1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
--------------------------
Commission File Number 333-21873
--------------------------
FIRST INDUSTRIAL, L.P.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3924586
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices)
(312) 344-4300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /
2
FIRST INDUSTRIAL, L.P.
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2000
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999.............................................. 2
Consolidated Statements of Operations for the Six Months Ended
June 30, 2000 and June 30, 1999................................ 3
Consolidated Statements of Operations for the Three Months
Ended June 30, 2000 and June 30, 1999.......................... 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000 and June 30, 1999................................ 5
Notes to Consolidated Financial Statements .................... 6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 14-20
Item 3. Quantitative and Qualitative Disclosures About
Market Risk................................................ 21
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 21
Item 2. Changes in Securities ..................................... 21
Item 3. Defaults Upon Senior Securities............................ 21
Item 4. Submission of Matters to a Vote of Security Holders ....... 21
Item 5. Other Information ......................................... 21
Item 6. Exhibits and Report on Form 8-K............................ 21
SIGNATURE .......................................................... 22
EXHIBIT INDEX....................................................... 23
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
June 30, December 31,
2000 1999
----------- ------------
ASSETS
Assets:
Investment in Real Estate:
Land .............................................................. $ 285,625 $ 311,149
Buildings and Improvements ........................................ 1,492,986 1,776,217
Furniture, Fixtures and Equipment ................................. 1,353 1,353
Construction in Progress .......................................... 22,133 42,715
Less: Accumulated Depreciation .................................... (169,002) (179,293)
----------- -----------
Net Investment in Real Estate ............................. 1,633,095 1,952,141
Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $33,442............................................ 354,774 --
Investments in and Advances to Other Real Estate Partnerships ........ 402,143 380,774
Cash and Cash Equivalents ............................................ 2,547 22
Restricted Cash ...................................................... 11,887 927
Tenant Accounts Receivable, Net ...................................... 10,060 8,986
Investments in Joint Ventures ........................................ 6,078 6,408
Deferred Rent Receivable ............................................. 13,751 13,777
Deferred Financing Costs, Net......................................... 11,318 9,905
Prepaid Expenses and Other Assets, Net ............................... 72,471 71,047
----------- -----------
Total Assets .............................................. $ 2,518,124 $ 2,443,987
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable, Net .......................................... $ 62,166 $ 63,059
Senior Unsecured Debt, Net ........................................... 948,735 948,688
Acquisition Facility Payable ......................................... 161,800 94,000
Accounts Payable and Accrued Expenses ................................ 77,762 75,397
Rents Received in Advance and Security Deposits ...................... 19,943 19,329
Distributions Payable ................................................ 28,601 28,164
----------- -----------
Total Liabilities ......................................... 1,299,007 1,228,637
----------- -----------
Commitments and Contingencies ........................................... -- --
Partners' Capital:
General Partner Preferred Units ...................................... 336,990 336,990
General Partner Units ................................................ 708,868 694,899
Unamortized Value of General Partnership Restricted Units ............ (11,787) (4,087)
Limited Partners' Units .............................................. 185,046 187,548
----------- -----------
Total Partners' Capital ................................... 1,219,117 1,215,350
----------- -----------
Total Liabilities and Partners' Capital ................... $ 2,518,124 $ 2,443,987
=========== ===========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA)
(UNAUDITED)
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
Revenues:
Rental Income ........................................................ $ 124,668 $ 126,806
Tenant Recoveries and Other Income ................................... 33,421 33,241
--------- ---------
Total Revenues ............................................. 158,089 160,047
--------- ---------
Expenses:
Real Estate Taxes .................................................... 25,603 25,621
Repairs and Maintenance .............................................. 7,863 8,789
Property Management .................................................. 6,154 4,706
Utilities ............................................................ 3,808 3,945
Insurance ............................................................ 549 360
Other ................................................................ 2,410 1,793
General and Administrative ........................................... 7,426 6,456
Interest Expense ..................................................... 38,559 38,775
Amortization of Deferred Financing Costs ............................. 865 570
Depreciation and Other Amortization .................................. 29,638 29,163
--------- ---------
Total Expenses ............................................. 122,875 120,178
--------- ---------
Income from Operations Before Equity in Income of Other Real
Estate Partnerships and Equity in Income of Joint Ventures .......... 35,214 39,869
Equity in Income of Other Real Estate Partnerships ...................... 18,131 12,929
Equity in Income of Joint Ventures ...................................... 119 246
--------- ---------
Income from Operations .................................................. 53,464 53,044
Gain on Sales of Real Estate ............................................ 12,145 8,395
--------- ---------
Net Income .............................................................. 65,609 61,439
Less: Preferred Unit Distributions ..................................... (14,462) (14,462)
--------- ---------
Net Income Available to Unitholders ..................................... $ 51,147 $ 46,977
========= =========
Net Income Available to Unitholders per Weighted Average Unit Outstanding:
Basic ........................................................ $ 1.12 $ 1.04
========= =========
Diluted ...................................................... $ 1.11 $ 1.04
========= =========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA)
(UNAUDITED)
Three Months Three Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
Revenues:
Rental Income ........................................................ $ 62,281 $ 62,555
Tenant Recoveries and Other Income ................................... 16,041 16,534
-------- --------
Total Revenues ............................................. 78,322 79,089
-------- --------
Expenses:
Real Estate Taxes .................................................... 12,256 12,573
Repairs and Maintenance .............................................. 3,882 3,720
Property Management .................................................. 3,329 2,326
Utilities ............................................................ 1,802 1,749
Insurance ............................................................ 398 167
Other ................................................................ 1,208 898
General and Administrative ............................................ 3,872 3,361
Interest Expense ..................................................... 19,533 19,457
Amortization of Deferred Financing Costs ............................. 453 322
Depreciation and Other Amortization .................................. 14,754 14,571
-------- --------
Total Expenses ............................................. 61,487 59,144
-------- --------
Income from Operations Before Equity in Income of Other Real
Estate Partnerships and Equity in Income of Joint Ventures .......... 16,835 19,945
Equity in Income of Other Real Estate Partnerships ...................... 11,323 6,521
Equity in Income of Joint Ventures ...................................... 88 120
-------- --------
Income from Operations .................................................. 28,246 26,586
Gain on Sales of Real Estate ............................................ 6,257 6,850
-------- --------
Net Income .............................................................. 34,503 33,436
Less: Preferred Unit Distributions ..................................... (7,231) (7,231)
-------- --------
Net Income Available to Unitholders ..................................... $ 27,272 $ 26,205
======== ========
Net Income Available to Unitholders per Weighted Average Unit Outstanding:
Basic ........................................................ $ .59 $ .58
======== ========
Diluted ...................................................... $ .59 $ .58
======== ========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ........................................................ $ 65,609 $ 61,439
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation ..................................................... 26,655 26,574
Amortization of Deferred Financing Costs ......................... 865 570
Other Amortization ............................................... 4,362 2,744
Provision for Bad Debts .......................................... 50 --
Equity in Income of Joint Ventures ............................... (119) (246)
Distributions from Joint Ventures ................................ 119 246
Gain on Sales of Properties ...................................... (12,145) (8,395)
Equity in Income of Other Real Estate Partnerships ............... (18,131) (12,929)
Distributions from Investment in Other Real Estate Partnerships .. 18,131 12,929
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net .............................. (18,620) (5,592)
Increase in Deferred Rent Receivable ............................. (519) (2,288)
Increase (Decrease) in Accounts Payable and Accrued Expenses and
Rents Received in Advance and Security Deposits ............. 2,762 (5,188)
--------- ---------
Net Cash Provided by Operating Activities ................... 69,019 69,864
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate .......... (150,545) (67,701)
Net Proceeds from Sales of Investment in Real Estate ............. 103,013 76,567
Investments in and Advances to Other Real Estate
Partnerships ................................................... (43,799) (39,507)
Distributions from Other Real Estate Partnerships ................ 22,430 22,733
Contributions to and Investments in Joint Venture ................ (37) (778)
Distributions from Joint Venture ................................. 367 119
Repayment of Mortgage Loans Receivable ........................... 12,813 199
Increase in Restricted Cash ...................................... (10,960) (27,917)
--------- ---------
Net Cash Used in Investing Activities ....................... (66,718) (36,285)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Unit Contributions ................................................ 6,667 59
Unit Distributions ................................................ (56,626) (54,227)
Preferred Unit Distributions ...................................... (14,462) (14,462)
Repayments on Mortgage Loans Payable .............................. (875) (829)
Proceeds from Acquisition Facilities Payable ...................... 111,000 56,600
Repayments on Acquisition Facilities Payable ...................... (43,200) (33,300)
Debt Issuance Costs ............................................... (2,280) (651)
--------- ---------
Net Cash Provided by (Used in) Financing Activities .......... 224 (46,810)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents .............. 2,525 (13,231)
Cash and Cash Equivalents, Beginning of Period .................... 22 13,946
--------- ---------
Cash and Cash Equivalents, End of Period .......................... $ 2,547 $ 715
========= =========
The accompanying notes are an integral part of the financial statements.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
1. ORGANIZATION AND FORMATION OF COMPANY
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 of the Operating Partnership is First Industrial Realty Trust,
Inc. (the "Company") with an approximate 84.3% ownership interest at June 30,
2000. The Company also owns a preferred general partnership interest in the
Operating Partnership with an aggregate liquidation priority of $350,000. 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 limited partners of the Operating Partnership own
approximately a 15.7% aggregate ownership interest at June 30, 2000.
The Operating Partnership is the sole member of several limited liability
companies (the "L.L.C.s"), owns a 95% economic interest in FR Development
Services, Inc. as well as a limited partnership interest (subject in one case,
as described below, to a preferred limited partnership interest) in each of
eight limited partnerships (together, the "Other Real Estate Partnerships"). The
Operating Partnership, through separate wholly-owned limited liability companies
in which it is the sole member, also owns 10% equity interests in and provides
asset and property management services to, two joint ventures which invest in
industrial properties (the "September 1998 Joint Venture" and the "September
1999 Joint Venture").
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. First Industrial Securities Corporation, the general
partner of one of the Other Real Estate Partnerships (First Industrial
Securities, L.P.), also owns a preferred limited partnership interest in First
Industrial Securities L.P. which entitles it to receive a fixed quarterly
distribution, and results in it being allocated income in the same amount, equal
to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value,
Series A Cumulative Preferred Stock.
The consolidated financial statements of the Operating Partnership report
the L.L.C.s and FR Development Services, Inc. (hereinafter defined as the
"Consolidated Operating Partnership") on a consolidated basis. The Other Real
Estate Partnerships, the September 1998 Joint Venture and the September 1999
Joint Venture are accounted for under the equity method of accounting. The
minority ownership interest in FR Development Services, Inc. is not reflected in
the consolidated financial statements due to its immateriality. As of June 30,
2000, the Consolidated Operating Partnership owned 876 in-service properties
containing an aggregate of approximately 56.4 million square feet of gross
leasable area ("GLA"). On a combined basis, as of June 30, 2000, the Other Real
Estate Partnerships owned 99 in-service properties containing an aggregate of
approximately 11.9 million square feet of GLA.
Profits, losses and distributions of the Operating Partnership, the
L.L.C.s and the Other Real Estate Partnerships are allocated to the general
partner and the limited partners, or the members, as applicable, in accordance
with the provisions contained within the partnership agreements or ownership
agreements, as applicable, of the Operating Partnership, the L.L.C.s and the
Other Real Estate Partnerships.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
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 Operating Partnership's 1999 Form 10-K and
should be read in conjunction with such financial statements and related notes.
The following notes to these interim financial statements highlight significant
changes to the notes included in the December 31, 1999 audited financial
statements included in the Operating Partnership's 1999 Form 10-K and present
interim disclosures as required by the Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the 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, 2000 and December 31, 1999, and the reported
amounts of revenues and expenses for each of the six months and three months
ended June 30, 2000 and 1999. Actual results could differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary for a fair statement of the financial position of the
Consolidated Operating Partnership as of June 30, 2000 and the results of its
operations and its cash flows for each of the six months and three months ended
June 30, 2000 and 1999.
Tenant Accounts Receivable, Net:
The Consolidated Operating Partnership provides an allowance for doubtful
accounts against the portion of tenant accounts receivable which is estimated to
be uncollectible. Tenant accounts receivable in the consolidated balance sheets
are shown net of an allowance for doubtful accounts of $1,707 and $1,657 as of
June 30, 2000 and December 31, 1999, respectively.
Reclassification:
Certain 1999 items have been reclassified to conform to the 2000 presentation.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
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 and advances
to the entities referred to in Note 1 to these financial statements.
Summarized 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,
2000 1999
--------- ------------
ASSETS
Assets:
Investment in Real Estate, Net ................................. $ 432,555 $ 433,970
Other Assets, Net .............................................. 53,528 38,491
--------- ---------
Total Assets ........................................... $ 486,083 $ 472,461
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable ........................................ $ 41,617 $ 41,891
Other Liabilities .............................................. 36,221 35,620
--------- ---------
Total Liabilities ..................................... 77,838 77,511
--------- ---------
Partners' Capital .............................................. 408,245 394,950
--------- ---------
Total Liabilities and Partners' Capital ............... $ 486,083 $ 472,461
========= =========
Condensed Combined Statements of Operations:
Six Months Ended
-----------------------
June 30, June 30,
2000 1999
--------- ----------
Total Revenues ......................................................... $ 31,284 $ 29,325
Property Expenses ...................................................... (7,639) (7,481)
General and Administrative ............................................. (112) --
Interest Expense ....................................................... (1,517) (1,527)
Amortization of Deferred Financing Costs ............................... (34) (34)
Depreciation and Other Amortization .................................... (5,524) (5,210)
Gain (Loss) on Sales of Real Estate .................................... 3,786 (53)
--------- ---------
Net Income ............................................................. $ 20,244 $ 15,020
========= =========
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
4. INVESTMENTS IN JOINT VENTURES
During the six months ended June 30, 2000, the Consolidated Operating
Partnership, through wholly-owned limited liability companies in which the
Operating Partnership is the sole member, received, in the aggregate,
approximately $1,412 in asset management and property management fees from the
September 1998 Joint Venture and the September 1999 Joint Venture. The Operating
Partnership, through a wholly-owned limited liability company in which it is the
sole member, received distributions of approximately $486 from the September
1998 Joint Venture. As of June 30, 2000, the September 1998 Joint Venture owned
146 industrial properties comprising approximately 7.5 million square feet of
GLA and the September 1999 Joint Venture owned 39 industrial properties
comprising approximately 1.2 million square feet of GLA.
5. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE
Acquisition Facilities:
In June 2000, the Operating Partnership amended and restated the 1997
Unsecured Acquisition Facility and entered into a $300,000 unsecured revolving
credit facility (the "2000 Unsecured Acquisition Facility") which initially
bears interest at LIBOR plus .80% or the Prime Rate at the Operating
Partnership's election and provides for interest only payments until maturity.
Under the 2000 Unsecured Acquisition Facility, the Operating Partnership has the
right, subject to certain conditions, to increase the aggregate commitment under
the 2000 Unsecured Acquisition Facility up to $400,000. The Operating
Partnership may borrow under the 2000 Unsecured Acquisition Facility to finance
the acquisition and development of additional properties and for other corporate
purposes, including to obtain additional working capital. The 2000 Unsecured
Acquisition Facility contains certain financial covenants relating to debt
service coverage, market value net worth, dividend payout ratio and total funded
indebtedness. The 2000 Unsecured Acquisition Facility matures on June 30, 2003.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
5. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION FACILITY
PAYABLE, CONTINUED
The following table discloses certain information regarding the
Consolidated Operating Partnership's mortgage loans, senior unsecured debt and
acquisition facility payable:
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT INTEREST RATE AT
------------------------------ --------------------------- ----------------------
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, MATURITY
2000 1999 2000 1999 2000 DATE
--------- ------------ ---------- ------------ -------- ----------
MORTGAGE LOANS PAYABLE, NET
CIGNA Loan ....................... $ 34,300 $ 34,636 $ 214 $ 216 7.500% 4/01/03
Assumed Loans .................... 8,173 8,343 -- -- 9.250% 1/01/13
LB Mortgage Loan II ............. 705 705 -- -- 8.000% (1)
Acquisition Mortgage Loan I ...... 3,446 3,591 -- -- 8.500% 8/01/08
Acquisition Mortgage Loan II ..... 7,533 7,630 -- -- 7.750% 4/01/06
Acquisition Mortgage Loan III .... 3,284 3,350 -- -- 8.875% 6/01/03
Acquisition Mortgage Loan IV ..... 2,392 2,423 -- -- 8.950% 10/01/06
Acquisition Mortgage Loan VI ..... 974 (2) 991 (2) -- -- 8.875% 11/01/06
Acquisition Mortgage Loan VII .... 1,359 (2) 1,390 (2) -- -- 9.750% 3/15/02
--------- --------- --------- ---------
Total ............................ $ 62,166 $ 63,059 $ 214 $ 216
========= ========= ========= =========
SENIOR UNSECURED DEBT, NET
2005 Notes ....................... $ 50,000 $ 50,000 $ 383 $ 383 6.900% 11/21/05
2006 Notes ....................... 150,000 150,000 875 875 7.000% 12/01/06
2007 Notes ....................... 149,964 (3) 149,961 (3) 1,457 1,457 7.600% 5/15/07
2011 Notes ....................... 99,494 (3) 99,470 (3) 942 942 7.375% 5/15/11 (4)
2017 Notes ....................... 99,833 (3) 99,828 (3) 625 625 7.500% 12/01/17
2027 Notes ....................... 99,869 (3) 99,867 (3) 914 914 7.150% 5/15/27 (5)
2028 Notes ....................... 199,779 (3) 199,776 (3) 7,009 7,009 7.600% 7/15/28
2011 Drs ......................... 99,796 (3) 99,786 (3) 1,553 1,553 6.500% (7) 4/05/11 (6)
Total ............................ $ 948,735 $ 948,688 $ 13,758 $ 13,758
========= ========= ========= =========
ACQUISITION FACILITY PAYABLE
1997 Unsecured Acquisition
Facility ......................... $ -- $ 94,000 $ -- $ 663 (8) (8)
========= ========= ========= =========
2000 Unsecured Acquisition
Facility ...................... $ 161,800 $ -- $ 34 $ -- 7.5400% 6/30/03
========= ========= ========= =========
(1) The maturity date of the LB Mortgage Loan II is based on a contingent event
relating to the environmental status of the property collateralizing the
loan.
(2) At June 30, 2000, the Acquisition Mortgage Loan VI and the Acquisition
Mortgage Loan VII are net of unamortized premiums of $53 and $49,
respectively. At December 31, 1999, the Acquisition Mortgage Loan VI and
the Acquisition Mortgage Loan VII are net of unamortized premiums of $57
and $64, respectively.
(3) At June 30, 2000, the 2007 Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028
Notes and the 2011 Drs. are net of unamortized discounts of $36, $506,
$167, $131, $221 and $204, respectively. At December 31, 1999, the 2007
Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs. are
net of unamortized discounts of $39, $530, $172, $133, $224 and $214,
respectively.
(4) The 2011 Notes are redeemable at the option of the holder thereof, on
May 15, 2004.
(5) The 2027 Notes are redeemable at the option of the holders thereof, on
May 15, 2002.
(6) The 2011 Drs. are required to be redeemed by the Operating Partnership on
April 5, 2001 if the Remarketing Dealer elects not to remarket the
2011 Drs.
(7) The 2011 Drs. bear interest at an annual rate of 6.50% to the Remarketing
Date. If the holder of the Call Option calls the 2011 Drs. and elects to
remarket the 2011 Drs., then after the Remarketing Date, the interest rate
on the 2011 Drs. will be reset at a fixed rate until April 5, 2011 based on
a predetermined formula as disclosed in the related Prospectus Supplement.
(8) The 1997 Unsecured Acquisition Facility was amended and restated in
June 2000.
The following is a schedule of the stated maturities and scheduled
principal payments of the mortgage loans, senior unsecured debt and acquisition
facility payable for each of the next five years ending December 31, and
thereafter:
Amount
-----------
Remainder of 2000 $ 912
2001 1,940
2002 3,325
2003 198,332
2004 1,319
Thereafter 967,331
-----------
Total $ 1,173,159
===========
The maturity date of the LB Mortgage Loan II is based on a contingent
event. As a result, this loan is not included in the preceding table.
10
12
FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
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. The preferred general partnership units
resulted from preferred capital contributions from the Company. The Operating
Partnership will be required to make all required distributions on the preferred
general partnership units prior to any distribution of cash or assets to the
holders of the general and limited partnership units except for distributions
required to enable the Company to maintain its qualification as a REIT.
Unit Contributions:
During the six months ended June 30, 2000, the Company awarded 355,139
shares of restricted common stock to certain employees and 1,833 shares of
restricted common stock to certain Directors. Other employees of the Company
converted certain in-the-money employee stock options to 14,903 shares of
restricted common stock. The Operating Partnership issued Units to the Company
in the same amount. These shares of restricted common stock had a fair value of
approximately $9,634 on the date of grant. The restricted common stock vests
over periods from one to ten years. Compensation expense will be charged to
earnings over the respective vesting periods.
Distributions:
On January 24, 2000, the Operating Partnership paid a fourth quarter 1999
distribution of $.62 per Unit, totaling approximately $28,164. On April 17, 2000
the Operating Partnership paid a first quarter 2000 distribution of $.62 per
Unit, totaling approximately $28,462.
On March 31, 2000, the Operating Partnership paid a first quarter 2000
distribution of $54.688 per unit on its Series B Cumulative Preferred Units,
$53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on
its Series D Cumulative Preferred Units and $49.375 per unit on its Series E
Cumulative Preferred Units. The preferred unit distributions paid on March 31,
2000 totaled, in the aggregate, approximately $7,231.
On June 30, 2000, the Operating Partnership paid a second quarter 2000
distribution of $54.688 per unit on its Series B Cumulative Preferred Units,
$53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on
its Series D Cumulative Preferred Units and $49.375 per unit on its Series E
Cumulative Preferred Units. The preferred unit distributions paid on June 30,
2000 totaled, in the aggregate, approximately $7,231.
7. ACQUISITION AND DEVELOPMENT OF REAL ESTATE
During the six months ended June 30, 2000, the Consolidated Operating
Partnership acquired 28 industrial properties and several land parcels. The
aggregate purchase price for these acquisitions totaled approximately $90,978,
excluding costs incurred in conjunction with the acquisition of the properties
and the land parcel. The Consolidated Operating Partnership also completed the
development of 11 industrial properties comprising approximately 2.2 million
square feet of GLA at a cost of approximately $71,646.
8. SALES OF REAL ESTATE
During the six months ended June 30, 2000, the Consolidated Operating
Partnership sold 32 industrial properties and several land parcels. Gross
proceeds from these sales were approximately $112,488. The gain on sales of real
estate was approximately $12,145.
11
13
FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
9. REAL ESTATE HELD FOR SALE
The Consolidated Operating Partnership has an active sales program through
which it is continually engaged in identifying and evaluating its current
portfolio for potential sales candidates. At June 30, 2000, the Consolidated
Operating Partnership had 111 properties comprising approximately 9.8 million
square feet of GLA held for sale (of which, 97 properties comprising
approximately 9.0 million square feet of GLA are in the Consolidated Operating
Partnership's exit markets). All of these industrial properties were identified
as held for sale during the three months ended June 30, 2000. There can be no
assurance that such properties held for sale will be sold.
The following table discloses certain information regarding the 111
industrial properties held for sale by the Consolidated Operating Partnership.
SIX MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
--------- --------
Total Revenues $ 29,600 $ 28,478
Operating Expenses (9,254) (9,235)
Depreciation and Amortization (5,299) (4,788)
--------- --------
Net Income $ 15,047 $ 14,455
========= ========
10. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Six Months Ended
---------------------
June 30, June 30,
2000 1999
-------- --------
Interest paid, net of capitalized interest ..................................... $ 39,190 $ 38,610
======== ========
Interest capitalized ........................................................... $ 2,747 $ 2,464
======== ========
Supplemental Schedule of Noncash Investing and
Financing Activities:
Distribution payable on Units ............................................... $ 28,601 $ 27,157
======== ========
Exchange of Limited Partnership Units for General Partnership Units:
Limited Partnership Units ................................................... (2,488) (638)
General Partnership Units ................................................... 2,488 638
-------- --------
$ -- $ --
======== ========
Issuance of Units in exchange for property ..................................... $ 869 $ --
======== ========
In Conjunction with the Property and Land Acquisitions, the Following Assets and
Liabilities Were Assumed:
Purchase of real estate ..................................................... $ 90,978 $ 16,484
Accrued real estate taxes and security deposits ............................ (957) (42)
-------- --------
$ 90,021 $ 16,442
======== ========
In conjunction with certain property sales, the Operating Partnership provided
seller financing on behalf of certain buyers:
Notes receivable ............................................................ $ 5,149 $ --
======== ========
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14
FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
11. EARNINGS PER UNIT ("EPU")
Net income per weighted average Unit - Basic, is based on the weighted
average Units outstanding. Net income per weighted average Unit - Diluted, is
based on the weighted average Units outstanding plus the effect of in-the-money
employee stock options that result in the issuance of general partnership units.
The computation of basic and diluted EPU is presented below:
Six Months Ended Three Months Ended
----------------------------- -----------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Numerator:
Net Income ......................................... $ 65,609 $ 61,439 $ 34,503 $ 33,436
Less: Preferred Distributions ...................... (14,462) (14,462) (7,231) (7,231)
-------- -------- -------- --------
Net Income Available to Unitholders
- For Basic and Diluted EPU ...................... $ 51,147 $ 46,977 $ 27,272 $ 26,205
======== ======== ======== ========
Denominator:
Weighted Average Units - Basic ..................... 45,851 45,222 46,004 45,251
Effect of Dilutive Securities:
Employee and Director Common Stock Options of the
Company that result in the issuance of general
partnership units ............................... 195 118 232 151
-------- -------- -------- --------
Weighted Average Units - Diluted ................... 46,046 45,340 46,236 45,402
======== ======== ======== ========
Basic EPU:
Net Income Available to Unitholders ................ $ 1.12 $ 1.04 $ .59 $ .58
======== ======== ======== ========
Diluted EPU:
Net Income Available to Unitholders ................ $ 1.11 $ 1.04 $ .59 $ .58
======== ======== ======== ========
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 ten development projects totaling approximately 1.0 million square feet of
GLA for an estimated investment of approximately $62.5 million. Of this amount,
approximately $31.9 million remains to be funded. These developments are
expected to be funded with cash flow from operations, borrowings under the 2000
Unsecured Acquisition Facility and proceeds from the sale of select properties.
13. SUBSEQUENT EVENTS
From July 1, 2000 to August 10, 2000, the Consolidated Operating
Partnership acquired several land parcels for an aggregate purchase price of
approximately $5,278, excluding costs incurred in conjunction with the
acquisition of these land parcels. The Consolidated Operating Partnership also
sold 11 industrial properties for approximately $40,693 of gross proceeds.
On July 17, 2000, the Operating Partnership paid a second quarter 2000
distribution of $.62 per Unit, totaling approximately $28,601.
13
15
FIRST INDUSTRIAL, L.P.
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 this Form 10-Q.
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The 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
these safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Operating Partnership, are generally identifiable by use of the words
"believe", "expect", "intend", "anticipate", "estimate", "project" or similar
expressions. The Operating Partnership's ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse affect on the operations and future
prospects of the Operating Partnership on a consolidated basis include, but are
not limited to, changes in: economic conditions generally and the real estate
market specifically, legislative/regulatory changes (including changes to laws
governing the taxation of real estate investment trusts), availability of
capital, interest rates, competition, supply and demand for industrial
properties in the Operating Partnership's current and proposed market areas and
general accounting principles, policies and guidelines applicable to real estate
investment trusts. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning the Operating Partnership and
its business, including additional factors that could materially affect the
Operating Partnership's financial results, is included herein and in the
Operating Partnership's other filings with the Securities and Exchange
Commission.
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 84.3% ownership interest at June 30, 2000. The Company also
owns a preferred general partnership interest in the Operating Partnership with
an aggregate liquidation priority of $350 million. 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
limited partners of the Operating Partnership own approximately a 15.7%
aggregate ownership interest at June 30, 2000.
The Operating Partnership is the sole member of several limited liability
companies (the "L.L.C.s"), owns a 95% economic interest in FR Development
Services, Inc. as well as a limited partnership interest (subject in one case,
as described below, to a preferred limited partnership interest) in each of
eight limited partnerships (together, the "Other Real Estate Partnerships"). The
Operating Partnership, through separate wholly-owned limited liability companies
in which it is the sole member, also owns 10% equity interests in and provides
asset and property management services to, two joint ventures which invest in
industrial properties (the "September 1998 Joint Venture" and the "September
1999 Joint Venture"). The financial statements of the Operating Partnership
report the L.L.C.s and FR Development Services, Inc. (hereinafter defined as the
"Consolidated Operating Partnership") on a consolidated basis. The Other Real
Estate Partnerships, the September 1998 Joint Venture and the September 1999
Joint Venture are accounted for under the equity method of accounting. The
minority ownership interest in FR Development Services, Inc. is not reflected in
the consolidated financial statements due to its immateriality.
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. First Industrial Securities Corporation, the general
partner of one of the Other Real Estate Partnerships (First Industrial
Securities, L.P.), also owns a preferred limited partnership interest in the
First Industrial Securities L.P. which entitles it to receive a fixed quarterly
distribution, and results in it being allocated income in the same amount, equal
to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value,
Series A Cumulative Preferred Stock.
Profits, losses and distributions of the Operating Partnership, the
L.L.C.s and the Other Real Estate Partnerships are allocated to the general
partner and the limited partners, or members, as applicable, in accordance with
the provisions contained within the partnership agreements or operating
agreements, as applicable, of the Operating Partnership, the L.L.C.s and the
Other Real Estate Partnerships.
RESULTS OF OPERATIONS
At June 30, 2000, the Consolidated Operating Partnership owned 876
in-service properties with approximately 56.4 million square feet of gross
leasable area ("GLA"), compared to 867 in-service properties with approximately
55.7 million square feet of GLA at June 30, 1999. During the period between July
1, 1999 and June 30, 2000, the Consolidated Operating Partnership acquired 42
properties containing approximately 3.4 million square feet of GLA, completed
development of 23 properties and expansion of one property totaling
approximately 4.1 million square feet of GLA and sold 51 in-service properties
totaling approximately 6.2 million square feet of GLA and several land parcels.
The Consolidated Operating Partnership also took one property out of service
which was subsequently sold comprising approximately .4 million square feet of
GLA. In addition, during the period between July 1, 1999 and June 30, 2000, the
Operating Partnership contributed four industrial properties comprising .2
million square feet of GLA to First Industrial Securities, L.P.
The comparison of the six months ended June 30, 2000 to the six months
ended June 30, 1999 and the comparison of the three months ended June 30, 2000
to the three months ended June 30, 1999 is shown net of property acquisitions,
developments placed in service and property dispositions.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999
Rental income and tenant recoveries and other income decreased by
approximately $2.0 million or 1.2% due primarily to a decrease in average
occupied GLA for the six months ended June 30, 2000, compared to the six months
ended June 30, 1999, offset by an increase in same store revenue. Rental income
and tenant recoveries and other income from properties owned prior to January 1,
1999, increased by approximately $5.3 million or 4.0% due primarily to general
rent increases and an increase in recoverable income due to an increase in
property expenses as discussed below.
14
16
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $1.2 million or 2.6% due primarily to increases in
property management expense and other expenses, offset by a decrease in repairs
and maintenance expense. The increase in property management expense is
primarily due to costs associated with the opening of a regional office in
California during the third quarter of 1999 as well as general pay increases.
Other expenses increased due primarily to an increase in master lease payments
associated with 14 properties during the six months ended June 30, 2000 as
compared to the six months ended June 30, 1999. The decrease in repairs and
maintenance expense is due to a decrease in snow removal and related expenses
incurred during the six months ended June 30, 2000 as compared to the six months
ended June 30, 1999. Property expenses from properties owned prior to January 1,
1999 increased approximately $1.2 million or 3.2% primarily due to an increase
in real estate taxes and property management expense offset by a decrease in
repairs and maintenance.
General and administrative expense increased by approximately $1.0 million
due primarily to general pay increases and additional employees.
Interest expense decreased by approximately $.2 million for the six months
ended June 30, 2000 compared to the six months ended June 30, 1999 due primarily
to a lower average debt balance outstanding and an increase in capitalized
interest for the six months ended June 30, 2000 due to an increase in
development activities. This was slightly offset by an increase in the weighted
average interest rate for the six months ended June 30, 2000 (7.29%) compared to
the six months ended June 30, 1999 (7.13%). The average debt balance outstanding
for the six months ended June 30, 2000 and 1999 was approximately $1.14 billion
and $1.17 billion, respectively.
Amortization of deferred financing costs increased by approximately $.3
million due primarily to amortization of additional deferred financing costs
relating to the Operating Partnership's $300 million unsecured line of credit
(the "1997 Unsecured Acquisition Facility").
Depreciation and other amortization increased by approximately $.5 million
due primarily to the additional depreciation related to tenant improvements
incurred subsequent to December 31, 1998.
Equity in income of Other Real Estate Partnerships increased by
approximately $5.2 million due primarily to an increase in average occupied GLA
and an increase in gain on sales of real estate for the six months ended June
30, 2000 as compared to the six months ended June 30, 1999. During the six
months ended June 30, 2000, the Other Real Estate Partnerships sold three
industrial properties and one land parcel for a gain of approximately $3.8
million. During the six months ended June 30, 1999, the Other Real Estate
Partnerships sold one land parcel for a loss of approximately $.1 million.
Equity in income of joint ventures remained relatively unchanged.
The $12.1 million gain on sales of properties for the six months ended
June 30, 2000 resulted from the sale of 32 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $112.5 million.
The $8.4 million gain on sales of properties for the six months ended June
30, 1999 resulted from the sale of 24 industrial properties and one land parcel.
Gross proceeds from these sales were approximately $76.6 million.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THREE MONTHS ENDED
JUNE 30, 1999
Rental income and tenant recoveries and other income decreased by
approximately $.8 million or 1.0% due primarily to a decrease in average
occupied GLA for the three months ended June 30, 2000, compared to the three
months ended June 30, 1999, offset by an increase in same store revenue. Rental
income and tenant recoveries and other income from properties owned prior to
April 1, 1999, increased by approximately $2.5 million or 3.8% due primarily to
general rent increases and an increase in recoverable income due to an increase
in property expenses as discussed below.
15
17
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $1.4 million or 6.7% due primarily to an increase in
property management expense and other expenses. The increase in property
management expense is primarily due to costs associated with the opening of a
regional office in California during the third quarter of 1999 as well as
general pay increases. Other expenses increased due primarily to an increase in
master lease payments associated with 11 properties during the three months
ended June 30, 2000 as compared to the three months ended June 30, 1999.
Property expenses from properties owned prior to April 1, 1999 increased
approximately $.6 million or 3.2% due to an increase in real estate taxes;
repairs and maintenance, property management expense and utilities expense.
General and administrative expense increased by approximately $.5 million
due primarily to general pay increases and additional employees.
Interest expense remained relatively unchanged.
Amortization of deferred financing costs increased by approximately $.1
million due primarily to amortization of additional deferred financing costs
relating to the Operating Partnership's 1997 Unsecured Acquisition Facility.
Depreciation and other amortization increased by approximately $.2 million
due primarily to the additional depreciation related to tenant improvements
incurred subsequent to March 31, 1999.
Equity in income of Other Real Estate Partnerships increased by
approximately $4.8 million due primarily to an increase in average occupied GLA
and an increase in gain on sales of real estate for the three months ended June
30, 2000 as compared to the three months ended June 30, 1999. During the three
months ended June 30, 2000, the Other Real Estate Partnerships sold three
industrial properties for a gain of approximately $3.8 million. During the three
months ended June 30, 1999, the Other Real Estate Partnerships sold one land
parcel for a loss of approximately $.1 million.
Equity in income of joint ventures remained relatively unchanged.
The $6.3 million gain on sales of properties for the three months ended
June 30, 2000 resulted from the sale of 21 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $57.8 million.
The $6.9 million gain on sales of properties for the three months ended
June 30, 1999 resulted from the sale of 14 industrial properties. Gross proceeds
from these sales were approximately $ 52.7 million.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2000, the Consolidated Operating Partnership's cash and cash
equivalents was approximately $2.5 million and restricted cash totaled
approximately $11.9 million. Restricted cash was comprised of gross proceeds
from the sales of certain properties. These sales proceeds will be disbursed as
the Consolidated Operating Partnership exchanges into properties under Section
1031 of the Internal Revenue Code.
SIX MONTHS ENDED JUNE 30, 2000
Net cash provided by operating activities of approximately $69.0 million
for the six months ended June 30, 2000 was comprised primarily of net income of
approximately $65.6 million and adjustments for non-cash items of approximately
$19.3 million, offset by the net change in operating assets and liabilities of
approximately $15.9 million. The adjustments for the non-cash items of
approximately $19.3 million are primarily comprised of depreciation and
amortization of approximately $31.8 million and a provision for bad debts of
approximately $.1 million, offset by the gain on sales of real estate of
16
18
approximately $12.1 million and the effect of the straight-lining of rental
income of approximately $.5 million.
Net cash used in investing activities of approximately $66.7 million for
the six months ended June 30, 2000 was comprised primarily of the acquisition of
real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate, investments in and advances
to the Other Real Estate Partnerships, contributions to and investments in the
September 1998 Joint Venture and an increase in restricted cash from sales
proceeds deposited with an intermediary for Section 1031 exchange purposes,
offset by distributions from investment in Other Real Estate Partnerships,
distributions from investment in the September 1998 Joint Venture, net proceeds
from the sales of real estate and the repayment of mortgage loans receivable.
Net cash provided by financing activities of approximately $.2 million for
the six months ended June 30, 2000 was comprised primarily of Unit (defined
below) and preferred general partnership unit distributions, repayments on
mortgage loans payable and debt issuance costs incurred in conjunction with the
2000 Unsecured Acquisition Facility (defined below), offset by the net
borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility
and 2000 Unsecured Acquisition Facility (defined below) and Unit contributions.
SIX MONTHS ENDED JUNE 30, 1999
Net cash provided by operating activities of approximately $69.9 million
for the six months ended June 30, 1999 was comprised primarily of net income of
approximately $61.4 million, adjustments for non-cash items of approximately
$19.2 million, offset by the net change in operating assets and liabilities of
approximately $10.7 million. The adjustments for the non-cash items of
approximately $19.2 million are primarily comprised of depreciation and
amortization of approximately $29.9 million, offset by the gain on sales of real
estate of approximately $8.4 million and the effect of the straight-lining of
rental income of approximately $2.3 million.
Net cash used in investing activities of approximately $36.3 million for
the six months ended June 30, 1999 was comprised primarily of the acquisition of
real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate, and investments in and
advances to the Other Real Estate Partnerships, contributions to and investments
in the September 1998 Joint Venture and an increase in restricted cash from
sales proceeds deposited with an intermediary for Section 1031 exchange
purposes, offset by distributions from the Other Real Estate Partnerships,
distributions from investment in the September 1998 Joint Venture, net proceeds
from the sales of real estate and the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $46.8 million for
the six months ended June 30, 1999 was comprised primarily of Unit (defined
below) and preferred general partnership unit distributions, repayments on
mortgage loans payable and debt issuance costs, offset by net borrowings under
the Operating Partnership's 1997 Unsecured Acquisition Facility and Unit
(defined below) contributions.
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.
17
19
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, 2000 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, 2000, $161.8 million (approximately 13.8% of total debt at
June 30, 2000) of the Consolidated Operating Partnership's debt was variable
rate debt (all of the variable rate debt relates to the Operating Partnership's
2000 Unsecured Acquisition Facility (defined below)) and $1,010.9 million
(approximately 86.2% of total debt at June 30, 2000) was fixed rate debt. The
Consolidated Operating Partnership also had outstanding a written put and a
written call option (collectively, the "Written Options") which were issued in
conjunction with the initial offering of two tranches of senior unsecured debt.
The Consolidated Operating Partnership's past practice has been to lock into
fixed interest rates at issuance or fix the rate of variable rate debt through
the use of interest rate protection agreements when interest rate market
conditions dictate it is advantageous to do so. Currently, the Consolidated
Operating Partnership does not enter into financial instruments for trading or
other speculative purposes.
For fixed rate debt, changes in interest rates generally affect the fair
value of the debt, but not earnings or cash flows of the 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, 2000,
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 $1.2 million per year. A 10%
increase in interest rates would decrease the fair value of the fixed rate debt
at June 30, 2000 by approximately $47.8 million to $901.9 million. A 10%
decrease in interest rates would increase the fair value of the fixed rate debt
at June 30, 2000 by approximately $53.2 million to $1,002.9 million. A 10%
increase in interest rates would decrease the fair value of the Written Options
at June 30, 2000 by approximately $2.1 million to $3.1 million. A 10% decrease
in interest rates would increase the fair value of the Written Options at June
30, 2000 by approximately $3.5 million to $8.7 million.
INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE
During the six months ended June 30, 2000, the Consolidated Operating
Partnership acquired 28 industrial properties and several land parcels. The
aggregate purchase price for these acquisitions totaled approximately $91.0
million, excluding costs incurred in conjunction with the acquisition of the
properties and the land parcel. The Consolidated Operating Partnership also
completed the development of 11 industrial properties comprising approximately
2.2 million square feet of GLA at a cost of approximately $71.6 million.
During the six months ended June 30, 2000, the Consolidated Operating
Partnership sold 32 industrial properties and several land parcels. Gross
proceeds from these sales were approximately $112.5 million.
The Consolidated Operating Partnership has committed to the construction
of ten development projects totaling approximately 1.0 million square feet of
GLA for an estimated investment of
18
20
approximately $62.5 million. Of this amount, approximately $31.9 million remains
to be funded. These developments are expected to be funded with cash flow from
operations, borrowings under the Operating Partnership's 2000 Unsecured
Acquisition Facility (defined below) and proceeds from the sale of select
properties.
REAL ESTATE HELD FOR SALE
The Consolidated Operating Partnership has an active sales program through
which it is continually engaged in identifying and evaluating its current
portfolio for potential sales candidates. At June 30, 2000, the Consolidated
Operating Partnership had 111 industrial properties comprising approximately 9.8
million square feet of GLA held for sale (of which, 97 properties comprising
approximately 9.0 million square feet of GLA are in the Consolidated Operating
Partnership's exit markets). Income from operations of the 111 industrial
properties held for sale for the six months ended June 30, 2000 and 1999 is
approximately $15.0 million and $14.5 million, respectively. Net carrying value
of the 111 industrial properties held for sale at June 30, 2000 is approximately
$354.8 million. All of these properties were identified as held for sale during
the three months ended June 30, 2000. There can be no assurance that such
properties held for sale will be sold.
INVESTMENTS IN JOINT VENTURES
During the six months ended June 30, 2000, the Consolidated Operating
Partnership, through wholly-owned limited liability companies in which the
Operating Partnership is the sole member, received, in the aggregate,
approximately $1.4 million in asset management and property management fees from
the September 1998 Joint Venture and the September 1999 Joint Venture. The
Operating Partnership, through a wholly-owned limited liability company in which
it is the sole member, received distributions of approximately $.5 million from
the September 1998 Joint Venture. As of June 30, 2000, the September 1998 Joint
Venture owned 146 industrial properties comprising approximately 7.5 million
square feet of GLA and the September 1999 Joint Venture owned 39 industrial
properties comprising approximately 1.2 million square feet of GLA.
ACQUISITION FACILITY PAYABLE
In June 2000, the Operating Partnership amended and restated the 1997
Unsecured Acquisition Facility and entered into a $300.0 million unsecured
revolving credit facility (the "2000 Unsecured Acquisition Facility") which
initially bears interest at LIBOR plus .80% or the Prime Rate at the Operating
Partnership's election, and provides for interest only payments until maturity.
Under the 2000 Unsecured Acquisition Facility, the Operating Partnership has the
right, subject to certain conditions, to increase the aggregate commitment
under the 2000 Unsecured Acquisition Facility up to $400.0 million. The
Operating Partnership may borrow under the 2000 Unsecured Acquisition Facility
to finance the acquisition and development of additional properties and for
other corporate purposes, including to obtain additional working capital. The
2000 Unsecured Acquisition Facility contains certain financial covenants
relating to debt service coverage, market value net worth, dividend payout ratio
and total funded indebtedness. The 2000 Unsecured Acquisition Facility matures
on June 30, 2003.
GENERAL PARTNERSHIP, LIMITED PARTNERSHIP AND PREFERRED GENERAL PARTNERSHIP UNIT
CONTRIBUTIONS
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. The preferred general partnership units
resulted from preferred capital contributions from the Company. The Operating
Partnership will be required to make all required distributions on the preferred
general partnership units prior to any distribution of cash or assets to the
holders of the general and limited partnership units except for distributions
required to enable the Company to maintain its qualification as a REIT.
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21
Unit Contributions:
During the six months ended June 30, 2000, the Company awarded 355,139
shares of restricted common stock to certain employees and 1,833 shares of
restricted common stock to certain Directors. Other employees of the Company
converted certain in-the-money employee stock options to 14,903 shares of
restricted common stock. The Operating Partnership issued Units to the Company
in the same amount. These shares of restricted common stock had a fair value of
approximately $9.6 million on the date of grant. The restricted common stock
vests over periods from one to ten years. Compensation expense will be charged
to earnings over the respective vesting periods.
DISTRIBUTIONS
On January 24, 2000, the Operating Partnership paid a fourth quarter 1999
distribution of $.62 per Unit, totaling approximately $28.2 million. On April
17, 2000, the Operating Partnership paid a first quarter 2000 distribution of
$.62 per Unit, totaling approximately $28.5 million.
On March 31, 2000, the Operating Partnership paid a first quarter 2000
distribution of $54.688 per unit on its Series B Cumulative Preferred Units,
$53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on
its Series D Cumulative Preferred Units and $49.375 per unit on its Series E
Cumulative Preferred Units. The preferred unit distributions paid on March 31,
2000 totaled, in the aggregate, approximately $7.2 million.
On June 30, 2000, the Operating Partnership paid a second quarter 2000
distribution of $54.688 per unit on its Series B Cumulative Preferred Units,
$53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on
its Series D Cumulative Preferred Units and $49.375 per unit on its Series E
cumulative Preferred Units. The preferred unit distributions paid on June 30,
2000, totaled, in the aggregate, approximately $7.2 million.
SUBSEQUENT EVENTS
From July 1, 2000 to August 10, 2000, the Consolidated Operating
Partnership acquired several land parcels for an aggregate purchase price of
approximately $5.3 million, excluding costs incurred in conjunction with the
acquisition of these land parcels. The Consolidated Operating Partnership also
sold 11 industrial properties for approximately $40.7 million of gross proceeds.
On July 17, 2000, the Operating Partnership paid a second quarter 2000
distribution of $.62 per Unit, totaling approximately $28.6 million.
SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS
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 by the Company 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.
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 secured and unsecured indebtedness and the issuance of additional
Units and preferred units. As of June 30, 2000 and August 10, 2000, $100.0
million of debt securities was registered and unissued under the Securities Act
of 1933, as amended. The Consolidated Operating Partnership also may finance the
development or acquisition of additional properties through borrowings under the
Operating Partnership's 2000 Unsecured Acquisition Facility. At June 30, 2000,
borrowings under the Operating Partnership's 2000 Unsecured Acquisition Facility
bore interest at a weighted average interest rate of 7.54%. As of August 10,
2000 the Operating Partnership had approximately $104.1 million available for
additional borrowings under the 2000 Unsecured Acquisition Facility.
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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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the six months ended June 30, 2000, the Operating Partnership issued
an aggregate of 30,413 Units having an aggregate market value of
approximately $.9 million in exchange for property.
The above Units were issued in a private placement in reliance on Section 4
(2) of the Securities Act of 1933, as amended, including Regulation D
promulgated thereunder, to individuals or entities holding real property or
interests therein. No underwriters were used in connection with such
issuance.
Subject to lock-up periods and certain adjustments, Units are generally
convertible into common stock, par value $.01, of the Company on a
one-for-one basis.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
Exhibit No. Description
- ----------- -----------
3.1 Twelfth Amendment, dated as of June 27, 2000, to Sixth Amended
and Restated Limited Partnership Agreement of First Industrial,
L.P., dated March 18, 1998 (incorporated by reference to Exhibit
10.2 of First Industrial Realty Trust, Inc.'s Form 10-Q for the
quarter ended June 30, 2000, File No. 1-13102)
4.1 Amended and restated Unsecured Revolving Credit Agreement, dated
as of June 30, 2000 among First Industrial, L.P., First
Industrial Realty Trust, Inc. and Bank One, N.A., UBS AG,
Stamford Branch, Bank of America, N.A. and certain other banks
(incorporated by reference to Exhibit 10.1 of First Industrial
Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30,
2000, File No. 1-13102)
10.1 Employment Agreement, dated July 19, 2000, between First
Industrial Realty Trust, Inc. and Michael J. Havala
(incorporated by reference to Exhibit 10.3 of First Industrial
Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30,
2000, File No. 1-13102)
10.2 Employment Agreement, dated July 26, 2000, between First
Industrial Realty Trust, Inc. and Johannson L. Yap (incorporated
by reference to Exhibit 10.4 of First Industrial Realty Trust,
Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No.
1-13102)
27* Financial Data Schedule
* Filed herewith.
Report on Form 8-K:
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL, L.P.
BY: FIRST INDUSTRIAL REALTY TRUST, INC.
ITS SOLE GENERAL PARTNER
Date: August 10, 2000 By: /s/ Michael J. Havala
----------------------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Twelfth Amendment, dated as of June 27, 2000, to Sixth Amended
and Restated Limited Partnership Agreement of First Industrial,
L.P., dated March 18, 1998 (incorporated by reference to Exhibit
10.2 of First Industrial Realty Trust, Inc.'s Form 10-Q for the
quarter ended June 30, 2000, File No. 1-13102)
4.1 Amended and restated Unsecured Revolving Credit Agreement, dated
as of June 30, 2000 among First Industrial, L.P., First
Industrial Realty Trust, Inc. and Bank One, N.A., UBS AG,
Stamford Branch, Bank of America, N.A. and certain other banks
(incorporated by reference to Exhibit 10.1 of First Industrial
Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30,
2000, File No. 1-13102)
10.1 Employment Agreement, dated July 19, 2000, between First
Industrial Realty Trust, Inc. and Michael J. Havala
(incorporated by reference to Exhibit 10.3 of First Industrial
Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30,
2000, File No. 1-13102)
10.2 Employment Agreement, dated July 26, 2000, between First
Industrial Realty Trust, Inc. and Johannson L. Yap (incorporated
by reference to Exhibit 10.4 of First Industrial Realty Trust,
Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No.
1-13102)
27 * Financial Data Schedule
* Filled herewith.
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