First Industrial 10Q 2007 Q2 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 June 30, 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 file number333-21873

First Industrial, L.P.

(Exact Name of Registrant as Specified in its Charter)


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

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

(Address of Principal Executive Offices)

(312) 344-4300

(Registrant’s Telephone Number, Including Area Code)

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 June 30, 2007

INDEX


			Page

PART I: FINANCIAL INFORMATION
	Item 1.	Financial Statements		3
		Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006		3
		Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and June 30, 2006		4
		Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2007 and June 30, 2006		5
		Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007, and June 30, 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		31
	Item 4.	Controls and Procedures		32

PART II: OTHER INFORMATION
	Item 1.	Legal Proceedings		32
	Item 1A.	Risk Factors		32
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32
	Item 3.	Defaults Upon Senior Securities		32
	Item 4.	Submission of Matters to a Vote of Security Holders		32
	Item 5.	Other Information		32
	Item 6.	Exhibits		32
SIGNATURE				34
EXHIBIT INDEX				35
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Section 1350 Certifications

PART I: FINANCIAL INFORMATION


Item 1.	*Financial Statements*

FIRST INDUSTRIAL, L.P.

CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2007			2006
	(Unaudited)
	(Dollars in thousands,
	except unit data)

ASSETS
Assets:
Investment in Real Estate:
Land	$	559,352		$	498,025
Buildings and Improvements		2,262,121			2,297,988
Construction in Progress		71,412			30,575
Less: Accumulated Depreciation		(428,313	)		(402,497	)

Net Investment in Real Estate		2,464,572			2,424,091

Real Estate Held for Sale, Net of Accumulated Depreciation and Amortization of $3,716 and $9,688 at June 30, 2007 and December 31, 2006, respectively		65,927			115,961
Investments in and Advances to Other Real Estate Partnerships		402,674			371,390
Cash and Cash Equivalents		4,077			15,124
Restricted Cash		44,754			15,970
Tenant Accounts Receivable, Net		8,737			6,571
Investments in Joint Ventures		63,483			55,614
Deferred Rent Receivable, Net		26,665			24,721
Deferred Financing Costs, Net		15,544			15,210
Deferred Leasing Intangibles, Net		79,933			75,958
Prepaid Expenses and Other Assets, Net		142,207			114,756

Total Assets	$	3,318,573		$	3,235,366


LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	82,590		$	77,926
Senior Unsecured Debt, Net		1,550,139			1,549,732
Unsecured Line of Credit		347,000			207,000
Accounts Payable, Accrued Expenses and Other Liabilities, Net		117,491			128,691
Deferred Leasing Intangibles, Net		19,363			17,402
Rents Received in Advance and Security Deposits		26,464			26,097
Leasing Intangibles Held for Sale, Net of Accumulated Amortization of $215 and $183 at June 30, 2007 and December 31, 2006, respectively		1,296			2,310
Distributions Payable		41,710			42,548

Total Liabilities		2,186,053			2,051,706

Commitments and Contingencies		—			—
Partners’ Capital:
General Partner Preferred Units (1,550 and 21,550 units issued and outstanding at June 30, 2007 and December 31, 2006, respectively) with a liquidation preference of $275,000 and $325,000		266,211			314,208
General Partner Units (45,411,646 and 45,010,630 units issued and outstanding at June 30, 2007 and December 31, 2006, respectively)		730,204			730,493
Limited Partners’ Units (6,495,924 and 6,558,442 units issued and outstanding at June 30, 2007 and December 31, 2006, respectively)		148,489			150,758
Accumulated Other Comprehensive Loss		(12,384	)		(11,799	)

Total Partners’ Capital		1,132,520			1,183,660

Total Liabilities and Partners’ Capital	$	3,318,573		$	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			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006
				(Unaudited)
	(Dollars in thousands, except unit and per unit data)

Revenues:
Rental Income	$	64,916		$	52,848		$	128,027		$	104,125
Tenant Recoveries and Other Income		28,343			25,006			58,709			47,081
Revenues from Build to Suit Development for Sale		3,233			—			6,440			733
Contractor Revenues		4,368			—			9,408			—

Total Revenues		100,860			77,854			202,584			151,939

Expenses:
Property Expenses		30,681			25,989			60,094			52,439
General and Administrative		22,309			18,062			45,239			35,445
Depreciation and Other Amortization		34,864			30,106			67,881			57,778
Expenses from Build to Suit Development for Sale		2,930			—			6,131			666
Contractor Expenses		4,123			—			8,959			—

Total Expenses		94,907			74,157			188,304			146,328

Other Income/Expense:
Interest Income		170			209			387			438
Interest Expense		(29,667	)		(29,743	)		(59,568	)		(59,220	)
Amortization of Deferred Financing Costs		(824	)		(603	)		(1,644	)		(1,221	)
Mark-to-Market/Loss on Settlement of Interest Rate Protection Agreement		—			—			—			(170	)
Loss From Early Retirement of Debt		(108	)		—			(254	)		—

Total Other Income/Expense		(30,429	)		(30,137	)		(61,079	)		(60,173	)
Loss from Continuing Operations Before Equity in Income of Other Real Estate Partnerships, Equity in Income of Joint Ventures and Income Tax Benefit		(24,476	)		(26,440	)		(46,799	)		(54,562	)
Equity in Income of Other Real Estate Partnerships		4,374			17,950			9,894			22,838
Equity in Income of Joint Ventures		11,626			7,307			17,257			7,271
Income Tax (Provision) Benefit		(115	)		983			1,616			6,951

Loss from Continuing Operations		(8,591	)		(200	)		(18,032	)		(17,502	)
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $59,429 and $38,823 for the Three Months Ended June 30, 2007 and June 30, 2006, respectively, and $114,799 and $92,905 for the Six Months Ended June 30, 2007 and 2006, respectively)		61,325			43,513			119,747			100,890
Provision for Income Taxes Allocable to Discontinued Operations (Including $11,070 and $7,625 for the Three Months Ended June 30, 2007 and June 30, 2006, respectively and $21,203 and $22,535 for the Six Months Ended June 30, 2007 and 2006, respectively allocable to Gain on Sale of Real Estate)		(11,577	)		(8,321	)		(22,613	)		(23,596	)

Income Before Gain on Sale of Real Estate		41,157			34,992			79,102			59,792
Gain on Sale of Real Estate		830			2,447			2,859			3,522
Provision for Income Taxes Allocable to Gain on Sale of Real Estate		(327	)		(971	)		(1,095	)		(1,051	)

Net Income		41,660			36,468			80,866			62,263
Less: Preferred Unit Distributions		(5,671	)		(5,029	)		(11,606	)		(10,048	)
Less: Preferred Unit Redemptions		(2,017	)		—			(2,017	)		(672	)

Net Income Available to Unitholders	$	33,972		$	31,439		$	67,243		$	51,543

Basic and Diluted Earnings Per Unit:
Loss from Continuing Operations	$	(0.31	)	$	(0.07	)	$	(0.59	)	$	(0.51	)

Income From Discontinued Operations	$	0.98		$	0.69		$	1.91		$	1.53

Net Income Available to Unitholders	$	0.67		$	0.62		$	1.32		$	1.02

Weighted Average Units Outstanding		50,985			50,706			50,975			50,675

Net Income Available to Unitholders Attributable to:
General Partners	$	29,710		$	27,250		$	58,769		$	44,701
Limited Partners		4,262			4,189			8,474			6,842

Net Income Available to Unitholders	$	33,972		$	31,439		$	67,243		$	51,543

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

FIRST INDUSTRIAL, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2007			2006			2007			2006
				(Unaudited)
				(Dollars in thousands)

Net Income	$	41,660		$	36,468			80,866		$	62,263
Mark-to-Market of Interest Rate Protection Agreements		4,357			3,374			4,215			4,789
Settlement of Interest Rate Protection Agreements		(4,261	)		—			(4,261	)		(1,729	)
Amortization of Interest Rate Protection Agreements		(243	)		(220	)		(539	)		(450	)

Comprehensive Income	$	41,513		$	39,622		$	80,281		$	64,873

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

FIRST INDUSTRIAL, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2007			2006
	(Unaudited)
	(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	80,866		$	62,263
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		53,010			53,763
Amortization of Deferred Financing Costs		1,644			1,221
Other Amortization		23,498			17,977
Provision for Bad Debt		31			648
Equity in Income of Joint Ventures		(17,257	)		(7,272	)
Distributions from Joint Ventures		17,327			7,847
Gain on Sale of Real Estate		(117,658	)		(96,427	)
Loss on Early Retirement of Debt		254			—
Mark to Market of Interest Rate Protection Agreement		—			(16	)
Equity in Income of Other Real Estate Partnerships		(9,894	)		(22,838	)
Distributions from Investment in Other Real Estate Partnerships		9,894			22,838
Decrease in Developments for Sale Costs		7,528			16,241
Decrease in Tenant Accounts Receivable and Prepaid Expenses and Other Assets, Net		2,212			4,914
Increase in Deferred Rent Receivable		(5,017	)		(4,296	)
Decrease in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits		(8,137	)		(3,999	)
Increase in Restricted Cash		(234	)		—

Net Cash Provided by Operating Activities		38,067			52,864

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate		(329,396	)		(353,088	)
Net Proceeds from Sales of Investments in Real Estate		386,259			433,208
Investments in and Advances to Other Real Estate Partnerships		(57,058	)		(17,998	)
Distributions from Other Real Estate Partnerships in Excess of Equity in Income		25,774			42,573
Contributions to and Investments in Joint Ventures		(15,767	)		(14,093	)
Distributions from Joint Ventures		7,436			8,099
Funding of Notes Receivable		(8,385	)		—
Repayment of Notes Receivable		8,385			11,200
Funding of Restricted Cash		(28,532	)		(43,525	)

Net Cash (Used in) Provided by Investing Activities		(11,284	)		66,376

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from the Issuance of Preferred Units		—			144,672
Unit Contributions		393			1,240
Unit Distributions		(73,483	)		(71,766	)
Preferred Unit Distributions		(12,684	)		(12,574	)
Redemption of Preferred Units		(50,014	)		(182,156	)
Repurchase of Restricted Units		(3,707	)		(2,660	)
Net Proceeds from Senior Unsecured Debt		149,595			199,306
Repayments of Senior Unsecured Debt		(150,000	)		—
Other Costs of Senior Unsecured Debt		(4,261	)		(1,729	)
Repayments on Mortgage Loans Payable		(32,795	)		(9,076	)
Debt Issuance Costs and Loss from Early Retirement of Debt		(2,190	)		(1,814	)
Proceeds from Unsecured Line of Credit		570,000			303,500
Repayments on Unsecured Line of Credit		(430,000	)		(493,000	)
Cash Book Overdraft		1,316			6

Net Cash Used in Financing Activities		(37,830	)		(126,051	)

Net Decrease in Cash and Cash Equivalents		(11,047	)		(6,811	)
Cash and Cash Equivalents, Beginning of Period		15,124			6,811

Cash and Cash Equivalents, End of Period	$	4,077		$	—

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 87.5% and 87.0% ownership interest at June 30, 2007 and June 30, 2006, respectively. The limited partners of the Operating Partnership own approximately a 12.5% and 13.0% interest in the Operating Partnership at June 30, 2007 and June 30, 2006, respectively. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $275,000 at June 30, 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 June 30, 2007, the Consolidated Operating Partnership owned 832 industrial properties (inclusive of developments in process) containing an aggregate of approximately 67.7 million square feet of gross leasable area (“GLA”). On a combined basis, as of June 30, 2007, the Other Real Estate Partnerships owned 103 industrial properties containing an aggregate of approximately 10.1 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 owned 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 June 30, 2007 and December 31, 2006, and the reported amounts of revenues and expenses for each of the three and six months ended June 30, 2007 and June 30, 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 June 30, 2007 and December 31, 2006 and the results of its operations and comprehensive income for each of the three and six months ended June 30, 2007 and June 30, 2006, and its cash flows for each of the six months ended June 30, 2007 and June 30, 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:


	June 30,			December 31,
	2007			2006

In-Place Leases	$	77,380		$	73,341
Less: Accumulated Amortization		(17,427	)		(13,832	)

	$	59,953		$	59,509

Above Market Leases	$	4,846		$	5,049
Less: Accumulated Amortization		(1,617	)		(1,680	)

	$	3,229		$	3,369

Tenant Relationship	$	18,502		$	14,080
Less: Accumulated Amortization		(1,751	)		(1,000	)

	$	16,751		$	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:


	June 30,			December 31,
	2007			2006

Below Market Leases	$	25,672		$	22,873
Less: Accumulated Amortization		(6,309	)		(5,471	)

	$	19,363		$	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 six months ended June 30, 2007 was $14,666, $855, $7,442 and $(6,051), 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 six months ended June 30, 2006 was $14,645, $1,090, $7,507 and $(4,196), respectively.

Amortization expense related to deferred leasing intangibles was $7,893 and $4,794 for the six months ended June 30, 2007 and 2006, respectively.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Build to Suit Development for Sale and General Contractor Revenues and Expenses

During 2007 and 2006, the Consolidated Operating Partnership, through the TRS, entered into contracts with third parties to construct industrial properties. The build-to-suit for sale contracts require the purchase price to be paid at closing. The Consolidated Operating Partnership uses the percentage-of-completion contract method. Using this method, profits are recorded based on estimates of the percentage of completion of individual contracts. The percentage of completion estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

During 2007, the Consolidated Operating Partnership, through the TRS, acted as general contractor to construct industrial properties for the March 2005 Joint Venture. The Consolidated Operating Partnership uses the percentage-of-completion contract method. Using this method, profits are recorded based on estimates of the percentage of completion of individual contracts. The percentage of completion estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

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 $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 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 six months ended June 30, 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 Option 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.


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.

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Condensed Combined Balance Sheets:


	June 30,		December 31,
	2007		2006

ASSETS
Assets:
Investment in Real Estate, Net	$	371,385	$	330,223
Other Assets, Net		48,116		59,363

Total Assets	$	419,501	$	389,586


LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Other Liabilities	$	13,488	$	15,024
Partners’ Capital		406,013		374,562

Total Liabilities and Partners’ Capital	$	419,501	$	389,586

Condensed Combined Statements of Operations:


	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006

Total Revenues, Including Interest Income	$	14,193		$	12,253		$	27,794		$	24,792
Property Expenses		(4,200	)		(3,188	)		(8,366	)		(7,285	)
Interest Expense		—			—			—			(11	)
Amortization of Deferred Financing Costs		—			—			—			(2	)
Depreciation and Other Amortization		(5,576	)		(4,706	)		(10,987	)		(8,794	)
Income Tax Provision		(3	)		—			(9	)		—

Income from Continuing Operations		4,414			4,359			8,432			8,700
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $13,176 and $13,116 for the Three and Six Months Ended June 30, 2006, respectively)		—			13,768			—			14,359
Gain on Sale of Real Estate		—			—			1,545			—

Net Income	$	4,414		$	18,127		$	9,977		$	23,059


4.	Investments in Joint Ventures

At June 30, 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 40 industrial properties comprising approximately 4.1 million square feet of GLA and several land parcels, the September 2005 Joint Venture owned 90 industrial properties comprising approximately 6.3 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

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. The mortgage loans payable were subsequently paid off in February 2007 (see Note 5).

During the year ended December 31, 2005, the Consolidated Operating Partnership sold several land parcels to the March 2005 Joint Venture. The Consolidated Operating Partnership deferred 10% of the gain from the sale, which is equal to the Consolidated Operating Partnership’s economic interest in the March 2005 Joint Venture. On May 18, 2007, the Consolidated Operating Partnership repurchased 66 acres of the land it had sold to the March 2005 Joint Venture for a purchase price of $6,379. Since the Consolidated Operating Partnership had deferred 10% of the gain on sale from the original sale in 2005, the Consolidated Operating Partnership netted the unamortized deferred gain amount, along with its 10% economic interest in the gain on sale and distributions in excess of its 10% economic interest it received from the sale of the 66 acres from the March 2005 Joint Venture against the basis of the land.

At June 30, 2007 and December 31, 2006, the Consolidated Operating Partnership has a receivable from the Joint Ventures of $7,851 and $7,967, respectively, which mainly relates 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 the TRS who is acting in the capacity of the general contractor for development projects for the March 2005 Joint Venture.

During the six months ended June 30, 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 Six
	Months Ended
	June 30,		June 30,
	2007		2006

Contributions	$	14,734	$	12,198
Distributions		24,763	$	15,946
Fees	$	13,251	$	10,793

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
	June 30,			December 31,			June 30,	Issuance/
	2007			2006			2007	Assumption	Maturity Date

Mortgage Loans Payable, Net	$	82,590		$	77,926		5.35%-9.25%	4.58%-9.25%	December 2007- September 2024
Unamortized Premiums		(2,558	)		(2,919	)

Mortgage Loans Payable, Gross	$	80,032		$	75,007

Senior Unsecured Debt, Net
2007 Notes	$	—		$	149,998		N/A	N/A	05/15/07
2016 Notes		199,407			199,372		5.750%	5.91%	01/15/16
2017 Notes		99,900			99,895		7.500%	7.52%	12/01/17
2027 Notes		15,056			15,055		7.150%	7.11%	05/15/27
2028 Notes		199,835			199,831		7.600%	8.13%	07/15/28
2011 Notes		199,776			199,746		7.375%	7.39%	03/15/11
2012 Notes		199,339			199,270		6.875%	6.85%	04/15/12
2032 Notes		49,446			49,435		7.750%	7.87%	04/15/32
2009 Notes		124,915			124,893		5.250%	4.10%	06/15/09
2014 Notes		112,865			112,237		6.420%	6.54%	06/01/14
2011 Exchangeable Notes		200,000			200,000		4.625%	4.63%	09/15/11
2017 II Notes		149,600			—		5.950%	6.37%	05/15/17

Subtotal	$	1,550,139		$	1,549,732

Unamortized Discounts		14,931			15,338

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

Unsecured Line of Credit Total	$	347,000		$	207,000		5.863%	5.863%	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. As of June 30, 2007 the Consolidated Operating Partnership has repaid $22,922 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 redemption of 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 repaid 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 $254. On June 28, 2007, in conjunction with the sale of a property, the buyer assumed a mortgage loan payable of $769 from the Consolidated Operating Partnership.

On May 7, 2007, the Consolidated Operating Partnership, issued $150,000 of senior unsecured debt which matures on May 15, 2017 and bears interest at a rate of 5.95% (the “2017 II Notes”). The issue price of the 2017 II

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Notes was 99.730%. Interest is paid semi-annually in arrears on May 15 and November 15. In April 2006, the Consolidated Operating Partnership entered into interest rate protection agreements to fix the interest rate on the 2017 II Notes prior to issuance. The Consolidated Operating Partnership settled the effective portion of the interest rate protection agreements on May 1, 2007 for $4,261, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreements will be amortized over the life of the 2017 II Notes as an adjustment to interest expense. Including the impact of the offering discount and the settlement amount of the interest rate projection agreements, the Consolidated Operating Partnership’s effective interest rate on the 2017 II Notes is 6.37%. The 2017 II Notes contain certain covenants, including limitations on incurrence of debt and debt service coverage.

On May 15, 2007, the Consolidated Operating Partnership paid off and retired its 7.60% 2007 Unsecured Notes in the amount of $150,000.

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	$	8,678
2008		350,111
2009		132,959
2010		15,453
2011		407,269
Thereafter		1,077,632

Total	$	1,992,102

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 had a notional value of $72,900 and were effective from November 28, 2006 through November 28, 2016 (the “April 2006 Agreements”). The April 2006 Agreements fixed the LIBOR rate at 5.537%. On May 1, 2007, the Consolidated Operating Partnership, settled the effective portion of the April 2006 Agreements for $4,261, which is included in other comprehensive income. The settlement amount of the April 2006 Agreements will be amortized over the life of the 2017 II Notes as an adjustment to interest expense.

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 $749 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 a one-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

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 six months ended June 30, 2007, certain employees exercised 19,600 non-qualified employee stock options. Net proceeds to the Company were approximately $613. The Company contributed the net proceeds to the Consolidated Operating Partnership and the Consolidated Operating Partnership issued Units to the Company in the same amount.

During the six months ended June 30, 2007, the Company awarded 442,008 shares of restricted common stock to certain employees and 3,034 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 $21,018 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 period for the shares expected to vest.

Preferred Units

On June 6, 1997, the Company issued 2,000,000 Depositary Shares, each representing 1/100th of a share of the Company’s 85/8%, $.01 par value, Series C Cumulative Preferred Stock (the “Series C Preferred Stock”), at an initial offering price of $25.00 per Depositary Share. The net proceeds of $47,997 received from the Series C Preferred Stock were contributed to the Consolidated Operating Partnership in exchange for 85/8% Series C Cumulative Preferred Units (the “Series C Preferred Units”) and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner preferred unit contribution. On or after June 6, 2007, the Series C Preferred Stock became redeemable for cash at the option of the Company, in whole or in part, at a redemption price equivalent to $25.00 per Depositary Share, or $50,000 in the aggregate, plus dividends accrued and unpaid to the redemption date. The Company redeemed the Series C Preferred Stock on June 7, 2007, at a redemption price of $25.00 per Depositary Share, and paid a prorated second quarter dividend of $0.40729 per Depositary Share, totaling approximately $815. The Series C Preferred Units were redeemed on June 7, 2007 as well. In accordance with EITF D-42, due to the redemption of the Series C Preferred Units, the initial offering costs associated with the issuance of the Series C Preferred Units of $2,017 were reflected as a deduction from net income to arrive at net income available to unitholders in determining earnings per unit for the three and six months ended June 30, 2007.

Distributions

The following table summarizes distributions accrued during the six months ended June 30, 2007:


	Six Months Ended
	June 30, 2007
	Distribution		Total
	per Unit		Distribution

Operating Partnership Units	$	1.42	$	73,721
Series C Preferred Units	$	94.64	$	1,893
Series F Preferred Units	$	3,118.00	$	1,559
Series G Preferred Units	$	3,618.00	$	905
Series J Preferred Units	$	9,062.60	$	5,438
Series K Preferred Units	$	9,062.60	$	1,813

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	Acquisition of Real Estate

During the six months ended June 30, 2007, the Consolidated Operating Partnership acquired 78 industrial properties comprising approximately 5.2 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 $275,584, 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 six months ended June 30, 2007, the Consolidated Operating Partnership sold 85 industrial properties comprising approximately 7.7 million square feet of GLA and several land parcels. Gross proceeds from the sales of the 85 industrial properties and several land parcels were approximately $439,602. The gain on sale of real estate, net of income taxes was approximately $95,360. Eighty-four of the 85 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 84 of the 85 sold industrial properties are included in discontinued operations. The results of operations and gain on sale of real estate, net of income taxes, for one property and several land parcels that do not meet the criteria established by FAS 144, are included in continuing operations.

At June 30, 2007, the Consolidated Operating Partnership had 20 industrial properties comprising approximately 1.2 million square feet of GLA held for sale. In accordance with FAS 144, the results of operations of the 20 industrial properties held for sale at June 30, 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 and six months ended June 30, 2006 reflects the results of operations of 84 industrial properties that were sold during the six months ended June 30, 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 20 industrial properties identified as held for sale at June 30, 2007 and the gain on sale of real estate relating to 54 industrial properties that were sold during the six months ended June 30, 2006.

The following table discloses certain information regarding the industrial properties included in discontinued operations by the Consolidated Operating Partnership for the three and six months ended June 30, 2007 and June 30, 2006:


	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006

Total Revenues	$	4,996		$	14,325		$	13,768		$	28,805
Property Expenses		(1,710	)		(4,566	)		(4,611	)		(9,489	)
Depreciation and Amortization		(1,390	)		(5,069	)		(4,209	)		(11,331	)
Provision for Income Taxes Allocable to Operations		(507	)		(696	)		(1,410	)		(1,061	)
Gain on Sale of Real Estate		59,429			38,823			114,799			92,905
Provision for Income Taxes Allocable to Gain on Sale of Real Estate		(11,070	)		(7,625	)		(21,203	)		(22,535	)

Income from Discontinued Operations	$	49,748		$	35,192		$	97,134		$	77,294

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	Supplemental Information to Statements of Cash Flows

Supplemental disclosure of cash flow information:


	Six Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2006

Interest paid, net of capitalized interest	$	58,945		$	54,253

Capitalized interest	$	3,387		$	3,165

Supplemental schedule of non-cash investing and financing activities:
Distribution payable on units	$	36,854		$	36,038

Distribution payable on preferred units	$	4,856		$	1,232

Exchange of limited partnership units for general partnership units:
Limited partnership units	$	(1,480	)	$	(1,959	)
General partnership units		1,480			1,959

	$	—		$	—

In conjunction with the property and land acquisitions, the following liabilities were assumed:
Accounts payable and accrued expenses	$	(5,040	)	$	(1,082	)

Issuance of Limited Partnership Units	$	—		$	(1,288	)

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

Write-off of fully depreciated assets	$	16,861		$	8,547

In conjunction with certain property sales, the Operating Partnership provided seller financing or assigned a mortgage loan payable:
Notes Receivable	$	42,172		$	11,200

Mortgage Note Payable	$	769		$	—

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			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006

Numerator:
Loss from Continuing Operations	$	(8,591	)	$	(200	)	$	(18,032	)	$	(17,502	)
Gain on Sale of Real Estate, Net of Income Taxes		503			1,476			1,764			2,471
Less: Preferred Distributions		(5,671	)		(5,029	)		(11,606	)		(10,048	)
Less: Redemption of Preferred Units		(2,017	)		—			(2,017	)		(672	)

Loss from Continuing Operations Available to Unitholders — For Basic and Diluted EPU		(15,776	)		(3,753	)		(29,891	)		(25,751	)
Discontinued Operations, Net of Income Taxes		49,748			35,192			97,134			77,294

Net Income Available to Unitholders	$	33,972		$	31,439		$	67,243		$	51,543

Denominator:
Weighted Average Units — Basic and Diluted		50,984,560			50,705,548			50,975,175			50,675,187

Basic and Diluted EPU:
Loss from Continuing Operations Available to Unitholders	$	(0.31	)	$	(0.07	)	$	(0.59	)	$	(0.51	)

Discontinued Operations, Net of Income Taxes	$	0.98		$	0.69		$	1.91		$	1.53

Net Income Available to Unitholders	$	0.67		$	0.62		$	1.32		$	1.02

Unvested restricted stock shares aggregating 432,129 and 176,001 for the three months ended June 30, 2007 and 2006, respectively, and 430,693 and 176,001 for the six months ended June 30, 2007 and 2006, respectively, were antidilutive, and accordingly, were excluded from dilution computations.

Options to purchase common stock of 362,376 and 455,089 were outstanding as of June 30, 2007 and 2006, respectively. All of the options outstanding at June 30, 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 and six months June 30, 2007 and 2006 as the dilutive effect of stock options and restricted stock was excluded because its inclusion would have been anti-dilutive to the loss from continuing operations available to unitholders. If the Consolidated Operating Partnership had income from continuing operations available to unitholders, the dilutive stock options and restricted stock that would be added to the denominator of weighted average units-basic would have been 192,600 and 156,132, respectively for the three months ended June 30, 2007 and 2006 and 219,349 and 177,803, respectively for the six months ended June 30, 2007 and 2006.


11.	Stock Based Compensation

The Consolidated Operating Partnership recognized $3,648 and $2,480 for the three months ended June 30, 2007 and 2006, respectively, and $7,254 and $4,625 for the six months ended June 30, 2007 and 2006, respectively,

FIRST INDUSTRIAL, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in compensation expense related to restricted stock awards, of which $556 and $354 was capitalized for the three months ended June 30, 2007 and 2006, respectively, and $1,112 and $614 was capitalized for the six months ended June 30, 2007 and 2006, respectively, in connection with development activities. At June 30, 2007, the Consolidated Operating Partnership has $30,698 in unrecognized compensation related to unvested restricted stock awards. The weighted average period that the unrecognized compensation is expected to be incurred is 1.5 years. The Consolidated Operating Partnership has not awarded options to employees or directors of the Consolidated Operating Partnership during the six months ended June 30, 2007 and June 30, 2006.

Stock option transactions for the six months ended June 30, 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		(19,600	)	$	31.27	$30.38-$33.13	$	230

Outstanding at June 30, 2007		362,376		$	31.67	$25.13-$33.15	$	4,853

The following table summarizes currently outstanding and exercisable options as of June 30, 2007:


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

$25.13-$30.53		103,676		3.82	$	29.82
$31.05-$33.15		258,700		2.94	$	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 2.6 million square feet of GLA. The estimated total construction costs are approximately $122,866. Of this amount, approximately $94,429 remains to be funded. There can be no assurance the actual completion cost will not exceed the estimated completion cost stated above.

At June 30, 2007, the Consolidated Operating Partnership had 21 letters of credit outstanding in the aggregate amount of $7,586. These letters of credit expire between August 2007 and January 2010.


13.	Related Party Transactions

At June 30, 2007, the Consolidated Operating Partnership has a payable balance of $8,902 to 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 July 1, 2007 to July 27, 2007 the Consolidated Operating Partnership acquired four industrial properties and several land parcels for a purchase price of approximately $11,889, excluding costs incurred in conjunction with the acquisition of these industrial properties and several land parcels. No industrial properties have been sold during this period

On July 16, 2007, the Operating Partnership paid a second quarter 2007 distribution of $0.71 per Unit, totaling approximately $36,854.


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: national, international, regional, and local 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, and risks related to doing business internationally (including foreign currency exchange risks). 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 87.5% ownership interest at June 30, 2007. The limited partners of the Operating Partnership own, in the aggregate, approximately a 12.5% interest in the Operating Partnership at June 30, 2007. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $275.0 million at June 30, 2007. The Company is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code (the “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 June 30, 2007, the Consolidated Operating Partnership owned 832 industrial properties (inclusive of developments in process) containing an aggregate of approximately 67.7 million square feet of gross leasable area (“GLA”). On a combined basis, as of June 30, 2007, the Other Real Estate Partnerships owned 103 industrial properties containing an aggregate of approximately 10.1 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 Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006

The Consolidated Operating Partnership’s net income available to unitholders was $67.2 million and $51.5 million for the six months ended June 30, 2007 and 2006, respectively. Basic and diluted net income available to unitholders were $1.32 per unit for the six months ended June 30, 2007 and $1.02 per unit for the six months ended June 30, 2006.

The tables below summarize the Consolidated Operating Partnership’s revenues, property expenses and depreciation and other amortization by various categories for the six months ended June 30, 2007 and June 30, 2006. Same store properties are properties owned prior to January 1, 2006 and held as an operating property through June 30, 2007 and developments and redevelopments that were stabilized (generally defined as 90% occupied) prior to January 1, 2006 or were substantially completed for 12 months prior to January 1, 2006. Acquired properties are properties that were acquired subsequent to December 31, 2005 and held as an operating property through June 30, 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) stabilized 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 March 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 June 30, 2007 and 2006, the occupancy rates of the Consolidated Operating Partnership’s same store properties were 92.9% and 89.0%, respectively.


	Six Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

REVENUES
Same Store Properties	$	140,793		$	132,311		$	8,482			6.4	%
Acquired Properties		25,030			3,880			21,150			545.1	%
Sold Properties		11,192			27,044			(15,852	)		(58.6	)%
(Re)Developments and Land, Not Included Above		2,500			1,722			778			45.2	%
Other		20,989			15,054			5,935			39.4	%

	$	200,504		$	180,011		$	20,493			11.4	%
Discontinued Operations		(13,768	)		(28,805	)		15,037			(52.2	)%

Subtotal Revenues	$	186,736		$	151,206		$	35,530			23.5	%

Revenues from Build to Suit Developments for Sale		6,440			733			5,707			778.6	%
Contractor Revenues		9,408			—			9,408			100.0	%

Total Revenues	$	202,584		$	151,939		$	50,645			33.3	%

Revenues from same store properties increased by $8.5 million due primarily to an increase in same store property occupancy rates. Revenues from acquired properties increased $21.2 million due to the 157 industrial properties acquired subsequent to December 31, 2005 totaling approximately 14.9 million square feet of GLA. Revenues from sold properties decreased $15.9 million due to the 194 industrial properties sold subsequent to December 31, 2005 totaling approximately 23.8 million square feet of GLA. Revenues from (re)developments and land increased $0.8 million due to an increase in occupancy. Other revenues increased by approximately $5.9 million due primarily to an increase in joint venture fees and 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 $5.7 million due to increased development activity. Contractor revenues for the six months ended June 30, 2007 represent revenues earned on construction projects for which the TRS acted as general contractor.


	Six Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

PROPERTY EXPENSES
Same Store Properties	$	44,916		$	43,262		$	1,654			3.8	%
Acquired Properties		5,697			981			4,716			480.7	%
Sold Properties		3,522			8,200			(4,678	)		(57.0	)%
(Re) Developments and Land, Not Included Above		1,642			1,916			(274	)		(14.3	)%
Other		8,928			7,569			1,359			18.0	%

	$	64,705		$	61,928		$	2,777			4.5	%
Discontinued Operations		(4,611	)		(9,489	)		4,878			(51.4	)%

Subtotal Property Expenses	$	60,094		$	52,439		$	7,655			14.6	%

Expenses from Build to Suit Development for Sale		6,131			666			5,465			820.6	%
Contractor Expenses		8,959			—			8,959			100.0	%

Total Property Expenses	$	75,184		$	53,105		$	22,079			41.6	%

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 increased by $1.7 million due primarily to an increase in real estate taxes due to a reassessment of values of certain properties of the Consolidated Operating Partnership, as well as an increase in repairs and maintenance. Property expenses from acquired properties increased by $4.7 million due to properties acquired subsequent to December 31, 2005. Property expenses from sold properties decreased by $4.7 million due to properties sold subsequent to December 31, 2005. Property expenses from (re)developments and land remained relatively unchanged. The $1.4 million increase in other expense is primarily attributable to an increase in the bad debt reserve and a loss recorded in connection with roof damage at a property that occurred during the six months ended June 30, 2007. The damage was accounted for as an involuntary conversion which requires the recognition of a loss in the period in which the damage occurred. Insurance reimbursements will be deferred until realizable. Expenses from build to suit development for sale increased $5.5 million due to increased development activity. Contractor expenses for the six months ended June 30, 2007 represent expenses incurred on construction projects for which the TRS acted as general contractor.

General and administrative expense increased by approximately $9.8 million, or 27.6%, due primarily to increases in employee compensation related to compensation for additional employees as well as an increase in incentive compensation.


	Six Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

DEPRECIATION AND OTHER AMORTIZATION
Same Store Properties	$	51,161		$	50,034		$	1,127			2.3	%
Acquired Properties		16,092			3,619			12,473			344.7	%
Sold Properties		2,732			9,363			(6,631	)		(70.8	)%
(Re) Developments and Land, Not Included Above and Other		1,143			5,229			(4,086	)		(78.1	)%
Corporate Furniture, Fixtures and Equipment		962			864			98			11.3	%

	$	72,090		$	69,109		$	2,981			4.3	%
Discontinued Operations		(4,209	)		(11,331	)		7,122			(62.9	)%

Total Depreciation and Other Amortization	$	67,881		$	57,778		$	10,103			17.5	%

Depreciation and other amortization for same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased by $12.5 million due to properties acquired subsequent to December 31, 2005. Depreciation and other amortization from sold properties decreased by $6.6 million due to properties sold subsequent to December 31, 2005. Depreciation and other amortization for (re)developments and land and other decreased by $4.1 million due primarily to accelerated depreciation recognized for the six months ended June 30, 2006 on one property in Columbus, OH which was razed during 2006.

Interest income decreased $0.1 million due primarily to a decrease in the average notes receivable outstanding during the six months ended June 30, 2007, as compared to the six months ended June 30, 2006.

Interest expense increased by approximately $0.3 million primarily due to an increase in the weighted average debt balance outstanding for the six months ended June 30, 2007 ($1,936.9 million), as compared to the six months ended June 30, 2006 ($1,853.4 million), offset by a decrease in the weighted average interest rate for the six months ended June 30, 2007 (6.55%), as compared to the six months ended June 30, 2006 (6.79%).

Amortization of deferred financing costs increased by $0.4 million, or 34.6% due primarily to financing fees incurred associated with the issuance of $200.0 million of senior unsecured debt in September 2006.

In October 2005, the Consolidated 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 Consolidated 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” 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 Consolidated Operating Partnership, through the TRS, settled the interest rate protection agreement for a payment of $0.2 million. Included in Mark-to-Market/Loss on Settlement of Interest Rate Protection Agreement for the six months ended June 30, 2006 is the settlement and mark-to-market of the interest rate production agreement.

During 2007, the Consolidated Operating Partnership incurred a $0.3 million loss from early retirement of debt due to early payoffs of mortgage loans.

Equity in income of Other Real Estate Partnerships decreased by $12.9 million primarily due to a decrease in gain on sale of real estate.

Equity in income of joint ventures increased by $10.0 million primarily due to the Consolidated Operating Partnership’s economic share of the gains and earn outs on property sales from the March 2005 Joint Venture and the September 2005 Joint Venture during the six months ended June 30, 2007.

The income tax provision (included in continuing operations, discontinued operations, and gain of sale) increased by $4.4 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 $1.8 million gain on sale of real estate, net of income taxes, for the six months ended June 30, 2007, resulted from the sale of one industrial property and several land parcels that do not meet the criteria established by FAS 144 for inclusion in discontinued operations. The $2.5 million gain on sale of real estate, net of income taxes, for the six months ended June 30, 2006, 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 six months ended June 30, 2007 and June 30, 2006.


	Six Months			Six Months
	Ended			Ended
	June 30, 2007			June 30, 2006
	($ in 000’s)

Total Revenues	$	13,768		$	28,805
Operating Expenses		(4,611	)		(9,489	)
Depreciation and Amortization		(4,209	)		(11,331	)
Provision for Income Taxes Allocable to Operations		(1,410	)		(1,061	)
Gain on Sale of Real Estate		114,799			92,905
Provision for Income Taxes Allocable to Gain on Sale		(21,203	)		(22,535	)

Income from Discontinued Operations	$	97,134		$	77,294

Income from discontinued operations (net of income taxes) for the six months ended June 30, 2007 reflects the results of operations and gain on sale of real estate, net of income taxes, relating to 84 industrial properties that were sold during the six months ended June 30, 2007 and the results of operations of 20 properties that were identified as held for sale at June 30, 2007.

Income from discontinued operations (net of income taxes) for the six months ended June 30, 2006 reflects the results of operations of the 84 industrial properties that were sold during the six months ended June 30, 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 20 industrial properties identified as held for sale at June 30, 2007 and gain on sale of real estate relating to 54 industrial properties that were sold during the six months ended June 30, 2006.

Comparison of Three Months Ended June 30, 2007 to Three Months Ended June 30, 2006

The Consolidated Operating Partnership’s net income available to unitholders was $34.0 million and $31.4 million for the three months ended June 30, 2007, and June 30, 2006, respectively. Basic and diluted net income available to unitholders were $0.67 per unit for the three months ended June 30, 2007, and $0.62 per unit for the three months ended June 30, 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 June 30, 2007 and June 30, 2006. Same store properties are properties owned prior to January 1, 2006 and held as an operating property through June 30, 2007 and developments and redevelopments that were stabilized (generally defined as 90% occupied) prior to January 1, 2006 or were substantially completed for 12 months prior to January 1, 2006. Acquired properties are properties that were acquired subsequent to December 31, 2005 and held as an operating property through June 30, 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) stabilized 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 March 2005 Joint Venture. Other expenses are derived from the operations of the Consolidated Operating Partnership’s maintenance company and other miscellaneous regional expenses.

At June 30, 2007 and 2006, the occupancy rates of the Consolidated Operating Partnership’s same store properties were 92.9% and 89.0%, respectively.


	Three Months			Three Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

REVENUES
Same Store Properties	$	70,686		$	66,243		$	4,443			6.7	%
Acquired Properties		12,771			2,734			10,037			367.1	%
Sold Properties		3,742			13,309			(9,567	)		(71.9	)%
(Re)Developments and Land, Not Included Above		1,422			899			523			58.2	%
Other		9,634			8,994			640			7.1	%

		98,255			92,179			6,076			6.6	%
Discontinued Operations		(4,996	)		(14,325	)		9,329			(65.1	)%

Subtotal Revenues		93,259			77,854			15,405			19.8	%

Revenues from Build to Suit Development for Sale		3,233			—			3,233			100.0	%
Contractor Revenues		4,368			—			4,368			100.0	%

Total Revenues	$	100,860		$	77,854		$	23,006			29.6	%

Revenues from same store properties increased by $4.4 million due primarily to an increase in same store property occupancy rates. Revenues from acquired properties increased $10.0 million due to the 157 industrial properties acquired subsequent to December 31, 2005 totaling approximately 14.9 million square feet of GLA. Revenues from sold properties decreased $9.6 million due to the 194 industrial properties sold subsequent to December 31, 2005 totaling approximately 23.8 million square feet of GLA. Revenues from (re)developments and land increased $0.5 million due to an increase in occupancy. Other revenues increased by approximately $0.6 million primarily due to an increase in joint venture fees. Revenues from build to suit development for sale increased $3.2 million due to increased development activity. Contractor revenues for the three months ended June 30, 2007 represent revenues earned on construction projects for which the TRS acted as general contractor.


	Three Months			Three Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

PROPERTY EXPENSES
Same Store Properties	$	21,735		$	20,967		$	768			3.7	%
Acquired Properties		3,272			752			2,520			335.1	%
Sold Properties		1,229			4,057			(2,828	)		(69.7	)%
(Re)Developments and Land, Not Included Above		847			731			116			15.9	%
Other		5,308			4,048			1,260			31.1	%

		32,391			30,555			1,836			6.0	%
Discontinued Operations		(1,710	)		(4,566	)		2,856			(62.5	)%

Subtotal Property Expenses		30,681			25,989			4,692			18.1	%

Expenses from Build to Suit Development for Sale		2,930			—			2,930			100.0	%
Contractor Expenses		4,123			—			4,123			100.0	%

Total Property Expenses	$	37,734		$	25,989		$	11,745			45.2	%

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 increased $0.8 million primarily due to an increase in real estate taxes due to a reassessment of values of certain properties of the Consolidated Operating Partnership. Property expenses from acquired properties increased by $2.5 million due to properties acquired subsequent to December 31, 2005. Property expenses from sold properties decreased by $2.8 million due to properties sold subsequent to December 31, 2005. Property expenses from (re)developments and land remained relatively unchanged. The $1.3 million increase in other expense is primarily attributable to an increase in the bad debt reserve and a loss recorded in connection with roof damage at a property that occurred during the three months ended June 30, 2007. The damage was accounted for as an involuntary conversion which requires the recognition of a loss in the period in which the damage occurred. Insurance reimbursements will be deferred until realizable. Expenses from build to suit development for sale increased $2.9 million due to increased development activity. Contractor expenses for the three months ended June 30, 2007 represent expenses incurred on construction projects for which the TRS acted as general contractor.

General and administrative expense increased by approximately $4.2 million, or 23.5%, due primarily to increases in employee compensation related to compensation for additional employees as well as an increase in incentive compensation.


	Three Months			Three Months
	Ended			Ended
	June 30, 2007			June 30, 2006			$ Change			% Change
	($ in 000’s)

DEPRECIATION AND OTHER AMORTIZATION
Same Store Properties	$	26,019		$	25,156		$	863			3.4	%
Acquired Properties		8,459			2,383			6,076			255.0	%
Sold Properties		694			4,139			(3,445	)		(83.2	)%
(Re)Developments and Land, Not Included Above and Other		591			3,049			(2,458	)		(80.6	)%
Corporate Furniture, Fixtures and Equipment		491			448			43			9.6	%

		36,254			35,175			1,079			3.1	%
Discontinued Operations		(1,390	)		(5,069	)		3,679			(72.6	)%

Total Depreciation and Other Amortization	$	34,864		$	30,106		$	4,758			15.8	%

Depreciation and other amortization for same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased by $6.1 million due to properties acquired subsequent to December 31, 2005. Depreciation and other amortization from sold properties decreased by $3.4 million due to properties sold subsequent to December 31, 2005. Depreciation and other amortization for (re)developments and land and other decreased by $2.5 million due primarily to accelerated depreciation recognized for the three months ended June 30, 2006 on one property in Columbus, OH which was razed during 2006.

Interest income remained relatively unchanged.

Interest expense decreased by approximately $0.1 million primarily due to a decrease in the weighted average interest rate for the three months ended June 30, 2007 (6.49%) as compared to the three months ended June 30, 2006 (6.79%), partially offset by an increase in the weighted average debt balance outstanding for the three months ended June 30, 2007 ($1,958.5 million), as compared to the three months ended June 30, 2006 ($1,863.2 million).

Amortization of deferred financing costs increased by approximately $0.2 million, or 36.7%, due primarily to financing fees incurred associated with the issuance of $200.0 million of senior unsecured debt issued in September 2006.

During the quarter ended June 30, 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 decreased by $13.6 million primarily due to a decrease in gain on sale of real estate.

Equity in income of joint ventures increased by approximately $4.3 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 June 30, 2007.

The income tax provision (included in continuing operations, discontinued operations and gain of sale) increased by $3.7 million, in the aggregate, due primarily to an increase in joint venture fees, equity in income of joint ventures and gains from the sale of real estate, partially offset by an increase in general and administrative expense within the TRS.

The $0.5 million gain on sale of real estate, net of income taxes, for the three months ended June 30, 2007, resulted from the sale of one industrial property and several land parcels that do not meet the criteria established by FAS 144 for inclusion in discontinued operations. The $1.5 million gain on sale of real estate, net of income taxes, for the three months ended June 30, 2006, 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 June 30, 2007 and June 30, 2006:


	Three Months			Three Months
	Ended			Ended
	June 30, 2007			June 30, 2006
	($ in 000’s)

Total Revenues	$	4,996		$	14,325
Property Expenses		(1,710	)		(4,566	)
Depreciation and Amortization		(1,390	)		(5,069	)
Provision for Income Taxes Allocable to Operations		(507	)		(696	)
Gain on Sale of Real Estate		59,429			38,823
Provision for Income Taxes Allocable to Gain on Sale		(11,070	)		(7,625	)

Income from Discontinued Operations	$	49,748		$	35,192

Income from discontinued operations (net of income taxes), for the three months ended June 30, 2007 reflects the results of operations and gain on sale of real estate, relating to 49 industrial properties that were sold during the three months ended June 30, 2007 and the results of operations of 20 properties that were identified as held for sale at June 30, 2007.

Income from discontinued operations (net of income taxes) for the three months ended June 30, 2006 reflects the results of operations of the 49 industrial properties that were sold during the three months ended June 30, 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 20 industrial properties identified as held for sale at June 30, 2007 and gain on sale of real estate relating to 30 industrial properties that were sold during the three months ended June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2007, the Consolidated Operating Partnership’s cash and restricted cash was approximately $4.1 and $44.8 million, respectively. Restricted cash is comprised of cash held in escrow in connection with mortgage debt requirements and gross proceeds from the sales of certain industrial properties. These sales proceeds will be disbursed as the Company exchanges industrial properties under Section 1031 of the Internal Revenue Code.

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 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. 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. The Consolidated Operating Partnership also may finance the development or acquisition of additional properties through borrowings under the Consolidated Operating Partnership’s $500.0 million unsecured revolving credit facility (“Unsecured Line of Credit”). At June 30, 2007, borrowings under the Unsecured Line of Credit bore interest at a weighted average interest rate of 5.86%. The Unsecured Line of Credit bears interest at a floating rate of LIBOR plus .625%, or the Prime Rate, at the Consolidated Operating Partnership’s election. As of July 27, 2007 the Consolidated Operating Partnership, through the Operating Partnership, had approximately $78.5 million available for additional borrowings under the Unsecured Line of Credit.

Six Months Ended June 30, 2007

Net cash provided by operating activities of approximately $38.1 million for the six months ended June 30, 2007 was comprised primarily of net income of approximately $80.9 million, the net change in operating assets and liabilities of approximately $1.4 million and net distributions from the Consolidating Operating Partnership’s industrial real estate joint ventures of $0.1 million, offset by adjustments for non-cash items of approximately $44.3 million. The adjustments for the non-cash items of approximately $44.3 million are primarily comprised of the gain on sale of real estate of approximately $117.7 million and the effect of straight-line rental income of approximately $5.0 million, offset by depreciation and amortization of approximately $78.2 million and loss on early retirement of debt of approximately $0.2 million.

Net cash used in investing activities of approximately $11.3 million for the six months ended June 30, 2007 was comprised primarily 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, an increase in restricted cash that is primarily held by an intermediary for Section 1031 exchange purposes, contributions to, and investments in, the Consolidating Operating Partnership’s industrial real estate joint ventures and the funding of notes receivable, partially offset by the net proceeds from the sale of real estate, distributions from the Other Real Estate Partnerships, the repayment of notes receivable and the distributions from the Consolidated Operating Partnership’s industrial real estate joint ventures.

During the six months ended June 30, 2007, the Consolidated Operating Partnership acquired 78 industrial properties comprising approximately 5.2 million square feet of GLA and several land parcels. The purchase price for these acquisitions totaled approximately $275.6 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 $15.8 million and received total distributions of approximately $24.8 million from the Operating Partnership’s industrial real estate joint ventures. As of June 30, 2007, the Operating Partnership’s industrial real estate joint ventures owned 153 industrial properties comprising approximately 20.5 million square feet of GLA and several land parcels.

Net cash used in financing activities of approximately $37.8 million for the six months ended June 30, 2007 was derived primarily by repayments of senior unsecured debt, general partnership and limited partnership units (“Unit”) and preferred general partnership unit distributions, redemption of preferred units, repayments on mortgage loans payable, other costs of senior unsecured debt, the repurchase of restricted units from employees of the Consolidated Operating Partnership for withholding taxes on the vesting of restricted units and debt issue costs and prepayment penalty partially offset by the net proceeds from the issuance of senior unsecured debt, net borrowings under the Consolidating Operating Partnership’s Unsecured Line of Credit, net proceeds from the exercise of stock options and a cash book overdraft.

During the six months ended June 30, 2007, the Company awarded 442,008 shares of restricted common stock to certain employees and 3,034 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 six months ended June 30, 2007, certain employees of the Company exercised 19,600 non-qualified employee stock options. Net proceeds to the Company were approximately $0.6 million. The Consolidated Operating Partnership issued Units to the Company in the same amount.

On June 7, 2007, the Company redeemed the Series C Preferred Stock for $25.00 per Depositary Share, or $50.0 million in the aggregate, and paid a prorated second quarter dividend of $0.40729 per Depositary Share, totaling approximately $0.8 million. The Operating Partnership also redeemed the Series C Preferred Units.

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.

This analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by the Consolidated Operating Partnership at June 30, 2007 that are sensitive to changes in the interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, the 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 June 30, 2007, approximately $1,632.7 million (approximately 82.5% of total debt at June 30, 2007) of the Company’s debt was fixed rate debt and approximately $347.0 million (approximately 17.5% of total debt at June 30, 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.

Based upon the amount of variable rate debt outstanding at June 30, 2007, a 10% increase or decrease in the interest rate on the Consolidated Operating Partnership’s variable rate debt would decrease or increase, respectively, future net income and cash flows by approximately $2.1 million per year.

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 June 30, 2007, the Consolidated Operating Partnership had no outstanding derivative instruments.

Recent Accounting Pronouncements

Refer to Footnote 2 in Part I, Item 1., of the June 30, 2007 Financial Statements.

Subsequent Events

From July 1, 2007 to July 27, 2007, the Consolidated Operating Partnership acquired four industrial properties and several land parcels for a purchase price of approximately $11.9 million, excluding costs incurred in conjunction with the acquisition of these industrial properties and several land parcels. No industrial properties have been sold during this period.

On July 16, 2007, the Operating Partnership paid a second quarter 2007 distribution of $0.71 per Unit, totaling approximately $36.9 million.


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 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


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

	4	.1***	Supplemental Indenture No. 11 dated as of May 7, 2007 between the Operating Partnership and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of theForm 8-K of the Company filed May 7, 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

***		Previously filed

The Company maintains a website at www.firstindustrial.com. Information on this website shall not constitute part of thisForm 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: August 7, 2007

EXHIBIT INDEX


Exhibit
Number			Description

	4	.1***	Supplemental Indenture No. 11 dated as of May 7, 2007 between the Operating Partnership and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of theForm 8-K of the Company filed May 7, 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

***		Previously filed

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

First Industrial 10-Q2007 Q2 Quarterly report

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