UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
--------------------------
Commission File Number 1-13102
--------------------------
FIRST INDUSTRIAL REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 36-3935116
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices)
(312) 344-4300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /
Number of shares of Common Stock, $.01 par value, outstanding as of May 3, 2002:
39,380,560
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2002
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2002 and
December 31, 2001................................................... 2
Consolidated Statements of Operations for the Three Months
Ended March 31, 2002 and March 31, 2001............................. 3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and March 31, 2001............................. 4
Notes to Consolidated Financial Statements ......................... 5-13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................... 14-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 21
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 22
Item 2. Changes in Securities ........................................ 22
Item 3. Defaults Upon Senior Securities............................... 22
Item 4. Submission of Matters to a Vote of Security Holders .......... 22
Item 5. Other Information ............................................ 22
Item 6. Exhibits and Report on Form 8-K............................... 22
SIGNATURE ............................................................... 24
EXHIBIT INDEX ........................................................... 25
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
March 31, December 31,
2002 2001
----------- ------------
ASSETS
Assets:
Investment in Real Estate:
Land ......................................................... $ 423,008 $ 421,828
Buildings and Improvements ................................... 2,134,814 2,137,666
Furniture, Fixtures and Equipment ............................ 1,258 1,258
Construction in Progress ..................................... 148,166 154,175
Less: Accumulated Depreciation ............................... (288,242) (276,820)
----------- -----------
Net Investment in Real Estate ............................. 2,419,004 2,438,107
Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $3,761 at March 31, 2002 and $4,033 at
December 31, 2001 ............................................ 28,535 30,750
Cash and Cash Equivalents ....................................... 2,075 ---
Restricted Cash ................................................. 60,568 22,764
Tenant Accounts Receivable, Net ................................. 11,499 11,956
Investments in Joint Ventures ................................... 10,494 9,010
Deferred Rent Receivable ........................................ 15,579 15,442
Deferred Financing Costs, Net ................................... 11,255 11,717
Prepaid Expenses and Other Assets, Net .......................... 101,199 81,654
----------- -----------
Total Assets .............................................. $ 2,660,208 $ 2,621,400
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable, Net ..................................... $ 86,924 $ 87,459
Senior Unsecured Debt, Net ...................................... 1,048,525 1,048,491
Acquisition Facility Payable .................................... 219,500 182,500
Accounts Payable and Accrued Expenses ........................... 59,030 71,031
Rents Received in Advance and Security Deposits ................. 23,554 26,684
Dividends/Distributions Payable ................................. 38,684 31,196
----------- -----------
Total Liabilities ......................................... 1,476,217 1,447,361
----------- -----------
Minority Interest .................................................. 177,564 178,442
Commitments and Contingencies ...................................... --- ---
Stockholders' Equity:
Preferred Stock ($.01 par value, 10,000,000 shares authorized,
40,000, 20,000, 50,000 and 30,000 shares of Series B, C, D
and E Cumulative Preferred Stock, respectively, issued and
outstanding at March 31, 2002 and December 31, 2001,
having a liquidation preference of $2,500 per share
($100,000), $2,500 per share ($50,000), $2,500 per share
($125,000) and $2,500 per share ($75,000), respectively) ....... 1 1
Common Stock ($.01 par value, 100,000,000 shares authorized,
40,694,338 and 40,302,287 shares issued and 39,296,738 and
38,904,687 shares outstanding at March 31, 2002 and
December 31, 2001, respectively) ............................... 407 403
Additional Paid-in-Capital ......................................... 1,210,389 1,197,877
Distributions in Excess of Accumulated Earnings .................... (147,290) (143,958)
Unearned Value of Restricted Stock Grants .......................... (8,228) (6,247)
Accumulated Other Comprehensive Loss ............................... (8,754) (12,381)
Treasury Shares at Cost (1,397,600 shares at March 31, 2002
and December 31, 2001) ......................................... (40,098) (40,098)
----------- -----------
Total Stockholders' Equity ................................ 1,006,427 995,597
----------- -----------
Total Liabilities and Stockholders' Equity ................ $ 2,660,208 $ 2,621,400
=========== ===========
The accompanying notes are an integral part of the financial statements.
2
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
-------------- --------------
Revenues:
Rental Income .................................................. $ 68,671 $ 74,164
Tenant Recoveries and Other Income ............................. 20,656 24,737
-------- --------
Total Revenues ............................................ 89,327 98,901
-------- --------
Expenses:
Real Estate Taxes .............................................. 14,069 14,868
Repairs and Maintenance ........................................ 4,794 5,629
Property Management ............................................ 3,420 3,465
Utilities ...................................................... 2,275 3,255
Insurance ...................................................... 609 585
Other .......................................................... 2,216 2,859
General and Administrative ..................................... 5,163 4,602
Interest Expense ............................................... 19,784 21,202
Amortization of Deferred Financing Costs ....................... 462 442
Depreciation and Other Amortization ............................ 18,721 17,081
-------- --------
Total Expenses ............................................ 71,513 73,988
-------- --------
Income from Continuing Operations Before Equity in Income of Joint
Ventures, Income Allocated to Minority Interest and
Gain on Sale of Real Estate .................................... 17,814 24,913
Equity in Income of Joint Ventures ................................ 222 186
Gain on Sale of Real Estate ....................................... 640 13,876
Minority Interest Allocable to Continuing Operations .............. (1,707) (4,837)
-------- --------
Income from Continuing Operations ................................. 16,969 34,138
Income from Discontinued Operations (Including Gain on Sale of Real
Estate of $15,028 for the Three Months Ended March 31, 2002) ... 16,274 1,258
Minority Interest Allocable to Discontinued Operations ............ (2,470) (197)
-------- --------
Net Income ........................................................ 30,773 35,199
Less: Preferred Stock Dividends ................................... (7,231) (8,211)
-------- --------
Net Income Available to Common Stockholders ....................... $ 23,542 $ 26,988
======== ========
Income from Continuing Operations Available to Common
Stockholders Per Weighted Average Common Share Outstanding:
Basic ..................................................... $ .25 $ .67
======== ========
Diluted ................................................... $ .25 $ .66
======== ========
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ..................................................... $ .60 $ .69
======== ========
Diluted ................................................... $ .60 $ .69
======== ========
Net Income ........................................................ $ 30,773 $ 35,199
Other Comprehensive Income:
Cumulative Transition Adjustment .......................... --- (14,920)
Settlement of Interest Rate Protection Agreement .......... --- 371
Mark-to-Market of Interest Rate Protection Agreements ..... 3,573 (137)
Amortization of Interest Rate Protection Agreements ....... 54 90
-------- --------
Comprehensive Income .............................................. $ 34,400 $ 20,603
======== ========
The accompanying notes are an integral part of the financial statements.
3
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ...................................................... $ 30,773 $ 35,199
Income Allocated to Minority Interest ........................... 4,177 5,034
--------- ---------
Income Before Minority Interest ................................. 34,950 40,233
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation ................................................ 16,240 15,069
Amortization of Deferred Financing Costs .................... 462 442
Other Amortization .......................................... 3,786 3,753
Equity in Income of Joint Ventures .......................... (222) (186)
Distributions from Joint Ventures ........................... 181 186
Gain on Sale of Real Estate ................................. (15,668) (13,876)
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net ............................ (2,860) (7,480)
Increase in Deferred Rent Receivable ........................ (704) (294)
Decrease in Accounts Payable and Accrued Expenses and
Rents Received in Advance and Security Deposits ........... (13,511) (4,312)
Increase in Restricted Cash ................................. (6) (104)
--------- ---------
Net Cash Provided by Operating Activities .............. 22,648 33,431
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate ......... (66,881) (106,825)
Net Proceeds from Sales of Investment in Real Estate ............ 60,332 56,360
Contributions to Joint Ventures ................................. (2,176) ---
Distributions from Joint Ventures ............................... --- 251
Repayment of Mortgage Loans Receivable .......................... 13,036 3,381
(Increase) Decrease in Restricted Cash .......................... (37,798) 20,002
--------- ---------
Net Cash Used in Investing Activities .................. (33,487) (26,831)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Exercise of Employee Stock Options ............ 10,062 5,060
Repurchase of Restricted Stock .................................. (1,679) (1,588)
Purchase of U.S. Government Securities .......................... (750) (1,123)
Proceeds from Senior Unsecured Debt ............................. --- 199,390
Dividends/Distributions ......................................... (31,196) (30,275)
Preferred Stock Dividends ....................................... --- (8,211)
Repayments on Mortgage Loans Payable ............................ (523) (1,625)
Proceeds from Acquisition Facility Payable ...................... 83,500 99,300
Repayments on Acquisition Facility Payable ...................... (46,500) (260,000)
Cost of Debt Issuance and Prepayment Fees ....................... --- (1,896)
--------- ---------
Net Cash Provided by (Used in) Financing Activities .... 12,914 (968)
--------- ---------
Net Increase in Cash and Cash Equivalents .......................... 2,075 5,632
Cash and Cash Equivalents, Beginning of Period ..................... --- 7,731
--------- ---------
Cash and Cash Equivalents, End of Period ........................... $ 2,075 $ 13,363
========= =========
The accompanying notes are an integral part of the financial statements.
4
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND FORMATION OF COMPANY
First Industrial Realty Trust, Inc. (the "Company") was organized in the
state of Maryland on August 10, 1993. The Company is a real estate investment
trust as defined in the Internal Revenue Code. The Company's operations are
conducted primarily through First Industrial, L.P. (the "Operating Partnership")
of which the Company is the sole general partner with an approximate 85.0%
ownership interest at March 31, 2002. Minority interest in the Company at March
31, 2002 represents the approximate 15.0% aggregate partnership interest in the
Operating Partnership held by the limited partners thereof.
As of March 31, 2002, the Company owned 914 in-service properties located
in 24 states, containing an aggregate of approximately 63.1 million square feet
of gross leasable area ("GLA"). Of the 914 in-service properties owned by the
Company, 774 are held by the Operating Partnership, 115 are held by limited
partnerships in which the Operating Partnership is the limited partner and
wholly-owned subsidiaries of the Company are the general partners, 11 are held
by limited liability companies of which the Operating Partnership is the sole
member and 14 are held by an entity wholly-owned by the Operating Partnership.
The Company, through wholly-owned limited liability companies of which the
Operating Partnership is the sole member, also owns minority equity interests
in, and provides asset and property management services to, three joint ventures
which invest in industrial properties (the "September 1998 Joint Venture", the
"September 1999 Joint Venture" and the "December 2001 Joint Venture").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared
in accordance with the accounting policies described in the financial statements
and related notes included in the Company's 2001 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, 2001 audited financial statements included in
the Company's 2001 Form 10-K and present interim disclosures as required by the
Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the Company's financial statements, is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of March 31,
2002 and December 31, 2001, and the reported amounts of revenues and expenses
for each of the three months ended March 31, 2002 and 2001. Actual results could
differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary for a fair statement of the financial position of the
Company as of March 31, 2002 and the results of its operations and its cash
flows for each of the three months ended March 31, 2002 and 2001.
Tenant Accounts Receivable, Net:
The Company provides an allowance for doubtful accounts against the portion
of tenants accounts receivable which is estimated to be uncollectible. Tenant
accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of approximately $2,050 as of March 31, 2002 and
December 31, 2001.
5
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Discontinued Operations:
On January 1, 2002, the Company adopted the Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long Lived Assets" ("FAS 144").
FAS 144 addresses final accounting and reporting for the disposal of long lived
assets. FAS 144 requires that the results of operations and gains or losses on
the sale of properties sold subsequent to December 31, 2001 that were not
classified as held for sale at December 31, 2001 and the results of operations
from properties that were classified as held for sale subsequent to December 31,
2001 be presented in discontinued operations. FAS 144 also requires prior period
results of operations for these properties to be restated and presented in
discontinued operations in prior consolidated statements of operations.
Recent Accounting Pronouncements:
On April 30, 2002, the FASB issued Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" ("FAS 145"). FAS 145 rescinds both Statement
of Financial Accounting Standards No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" ("FAS 4"), and the amendment to FAS 4, Statement of
Financial Accounting Standards No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". FAS 145 eliminates the requirement that gains and
losses from the extinguishment of debt be aggregated and, if material,
classified as an extraordinary item, net of the related income tax effect,
unless the criteria in Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" are met. FAS 145 is effective for transactions occurring
subsequent to May 15, 2002. The Company is currently assessing the impact of FAS
145 on its consolidated financial position, liquidity, and results of
operations.
Reclassification:
Certain 2001 items have been reclassified to conform to the 2002
presentation.
3. INVESTMENTS IN JOINT VENTURES
During the three months ended March 31, 2002, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, recognized, in the aggregate, approximately $224 in asset
management fees from the September 1998 Joint Venture and the September 1999
Joint Venture, collectively and approximately $243 in property management fees
from the September 1998 Joint Venture, the September 1999 Joint Venture and the
December 2001 Joint Venture, collectively. The Company, through a wholly-owned
limited liability company in which the Operating Partnership is the sole member,
invested approximately $2,176 in the December 2001 Joint Venture. The Company,
through wholly-owned limited liability companies in which the Operating
Partnership is the sole member, received distributions of approximately $181
from the September 1998 Joint Venture and the September 1999 Joint Venture,
collectively. As of March 31, 2002, the September 1998 Joint Venture owned 90
industrial properties comprising approximately 4.3 million square feet of GLA,
the September 1999 Joint Venture owned 36 industrial properties comprising
approximately 1.0 million square feet of GLA and the December 2001 Joint Venture
had economic interests in 11 industrial properties comprising approximately 2.2
million square feet of GLA. The properties purchased by the December 2001 Joint
Venture were purchased from the Company. The Company deferred 15% of the gain
resulting from these sales which is equal to the Company's economic interest in
the December 2001 Joint Venture.
6
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE
Mortgage Loans Payable, Net:
On December 29, 1995, the Company, through an entity in which the Operating
Partnership is the sole limited partner and a wholly-owned subsidiary of the
Company is the general partner (the "Mortgage Partnership"), entered into a
$40,200 mortgage loan (the "1995 Mortgage Loan"). In January 2002, the Company
purchased approximately $.8 million of U.S. Government securities as substitute
collateral to execute a legal defeasance of approximately $.8 million of the
1995 Mortgage Loan. The terms of the legal defeasance require the Mortgage
Partnership to use the gross proceeds from the maturities of the U.S. Government
securities to pay down and subsequently retire the defeased portion of the 1995
Mortgage Loan in January 2003. The Company is carrying the defeased portion of
the 1995 Mortgage Loan on its balance sheet until it pays down and retires the
defeased portion of the 1995 Mortgage Loan in January 2003. Upon the execution
of the legal defeasance, one of the 21 properties collateralizing the 1995
Mortgage Loan was released and subsequently sold.
Acquisition Facility Payable:
In January 2002, the Company entered into an interest rate swap agreement
(the "Interest Rate Swap Agreement") which fixed the interest rate on a portion
of the Company's outstanding borrowings on its 2000 Unsecured Acquisition
Facility. The Company designated this transaction as a cash flow hedge. The
Interest Rate Swap Agreement has a notional value of $25,000, is effective from
February 4, 2002 through February 4, 2003 and fixed the LIBOR Rate at 2.4975%.
Any payments or receipts from the Interest Rate Swap Agreement will be treated
as a component of interest expense. The Company anticipates that the Interest
Rate Swap Agreement will be 100% effective and, as a result, the change in value
will be shown in other comprehensive income.
7
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
The following table discloses certain information regarding the Company's
mortgage loans payable, senior unsecured debt and acquisition facility payable:
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT INTEREST RATE AT
------------------------------ --------------------------- ----------------
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, MATURITY
2002 2001 2002 2001 2002 DATE
---------- ------------ ---------- ------------ --------- --------
MORTGAGE LOANS PAYABLE, NET
- ---------------------------
1995 Mortgage Loan ............ $ 37,912 (1) $ 38,063 $ 160 $ 160 7.220% 1/11/26 (1)
CIGNA Loan .................... 33,021 33,214 206 207 7.500% 4/01/03
Assumed Loans ................. 6,411 6,538 --- --- 9.250% 1/01/13
LB Loan II ................... 705 705 38 24 8.000% (2)
Acquisition Mortgage Loan III.. 3,039 3,065 22 --- 8.875% 6/01/03
Acquisition Mortgage Loan IV... 2,274 2,286 17 --- 8.950% 10/01/06
Acquisition Mortgage Loan V ... 2,648 (3) 2,665 (3) --- --- 9.010% 9/01/06
Acquisition Mortgage Loan VI... 914 (3) 923 (3) 7 7 8.875% 11/01/06
---------- ---------- ---------- ----------
Total ......................... $ 86,924 $ 87,459 $ 450 $ 398
========== ========== ========== ==========
SENIOR UNSECURED DEBT, NET
- --------------------------
2005 Notes .................... $ 50,000 $ 50,000 $ 1,246 $ 383 6.900% 11/21/05
2006 Notes .................... 150,000 150,000 3,500 875 7.000% 12/01/06
2007 Notes .................... 149,973 (4) 149,972 (4) 4,307 1,457 7.600% 5/15/07
2011 PATS ..................... 99,575 (4) 99,563 (4) 2,786 942 7.375% 5/15/11 (5)
2017 Notes .................... 99,850 (4) 99,847 (4) 2,500 625 7.500% 12/01/17
2027 Notes .................... 99,878 (4) 99,877 (4) 2,701 914 7.150% 5/15/27 (6)
2028 Notes .................... 199,793 (4) 199,791 (4) 3,209 7,009 7.600% 7/15/28
2011 Notes .................... 199,456 (4) 199,441 (4) 655 4,343 7.375% 3/15/11
---------- ---------- ---------- ----------
Total ......................... $1,048,525 $1,048,491 $ 20,904 $ 16,548
========== ========== ========== ==========
ACQUISITION FACILITY PAYABLE
- ----------------------------
2000 Unsecured Acquisition
Facility .................... $ 219,500 $ 182,500 $ 559 $ 571 3.31% 6/30/03
========== ========== ========== ==========
(1) Approximately $3.0 million of this loan has been defeased and will be paid
in full in January 2003.
(2) The maturity date of the LB Loan II is based on a contingent event relating
to the environmental status of the property collateralizing the loan.
(3) At March 31, 2002, the Acquisition Mortgage Loan V and the Acquisition
Mortgage Loan VI are net of unamortized premiums of $171 and $38
respectively. At December 31, 2001 the Acquisition Mortgage Loan V and the
Acquisition Mortgage Loan VI are net of unamortized premiums of $180 and
$41, respectively.
(4) At March 31, 2002, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028
Notes and the 2011 Notes are net of unamortized discounts of $27, $425,
$150, $122, $207 and $544, respectively. At December 31, 2001, the 2007
Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Notes are
net of unamortized discounts of $28, $437, $153, $123, $209 and $559,
respectively.
(5) The 2011 PATS are redeemable at the option of the holder thereof, on May
15, 2004.
(6) The 2027 Notes are redeemable at the option of the holders thereof, on May
15, 2002. The Company has received redemption notices from holders
representing $84,930 of the 2027 Notes outstanding.
8
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
The following is a schedule of the stated maturities and scheduled
principal payments of the mortgage loans payable, senior unsecured debt and
acquisition facility payable for the next five years ending December 31, and
thereafter:
Amount
-----------
Remainder of 2002 $ 86,605
2003 259,060
2004 1,407
2005 51,537
2006 156,497
Thereafter 800,404
-----------
Total $ 1,355,510
===========
The maturity date of the LB Loan II is based on a contingent event. As a
result, this loan is not included in the preceding table. The table presents
$84,930 of the 2027 Notes as being due in 2002 due to redemption notices the
Company has received from certain holders. The table presents the remaining
$15,070 as coming due in 2027.
Other Comprehensive Income:
In conjunction with the prior issuances of senior unsecured debt, the
Company entered into interest rate protection agreements to fix the interest
rate on anticipated offerings of senior unsecured debt (the "Interest Rate
Protection Agreements"). In the next 12 months, the Company will amortize
approximately $234 of the Interest Rate Protection Agreements into net income as
an increase to interest expense.
The following is a rollforward of the accumulated other comprehensive loss
balance relating to derivative transactions:
Balance at December 31, 2001............................... $(12,381)
Mark-to-Market of Interest Rate Protection Agreements and
Interest Rate Swap Agreements.......................... 3,573
Amortization of Interest Rate Protection Agreements...... 54
--------
Balance at March 31, 2002.................................. $ (8,754)
========
5. STOCKHOLDERS' EQUITY
Restricted Stock:
During the three months ended March 31, 2002, the Company awarded 90,260
shares of restricted common stock to certain employees and 965 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3,144 on the date of grant. The
restricted common stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting period.
Non-Qualified Employee Stock Options:
During the three months ended March 31, 2002, the Company issued 870,600
non-qualified employee stock options to certain officers, Directors and
employees of the Company. These non-qualified employee stock options vest over
periods from one to three years, have a strike price of $30.53 per share and
expire ten years from the date of grant.
During the three months ended March 31, 2002, certain employees of the
Company exercised 354,953 non-qualified employee stock options. Net proceeds
to the Company were approximately $10,062.
9
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. STOCKHOLDERS' EQUITY, CONTINUED
Dividends/Distributions:
The following table summarizes dividends/distributions paid during the
three months ended March 31, 2002.
COMMON STOCK/OPERATING PARTNERSHIP UNITS
Dividend/Distribution Total
Record Date Payable Date Per Share/Unit Dividend/Distribution
----------------- ---------------- --------------------- ---------------------
Fourth Quarter 2001 December 31, 2001 January 22, 2002 $ .6800 $ 31,196
6. ACQUISITION AND DEVELOPMENT OF REAL ESTATE
During the three months ended March 31, 2002, the Company acquired 15
industrial properties comprising approximately .8 million square feet of GLA.
The aggregate purchase price for these acquisitions totaled approximately
$41,704, excluding costs incurred in conjunction with the acquisition of the
properties. The Company also completed the development of three industrial
properties comprising approximately .8 million square feet of GLA at a cost of
approximately $24.2 million.
7. SALES OF REAL ESTATE, REAL ESTATE HELD FOR SALE AND DISCONTINUED OPERATIONS
During the three months ended March 31, 2002, the Company sold 20
industrial properties comprising approximately 2.4 million square feet of GLA
that were not classified as held for sale at December 31, 2001, two properties
comprising approximately .1 million square feet of GLA that were classified as
held for sale at December 31, 2001 and several land parcels. Gross proceeds from
these sales were approximately $96,931. The gain on sale of real estate was
approximately $15,668. In accordance with FAS 144, the results of operations and
gain on sale of real estate for the 20 sold properties that were not identified
as held for sale at December 31, 2001 are included in discontinued operations.
At March 31, 2002, the Company had 12 industrial properties comprising
approximately 1.2 million square feet of GLA held for sale. Eleven of the 12
properties comprising approximately 1.1 million square feet of GLA that were
held for sale as of March 31, 2002 were identified as held for sale as of
December 31, 2001. In accordance with FAS 144, the results of operations of the
property identified as held for sale during the three months ended March 31,
2002 are included in discontinued operations. There can be no assurance that
such properties held for sale will be sold.
The following table discloses certain information regarding the 11
industrial properties identified held for sale by the Company prior to January
1, 2002.
THREE MONTHS ENDED
MARCH 31,
--------------------
2002 2001
------- -------
Total Revenues $ 1,390 $ 1,218
Operating Expenses (535) (575)
Depreciation and Amortization --- (7)
------- -------
Income from Operations $ 855 $ 636
======= =======
10
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Three Months Ended
-----------------------
March 31, March 31,
2002 2001
--------- ---------
Interest paid, net of capitalized interest ......................... $ 15,388 $ 11,429
======== ========
Interest capitalized ............................................... $ 2,855 $ 1,973
======== ========
Supplemental schedule of noncash investing and financing activities:
Distribution payable on common stock/units ......................... $ 31,453 $ 30,537
======== ========
Distribution payable on preferred stock ............................ $ 7,231 $ 8,211
======== ========
Issuance of units in exchange for property ............................ $ --- $ 1,491
======== ========
Exchange of units for common shares:
Minority interest .................................................. $ (322) $ (2,512)
Common stock ....................................................... --- 1
Additional paid-in capital ......................................... 322 2,511
-------- --------
$ --- $ ---
======== ========
In conjunction with the property and land acquisitions, the following
liabilities were assumed:
Purchase of real estate ............................................ $ 41,704 $ 73,294
Accrued real estate taxes and security deposits .................... (348) (676)
-------- --------
$ 41,356 $ 72,618
======== ========
In conjunction with certain property sales, the Company provided seller
financing on behalf of certain buyers:
Notes Receivable ................................................... $ 28,838 $ ---
======== ========
11
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
9. EARNINGS PER SHARE
The computation of basic and diluted EPS is presented below:
Three Months Ended
--------------------------------
March 31, 2002 March 31, 2001
-------------- -------------
Numerator:
----------
Income from Continuing Operations .................... $ 16,969 $ 34,138
Less: Preferred Stock Dividends ...................... (7,231) (8,211)
------------ ------------
Income from Continuing Operations Available to
Common Stockholders, Net of Minority Interest
-For Basic and Diluted EPS .......................... 9,738 25,927
Discontinued Operations, Net of Minority Interest .... 13,804 1,061
------------ ------------
Net Income Available to Common Stockholders-For
Basic and Diluted EPS ............................... $ 23,542 $ 26,988
============ ============
Denominator:
------------
Weighted Average Shares - Basic ...................... 38,977,524 38,950,566
Effect of Dilutive Securities:
Employee and Director Common Stock Options ........... 279,647 416,657
------------ ------------
Weighted Average Shares- Diluted ..................... 39,257,171 39,367,223
============ ============
Basic EPS:
----------
Income from Continuing Operations Available to
Common Stockholders, Net of Minority Interest ....... $ .25 $ .67
============ ============
Discontinued Operations, Net of Minority Interest .... $ .35 $ .03
============ ============
Net Income Available to Common Stockholders .......... $ .60 $ .69
============ ============
Diluted EPS:
------------
Income from Continuing Operations Available to
Common Stockholders, Net of Minority Interest ....... $ .25 $ .66
============ ============
Discontinued Operations, Net of Minority Interest .... $ .35 $ .03
============ ============
Net Income Available to Common Stockholders .......... $ .60 $ .69
============ ============
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company 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 Company.
The Company has committed to the construction of 42 development projects
totaling approximately 4.3 million square feet of GLA for an estimated
investment of approximately $209.2 million. Of this amount, approximately $44.5
million remains to be funded. These developments are expected to be funded with
proceeds from the sale of select properties, cash flows from operations and
borrowings under the Company's 2000 Unsecured Acquisition Facility. The Company
expects to place in service all of the development projects during the next
twelve months. There can be no assurance that the Company will place these
projects in service during the next twelve months or that the actual completion
cost will not exceed the estimated completion cost stated above.
12
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
11. SUBSEQUENT EVENTS
From April 1, 2002 to May 3, 2002, the Company acquired 11 industrial
properties for an aggregate purchase price of approximately $45,190 excluding
costs incurred in conjunction with the acquisition of these industrial
properties. The Company also sold one industrial property for approximately
$20,863 of gross proceeds.
On April 1, 2002, the Company paid first quarter preferred stock dividends
of $54.688 per share (equivalent to $.54688 per Depositary Share) on its Series
B Preferred Stock, $53.906 per share (equivalent to $.53906 per Depositary
Share) on its Series C Preferred Stock, $49.687 per share (equivalent to $.49687
per Depositary Share) on its Series D Preferred Stock and $49.375 per share
(equivalent to $.49375 per Depositary Share) on its Series E Preferred Stock.
The preferred stock dividends paid on April 1, 2002 totaled, in the aggregate,
approximately $7,231.
On April 12, 2002, the Company called for the redemption of all of its
outstanding Series B Preferred Stock at the price of $25.00 per share, plus
accrued and unpaid dividends. The redemption date will be May 14, 2002.
On April 15, 2002, the Company, through the Operating Partnership, issued
$200,000 of senior unsecured debt which matures on April 15, 2012 and bears a
coupon interest rate of 6.875% (the "2012 Notes"). The issue price of the 2012
Notes was 99.310%. Interest is paid semi-annually in arrears on October 15 and
April 15. The Company also entered into interest rate protection agreements
which were used to fix the interest rate on the 2012 Notes prior to issuance.
The Company settled the interest rate protection agreements for approximately
$1,772 of proceeds which will be included in other comprehensive income. The
debt issue discount and the settlement amount of the interest rate protection
agreements are being amortized over the life of the 2012 Notes as an adjustment
to interest expense. The 2012 Notes contain certain covenants including
limitations on incurrence of debt and debt service coverage.
On April 15, 2002, the Company, through the Operating Partnership, issued
$50,000 of senior unsecured debt which matures on April 15, 2032 and bears a
coupon interest rate of 7.75% (the "2032 Notes"). The issue price of the 2032
Notes was 98.660%. Interest is paid semi-annually in arrears on October 15 and
April 15. The debt issue discount is being amortized over the life of the 2032
Notes as an adjustment to interest expense. The 2032 Notes contain certain
covenants including limitations on incurrence of debt and debt service coverage.
On April 15, 2002, the Company received redemption notices from holders
representing $84,930 of the 2027 Notes outstanding. The redemption notices
require the Company to payoff and retire $84,930 of the 2027 Notes on May 15,
2002.
On April 22, 2002, the Company and the Operating Partnership paid a first
quarter 2002 dividend/distribution of $.6800 per common share/Unit, totaling
approximately $31,453.
13
FIRST INDUSTRIAL REALTY TRUST, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of First Industrial Realty Trust,
Inc.'s (the "Company") financial condition and results of operations should be
read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-Q.
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
affect on the operations and future prospects of the Company on a consolidated
basis include, but are not limited to, changes in: economic conditions generally
and the real estate market specifically, legislative/regulatory changes
(including changes to laws governing the taxation of real estate investment
trusts), availability of financing, interest rate levels, competition, supply
and demand for industrial properties in the Company's current and proposed
market areas, potential environmental liabilities, slippage in development or
lease-up schedules, tenant credit risks, higher-than-expected costs, and general
accounting principles, policies and guidelines applicable to real estate
investment trusts. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included herein and in the Company's other filings with
the Securities and Exchange Commission.
The Company was organized in the state of Maryland on August 10, 1993. The
Company is a real estate investment trust ("REIT") as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through First
Industrial, L.P. (the "Operating Partnership") of which the Company is the sole
general partner with an approximate 85.0% ownership interest at March 31, 2002.
Minority interest in the Company at March 31, 2002 represents the approximate
15.0% aggregate partnership interest in the Operating Partnership held by the
limited partners thereof.
As of March 31, 2002, the Company owned 914 in-service properties located
in 24 states, containing an aggregate of approximately 63.1 million square feet
of gross leasable area ("GLA"). Of the 914 in-service properties owned by the
Company, 774 are held by the Operating Partnership, 115 are held by limited
partnerships in which the Operating Partnership is the limited partner and
wholly-owned subsidiaries of the Company are the general partners, 11 are held
by limited liability companies of which the Operating Partnership is the sole
member and 14 are held by an entity wholly-owned by the Operating Partnership.
The Company, through wholly-owned limited liability companies of which the
Operating Partnership is the sole member, also owns minority equity interests
in, and provides asset and property management services to, three joint ventures
which invest in industrial properties (the "September 1998 Joint Venture", the
"September 1999 Joint Venture" and the "December 2001 Joint Venture").
RESULTS OF OPERATIONS
At March 31, 2002, the Company owned 914 in-service properties with
approximately 63.1 million square feet of GLA, compared to 968 in-service
properties with approximately 68.2 million square feet of GLA at March 31, 2001.
During the period between April 1, 2001 and March 31, 2002, the Company acquired
67 in-service properties containing approximately 3.8 million square feet of
GLA, completed development of eight properties totaling approximately 1.7
million square feet of GLA and sold 127 in-service properties totaling
approximately 10.2 million square feet of GLA, three out of service properties
and several land parcels. The Company also took six properties out of service
that are under
14
redevelopment, comprising approximately .7 million square feet of GLA and placed
in service four properties comprising approximately .3 million square feet of
GLA.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED MARCH 31,
2001
Rental income and tenant recoveries and other income decreased by
approximately $9.6 million or 9.7% due primarily to a decrease in average GLA
and a decrease in average occupancy for the three months ended March 31, 2002 as
compared to the three months ended March 31, 2001. Rental income and tenant
recoveries and other income from properties owned prior to January 1, 2001
decreased by approximately $1.2 million or 1.6% due primarily to a decrease in
tenant recoveries due to a decrease in property expenses (as discussed below)
for the three months ended March 31, 2002 as compared to the three months ended
March 31, 2001.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
decreased by approximately $3.3 million or 10.7%. This decrease is due primarily
to decreases in real estate taxes, repairs and maintenance and utilities. The
decrease in real estate taxes and utilities is due to a decrease in average GLA
for the three months ended March 31, 2002 as compared to the three months ended
March 31, 2001. The decrease in repairs and maintenance is due to a decrease in
maintenance expenses. Property expenses from properties owned prior to January
1, 2001 decreased by approximately $.7 million or 3.1% due primarily to the
explanations above.
General and administrative increased by approximately $.6 million due
primarily to increases in employee compensation and additional employees.
Interest expense decreased by approximately $1.4 million for the three
months ended March 31, 2002 compared to the three months ended March 31, 2001
due primarily to a decrease in the weighted average interest rate on the
Company's outstanding debt for the three months ended March 31, 2002 (6.69%) as
compared to the three months ended March 31, 2001 (7.26%), as well as an
increase in capitalized interest due to an increase in development activities.
This was slightly offset by a higher average debt balance outstanding for the
three months ended March 31, 2002 as compared to the three months ended March
31, 2001. The average debt balance outstanding for the three months ended March
31, 2002 and 2001 was approximately $1,348.1 million and $1,274.6 million,
respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization increased by approximately $1.6 million
due primarily to a decrease in the number of properties the Company considered
held for sale at March 31, 2002 as compared to March 31, 2001.
Equity in income of joint ventures remained relatively unchanged.
The $.6 million gain on sale of real estate for the three months ended
March 31, 2002 resulted from the sale of two industrial properties that were
identified as held for sale at December 31, 2001. Gross proceeds from these
sales were approximately $4.8 million.
The $13.9 million gain on sale of real estate for the three months ended
March 31, 2001 resulted from the sale of 24 industrial properties and several
land parcels. Gross proceeds from these sales were approximately $60.9 million.
Income from discontinued operations of approximately $16.3 million for
the three months ended March 31, 2002 reflects the results of operations and
gain on sale of 20 industrial properties and several land parcels that were sold
during the three months ended March 31, 2002 as well as the results of
operations of one industrial property identified as held for sale during the
three months ended March 31, 2002. Gross
15
proceeds from the sales of the 20 industrial properties and several land parcels
were approximately $92.1 million, resulting in a gain on sale of real estate of
approximately $15.0 million.
Income from discontinued operations of approximately $1.3 million for the
three months ended March 31, 2001 reflects the results of operations of the 20
industrial properties that were sold during the three months ended March 31,
2002 as well as the results of operations of one industrial property identified
as held for sale during the three months ended March 31, 2002.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company's cash and cash equivalents was
approximately $2.1 million and restricted cash was approximately $60.6 million.
Included in restricted cash are approximately $2.6 million of cash reserves
required to be set aside under the Company's $40.0 million mortgage loan (the
"1995 Mortgage Loan") for payments of security deposit refunds, capital
expenditures, interest, real estate taxes, insurance and releasing costs. The
portion of the cash reserve relating to payments for capital expenditures,
interest, real estate taxes and insurance for properties collateralizing the
1995 Mortgage Loan is established monthly, distributed to the Company as such
expenditures are made and is replenished to a level adequate to make the next
periodic payment of such expenditures. The portion of the cash reserve relating
to security deposit refunds is adjusted as tenants turn over. The portion of
cash reserves relating to releasing costs resulted from a deposit of a lease
termination fee that will be used to cover the costs of releasing that space.
Also included in restricted cash is approximately $58.0 million of gross
proceeds from the sales of certain properties. These sales proceeds will be
disbursed as the Company exchanges properties under Section 1031 of the Internal
Revenue Code.
THREE MONTHS ENDED MARCH 31, 2002
Net cash provided by operating activities of approximately $22.6 million
for the three months ended March 31, 2002 was comprised primarily of net income
before minority interest of approximately $34.9 million and adjustments for
non-cash items of approximately $4.1 million, offset by the net change in
operating assets and liabilities of approximately $16.4 million. The adjustments
for the non-cash items of approximately $4.1 million are primarily comprised of
depreciation and amortization of approximately $20.5 million, offset by the gain
on sale of real estate of approximately $15.7 million and the effect of the
straight-lining of rental income of approximately $.7 million.
Net cash used in investing activities of approximately $33.5 million for
the three months ended March 31, 2002 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, an increase in restricted
cash from sales proceeds deposited with an intermediary for Section 1031
exchange purposes and contributions to the December 2001 Joint Venture, offset
by the net proceeds from the sale of real estate and the repayment of mortgage
loans receivable.
Net cash provided by financing activities of approximately $12.9 million
for the three months ended March 31, 2002 was comprised primarily of repayments
on mortgage loans payable, the repurchase of restricted stock, the purchase of
U.S. Government securities used as substitute collateral to execute a legal
defeasance of a portion of the 1995 Mortgage Loan and common and preferred stock
dividends and unit distributions, offset by the net proceeds from the exercise
of employee stock options and net borrowings under the Company's $300 million
unsecured line of credit (the "2000 Unsecured Acquisition Facility").
THREE MONTHS ENDED MARCH 31, 2001
Net cash provided by operating activities of approximately $33.4 million
for the three months ended March 31, 2001 was comprised primarily of net income
before minority interest of approximately $40.2 million, adjustments for
non-cash items of approximately $5.1 million offset by the net change in
operating assets and liabilities of approximately $11.9 million. The adjustments
for the non-cash items of
16
approximately $5.1 million are primarily comprised of depreciation and
amortization of approximately $19.3 million, offset by the gain on sale of real
estate of approximately $13.9 million and the effect of the straight-lining of
rental income of approximately $.3 million.
Net cash used in investing activities of approximately $26.8 million for
the three months ended March 31, 2001 was comprised primarily of the acquisition
of real estate, development of real estate, capital expenditures related to the
expansion and improvement of existing real estate, offset by a decrease in
restricted cash from sales proceeds deposited with an intermediary for Section
1031 exchange purposes, the net proceeds from the sale of real estate,
distributions from two of the Company's industrial real estate joint ventures
and the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $1.0 million for the
three months ended March 31, 2001 was comprised primarily of repayments on
mortgage loans payable, the repurchase of restricted stock, the purchase of U.S.
Government securities used as substitute collateral to execute a legal
defeasance of a portion of the 1995 Mortgage Loan, common and preferred stock
dividends and unit distributions, debt issuance costs incurred in conjunction
with the issuance of senior unsecured debt and net repayments under the 2000
Unsecured Acquisition Facility, offset by the proceeds from the issuance of
senior unsecured debt and net proceeds from the exercise of employee stock
options.
INVESTMENT IN REAL ESTATE AND DEVELOPMENT OF REAL ESTATE
During the three months ended March 31, 2002, the Company purchased 15
industrial properties comprising, in the aggregate, approximately .8 million
square feet of GLA for an aggregate purchase price of approximately $41.7
million, excluding costs incurred in conjunction with the acquisition of the
properties. The Company also completed the development of three industrial
properties comprising approximately .8 million square feet of GLA at a cost of
approximately $24.2 million.
The Company has committed to the construction of 42 development projects
totaling approximately 4.3 million square feet of GLA for an estimated
investment of approximately $209.2 million. Of this amount, approximately $44.5
million remains to be funded. These developments are expected to be funded with
proceeds from the sale of select properties, cash flows from operations and
borrowings under the Company's 2000 Unsecured Acquisition Facility. The Company
expects to place in service all of the development projects during the next
twelve months. There can be no assurance that the Company will place these
projects in service during the next twelve months or that the actual completion
cost will not exceed the estimated completion cost stated above.
SALE OF REAL ESTATE, REAL ESTATE HELD FOR SALE AND DISCONTINUED OPERATIONS
During the three months ended March 31, 2002, the Company sold 20
industrial properties comprising approximately 2.4 million square feet of GLA
that were not classified as held for sale at December 31, 2001, two properties
comprising approximately .1 million square feet of GLA that were classified as
held for sale at December 31, 2001 and several land parcels. Gross proceeds from
these sales were approximately $96.9 million. In accordance with FAS 144, the
results of operations and gain on sale of real estate for the 20 sold properties
that were not identified as held for sale at December 31, 2001 are included in
discontinued operations.
At March 31, 2002, the Company had 12 industrial properties comprising
approximately 1.2 million square feet of GLA held for sale. Eleven of the 12
properties comprising approximately 1.1 million square feet of GLA that were
held for sale as of March 31, 2002 were identified as held for sale as of
December 31, 2001. Income from operations for these 11 industrial properties
held for sale for the three months ended March 31, 2002 and 2001 is
approximately $.9 million and $.6 million, respectively. Net carrying value of
the 12 industrial properties held for sale at March 31, 2002 is approximately
$28.5 million. In accordance with FAS 144, the results of operations of the
property identified as held for sale during the three months ended March 31,
2002 are included in discontinued operations. There can be no assurance that
such properties held for sale will be sold.
17
INVESTMENTS IN JOINT VENTURES
During the three months ended March 31, 2002, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, recognized, in the aggregate, approximately $.5 million in
asset management and property management fees from the September 1998 Joint
Venture, the September 1999 Joint Venture and the December 2001 Joint Venture,
collectively. The Company, through a wholly-owned limited liability company in
which the Operating Partnership is the sole member, invested approximately $2.2
million in the December 2001 Joint Venture. The Company, through wholly-owned
limited liability companies in which the Operating Partnership is the sole
member, received distributions of approximately $.2 million from the September
1998 Joint Venture and the September 1999 Joint Venture, collectively. As of
March 31, 2002, the September 1998 Joint Venture owned 90 industrial properties
comprising approximately 4.3 million square feet of GLA, the September 1999
Joint Venture owned 36 industrial properties comprising approximately 1.0
million square feet of GLA and the December 2001 Joint Venture had economic
interests in 11 industrial properties comprising approximately 2.2 million
square feet of GLA. The properties purchased by the December 2001 Joint Venture
were purchased from the Company. The Company deferred 15% of the gain resulting
from these sales which is equal to the Company's economic interest in the
December 2001 Joint Venture.
MORTGAGE LOANS PAYABLE
In January 2002, the Company purchased approximately $.8 million of U.S.
Government securities as substitute collateral to execute a legal defeasance of
approximately $.8 million of the 1995 Mortgage Loan. The terms of the legal
defeasance require the Mortgage Partnership to use the gross proceeds from the
maturities of the U.S. Government securities to pay down and subsequently retire
the defeased portion of the 1995 Mortgage Loan in January 2003. The Company is
carrying the defeased portion of the 1995 Mortgage Loan on its balance sheet
until it pays down and retires the defeased portion of the 1995 Mortgage Loan in
January 2003. Upon the execution of the legal defeasance, one of the 21
properties collateralizing the 1995 Mortgage Loan was released and subsequently
sold.
MARKET RISK
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.
This analysis presents the hypothetical gain or loss in earnings, cash
flows or fair value of the financial instruments and derivative instruments
which are held by the Company at March 31, 2002 that are sensitive to changes in
the interest rates. While this analysis may have some use as a benchmark, it
should not be viewed as a forecast.
In the normal course of business, the Company also faces risks that are
either non-financial or non-quantifiable. Such risks principally include credit
risk and legal risk and are not represented in the following analysis.
At March 31, 2002, $1,210.5 million (approximately 89.3% of total debt at
March 31, 2002) of the Company's debt was fixed rate debt (included in the fixed
rate debt is $75.0 million of borrowings under the Company's 2000 Unsecured
Acquisition Facility which the Company fixed the interest rate via interest
rate swap agreements) and $144.5 million (approximately 10.7% of total debt at
March 31, 2002) was variable rate debt. The Company also has outstanding a
written put option (the "Written Option") which was issued in conjunction with
the initial offering of one tranche of senior unsecured debt as well as interest
rate protection agreements with a notional value of $100 million which fixed the
interest rate
18
on a forecasted offering of unsecured debt (the "Treasury Locks"). Currently,
the Company does not enter into financial instruments for trading or other
speculative purposes.
For fixed rate debt, changes in interest rates generally affect the fair
value of the debt, but not earnings or cash flows of the Company. Conversely,
for variable rate debt, changes in the interest rate generally do not impact the
fair value of the debt, but would affect the Company's future earnings and cash
flows. The interest rate risk and changes in fair market value of fixed rate
debt generally do not have a significant impact on the Company until the Company
is required to refinance such debt. See Note 4 to the consolidated financial
statements for a discussion of the maturity dates of the Company's various fixed
rate debt.
Based upon the amount of variable rate debt outstanding at March 31, 2002,
a 10% increase or decrease in the interest rate on the Company's variable rate
debt would decrease or increase, respectively, future net income and cash flows
by approximately $.5 million per year. A 10% increase in interest rates would
decrease the fair value of the fixed rate debt at March 31, 2002 by
approximately $50.4 million to $1,143.9 million. A 10% decrease in interest
rates would increase the fair value of the fixed rate debt at March 31, 2002 by
approximately $55.6 million to $1,249.9 million. A 10% increase in interest
rates would decrease the fair value of the Written Option at March 31, 2002 by
approximately $1.8 million to $3.4 million. A 10% decrease in interest rates
would increase the fair value of the Written Option at March 31, 2002 by
approximately $2.5 million to $7.7 million. The Company settled the Treasury
Locks on April 5, 2002 for proceeds of approximately $2.3 million.
ISSUANCE OF RESTRICTED STOCK AND EMPLOYEE STOCK OPTIONS
During the three months ended March 31, 2002, the Company awarded 90,260
shares of restricted common stock to certain employees and 965 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3.1 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.
During the three months ended March 31, 2002, the Company issued 870,600
non-qualified employee stock options to certain officers, Directors and
employees of the Company. These non-qualified employee stock options vest over
periods from one to three years, have a strike price of $30.53 per share and
expire ten years from the date of grant.
COMMON STOCK
During the three months ended March 31, 2002, certain employees of the
Company exercised 354,953 non-qualified employee stock options. Net proceeds
to the Company were approximately $10.1 million.
DIVIDENDS/DISTRIBUTIONS
On January 22, 2002, the Company and the Operating Partnership paid a
fourth quarter 2001 distribution of $.6800 per common share/Unit, totaling
approximately $31.2 million.
SUBSEQUENT EVENTS
From April 1, 2002 to May 3, 2002, the Company acquired 11 industrial
properties for an aggregate purchase price of approximately $45.2 million,
excluding costs incurred in conjunction with the acquisition of these industrial
properties. The Company also sold one industrial property for approximately
$20.9 million of gross proceeds.
On April 1, 2002, the Company paid first quarter preferred stock dividends
of $54.688 per share (equivalent to $.54688 per Depositary Share) on its Series
B Preferred Stock, $53.906 per share (equivalent
19
to $.53906 per Depositary Share) on its Series C Preferred Stock, $49.687 per
share (equivalent to $.49687 per Depositary Share) on its Series D Preferred
Stock and $49.375 per share (equivalent to $.49375 per Depositary Share) on its
Series E Preferred Stock. The preferred stock dividends paid on April 1, 2002
totaled, in the aggregate, approximately $7.2 million.
On April 12, 2002, the Company called for the redemption of all of its
outstanding Series B Preferred Stock at the price of $25.00 per share, plus
accrued and unpaid dividends. The redemption date will be May 14, 2002.
On April 15, 2002, the Company, through the Operating Partnership, issued
$200.0 million of senior unsecured debt which matures on April 15, 2012 and
bears a coupon interest rate of 6.875% (the "2012 Notes"). The issue price of
the 2012 Notes was 99.310%. Interest is paid semi-annually in arrears on October
15 and April 15. The Company also entered into interest rate protection
agreements which were used to fix the interest rate on the 2012 Notes prior to
issuance. The Company settled the interest rate protection agreements for
approximately $1.8 million of proceeds which will be included in other
comprehensive income. The debt issue discount and the settlement amount of the
interest rate protection agreements are being amortized over the life of the
2012 Notes as an adjustment to interest expense. The 2012 Notes contain certain
covenants including limitations on incurrence of debt and debt service coverage.
On April 15, 2002, the Company, through the Operating Partnership, issued
$50.0 million of senior unsecured debt which matures on April 15, 2032 and bears
a coupon interest rate of 7.75% (the "2032 Notes"). The issue price of the 2032
Notes was 98.660%. Interest is paid semi-annually in arrears on October 15 and
April 15. The debt issue discount is being amortized over the life of the 2032
Notes as an adjustment to interest expense. The 2032 Notes contain certain
covenants including limitations on incurrence of debt and debt service coverage.
On April 15, 2002, the Company received redemption notices from holders
representing $84.9 million of the 2027 Notes outstanding. The redemption notices
require the Company to payoff and retire $84.9 million of the 2027 Notes on May
15, 2002.
On April 22, 2002, the Company and the Operating Partnership paid a first
quarter 2002 dividend/distribution of $.6800 per common share/Unit, totaling
approximately $31.5 million.
SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS
The Company has considered its short-term (one year or less) liquidity
needs and the adequacy of its estimated cash flow from operations and other
expected liquidity sources to meet these needs. The Company believes that its
principle short-term liquidity needs are to fund normal recurring expenses, debt
service requirements and the minimum distribution required to maintain the
Company's REIT qualification under the Internal Revenue Code. The Company
anticipates that these needs will be met with cash flows provided by operating
activities.
The Company expects to meet long-term (greater than one year) liquidity
requirements such as property acquisitions, developments, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through the disposition of select assets, long-term unsecured
indebtedness and the issuance of additional equity securities. As of March 31,
2002, $589.2 million of common stock, preferred stock and depositary shares and
$500.0 million of debt securities were registered and unissued under the
Securities Act of 1933, as amended. As of May 3, 2002, $589.2 million of common
stock, preferred stock and depositary shares and $250.0 million of debt
securities were registered and unissued under the Securities Act of 1933, as
amended. The Company also may finance the development or acquisition of
additional properties through borrowings under the 2000 Unsecured Acquisition
Facility. At March 31, 2002, borrowings under the 2000 Unsecured Acquisition
Facility bore interest at a weighted average interest rate of 3.31%. The 2000
Unsecured Acquisition Facility bears interest at a floating rate of LIBOR plus
...80%, or the Prime Rate, at the Company's election. As of May 3, 2002, the
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Company had approximately $297.8 million available for additional borrowings
under the 2000 Unsecured Acquisition Facility.
OTHER
On April 30, 2002, the FASB issued Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" ("FAS 145"). FAS 145 rescinds both Statement
of Financial Accounting Standards No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" ("FAS 4"), and the amendment to FAS 4, Statement of
Financial Accounting Standards No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". FAS 145 eliminates the requirement that gains and
losses from the extinguishment of debt be aggregated and, if material,
classified as an extraordinary item, net of the related income tax effect,
unless the criteria in Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" are met. FAS 145 is effective for transactions occurring
subsequent to May 15, 2002. The Company is currently assessing the impact of FAS
145 on its consolidated financial position, liquidity, and results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is included in Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" above.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
a) Exhibits:
Exhibit
Number Description
------ -----------
10.1* Employment Agreement, dated March 31, 2002, between First
Industrial Realty Trust, Inc. and Michael J. Havala
10.2* Employment Agreement, dated March 31, 2002, between First
Industrial Realty Trust, Inc. and Johannson L. Yap
10.3* Employment Agreement, dated March 25, 2002, between First
Industrial Realty Trust, Inc. and David P. Draft
b) Report on Form 8-K:
None.
* Filed herewith.
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================================================================================
The Company has prepared supplemental financial and operating information
which is available without charge upon request to the Company, or please visit
our 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
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Date: May 9, 2002 By: /s/ Scott A. Musil
------------------
Scott A. Musil
Senior Vice President- Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1* Employment Agreement, dated March 31, 2002, between First
Industrial Realty Trust, Inc. and Michael J. Havala
10.2* Employment Agreement, dated March 31, 2002, between First
Industrial Realty Trust, Inc. and Johannson L. Yap
10.3* Employment Agreement, dated March 25, 2002, between First
Industrial Realty Trust, Inc. and David P. Draft
* Filed herewith.
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