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 MARCH 31, 1999
[ ] 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 MARCH 31, 1999
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998........................................... 2
Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and March 31, 1998.............. 3
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and March 31, 1998..................... 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/A....................... 22
SIGNATURE........................................................... 23
EXHIBIT INDEX....................................................... 24
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
March 31, December 31,
1999 1998
----------- -----------
ASSETS
Assets:
Investment in Real Estate:
Land............................................. 322,380 $ 323,363
Buildings and Improvements....................... 1,803,961 1,794,611
Furniture, Fixtures and Equipment................ 1,353 1,353
Construction in Progress......................... 15,224 14,138
Less: Accumulated Depreciation................ (156,967) (145,435)
----------- -----------
Net Investment in Real Estate........... 1,985,951 1,988,030
Investment in Other Real Estate
Partnerships................................... 383,105 368,364
Cash and Cash Equivalents........................ --- 13,946
Restricted Cash.................................. 10,341 7,680
Tenant Accounts Receivable, Net.................. 12,643 9,755
Investment in Joint Venture...................... 5,154 4,458
Deferred Rent Receivable......................... 12,627 11,150
Deferred Financing Costs, Net.................... 10,356 10,458
Prepaid Expenses and Other Assets, Net........... 59,554 56,820
----------- -----------
Total Assets............................ $ 2,479,731 $ 2,470,661
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable, Net...................... $ 65,641 $ 66,065
Senior Unsecured Debt, Net....................... 948,618 948,595
Acquisition Facility Payable..................... 141,600 134,800
Accounts Payable and Accrued Expenses............ 75,025 68,198
Rents Received in Advance and Security
Deposits....................................... 17,947 16,363
Distributions Payable............................ 27,157 27,081
----------- -----------
Total Liabilities....................... 1,275,988 1,261,102
----------- -----------
Commitments and Contingencies....................... --- ---
Partners' Capital:
General Partner Preferred Units.................. 336,990 336,990
General Partner Units............................ 686,950 689,923
Unamortized Value of General Partnership
Restricted Units............................... (4,889) (3,312)
Limited Partners Units........................... 184,692 185,958
----------- -----------
Total Partners' Capital................. 1,203,743 1,209,559
----------- -----------
Total Liabilities and Partners'
Capital............................... $ 2,479,731 $ 2,470,661
=========== ===========
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
March 31, 1999 March 31, 1998
-------------- --------------
Revenues:
Rental Income............................. $ 64,251 $ 51,334
Tenant Recoveries and Other Income........ 16,707 11,744
----------- -----------
Total Revenues................... 80,958 63,078
----------- -----------
Expenses:
Real Estate Taxes......................... 13,048 10,808
Repairs and Maintenance................... 5,069 2,979
Property Management....................... 2,380 2,485
Utilities................................. 2,196 1,944
Insurance................................. 193 179
Other..................................... 895 852
General and Administrative................ 3,095 2,619
Interest.................................. 19,318 14,069
Amortization of Deferred Financing Costs.. 248 161
Depreciation and Other Amortization....... 14,592 11,617
----------- -----------
Total Expenses................... 61,034 47,713
----------- -----------
Income from Operations Before Equity in
Income of Other Real Estate Partnerships
and Equity in Income of Joint Venture..... 19,924 15,365
Equity in Income of Other Real Estate
Partnerships.............................. 6,408 8,757
Equity in Income of Joint Venture............ 126 ---
----------- -----------
Income from Operations....................... 26,458 24,122
Gain on Sales of Real Estate................. 1,545 43
----------- -----------
Net Income................................... 28,003 24,165
Less: Preferred Unit Distributions.......... (7,231) (4,998)
----------- -----------
Net Income Available to Unitholders.......... $ 20,772 $ 19,167
=========== ===========
Net Income Available to Unitholders per
Weighted Average Unit Outstading:
Basic................................... $ .46 $ .45
=========== ===========
Diluted................................ $ .46 $ .45
=========== ===========
The accompanying notes are an integral part of the financial statements.
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5
FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................ $ 28,003 $ 24,165
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation....................... 13,335 10,642
Amortization of Deferred Financing
Costs.............................. 248 161
Other Amortization................. 1,295 1,228
Equity in Income of Joint Venture.. (126) ---
Gain on Sales of Real Estate....... (1,545) (43)
Equity in Income of Other Real
Estate Partnerships.............. (6,408) (8,757)
Increase in Tenant Accounts
Receivable and Prepaid Expenses
and Other Assets................. (7,220) (6,412)
Increase in Deferred Rent
Receivable....................... (1,520) (956)
Increase in Accounts Payable and
Accrued Expenses and Rents
Received in Advance and
Security Deposits................ 7,473 8,366
---------- -----------
Net Cash Provided by Operating
Activities..................... 33,535 28,394
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and Additions to
Investment in Real Estate and
Closing Costs of Sales of Real
Estate........................... (33,914) (147,445)
Contributions to Investment in
Other Real Estate Partnerships... (21,588) (43,175)
Distributions from Investment in
Other Real Estate Partnerships... 13,255 5,744
Contributions to and Investments
in Joint Venture................. (750) ---
Distributions from Joint Venture... 180 ---
Proceeds from Sales of Investment
in Real Estate................... 23,926 1,798
Repayment of Mortgage Loans
Receivable....................... 87 16
Increase in Restricted Cash........ (2,661) ---
---------- -----------
Net Cash Used in Investing
Activities..................... (21,465) (183,062)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Unit Distributions................. (27,074) (22,004)
Preferred Unit Contributions....... --- 192,700
Preferred Unit Distributions....... (7,231) (4,784)
Repayments on Mortgage Loans
Payable.......................... (406) (363)
Proceeds from Acquisition
Facilities Payable............... 29,300 164,900
Repayments on Acquisition
Facilities Payable............... (22,500) (276,500)
Proceeds from Senior Unsecured
Debt............................. --- 99,753
Other Proceeds from Senior Unsecured
Debt............................. --- 2,760
Other Costs of Senior Unsecured
Debt............................. --- (2,565)
Book Overdraft..................... 2,125 ---
Debt Issuance Costs and Prepayment
Fees............................. (230) (1,195)
---------- -----------
Net Cash (Used in) Provided
by Financing Activities........ (26,016) 152,702
---------- -----------
Net Decrease in Cash and Cash
Equivalents...................... (13,946) (1,966)
Cash and Cash Equivalents,
Beginning of Period.............. 13,946 4,995
---------- -----------
Cash and Cash Equivalents, End of
Period........................... $ --- $ 3,029
========== ===========
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 84.0% ownership interest at March 31,
1999. The Company also owns preferred units 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 16.0% aggregate ownership interest at
March 31, 1999.
The Operating Partnership is the sole member of limited liability
companies (the "L.L.C.s"), owns a 95% economic interest in FR Development
Services, Inc. as well as a 99% 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 wholly owned limited liability companies in
which it is the sole member, also owns a 10% equity interest in and provides
asset and property management services to a joint venture which invests in
industrial properties (the "September 1998 Joint Venture").
The general partners of the Other Real Estate Partnerships are separate
corporations, each with a one percent 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.
The consolidated financial statements of the Operating Partnership report
the L.L.C.s and FR Development Services, Inc. on a consolidated basis
(hereinafter defined as the "Consolidated Operating Partnership") and the Other
Real Estate Partnerships 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 March 31, 1999, the Consolidated Operating Partnership owned 876
in-service properties containing an aggregate of approximately 57.0 million
square feet of gross leasable area ("GLA"). On a combined basis, as of March 31,
1999, the Other Real Estate Partnerships owned 102 in-service properties
containing an aggregate of approximately 11.8 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 operating
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 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 1998 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, 1998 audited financial
statements included in the Operating Partnership's 1998 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 March 31, 1999 and December 31, 1998, and the reported
amounts of revenues and expenses for the three months ended March 31, 1999 and
1998. Actual results could differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary to present fairly the financial position of the
Consolidated Operating Partnership as of March 31, 1999, the results of its
operations and its cash flows for each of the three months ended March 31, 1999
and 1998.
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 $1,649 as
of March 31, 1999 and December 31, 1998.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
3. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS
The Investment in Other Real Estate Partnerships reflects the Operating
Partnership's 99% limited partnership equity interest in the entities described
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:
March 31, December 31,
1999 1998
--------- ---------
ASSETS
Assets:
Investment in Real Estate, Net....... $ 434,775 $ 419,117
Other Assets......................... 40,017 41,198
--------- ---------
Total Assets............... $ 474,792 $ 460,315
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............... $ 42,283 $ 42,422
Other Liabilities.................... 5,765 5,901
--------- ---------
Total Liabilities.......... 48,048 48,323
--------- ---------
Partners' Capital.................... 426,744 411,992
--------- ---------
Total Liabilities and
Partners' Capital........ $ 474,792 $ 460,315
========= =========
Condensed Combined Statements of Operations:
Three Months Ended
---------------------------
March 31, March 31,
1999 1998
--------- ---------
Total Revenues............................. $ 14,440 $ 13,123
Property Expenses.......................... (3,733) (2,805)
Interest Expense........................... (761) (692)
Amortization of Deferred Financing Costs... (17) (17)
Depreciation and Other Amortization........ (2,476) (2,100)
Gain on Sales of Real Estate............... --- 2,317
--------- ---------
Net Income................................. $ 7,453 $ 9,826
========= =========
7
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
4. INVESTMENT IN JOINT VENTURE
During the three months ended March 31, 1999, the Consolidated Operating
Partnership received approximately $728 (net of the intercompany elimination) in
acquisition, asset management and property management fees from the September
1998 Joint Venture. The Operating Partnership, through a wholly owned limited
liability company in which it is the sole member, also contributed $714 and
received distributions of $180 from the September 1998 Joint Venture. As of
March 31, 1999, the September 1998 Joint Venture owned 146 industrial properties
comprising approximately 7.5 million square feet of GLA.
5. 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 in order to redeploy capital. At March
31, 1999, the Consolidated Operating Partnership had 24 industrial properties
comprising approximately 3.9 million square feet of GLA held for sale.
Twenty-three of 24 of these properties were identified as held for sale during
the three months ended March 31, 1999. There can be no assurance that such
properties held for sale will be sold.
The following table discloses certain information regarding the 24
industrial properties held for sale by the Consolidated Operating Partnership.
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
--------- ---------
Total Revenues $ 5,237 $ 4,076
Operating Expenses (1,453) (1,473)
Depreciation and Amortization (756) (756)
--------- ---------
Income from Operations $ 3,028 $ 1,847
========= =========
Net Carrying Value $ 93,108
=========
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
6. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION FACILITY
PAYABLE
The following table discloses certain information regarding the
Consolidated Operating Partnership's mortgage loans, senior unsecured debt and
acquisition facility payable:
ACCRUED INTEREST
OUTSTANDING BALANCE AT PAYABLE AT INTEREST RATE AT
------------------------ ------------------------ ---------------- --------
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, MATURITY
1999 1998 1999 1998 1999 DATE
---------- ------------ --------- ------------ --------------- --------
MORTGAGE LOANS PAYABLE, NET
CIGNA Loan ......................... $ 35,117 $ 35,220 $ 219 $ -- 7.500% 4/01/03
Assumed Loans ...................... 8,584 8,661 -- -- 9.250% 1/01/13
LB Mortgage Loan II ................ 705 705 -- -- 8.000% (1)
Acquisition Mortgage Loan I ........ 3,798 3,864 -- -- 8.500% 8/01/08
Acquisition Mortgage Loan II ....... 7,769 7,828 -- 51 7.750% 4/01/06
Acquisition Mortgage Loan III ...... 3,444 3,485 -- 26 8.875% 6/01/03
Acquisition Mortgage Loan IV ....... 2,469 2,488 -- 19 8.950% 10/01/06
Acquisition Mortgage Loan VI ....... 1,014 (2) 1,024 -- 7 8.875% 11/01/06
Acquisition Mortgage Loan VII ...... 1,434 (2) 1,450 -- 11 9.750% 3/15/02
Acquisition Mortgage Loan VIII ..... 1,307 1,340 -- 9 8.450% 7/01/09
-------- -------- ----- -----
Total .............................. $ 65,641 $ 66,065 $ 219 $ 123
======== ======== ===== =====
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 ...................... 149,957 (3) 149,956 4,307 1,457 7.600% 5/15/07
2011 Notes ...................... 99,435 (3) 99,424 2,786 942 7.375% 5/15/11 (4)
2017 Notes ...................... 99,821 (3) 99,818 2,500 625 7.500% 12/01/17
2027 Notes ...................... 99,863 (3) 99,862 2,701 914 7.150% 5/15/27 (5)
2028 Notes ...................... 199,770 (3) 199,768 3,209 7,051 7.600% 7/15/28
2011 Drs ........................ 99,772 (3) 99,767 3,178 1,553 6.500% (7) (6)
................................. 4/05/11
---------- ------------ -------- ----------
Total .......................... $ 948,618 $ 948,595 $ 23,427 $ 13,800
========== ============ ======== ==========
ACQUISITION FACILITY
PAYABLE
1997 Unsecured Acquisition
Facility............ $ 141,600 $ 134,800 $ 695 $ 690 5.838% 4/30/01
========== ============ ======== ==========
(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) The Acquisition Mortgage Loan VI and the Acquisition Mortgage Loan VII
are net of unamortized premiums of $64 and $86, respectively.
(3) The 2007 Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028 Notes and the
2011 Drs. are net of unamortized discounts of $43, $565, $179, $137,
$230 and $228, 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.
The following is a schedule of the stated maturities of the mortgage
loans, senior unsecured debt and acquisition facility payable for the next five
years ending December 31, and thereafter:
Amount
-------------
1999 $ 1,335
2000 1,901
2001 143,664
2002 3,463
2003 36,620
Thereafter 969,403
-------------
Total $ 1,156,386
=============
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.
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
7. 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 three months ended March 31, 1999, the Company awarded 72,100
shares of restricted common stock to certain employees and 837 shares of
restricted common stock to certain Directors. Other employees of the Company
converted certain employee stock options to 1,129 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 $1,937 on the date
of grant. The restricted common stock vests over periods from five to ten years.
Compensation expense will be charged to earnings over the respective vesting
period.
Distributions:
On January 18, 1999, the Operating Partnership paid a fourth quarter 1998
distribution of $.60 per Unit, totaling approximately $27,081.
On March 31, 1999, the Operating Partnership paid a first quarter
distribution of $54.688 per unit on its Series B Cumulative Preferred Units. On
March 31, 1999, the Operating Partnership paid a first quarter distribution of
$53.906 per unit on its Series C Cumulative Preferred Units. On March 31, 1999,
the Operating Partnership paid a first quarter distribution of $49.687 per unit
on its Series D Cumulative Preferred Units. On March 31, 1999, the Operating
Partnership paid a first quarter distribution of $49.375 per unit on its Series
E Cumulative Preferred Units. The preferred unit distributions paid on March 31,
1999 totaled, in the aggregate, approximately $7,231.
8. ACQUISITION OF REAL ESTATE
During the three months ended March 31, 1999, the Consolidated Operating
Partnership acquired one existing industrial property and several land parcels.
The aggregate purchase price for these acquisitions totaled approximately
$6,405, excluding costs incurred in conjunction with the acquisition of the
properties.
9. SALES OF REAL ESTATE
During the three months ended March 31, 1999, the Consolidated Operating
Partnership sold ten existing industrial properties and one land parcel. Gross
proceeds from these sales were approximately $23,926. Approximately $4,759 of
the gross proceeds from the sales of these properties was received from the
September 1998 Joint Venture (the Consolidated Operating Partnership sold two of
the ten properties to the September 1998 Joint Venture at the Consolidated
Operating Partnership's net book value). The gain on sales of real estate was
approximately $1,545.
10
12
FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
10. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Three Months Ended
------------------------
March 31, March 31,
1999 1998
--------- ---------
Interest paid, net of capitalized
interest.............................. $ 9,590 $ 1,991
========= =========
Interest capitalized.................... $ 1,229 $ 935
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Distribution payable on Units........... $ 27,157 $ 22,709
========= =========
EXCHANGE OF LIMITED PARTNERSHIP UNITS FOR
GENERAL PARTNERSHIP UNITS:
Limited Partnership Units............... $ (255) $ (2,574)
General Partnership Units............... 255 2,574
--------- ---------
$ --- $ ---
========= =========
IN CONJUNCTION WITH THE PROPERTY
ACQUISITIONS, THE FOLLOWING ASSETS
AND LIABILITIES WERE ASSUMED AND
OPERATING PARTNERSHIP UNITS WERE
EXCHANGED:
Purchase of real estate ................ $ 6,405 $ 127,689
Prepaid(Accrued) real estate taxes
and security deposits ................ 17 (1,782)
Operating Partnership Units............. --- (1,971)
--------- ---------
$ 6,422 $ 123,936
========= =========
IN CONJUNCTION WITH THE DISTRIBUTION OF 173
PROPERTIES FROM THE FINANCING PARTNERSHIP
TO THE OPERATING PARTNERSHIP ON JANUARY 2,
1998, THE FOLLOWING ASSETS AND LIABILITIES
WERE ASSUMED:
Investment in real estate net........... $ 382,190
Tenant accounts receivable.............. 3,017
Deferred rent receivable................ 4,689
Other assets............................ 6,209
Accounts payable and accrued expenses... (5,920)
Rents received in advance and security
deposits.............................. (2,538)
---------
Investment in other real estate
partnerships.......................... $ 387,647
=========
11
13
FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
11. EARNINGS PER UNIT
Net income per weighted average Units - 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:
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
----------- -----------
Numerator:
----------
Net Income............................ $ 28,003 $ 24,165
Less: Preferred Distributions......... (7,231) (4,998)
----------- -----------
Net Income Available to Unitholders
- For Basic and Diluted EPS.......... $ 20,772 $ 19,167
=========== ===========
Denominator:
------------
Weighted Average Units - Basic........ 45,193,231 42,388,857
Effect of Dilutive Securities:
Employee and Director Common
Stock Options of the Company that
result in the issuance of general
partnership units.................. 84,166 374,177
----------- -----------
Weighted Average Units - Diluted...... 45,277,397 42,763,034
=========== ===========
Basic EPS:
----------
Net Income Available to Unitholders... $ .46 $ .45
=========== ===========
Diluted EPS:
------------
Net Income Available to Unitholders... $ .46 $ .45
=========== ===========
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FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA)
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 seven development projects totaling approximately .6 million square feet of
GLA. These developments are expected to be funded with cash flow from operations
as well as borrowings under the Operating Partnership's $300,000 unsecured
revolving credit facility.
13. SUBSEQUENT EVENTS
From April 1, 1999 to May 7, 1999, the Consolidated Operating Partnership
sold four industrial properties for approximately $13,036 of gross proceeds.
On April 19, 1999, the Operating Partnership paid a first quarter 1999
distribution of $.60 per Unit, totaling approximately $27,157.
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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
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Operating Partnership, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," or similar
expressions. The Operating Partnership's ability to predict results or the
actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse affect on the operations and future
prospects of the Operating Partnership on a consolidated basis include, but are
not limited to, changes in: economic conditions generally and the real estate
market specifically, legislative/regulatory changes (including changes to laws
governing the taxation of REITs), availability of capital, interest rates,
competition, supply and demand for industrial properties in the Operating
Partnership's current and proposed market areas, general accounting principles,
policies and guidelines applicable to REITs and status of Year 2000 compliance.
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 84.0% ownership interest at March 31, 1999. The Company also
owns preferred units 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 16.0% aggregate ownership interest at March 31, 1999.
The Operating Partnership is the sole member of 23 limited liability
companies (the "L.L.C.s"), owns a 95% economic interest in FR Development
Services, Inc. as well as a 99% 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 financial statements of the Operating Partnership report the L.L.C.s and FR
Development Services, Inc. on a consolidated basis (hereinafter defined as the
"Consolidated Operating Partnership") and the Other Real Estate Partnerships 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 a one percent 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 the
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
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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 "Series A 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 March 31, 1999, the Consolidated Operating Partnership owned 876
in-service properties with approximately 57.0 million square feet of gross
leasable area ("GLA"), compared to 746 in-service properties with approximately
50.8 million square feet of GLA at March 31, 1998. The addition of 176
properties acquired or developed between April 1, 1998 and March 31, 1999
included the acquisitions of 167 properties totaling approximately 7.2 million
square feet of GLA and the completed development of nine properties totaling
approximately 1.3 million square feet of GLA. The Consolidated Operating
Partnership also sold 45 in-service properties totaling approximately 2.2
million square feet of GLA and several land parcels. The Consolidated Operating
Partnership also took one property out of service that was under redevelopment
comprising approximately .1 million square feet of GLA.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 TO THREE MONTHS ENDED MARCH 31,
1998
Rental income and tenant recoveries and other income increased by
approximately $17.9 million or 28.4% due primarily to the properties acquired or
developed after December 31, 1997. Approximately $.7 million of this increase is
due to acquisition, asset management and property management fees received from
the September 1998 Joint Venture. Revenues from properties owned prior to
January 1, 1998, increased by approximately $3.0 million or 4.9% due primarily
to general rent increases and an increase in recoverable income related to an
increase in recoverable property expenses as discussed below.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by approximately $4.5 million or 23.6% due primarily to the properties
acquired or developed after December 31, 1997. Expenses from properties owned
prior to January 1, 1998, increased by approximately $1.6 million or 9.2% due
primarily to an increase in snow removal and related expenses incurred during
the three months ended March 31, 1999 as compared to the three months ended
March 31, 1998 for properties located in certain of the Consolidated Operating
Partnership's metropolitan areas.
General and administrative expense increased by approximately $.5 million
due primarily to the adoption of Emerging Issues Task Force Issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Acquisitions" ("EITF
97-11"). EITF 97-11, effective March 19, 1998, requires that internal costs of
preacquisition activities incurred in connection with the acquisition of an
operating property be expensed as incurred. Prior to March 19, 1998, the
Consolidated Operating Partnership capitalized internal costs of preacquisition
activities incurred in connection with the acquisition of operating properties.
Interest expense increased by approximately $5.2 million for the three
months ended March 31, 1999 compared to the three months ended March 31, 1998
due primarily to a higher average debt balance outstanding resulting from the
issuance of senior unsecured debt to fund the acquisition of additional
properties. The average debt balances outstanding for the three months ended
March 31, 1999 and 1998 were approximately $1.2 billion and $.8 billion,
respectively.
Amortization of deferred financing costs increased by approximately $.1
million due primarily to additional amortization of deferred financing costs
related to the issuance of additional senior unsecured debt.
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Depreciation and other amortization increased by approximately $3.0
million due primarily to the additional depreciation and amortization related to
the properties acquired after December 31, 1997.
Equity in Income of Other Real Estate Partnerships decreased by
approximately $2.3 million due primarily to a decrease in gain on sales of real
estate. During the three months ended March 31, 1999, the Other Real Estate
Partnerships did not sell any industrial properties. During the three months
ended March 31, 1998, the Other Real Estate Partnerships sold five industrial
properties and one land parcel for a gain of approximately $2.3 million.
Equity in income of joint venture of approximately $.1 million for the
three months ended March 31, 1999 represents the Consolidated Operating
Partnership's 10% income interest in the September 1998 Joint Venture.
The $1.5 million gain on sales of properties for the three months ended
March 31, 1999 resulted from the sale of ten existing industrial properties and
one land parcel. Gross proceeds from these sales were approximately $23.9
million.
The $.04 million gain on sales of properties for the three months ended
March 31, 1998 resulted from the sale of one existing industrial property and
one land parcel. Gross proceeds from these sales were approximately $1.8
million.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1999, the Consolidated Operating Partnership's restricted
cash totaled approximately $10.3 million. Restricted cash was comprised of
approximately $10.3 million of net proceeds from the sales of certain
properties. These sales proceeds will be disbursed as the Operating Partnership
exchanges into properties under Section 1031 of the Internal Revenue Code.
THREE MONTHS ENDED MARCH 31, 1999
Net cash provided by operating activities of approximately $33.5 million
for the three months ended March 31, 1999 was comprised primarily of net income
of approximately $28.0 million, adjustments for non-cash items of approximately
$5.3 million and the net change in operating assets and liabilities of
approximately $.2 million. The adjustments for the non-cash items are primarily
comprised of depreciation and amortization, offset by equity in income of Other
Real Estate Partnerships, equity in income of the September 1998 Joint Venture,
the gain on sales of real estate and the effect of the straight-lining of rental
income.
Net cash used in investing activities of approximately $21.5 million
for the three months ended March 31, 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, closing costs
from the sales of real estate, contributions to investment in 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, proceeds from the sales of real estate and the
repayment of mortgage loans receivable.
Net cash provided by financing activities of approximately $26.0
million for the three months ended March 31, 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 $300.0 million unsecured revolving
credit facility (the "1997 Unsecured Acquisition Facility") and a book
overdraft. The general partner of the Operating Partnership manages the cash of
the Consolidated Operating Partnership and the Other Real Estate Partnerships on
a
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consolidated basis. On a consolidated basis, the Consolidated Operating
Partnership and the Other Real Estate Partnerships have a positive cash balance
as of March 31, 1999.
THREE MONTHS ENDED MARCH 31, 1998
Net cash provided by operating activities of approximately $28.4 million
for the three months ended March 31, 1998 was comprised primarily of net income
of approximately $24.2 million, adjustments for non-cash items of approximately
$2.3 million and the net change in operating assets and liabilities of
approximately $1.9 million. The adjustments for the non-cash items are primarily
comprised of depreciation and amortization, offset by equity in income of Other
Real Estate Partnerships, the gain on sales of real estate and the effect of the
straight-lining of rental income.
Net cash used in investing activities of approximately $183.1 million for
the three months ended March 31, 1998 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, closing costs from the sales
of real estate and contributions to investment in Other Real Estate
Partnerships, offset by the proceeds from sales of real estate, distributions
from investment in Other Real Estate Partnerships and the repayment of mortgage
loans receivable.
Net cash provided by financing activities of approximately $152.7
million for the three months ended March 31, 1998 was comprised primarily of
preferred general partnership unit contributions and the net proceeds from the
issuance of senior unsecured debt, offset by net repayments under the Operating
Partnership's 1997 Unsecured Acquisition Facility, Unit (defined below) and
preferred general partnership unit distributions and repayments on mortgage
loans payable.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges and preferred unit distributions
was 1.70 for the three months ended March 31, 1999 compared to 1.90 for the
three months ended March 31, 1998. The decrease is primarily due to additional
interest expense and preferred general partnership unit distributions incurred
during the three months ended March 31, 1999 from additional debt issued and
preferred general partner contributions, respectively, to fund property
acquisitions and developments, which is partially offset by higher net operating
income from property acquisitions as discussed in "Results of Operations" above.
MARKET RISK
The following discussion about the Consolidated Operating Partnership's
risk-management activities includes "forward-looking statements" that involve
risk and uncertainties. Actual results could differ materially from those
projected in the forward-looking statements.
This analysis presents the hypothetical gain or loss in earnings, cash
flows or fair value of the financial instruments and derivative instruments
which are held by the Consolidated Operating Partnership at March 31, 1999 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 March 31, 1999, $141.6 million (approximately 12% of total debt at
March 31, 1999) of the Consolidated Operating Partnership's debt was variable
rate debt (all of the variable rate debt relates to the Operating Partnership's
1997 Unsecured Acquisition Facility) and $1,014.3 million (approximately 88% of
total debt at March 31, 1999) 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
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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 6 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 March 31, 1999,
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 $.8 million per year. A 10%
increase in interest rates would decrease the fair value of the fixed rate debt
at March 31, 1999 by approximately $52.0 million to $1,116.6 million. A 10%
decrease in interest rates would increase the fair value of the fixed rate debt
at March 31, 1999 by approximately $57.4 million to $1,226.0 million. A 10%
increase in interest rates would decrease the fair value of the Written Options
at March 31, 1999 by approximately $2.7 million to $5.6 million. A 10% decrease
in interest rates would increase the fair value of the Written Options at March
31, 1999 by approximately $3.3 million to $11.6 million.
INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE
During the three months ended March 31, 1999, the Consolidated Operating
Partnership acquired one existing industrial property and several land parcels.
The aggregate purchase price for these acquisitions totaled approximately $6.4
million, excluding costs incurred in conjunction with the acquisition of the
properties.
The Consolidated Operating Partnership has committed to the construction
of seven development projects totaling approximately .6 million square feet of
GLA. These developments are expected to be funded with cash flow from operations
as well as borrowings under the Operating Partnership's 1997 Unsecured
Acquisition Facility.
During the three months ended March 31, 1999, the Consolidated Operating
Partnership sold ten existing industrial properties and one land parcel. Gross
proceeds from these sales were approximately $23.9 million. Approximately $4.8
million of the gross proceeds from the sales of these properties was received
from the September 1998 Joint Venture (the Consolidated Operating Partnership
sold two of the ten properties to the September 1998 Joint Venture at the
Consolidated Operating Partnership's net book value).
From April 1, 1999 to May 7, 1999, the Consolidated Operating Partnership
sold four industrial properties for approximately $13.0 million of gross
proceeds.
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 in order to redeploy capital. At March
31, 1999, the Consolidated Operating Partnership had 24 industrial properties
comprising approximately 3.9 million square feet of GLA held for sale. Income
from operations of the 24 industrial properties held for sale for the three
months ended March 31, 1999 and 1998 is $3.0 million and
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$1.8 million, respectively. Net carrying value of the 24 industrial properties
held for sale at March 31, 1999 is approximately $93.1 million. Twenty-three of
24 of these properties were identified as held for sale during the three months
ended March 31, 1999. There can be no assurance that such properties held for
sale will be sold.
INVESTMENT IN JOINT VENTURE
During the three months ended March 31, 1999, the Operating Partnership,
through a wholly owned limited liability company in which it is the sole member,
contributed $.7 million to and received distributions of $.2 million from the
September 1998 Joint Venture. As of March 31, 1999, the September 1998 Joint
Venture owned 146 industrial properties comprising approximately 7.5 million
square feet of GLA.
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.
Unit Contributions:
During the three months ended March 31, 1999, the Company awarded 72,100
shares of restricted common stock to certain employees and 837 shares of
restricted common stock to certain Directors. Other employees of the Company
converted certain employee stock options to 1,129 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 $1.9 million on the
date of grant. The restricted common stock vests over periods from five to ten
years. Compensation expense will be charged to earnings over the respective
vesting period.
DISTRIBUTIONS
On January 18, 1999, the Operating Partnership paid a fourth quarter 1998
distribution of $.60 per Unit, totaling approximately $27.1 million. On April
19, 1999, the Operating Partnership paid a first quarter 1999 distribution of
$.60 per Unit, totaling approximately $27.2 million.
On March 31, 1999, the Operating Partnership paid a first quarter
distribution of $54.688 per unit on its Series B Cumulative Preferred Units. On
March 31, 1999, the Operating Partnership paid a first quarter distribution of
$53.906 per unit on its Series C Cumulative Preferred Units. On March 31, 1999,
the Operating Partnership paid a first quarter distribution of $49.687 per unit
on its Series D Cumulative Preferred Units. On March 31, 1999, the Operating
Partnership paid a first quarter distribution of $49.375 per unit on its Series
E Cumulative Preferred Units. The preferred unit distributions paid on March 31,
1999 totaled, in the aggregate, approximately $7.2 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
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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, scheduled
debt maturities, major renovations, expansions and other nonrecurring capital
improvements through long-term secured and unsecured indebtedness and the
issuance of additional Units and preferred units. The Consolidated Operating
Partnership is also actively considering acquisition and development joint
ventures with institutional partners and the disposition of select assets as
additional financing strategies. As of March 31, 1999 and May 7, 1999, $100.0
million of debt securities was registered and unissued under the Securities Act
of 1933, as amended. The Consolidated Operating Partnership may finance the
development or acquisition of additional properties through borrowings under the
Operating Partnership's 1997 Unsecured Acquisition Facility. At March 31, 1999,
borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility
bore interest at a weighted average interest rate of 5.84%. As of May 7, 1999,
the Operating Partnership had approximately $139.4 million available for
additional borrowings under the 1997 Unsecured Acquisition Facility.
YEAR 2000 COMPLIANCE
The Year 2000 compliance issue concerns the inability of computerized
information systems and non-information systems to accurately calculate, store
or use a date after 1999. This could result in computer systems failures or
miscalculations causing disruptions of operations. The Year 2000 issue affects
almost all companies and organizations.
The Consolidated Operating Partnership has discussed its software
applications and internal operational programs with its current information
systems' vendor and, based on such discussions, believes that such applications
and programs will properly recognize calendar dates beginning in the year 2000.
The Consolidated Operating Partnership is discussing with its material
third-party service providers, such as its banks, payroll processor and
telecommunications provider, their Year 2000 compliance and is assessing what
effect their possible non-compliance might have on the Consolidated Operating
Partnership. In addition, the Consolidated Operating Partnership is discussing
with its material vendors the possibility of any interface difficulties and/or
electrical or mechanical problems relating to the year 2000 which may affect
properties owned by the Consolidated Operating Partnership. The Consolidated
Operating Partnership has also surveyed substantially all of its tenants to
determine the status of their Year 2000 compliance and what effect their
possible non-compliance might have on the Consolidated Operating Partnership.
The Consolidated Operating Partnership is currently processing the information
obtained from such tenant surveys and remains in discussions with its material
vendors and third-party service providers. Of the tenant surveys processed to
date, all have stated that they are Year 2000 compliant or will be Year 2000
compliant by the end of 1999. The Consolidated Operating Partnership plans to
complete its assessment of Year 2000 compliance by such parties by June 30,
1999. Until such time the Consolidated Operating Partnership cannot estimate any
potential adverse impact resulting from the failure of tenants, vendors or
third-party service providers to address their Year 2000 issues; however, to
date, no significant Year 2000-related conditions have been identified.
Because the Consolidated Operating Partnership's evaluation of its Year
2000 issues has been conducted by its own personnel or by its vendors in
connection with their servicing operations, the Consolidated Operating
Partnership believes that its expenditures for assessing its Year 2000 issues,
though difficult to quantify, to date have not been material. In addition, the
Consolidated Operating Partnership is not aware of any Year 2000-related
conditions that it believes would likely require any material expenditures by
the Consolidated Operating Partnership in the future.
Based on its current information, the Consolidated Operating Partnership
believes that the risk posed by any foreseeable Year 2000-related problem with
its internal systems and the systems at its
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properties (including both information and non-information systems) or with its
vendors or tenants is minimal. Year 2000-related problems with the Consolidated
Operating Partnership's software applications and internal operational programs
or with the electrical or mechanical systems at its properties are unlikely to
cause more than minor disruptions in the Consolidated Operating Partnership's
operations. The Consolidated Operating Partnership believes that the risk posed
by Year 2000-related problems at certain of its third-party service providers,
such as its banks, payroll processor and telecommunications provider is
marginally greater, though, based on its current information, the Consolidated
Operating Partnership does not believe any such problems would have a material
effect on its operations. Any Year 2000 related problems at such third-party
service providers could delay the processing of financial transactions and the
Consolidated Operating Partnership's payroll and could disrupt the Consolidated
Operating Partnership's internal and external communications. At this time, the
Consolidated Operating Partnership has not developed and does not anticipate
developing any contingency plans with respect to Year 2000 issues. In addition,
the Consolidated Operating Partnership has no plans to seek independent
verification or review of its assessment of its Year 2000 issues. The
Consolidated Operating Partnership does intend to complete its assessment of,
and to continue to monitor, its Year 2000 issues and will develop contingency
plans if, and to the extent, deemed necessary.
While the Consolidated Operating Partnership believes that it will be
Year 2000 compliant by December 31, 1999, there can be no assurance that the
Consolidated Operating Partnership has been or will be successful in identifying
and assessing Year 2000 issues, or that, to the extent identified, the
Consolidated Operating Partnership's efforts to remediate such issues will be
effective such that Year 2000 issues will not have a material adverse effect on
the Consolidated Operating Partnership's business, financial condition or
results of operation.
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
Exhibit No Description
---------- -----------
27 * Financial Data Schedule
* Filed herewith.
Report on Form 8-K/A:
---------------------
Report on Form 8-K/A No. 1, dated November 6, 1998, filed January 11, 1999
relating to (i) the acquisition of 70 industrial properties by the
Operating Partnership, (ii) four industrial properties by the Other Real
Estate Partnerships and (iii) the acquisition of 111 industrial properties
by a joint venture arrangement, entered into on September 28, 1998, between
the Operating Partnership, through a limited liability company in which it
is the sole member, and an institutional investor. The report includes
Combined Historical Statements of Revenues and Certain Expenses for the
acquired properties and Pro Forma Balance Sheet and Pro Forma Statements of
Operations for the Operating Partnership.
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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: May 11, 1999 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
- ---------- -----------
27 * Financial Data Schedule
* Filed herewith.
24