:
Limited partnership units	$	(190	)	$	(660	)
General partnership units		190			660

	$	—		$	—


In conjunction with the property and land acquisitions, the following liabilities were assumed:
Accounts payable and accrued expenses	$	(4,595	)	$	(433	)

Issuance of Limited Partnership Units	$	—		$	1,288

Mortgage Debt	$	(38,590	)	$	(6,995	)

Write-off of fully depreciated assets	$	(9,597	)	$	(1,604	)

In conjunction with certain property sales, the Operating Partnership provided seller financing:
Notes Receivable	$	5,250		$	11,200

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


10.	Earnings Per Unit (“EPU”)

The computation of basic and diluted EPU is presented below:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006

Numerator:
Loss from Continuing Operations	$	(8,969	)	$	(16,655	)
Gain on Sale of Real Estate, Net of Income Taxes		1,261			983
Less: Preferred Distributions		(5,935	)		(5,019	)
Less: Redemption of Preferred Units		—			(672	)

Loss from Continuing Operations Available to Unitholders — For Basic and Diluted EPU		(13,643	)		(21,363	)
Discontinued Operations, Net of Income Taxes		46,914			41,471

Net Income Available to Unitholders	$	33,271		$	20,108

Denominator:
Weighted Average Units — Basic and Diluted		50,965,685			50,644,488
		��
Basic and Diluted EPU:
Loss from Continuing Operations Available to Unitholders	$	(0.27	)	$	(0.42	)

Discontinued Operations, Net of Income Taxes	$	0.92		$	0.82

Net Income Available to Unitholders	$	0.65		$	0.40

Unvested restricted stock shares aggregating 429,759 and 117,335 were antidilutive at March 31, 2007 and 2006, respectively, and accordingly, were excluded from dilution computations.

Options to purchase common stock of 372,876 and 499,456 were outstanding as of March 31, 2007 and 2006, respectively. All of the options outstanding at March 31, 2007 and 2006 were antidilutive, and accordingly, were excluded in dilution computations.

The $200,000 of senior unsecured debt (the “2011 Exchangeable Notes”) issued during 2006, which are convertible into common shares of the Company at a price of $50.93, were not included in the computation of diluted EPU as the Company’s average stock price did not exceed the strike price of the conversion feature.

Weighted average units — diluted are the same as weighted average units — basic for the three months March 31, 2007 and 2006 as the dilutive effect of stock options and restricted stock was excluded as its inclusion would have been anti-dilutive to the loss from continuing operations available to unitholders. The dilutive effect of stock options and restricted stock excluded from the computation are 123,754 and 134,830, respectively, for the three months ended March 31, 2007 and 115,961 and 90,162, respectively, for the three months ended March 31, 2006.


11.	Stock Based Compensation

For the three months ended March 31, 2007 and 2006, the Consolidated Operating Partnership recognized $3,606 and $2,145 in compensation expense related to restricted stock awards, of which $556 and $260, respectively, was capitalized in connection with development activities. At March 31, 2007, the Consolidated Operating Partnership has $35,422 in unrecognized compensation related to unvested restricted stock awards. The weighted average period that the unrecognized compensation is expected to be incurred is 1.6 years. The

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Consolidated Operating Partnership has not awarded options to employees or directors of the Consolidated Operating Partnership during the three months ended March 31, 2007 and March 31, 2006, and therefore no stock-based employee compensation expense related to options is included in net income available to unitholders.

Stock option transactions for the three months ended March 31, 2007 are summarized as follows:


				Weighted
				Average		Exercise		Aggregate
				Exercise		Price		Intrinsic
	Shares			Price		per Share		Value

Outstanding at December 31, 2006		381,976		$	31.65	$	25.13-$33.15	$	5,823
Exercised		(9,100	)	$	32.16	$	30.53-$33.13	$	126

Outstanding at March 31, 2007		372,876		$	31.63	$	25.13-$33.15	$	5,707

The following table summarizes currently outstanding and exercisable options as of March 31, 2007:


	Number		Weighted		Weighted
	Outstanding		Average		Average
	and		Remaining		Exercise
Range of Exercise Price	Exercisable		Contractual Life		Price

$25.13-$30.53		114,176		3.70	$	29.89
$31.05-$33.15		258,700		3.19	$	32.40


12.	Commitments and Contingencies

In the normal course of business, the Consolidated Operating Partnership is involved in legal actions arising from the ownership of its properties. In management’s opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, operations or liquidity of the Consolidated Operating Partnership.

The Consolidated Operating Partnership has committed to the construction of several development projects totaling approximately 3.3 million square feet of GLA. The estimated total construction costs are approximately $198.2 million. Of this amount, approximately $92.1 million remains to be funded. There can be no assurance the actual completion cost will not exceed the estimated completion cost stated above.

At March 31, 2007, the Consolidated Operating Partnership had 21 letters of credit outstanding in the aggregate amount of $8,270. These letters of credit expire between April 2007 and November 2010.


13.	Related Party Transactions

At March 31, 2007, the Consolidated Operating Partnership has a receivables balance of $1,210 from a wholly-owned entity of the Company. At December 31, 2006, the Consolidated Operating Partnership has a payable balance of $17,468 to a wholly-owned entity of the Company.


14.	Subsequent Events

From April 1, 2007 to April 27, 2007 the Consolidated Operating Partnership sold seven industrial properties for approximately $32,282 of gross proceeds. The Consolidated Operating Partnership also acquired four industrial properties and several land parcels for a purchase price of approximately $17,295, excluding costs incurred in conjunction with the acquisition of these industrial properties and several land parcels.

On April 16, 2007, the Operating Partnership paid a first quarter 2007 distribution of $.71 per Unit, totaling approximately $36,867.

On May 1, 2007 the Consolidated Operating Partnership, through the Operating Partnership, priced $150,000 of senior unsecured debt with a maturity of May 15, 2017 (the “2017 Notes II”). The coupon interest rate and the

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

issue price on the 2017 Notes II was 5.95% and 99.730%, respectively. The offering of the 2017 Notes II is expected to close on May 7, 2007. There can be no assurance that the 2017 Notes II will close.

On May 1, 2007 the Consolidated Operating Partnership, through the Operating Partnership settled the April 2006 Agreements for a payment of $4,174, which will be included in other comprehensive income. The settlement amount of the April 2006 Agreements will be amortized over the life of the 2017 Notes II as an adjustment to interest expense.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The following discussion and analysis of First Industrial, L.P.’s (the “Operating Partnership”) financial condition and results of operations should be read in conjunction with the financial statements and notes thereto appearing elsewhere in thisForm 10-Q.

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Operating Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Operating Partnership, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Operating Partnership’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Operating Partnership on a consolidated basis include, but are not limited to, changes in: economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts), availability of financing, interest rates, competition, supply and demand for industrial properties in the Operating Partnership’s current and proposed market areas, potential environmental liabilities, slippage in development orlease-up schedules, tenant credit risks,higher-than-expected costs and changes in general accounting principles, policies and guidelines applicable to real estate investment trusts. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Operating Partnership and its business, including additional factors that could materially affect the Operating Partnership’s financial results, is included herein in Item 1A, “Risk Factors,” and in the Operating Partnership’s other filings with the Securities and Exchange Commission.

GENERAL

The Operating Partnership was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the “Company”), with an approximate 87.4% ownership interest at March 31, 2007. The limited partners of the Operating Partnership own, in the aggregate, approximately a 12.6% interest in the Operating Partnership at March 31, 2007. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $325.0 million at March 31, 2007. 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 is the sole member of several limited liability companies (the “L.L.C.s”) and the sole shareholder of First Industrial Investment, Inc. (the Company’s taxable REIT subsidiary (the TRS)) and holds at least a 99% limited partnership interest in each of eight limited partnerships (together, the “Other Real Estate Partnerships”).

The general partners of the Other Real Estate Partnerships are separate corporations, each with at least a .01% general partnership interest in the Other Real Estate Partnership for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of the Company.

The financial statements of the Operating Partnership report the L.L.C.s and the TRS (the “Consolidated Operating Partnership”) on a consolidated basis.

As of March 31, 2007, the Consolidated Operating Partnership owned 857 industrial properties (inclusive of developments in process) containing an aggregate of approximately 66.8 million square feet of gross leasable area (“GLA”). On a combined basis, as of March 31, 2007, the Other Real Estate Partnerships owned 102 industrial properties containing an aggregate of approximately 10.0 million square feet of GLA.

MANAGEMENT’S OVERVIEW

Management believes the Consolidated Operating Partnership’s financial condition and results of operations are, primarily, a function of the Consolidated Operating Partnership’s and its joint ventures’ performance in four key areas: leasing of industrial properties, acquisition and development of additional industrial properties, redeployment of internal capital and access to external capital.

The Consolidated Operating Partnership generates revenue primarily from rental income and tenant recoveries from long-term (generally three to six years) operating leases of its and its joint ventures’ industrial properties. Such revenue is offset by certain property specific operating expenses, such as real estate taxes, repairs and maintenance, property management, utilities and insurance expenses, along with certain other costs and expenses, such as depreciation and amortization costs and general and administrative and interest expenses. The Consolidated Operating Partnership’s revenue growth is dependent, in part, on its ability to (i) increase rental income, through increasing, either or both, occupancy rates and rental rates at the Consolidated Operating Partnership’s and its joint ventures’ properties, (ii) maximize tenant recoveries and (iii) minimize operating and certain other expenses. Revenues generated from rental income and tenant recoveries are a significant source of funds, in addition to income generated from gains/losses on the sale of the Consolidated Operating Partnership’s and its joint ventures’ properties (as discussed below), for the Consolidated Operating Partnership’s distributions. The leasing of property, in general, and occupancy rates, rental rates, operating expenses and certain non-operating expenses, in particular, are impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The leasing of property also entails various risks, including the risk of tenant default. If the Consolidated Operating Partnership were unable to maintain or increase occupancy rates and rental rates at the Consolidated Operating Partnership’s and its joint ventures’ properties or to maintain tenant recoveries and operating and certain other expenses consistent with historical levels and proportions, the Consolidated Operating Partnership’s revenue growth would be limited. Further, if a significant number of the Consolidated Operating Partnership’s or its joint ventures’ tenants were unable to pay rent (including tenant recoveries) or if the Consolidated Operating Partnership or its joint ventures were unable to rent their properties on favorable terms, the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

The Consolidated Operating Partnership’s revenue growth is also dependent, in part, on its and its joint ventures’ ability to acquire existing, and acquire and develop new, additional industrial properties on favorable terms. The Consolidated Operating Partnership itself, and through its various joint ventures, continually seeks to acquire existing industrial properties on favorable terms, and, when conditions permit, also seeks to acquire and develop new industrial properties on favorable terms. Existing properties, as they are acquired, and acquired and developed properties, as they are leased, generate revenue from rental income, tenant recoveries and fees, income

from which, as discussed above, is a source of funds for the Consolidated Operating Partnership’s distributions. The acquisition and development of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The acquisition and development of properties also entails various risks, including the risk that the Consolidated Operating Partnership’s and its joint ventures’ investments may not perform as expected. For example, acquired existing and acquired and developed new properties may not sustainand/or achieve anticipated occupancy and rental rate levels. With respect to acquired and developed new properties, the Consolidated Operating Partnership may not be able to complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing the properties. Also, the Consolidated Operating Partnership and its joint ventures face significant competition for attractive acquisition and development opportunities from other well-capitalized real estate investors, including both publicly-traded real estate investment trusts and private investors. Further, as discussed below, the Consolidated Operating Partnership and its joint ventures may not be able to finance the acquisition and development opportunities they identify. If the Company and its joint ventures were unable to acquire and develop sufficient additional properties on favorable terms or if such investments did not perform as expected, the Consolidated Operating Partnership’s revenue growth would be limited and its financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

The Consolidated Operating Partnership also generates income from the sale of its and its joint ventures’ properties (including existing buildings, buildings which the Consolidated Operating Partnership or joint ventures have developed or re-developed on a merchant basis and land). The Consolidated Operating Partnership itself, and through its various joint ventures, is continually engaged in, and its income growth is dependent, in part, on systematically redeploying capital from properties and other assets with lower yield potential into properties and other assets with higher yield potential. As part of that process, the Consolidated Operating Partnership and its joint ventures sell, on an ongoing basis, select stabilized properties or land or properties offering lower potential returns relative to their market value. The gain/loss on, and fees from, the sale of such properties are included in the Consolidated Operating Partnership’s income and are a significant source of funds, in addition to revenues generated from rental income and tenant recoveries, for the Consolidated Operating Partnership’s distributions. Also, a significant portion of the Consolidated Operating Partnership’s proceeds from such sales is used to fund the Consolidated Operating Partnership’s acquisition of existing, and the acquisition and development of new, industrial properties. The sale of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The sale of properties also entails various risks, including competition from other sellers and the availability of attractive financing for potential buyers of the Consolidated Operating Partnership’s properties. Further, the Consolidated Operating Partnership’s ability to sell properties is limited by safe harbor rules applying to REITs under the Code which relate to the number of properties that may be disposed of in a year, their tax bases and the cost of improvements made to the properties, along with other tests which enable a REIT to avoid punitive taxation on the sale of assets. If the Consolidated Operating Partnership and its joint ventures were unable to sell properties on favorable terms, the Consolidated Operating Partnership’s income growth would be limited and its financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

Currently, the Consolidated Operating Partnership utilizes a portion of the net sales proceeds from property sales, borrowings under its unsecured line of credit and proceeds from the issuance, when and as warranted, of additional debt and equity securities to finance future acquisitions and developments, and to fund its equity commitments to its joint ventures. Access to external capital on favorable terms plays a key role in the Consolidated Operating Partnership’s financial condition and results of operations, as it impacts the Consolidated Operating Partnership’s cost of capital and its ability and cost to refinance existing indebtedness as it matures and to fund acquisitions, developments and contributions to its joint ventures or through the issuance, when and as warranted, of additional equity securities. The Company’s ability to access external capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on the Company’s capital stock and debt, the market’s perception of the Company’s growth potential, the Company’s current and potential future earnings and cash distributions and the market price of the Company’s capital stock. If the Company were unable to

access external capital on favorable terms, the Company’s financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 2007 to Three Months Ended March 31, 2006

The Consolidated Operating Partnership’s net income available to unitholders was $33.3 million and $20.1 million for the three months ended March 31, 2007, and March 31, 2006, respectively. Basic and diluted net income available to unitholders were $0.65 per unit for the three months ended March 31, 2007, and $0.40 per unit for the three months ended March 31, 2006.

The tables below summarize the Consolidated Operating Partnership’s revenues, property expenses and depreciation and other amortization by various categories for the three months ended March 31, 2007 and March 31, 2006. Same store properties are properties owned prior to January 1, 2006 and held as an operating property through March 31, 2007 and developments and redevelopments that were placed in service prior to January 1, 2006 or were substantially completed for 12 months prior to January 1, 2006. Properties are placed in service as they reach stabilized occupancy (generally defined as 90% occupied). Acquired properties are properties that were acquired subsequent to December 31, 2005 and held as an operating property through March 31, 2007. Sold properties are properties that were sold subsequent to December 31, 2005. (Re)Developments and land are land parcels and developments and redevelopments that were not a) substantially complete 12 months prior to January 1, 2006 or b) placed in service prior to January 1, 2006. Other revenues are derived from the operations of the Consolidated Operating Partnership’s maintenance company, fees earned from the Consolidated Operating Partnership’s joint ventures and other miscellaneous revenues. Revenues and expenses from build to suit development for sale represent fees earned and expenses incurred for developing properties for third parties. Contractor revenues and expenses represent revenues earned and expenses incurred in connection with the TRS acting as general contractor for several industrial properties in the September 2005 Joint Venture. Other expenses are derived from the operations of the Consolidated Operating Partnership’s maintenance company and other miscellaneous regional expenses.

The Consolidated Operating Partnership’s future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition and sale of properties. The Consolidated Operating Partnership’s future revenues and expenses may vary materially from historical rates.

At March 31, 2007 and 2006, the occupancy rates of the Consolidated Operating Partnership’s same store properties were 91.6% and 87.9%, respectively.


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006			$ Change			% Change
	($ in 000’s)

REVENUES
Same Store Properties	$	72,319		$	68,631		$	3,688			5.4	%
Acquired Properties		13,640			1,146			12,494			1,090.2	%
Sold Properties		3,466			11,009			(7,543	)		(68.5	)%
(Re)Developments and Land, Not Included Above		1,468			986			482			48.9	%
Other		11,356			6,061			5,295			87.4	%

		102,249			87,833			14,416			16.4	%
Discontinued Operations		(5,148	)		(12,074	)		6,926			(57.4	)%

Subtotal Revenues		97,101			75,759			21,342			28.2	%

Revenues from Build to Suit Development for Sale		3,207			733			2,474			337.5	%
Contractor Revenues		5,040			—			5,040			100.0	%

Total Revenues	$	105,348		$	76,492		$	28,856			37.7	%

Revenues from same store properties increased by $3.7 million due to an increase in same store property occupancy rates. Revenues from acquired properties increased $12.5 million due to the 137 industrial properties acquired subsequent to December 31, 2005 totaling approximately 12.5 million square feet of GLA. Revenues from sold properties decreased $7.5 million due to the 144 industrial properties sold subsequent to December 31, 2005 totaling approximately 20.0 million square feet of GLA. Revenues from (re)developments, and land remained relatively unchanged. Other revenues increased by approximately $5.3 million due primarily to an increase in fees earned related to the Consolidated Operating Partnership assigning its interest in certain purchase contracts to third parties for consideration. Revenues from build to suit development for sale increased $2.5 million due to increased development activity. Contractor revenues for the three months ended March 31, 2007 represent revenues earned on construction projects for which the TRS acted as general contractor.


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006			$ Change			% Change
	($ in 000’s)

PROPERTY EXPENSES
Same Store Properties	$	24,166		$	23,211		$	955			4.1	%
Acquired Properties		2,675			230			2,445			1,063.0	%
Sold Properties		1,021			3,291			(2,270	)		(69.0	)%
(Re)Developments and Land, Not Included Above		832			1,122			(290	)		(25.8	)%
Other		3,620			3,519			101			2.9	%

		32,314			31,373			941			3.0	%
Discontinued Operations		(1,606	)		(4,097	)		2,491			(60.8	)%

Subtotal Operating Expenses		30,708			27,276			3,432			12.6	%

Expenses from Build to Suit Development for Sale		3,201			666			2,535			380.6	%
Contractor Expenses		4,836			—			4,836			100.0	%

Total Property Expenses	$	38,745		$	27,942		$	10,803			38.7	%

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance, other property related expenses, expenses from build to suit development for sale and contractor expenses. Property expenses from same store properties remained relatively unchanged. Property expenses from acquired properties increased by $2.4 million due to properties acquired subsequent to December 31, 2005. Property expenses from sold properties decreased by $2.3 million due to properties sold subsequent to December 31, 2005. Property expenses from (re)developments, and land remained relatively unchanged. Other expense remained relatively unchanged. Expenses from build to suit development for sale increased $2.5 million due to increased development activity. Contractor expenses for the three months ended March 31, 2007 represent expenses incurred on construction projects for which the TRS acted as general contractor.

General and administrative expense increased by approximately $5.5 million, or 31.9%, due primarily to increases in employee compensation related to compensation for new employees as well as an increase in incentive compensation.


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006			$ Change			% Change
	($ in 000’s)

DEPRECIATION and OTHER AMORTIZATION
Same Store Properties	$	25,905		$	25,663		$	242			0.9	%
Acquired Properties		8,239			1,236			7,003			566.6	%
Sold Properties		558			4,464			(3,906	)		(87.5	)%
(Re)Developments and Land, Not Included Above and Other		663			2,154			(1,491	)		(69.2	)%
Corporate Furniture, Fixtures and Equipment		471			416			55			13.2	%

		35,836			33,933			1,903			5.6	%
Discontinued Operations		(1,221	)		(5,364	)		4,143			(77.2	)%

Total Depreciation and Other Amortization	$	34,615		$	28,569		$	6,046			21.2	%

Depreciation and other amortization for same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased by $7.0 million due to properties acquired subsequent to December 31, 2005. Depreciation and other amortization from sold properties decreased by $3.9 million due to properties sold subsequent to December 31, 2005. Depreciation and other amortization for (re)development and land and other decreased by $1.5 million due primarily to accelerated depreciation recognized for the three months ended March 31, 2006 on one property in Columbus, OH which was razed during 2006.

Interest income remained relatively unchanged.

Interest expense increased by approximately $0.4 million primarily due to an increase in the weighted average debt balance outstanding for the three months ended March 31, 2007 ($1,915.1 million) as compared to the three months ended March 31, 2006 ($1,843.5 million), partially offset by a decrease in the weighted average interest rate for the three months ended March 31, 2007 (6.62%) as compared to the three months ended March 31, 2006 (6.79%).

Amortization of deferred financing costs increased by approximately $0.2 million, or 32.7%, due primarily to financing fees incurred associated with the issuance of $200,000 of senior unsecured debt issued in September 2006.

In October 2005, the Operating Partnership, through the TRS, entered into an interest rate protection agreement which hedged the change in value of a build to suit development project the Operating Partnership was constructing. This interest rate protection agreement had a notional value of $50 million, was based on the three month LIBOR rate, had a strike rate of 4.8675%, had an effective date of December 30, 2005 and a termination date of December 30, 2010. Per Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”) fair value and cash flow hedge accounting for hedges of non-financial assets and liabilities is limited to hedges of the risk of changes in the market price of the entire hedged item because changes in the price of an ingredient or component of a non-financial item generally do not have a predictable, separately measurable effect on the price of the item. Since the interest rate protection agreement is hedging a component of the change in value of the build to suit development, the interest rate protection agreement does not qualify for hedge accounting and the change in value of the interest rate protection agreement will be recognized immediately in net income as opposed to other comprehensive income. On January 5, 2006, the Operating Partnership, through the TRS, settled the interest rate protection agreement for a payment of $0.2 million.

During 2007, the Operating Partnership incurred a $0.1 million loss from early retirement of debt due to early payoffs of mortgage loans.

Equity in income of Other Real Estate Partnerships increased by $0.6 million primarily due to an increase in gain on sale of real estate for the Other Real Estate Partnerships, partially offset by an increase in depreciation and amortization expense on properties within the Other Real Estate Partnerships.

Equity in income of joint ventures increased by approximately $5.7 million due primarily to the Operating Partnership’s economic share of gains and earn outs on property sales from the March 2005 Joint Venture and the September 2005 Joint Venture during the three months ended March 31, 2007.

The income tax provision (included in continuing operations, discontinued operations and gain of sale) increased by $0.7 million, in the aggregate, due primarily to an increase in joint venture fees, assignment fees and equity in income of joint ventures, partially offset by an increase in general and administrative expense within the TRS.

The $1.3 million and $1.0 million gain on sale of real estate, net of income taxes, for the three months ended March 31, 2007 and 2006, respectively, resulted from the sale of several land parcels that do not meet the criteria established by FAS 144 for inclusion in discontinued operations.

The following table summarizes certain information regarding the industrial properties included in discontinued operations by the Consolidated Operating Partnership, for the three months ended March 31, 2007 and March 31, 2006:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2007			2006
	($ in 000’s)

Total Revenues	$	5,148		$	12,074
Property Expenses		(1,606	)		(4,097	)
Depreciation and Amortization		(1,221	)		(5,364	)
Provision for Income Taxes Allocable to Operations		(644	)		(384	)
Gain on Sale of Real Estate		55,370			54,082
Provision for Income Taxes Allocable to Gain on Sale		(10,133	)		(14,840	)

Income from Discontinued Operations	$	46,914		$	41,471

Income from discontinued operations, for the three months ended March 31, 2007 reflects the results of operations and gain on sale of real estate, relating to 35 industrial properties that were sold during the three months ended March 31, 2007 and the results of operations of 19 properties that were identified as held for sale at March 31, 2007.

Income from discontinued operations, for the three months ended March 31, 2006 reflects the gain on sale of real estate relating to 24 industrial properties that were sold during the three months ended March 31, 2006 and reflects the results of operations of 109 industrial properties that were sold during the year ended December 31, 2006, 35 industrial properties that were sold during the three months ended March 31, 2007 and 19 industrial properties identified as held for sale at March 31, 2007.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2007, the Consolidated Operating Partnership’s cash and restricted cash was approximately $2.3 and $0.3 million, respectively. Restricted cash is primarily comprised of cash held in escrow in connection with mortgage debt requirements.

The Consolidated Operating Partnership has considered its short-term (one year or less) liquidity needs and the adequacy of its estimated cash flow from operations and other expected liquidity sources to meet these needs. The Consolidated Operating Partnership’s 7.6% Notes due in 2007, in the aggregate principal amount of $150 million are due on May 15, 2007 (the “2007 Notes”). The Consolidated Operating Partnership expects to satisfy the payment obligations on the 2007 Notes with the issuance of additional debt. With the exception of the 2007 Notes, the Consolidated Operating Partnership believes that its principal short-term liquidity needs are to fund normal recurring expenses, debt service requirements and the minimum distribution required to maintain the Company’s REIT qualification under the Internal Revenue Code. The Consolidated Operating Partnership anticipates that these needs will be met with cash flows provided by operating activities and investment activities.

The Consolidated Operating Partnership expects to meet long-term (greater than one year) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through the disposition of select assets, long-term unsecured indebtedness and the issuance of additional Units and preferred Units. As of March 31, 2007 and April 27, 2007, $300.0 million of debt securities was registered and unissued under the Securities Act of 1933, as amended. On April 30, 2007 the Operating Partnership filed a registration statement with the Securities and Exchange Commission covering an indefinite number or amount of the same securities to be issued in the following three years. On May 1, 2007 the Operating Partnership publicly offered $150.0 million of 5.95% senior unsecured debt due in 2017. The Consolidated Operating Partnership also may finance the development or acquisition of additional properties through borrowings under the Unsecured Line of Credit. At March 31, 2007, borrowings under the Unsecured Line of Credit bore interest at a weighted average interest rate of 6.06%. As of April 27, 2007 the Consolidated Operating Partnership, through the Operating Partnership, had approximately $235.2 million available for additional borrowings under the Unsecured Line of Credit.

Three Months Ended March 31, 2007

Net cash used in operating activities of approximately $1.4 million for the three months ended March 31, 2007 was comprised primarily of net income of approximately $39.2 million and net distributions from the Consolidated Operating Partnership’s industrial real estate joint ventures of $0.2 million offset by the net change in operating assets and liabilities of approximately $19.9 million and adjustments for non-cash items of $20.9 million. The adjustments for the non-cash items of approximately $20.9 million are primarily comprised of the gain on sale of real estate of approximately $57.4 million and the effect of the straight-lining of rental income of approximately $2.5 million substantially offset by depreciation and amortization of approximately $38.8 million and loss on early retirement of debt of approximately $0.2 million.

Net cash provided by investing activities of approximately $60.1 million for the three months ended March 31, 2007 was comprised primarily of the net proceeds from sales of investment in real estate, repayments of notes receivable, distributions from the Other Real Estate Partnerships, distributions from the Consolidated Operating Partnership’s industrial real estate joint ventures and a decrease in restricted cash that was held by an intermediary for Section 1031 exchange purposes, partially offset by the acquisition of real estate, development of real estate, capital expenditures related to the expansion and improvement of existing real estate, investments in and advances to the Other Real Estate Partnerships, contributions to and investments in the Consolidated Operating Partnership’s industrial real estate joint ventures and funding of notes receivable.

During the three months ended March 31, 2007, the Consolidated Operating Partnership acquired 58 industrial properties comprising approximately 2.8 million square feet of GLA and several land parcels. The purchase price for these acquisitions totaled approximately $144.7 million, excluding costs incurred in conjunction with the acquisition of the industrial properties and land parcels.

The Consolidated Operating Partnership, through a wholly-owned limited liability company in which the Operating Partnership is the sole member, invested approximately $4.2 million and received distributions of approximately $11.0 million from the Operating Partnership’s industrial real estate joint ventures. As of March 31, 2007, the Operating Partnership’s industrial real estate joint ventures owned 197 industrial properties comprising approximately 23.6 million square feet of GLA and several land parcels.

Net cash used in financing activities of approximately $71.5 million for the three months ended March 31, 2007 was derived primarily of general partnership and limited partnership units (“Unit”) and preferred general partnership unit distributions, net repayments under the Consolidated Operating Partnership’s Unsecured Line of Credit, the repurchase of restricted units, repayments on mortgage loans payable and debt issue costs and prepayment penalty, partially offset by the net proceeds from the exercise of stock options and a cash book overdraft.

During the three months ended March 31, 2007, the Company awarded 442,008 shares of restricted common stock to certain employees and 1,598 shares of restricted common stock to certain directors. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of approximately $21.0 million on the date of approval. The restricted common stock awarded to employees generally vests over a three year period and the restricted common stock awarded to directors generally vests over a three to ten year period. Compensation expense will be charged to earnings over the respective vesting periods for the shares expected to vest.

During the three months ended March 31, 2007, certain employees exercised 9,100 non-qualified employee stock options. Net proceeds to the Company were approximately $0.2 million. The Consolidated Operating Partnership issued Units to the Company in the same amount.

Market Risk

The following discussion about the Consolidated Operating Partnership’s risk-management activities includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.

In the normal course of business, the Consolidated Operating Partnership also faces risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis.

At March 31, 2007, approximately $1,645.0 million (approximately 89.2% of total debt at March 31, 2007) of the Company’s debt was fixed rate debt and approximately $199.0 million (approximately 10.8% of total debt at March 31, 2007) was variable rate debt.

For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not earnings or cash flows of the Consolidated Operating Partnership. Conversely, for variable rate debt, changes in the interest rate generally do not impact the fair value of the debt, but would affect the Consolidated Operating Partnership’s future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on the Consolidated Operating Partnership until the Consolidated Operating Partnership is required to refinance such debt. See Note 5 to the consolidated financial statements for a discussion of the maturity dates of the Consolidated Operating Partnership’s various fixed rate debt.

The use of derivative financial instruments allows the Consolidated Operating Partnership to manage risks of increases in interest rates with respect to the effect these fluctuations would have on our earnings and cash flows. As of March 31, 2007, the Consolidated Operating Partnership had two outstanding interest rate swaps with aggregate notional amount of $145.8 million which fix the interest rate on a forecasted offering of debt.

Recent Accounting Pronouncements

Refer to Footnote 2 to the March 31, 2007 Financial Statements.

Subsequent Events

From April 1, 2007 to April 27, 2007, the Consolidated Operating Partnership sold seven industrial properties for approximately $32.3 million of gross proceeds. The Consolidated Operating Partnership also acquired four industrial properties and several land parcels for a purchase price of $17.3 million, excluding costs incurred in conjunction with the acquisition of these industrial properties and several land parcels.

On April 16, 2007, the Operating Partnership paid a first quarter 2007 distribution of $.71 per Unit, totaling approximately $36.9 million.

On May 1, 2007 the Consolidated Operating Partnership, through the Operating Partnership, priced $150.0 million of senior unsecured debt with a maturity of May 15, 2017 (the “2017 Notes II”). The coupon interest rate and the issue price on the 2017 Notes II was 5.95% and 99.730%, respectively. The offering of the 2017 Notes II is expected to close on May 7, 2007. There can be no assurance that the 2017 Notes II will close.

On May 1, 2007 the Consolidated Operating Partnership, through the Operating Partnership settled the April 2006 Agreements for a payment of $4.2 million, which will be included in other comprehensive income. The settlement amount of the April 2006 Agreements will be amortized over the life of the 2017 Notes II as an adjustment to interest expense.


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*

Response to this item is included in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above.


Item 4.	*Controls and Procedures*

The Company’s principal executive officer and principal financial officer, after evaluating the effectiveness of the Operating Partnership’s disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and15d-15(e)) as of the end of the period covered by this report, based on the evaluation of these controls and procedures required by Exchange ActRules 13a-15(b) or15d-15(b), have concluded that as of the end of such period the Operating Partnership’s disclosure controls and procedures were effective.

There has been no change in the Consolidated Operating Partnership’s internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	*Legal Proceedings*

None.


Item 1A.	*Risk Factors*

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 Consolidated Operating Partnership’s control.

The Consolidated 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 Consolidated 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 Consolidated 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 Consolidated 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 Consolidated Operating Partnership and the TRS and that no fee income should be imputed to the Operating Partnership 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. The Consolidated Operating Partnership 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 Consolidated 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.


Item 2.	*Unregistered Sales of Equity Securities and Use of Proceeds*

None.


Item 3.	*Defaults Upon Senior Securities*

None.


Item 4.	*Submission of Matters to a Vote of Security Holders*

None.


Item 5.	*Other Information*

Not applicable.


Item 6.	*Exhibits*

(a) Exhibits:


Exhibit
Number			Description

	1	.1	Underwriting Agreement dated May 1, 2007 among the Operating Partnership, the Company, J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC and Merrill Lynch, Pierce, Fenner and Smith Incorporated, as underwriters and as representatives of several other underwriters listed therein (incorporated by reference to Exhibit 1.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2007, FileNo. 1-13102).
	31	.1*	Certification of the Principal Executive Officer of First Industrial Realty Trust, Inc., registrant’s sole general partner, pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	31	.2*	Certification of the Principal Financial Officer of First Industrial Realty Trust, Inc., registrant’s sole general partner, pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	32	.1**	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes — Oxley Act of 2002.


*		Filed herewith

**		Furnished herewith

The Company maintains a website at www.firstindustrial.com. Information on this website shall not constitute part of this Form 10-Q. Copies of the Company’s annual report onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and amendments to such reports are available without charge on the Company’s website as soon as reasonably practicable after such reports are filed with or furnished to the SEC. In addition, the Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter, Nominating/Corporate Governance Committee Charter, along with supplemental financial and operating information prepared by the Company, are all available without charge on the Company’s website or upon request to the Company. Amendments to, or waivers from, the Company’s Code of Business Conduct and Ethics that apply to the Company’s executive officers or directors shall be posted to the Company’s website at www.firstindustrial.com. Please direct requests as follows:

First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 4000
Chicago, IL 60606
Attention: Investor Relations

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRST INDUSTRIAL, L.P.

By: FIRST INDUSTRIAL REALTY TRUST, INC.

Its Sole General Partner


	By:	/s/ Scott A. Musil

Scott A. Musil

Chief Accounting Officer

(Principal Accounting Officer)

Date: May 3, 2007

EXHIBIT INDEX


Exhibit
Number			Description

	1	.1	Underwriting Agreement dated May 1, 2007 among the Operating Partnership, the Company, J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC and Merrill Lynch, Pierce, Fenner and Smith Incorporated, as underwriters and as representatives of several other underwriters listed therein (incorporated by reference to Exhibit 1.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2007, FileNo. 1-13102).
	31	.1*	Certification of the Principal Executive Officer of First Industrial Realty Trust, Inc., registrant’s sole general partner, pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	31	.2*	Certification of the Principal Financial Officer of First Industrial Realty Trust, Inc., registrant’s sole general partner, pursuant toRule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
	32	.1**	Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith

**		Furnished herewith

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. junior Bad

First Industrial 10-Q2007 Q1 Quarterly report

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