e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31,
2011
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number
333-21873
First Industrial, L.P.
(Exact Name of
Registrant as Specified in its Charter)
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Delaware
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36-3924586
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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311 S. Wacker Drive, Suite 3900, Chicago,
Illinois 60606
(Address of Principal Executive
Offices)
(312) 344-4300
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
FIRST
INDUSTRIAL, L.P.
Form 10-Q
For the
Period Ended March 31, 2011
INDEX
PART I:
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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FIRST
INDUSTRIAL, L.P.
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March 31,
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December 31,
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2011
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2010
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(Unaudited)
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(In thousands except unit and per unit data)
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ASSETS
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Assets:
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Investment in Real Estate:
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Land
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$
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492,040
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$
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485,790
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Buildings and Improvements
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1,842,085
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1,843,134
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Construction in Progress
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3,471
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2,672
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Less: Accumulated Depreciation
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(457,635
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)
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(443,912
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)
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Net Investment in Real Estate
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1,879,961
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1,887,684
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Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $137,756 and $148,407 at March 31, 2011 and
December 31, 2010, respectively
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327,938
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344,353
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Investments in and Advances to Other Real Estate Partnerships
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251,226
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252,541
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Cash and Cash Equivalents
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10,787
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22,484
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Restricted Cash
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105
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Tenant Accounts Receivable, Net
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3,530
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2,602
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Investments in Joint Ventures
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2,494
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2,451
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Deferred Rent Receivable, Net
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34,534
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32,383
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Deferred Financing Costs, Net
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12,949
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14,492
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Deferred Leasing Intangibles, Net
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31,247
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33,639
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Prepaid Expenses and Other Assets, Net
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114,519
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119,052
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Total Assets
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$
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2,669,185
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$
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2,711,786
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LIABILITIES AND PARTNERS CAPITAL
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Liabilities:
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Mortgage and Other Loans Payable, Net
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$
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400,108
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$
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431,284
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Senior Unsecured Notes, Net
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880,136
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879,529
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Unsecured Credit Facility
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286,108
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376,184
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Mortgage Loan Payable on Real Estate Held for Sale, Net,
Inclusive of $6 of Accrued Interest at December 31, 2010
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944
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1,014
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Accounts Payable, Accrued Expenses and Other Liabilities, Net
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68,923
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79,949
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Deferred Leasing Intangibles, Net
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15,590
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16,145
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Rents Received in Advance and Security Deposits
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22,779
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24,469
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Leasing Intangibles Held for Sale, Net of Accumulated
Amortization of $1,681 and $2,642 at March 31, 2011 and
December 31, 2010, respectively
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1,681
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1,909
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Total Liabilities
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1,676,269
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1,810,483
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Commitments and Contingencies
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Partners Capital:
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General Partner Preferred Units (1,550 units issued and
outstanding at March 31, 2011 and December 31, 2010,
respectively) with a liquidation preference of $275,000,
respectively
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266,211
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266,211
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General Partner Units (77,965,162 and 68,841,296 units
issued and outstanding at March 31, 2011 and
December 31, 2010, respectively)
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650,081
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558,496
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Limited Partners Units (5,363,151 units issued and
outstanding at March 31, 2011 and December 31, 2010,
respectively)
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92,447
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93,100
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Accumulated Other Comprehensive Loss
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(15,823
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)
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(16,504
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)
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Total Partners Capital
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992,916
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901,303
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Total Liabilities and Partners Capital
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$
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2,669,185
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$
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2,711,786
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The accompanying notes are an integral part of the consolidated
financial statements.
2
FIRST
INDUSTRIAL, L.P.
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Three Months
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Three Months
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Ended
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Ended
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March 31,
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March 31,
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2011
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|
|
2010
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|
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|
(Unaudited)
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(In thousands except per unit data)
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Revenues:
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Rental Income
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$
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47,143
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$
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47,488
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Tenant Recoveries and Other Income
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15,532
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17,271
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Construction Revenues
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270
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|
|
|
|
|
|
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Total Revenues
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62,675
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65,029
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Expenses:
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Property Expenses
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22,549
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22,697
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General and Administrative
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5,258
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8,894
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Restructuring Costs
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1,160
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264
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Impairment of Real Estate
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(318
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)
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Depreciation and Other Amortization
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24,364
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24,121
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Construction Expenses
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209
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Total Expenses
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53,013
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56,185
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Other Income (Expense):
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Interest Income
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|
990
|
|
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|
1,086
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Interest Expense
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(25,849
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)
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(27,025
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)
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Amortization of Deferred Financing Costs
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(1,051
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)
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(792
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)
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Mark-to-Market
Gain (Loss) on Interest Rate Protection Agreements
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44
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(134
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)
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(Loss) Gain From Early Retirement of Debt
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(866
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)
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355
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Total Other Income (Expense)
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(26,732
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)
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(26,510
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)
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Loss from Continuing Operations Before Equity in Income of Other
Real Estate Partnerships, Equity in Income (Loss) of Joint
Ventures and Income Tax Benefit (Provision)
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(17,070
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)
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(17,666
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)
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Equity in Income of Other Real Estate Partnerships
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4,855
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2,833
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Equity in Income (Loss) of Joint Ventures
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|
36
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|
|
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(459
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)
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Income Tax Benefit (Provision)
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289
|
|
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|
(111
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)
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|
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|
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Loss from Continuing Operations
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(11,890
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)
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(15,403
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)
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Income (Loss) from Discontinued Operations (Including Gain on
Sale of Real Estate of $2,742 and $4,008 for the Three Months
Ended March 31, 2011 and March 31, 2010, respectively)
|
|
|
8,209
|
|
|
|
(4,079
|
)
|
Provision for Income Taxes Allocable to Discontinued Operations
(Including $516 allocable to Gain on Sale of Real Estate for the
Three Months Ended March 31, 2011)
|
|
|
(720
|
)
|
|
|
|
|
|
|
|
|
|
|
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Loss Before Gain on Sale of Real Estate
|
|
|
(4,401
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)
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|
(19,482
|
)
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Gain on Sale of Real Estate
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|
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|
|
|
|
1,073
|
|
Provision for Income Taxes Allocable to Gain on Sale of Real
Estate
|
|
|
|
|
|
|
(394
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)
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|
|
|
|
|
|
|
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Net Loss
|
|
|
(4,401
|
)
|
|
|
(18,803
|
)
|
Less: Preferred Unit Distributions
|
|
|
(4,927
|
)
|
|
|
(4,960
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)
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|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders and Participating Securities
|
|
$
|
(9,328
|
)
|
|
$
|
(23,763
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)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Earnings Per Unit:
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
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|
$
|
(0.22
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Income (Loss) From Discontinued Operations
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|
$
|
0.10
|
|
|
$
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(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders
|
|
$
|
(0.12
|
)
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Units Outstanding
|
|
|
76,002
|
|
|
|
67,187
|
|
|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders Attributable to:
|
|
|
|
|
|
|
|
|
General Partners
|
|
$
|
(8,675
|
)
|
|
$
|
(21,867
|
)
|
Limited Partners
|
|
|
(653
|
)
|
|
|
(1,896
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders and Participating Securities
|
|
$
|
(9,328
|
)
|
|
$
|
(23,763
|
)
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
3
FIRST
INDUSTRIAL, L.P.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Net Loss
|
|
$
|
(4,401
|
)
|
|
$
|
(18,803
|
)
|
Mark-to-Market
on Interest Rate Protection Agreements, Net of Income Tax
Provision of $414 for the Three Months Ended March 31, 2010
|
|
|
|
|
|
|
(567
|
)
|
Amortization of Interest Rate Protection Agreements
|
|
|
556
|
|
|
|
505
|
|
Write-off of Unamortized Settlement Amounts of Interest Rate
Protection Agreements
|
|
|
|
|
|
|
(145
|
)
|
Foreign Currency Translation Adjustment, Net of Income Tax
Benefit of $169 and $468 for the Three Months Ended
March 31, 2011 and March 31, 2010, respectively
|
|
|
125
|
|
|
|
682
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
|
$
|
(3,720
|
)
|
|
$
|
(18,328
|
)
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
4
FIRST
INDUSTRIAL, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Partner
|
|
|
General
|
|
|
Limited
|
|
|
Other
|
|
|
|
|
|
|
Preferred
|
|
|
Partner
|
|
|
Partner
|
|
|
Comprehensive
|
|
|
|
|
|
|
Units
|
|
|
Units
|
|
|
Units
|
|
|
Loss
|
|
|
Total
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Balance as of December 31, 2010
|
|
$
|
266,211
|
|
|
$
|
558,496
|
|
|
$
|
93,100
|
|
|
$
|
(16,504
|
)
|
|
$
|
901,303
|
|
Issuance of Common Stock, Net of Issuance Costs
|
|
|
|
|
|
|
100,288
|
|
|
|
|
|
|
|
|
|
|
|
100,288
|
|
Stock Based Compensation Activity
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
Preferred Dividends
|
|
|
(4,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,927
|
)
|
Other Comprehensive Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
|
4,927
|
|
|
|
(8,675
|
)
|
|
|
(653
|
)
|
|
|
|
|
|
|
(4,401
|
)
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
681
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2011
|
|
$
|
266,211
|
|
|
$
|
650,081
|
|
|
$
|
92,447
|
|
|
$
|
(15,823
|
)
|
|
$
|
992,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
5
FIRST
INDUSTRIAL, L.P.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(4,401
|
)
|
|
$
|
(18,803
|
)
|
Adjustments to Reconcile Net Loss to Net Cash (Used In) Provided
by Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
19,107
|
|
|
|
23,806
|
|
Amortization of Deferred Financing Costs
|
|
|
1,051
|
|
|
|
792
|
|
Other Amortization
|
|
|
7,843
|
|
|
|
8,671
|
|
Impairment of Real Estate, Net
|
|
|
829
|
|
|
|
9,155
|
|
Provision for Bad Debt
|
|
|
201
|
|
|
|
513
|
|
Equity in (Income) Loss of Joint Ventures
|
|
|
(36
|
)
|
|
|
459
|
|
Distributions from Joint Ventures
|
|
|
|
|
|
|
500
|
|
Gain on Sale of Real Estate
|
|
|
(2,742
|
)
|
|
|
(5,081
|
)
|
Loss (Gain) on Early Retirement of Debt
|
|
|
866
|
|
|
|
(355
|
)
|
Prepayment Premiums Associated with Early Retirement of Debt
|
|
|
(372
|
)
|
|
|
|
|
Mark-to-Market
(Gain) Loss on Interest Rate Protection Agreements
|
|
|
(44
|
)
|
|
|
134
|
|
Equity in Income of Other Real Estate Partnerships
|
|
|
(4,855
|
)
|
|
|
(2,833
|
)
|
Distributions from Investment in Other Real Estate Partnerships
|
|
|
4,855
|
|
|
|
2,833
|
|
Increase in Tenant Accounts Receivable, Prepaid Expenses and
Other Assets, Net
|
|
|
(4,944
|
)
|
|
|
(3,232
|
)
|
Increase in Deferred Rent Receivable
|
|
|
(2,221
|
)
|
|
|
(2,355
|
)
|
Decrease in Accounts Payable, Accrued Expenses, Other
Liabilities, Rents Received in Advance and Security Deposits
|
|
|
(10,389
|
)
|
|
|
(22,902
|
)
|
Decrease in Restricted Cash
|
|
|
105
|
|
|
|
3
|
|
Repayments of Discount on Senior Unsecured Notes
|
|
|
|
|
|
|
(1,775
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used In) Operating Activities
|
|
|
4,853
|
|
|
|
(10,470
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of and Additions to Investment in Real Estate and
Lease Costs
|
|
|
(12,361
|
)
|
|
|
(13,696
|
)
|
Net Proceeds from Sales of Investments in Real Estate
|
|
|
13,334
|
|
|
|
43,515
|
|
Investments in and Advances to Other Real Estate Partnerships
|
|
|
(8,767
|
)
|
|
|
(99,143
|
)
|
Distributions from Other Real Estate Partnerships in Excess of
Equity in Income
|
|
|
10,082
|
|
|
|
122,466
|
|
Contributions to and Investments in Joint Ventures
|
|
|
(4
|
)
|
|
|
(225
|
)
|
Distributions from Joint Ventures
|
|
|
|
|
|
|
725
|
|
Repayment of Notes Receivable
|
|
|
8,739
|
|
|
|
228
|
|
Increase in Restricted Cash and Escrows
|
|
|
(13
|
)
|
|
|
(22,732
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Investing Activities
|
|
|
11,010
|
|
|
|
31,138
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Offering Costs
|
|
|
(108
|
)
|
|
|
(4
|
)
|
Unit Contributions
|
|
|
100,570
|
|
|
|
5,970
|
|
Preferred Unit Distributions
|
|
|
(5,379
|
)
|
|
|
(5,412
|
)
|
Repurchase and Retirement of Restricted Units
|
|
|
(673
|
)
|
|
|
(268
|
)
|
Payments on Interest Rate Swap Agreement
|
|
|
(194
|
)
|
|
|
(152
|
)
|
Proceeds from Origination of Mortgage Loans Payable
|
|
|
|
|
|
|
19,280
|
|
Repayments on Mortgage Loans Payable
|
|
|
(31,215
|
)
|
|
|
(1,202
|
)
|
Debt Issuance Costs
|
|
|
|
|
|
|
(341
|
)
|
Repayments on Senior Unsecured Notes
|
|
|
|
|
|
|
(155,124
|
)
|
Costs Associated with Early Retirement of Debt
|
|
|
|
|
|
|
(877
|
)
|
Proceeds from Unsecured Credit Facility
|
|
|
10,000
|
|
|
|
51,500
|
|
Repayments on Unsecured Credit Facility
|
|
|
(100,590
|
)
|
|
|
(10,341
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing Activities
|
|
|
(27,589
|
)
|
|
|
(96,971
|
)
|
|
|
|
|
|
|
|
|
|
Net Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
29
|
|
|
|
284
|
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(11,726
|
)
|
|
|
(76,303
|
)
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
22,484
|
|
|
|
181,147
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
10,787
|
|
|
$
|
105,128
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
6
FIRST
INDUSTRIAL, L.P.
(Unaudited)
(In thousands except Unit and per Unit data)
|
|
1.
|
Organization
and Formation of Partnership
|
First Industrial, L.P. (the Operating Partnership)
was organized as a limited partnership in the state of Delaware
on November 23, 1993. The sole general partner is First
Industrial Realty Trust, Inc. (the Company) which
owns common units in the Operating Partnership
(Units) representing an approximate 93.6% common
ownership interest at March 31, 2011. The Company also owns
a preferred general partnership interest in the Operating
Partnership represented by preferred Units (Preferred
Units) with an aggregate liquidation priority of $275,000
at March 31, 2011. The Company is a real estate investment
trust (REIT) as defined in the Internal Revenue Code
of 1986 (the Code). The Companys operations
are conducted primarily through the Operating Partnership. The
limited partners of the Operating Partnership owned, in the
aggregate, approximately a 6.4% interest in the Operating
Partnership at March 31, 2011. Unless the context otherwise
requires, the term Operating Partnership refers to
First Industrial, L.P. and the terms we,
us, and our refer to First Industrial,
L.P. and its controlled subsidiaries.
We also own noncontrolling equity interests in, and provide
various services to, two joint ventures (the 2003 Net
Lease Joint Venture and the 2007 Europe Joint
Venture). During 2010, we provided various services to,
and ultimately disposed of our equity interests in, five joint
ventures (the 2005 Development/Repositioning Joint
Venture, the 2005 Core Joint Venture, the
2006 Net Lease Co-Investment Program, the 2006
Land/Development Joint Venture, and the 2007 Canada
Joint Venture; together with the 2003 Net Lease Joint
Venture and the 2007 Europe Joint Venture, the Joint
Ventures). The 2007 Europe Joint Venture does not own any
properties. See Note 5 for more information on the Joint
Ventures.
The Operating Partnership is the sole member of several limited
liability companies (the L.L.C.s). The Operating
Partnership, the L.L.C.s, FRIP and the taxable REIT subsidiaries
are referred to as the Consolidated Operating
Partnership. The operating data of the L.L.C.s, FRIP and
the taxable REIT subsidiaries are consolidated with that of the
Operating Partnership as presented herein. The Operating
Partnership also holds at least a 99% limited partnership
interest in each of eight limited partnerships (together, the
Other Real Estate Partnerships).
The general partners of the Other Real Estate Partnerships are
separate corporations, each with at least a .01% general
partnership interest in the Other Real Estate Partnership for
which it acts as a general partner. Each general partner of the
Other Real Estate Partnerships is a wholly-owned subsidiary of
the Company.
As of March 31, 2011, we owned 694 industrial properties
located in 27 states in the United States and one province
in Canada, containing an aggregate of approximately
60.2 million square feet of gross leasable area
(GLA). On a combined basis, as of March 31,
2011, the Other Real Estate Partnerships owned 68 industrial
properties containing an aggregate of approximately
7.7 million square feet of GLA.
The Other Real Estate Partnerships and the Joint Ventures are
accounted for under the equity method of accounting.
Accordingly, the operating data of the Other Real Estate
Partnerships and the Joint Ventures are not consolidated with
that of the Consolidated Operating Partnership as presented
herein.
|
|
2.
|
Summary
of Significant Accounting Policies
|
The accompanying unaudited interim financial statements have
been prepared in accordance with the accounting policies
described in the financial statements and related notes included
in our Annual Report on
Form 10-K
for the year ended December 31, 2010 (2010
Form 10-K)
and should be read in conjunction with such financial statements
and related notes. The 2010 year end consolidated balance
sheet data included in this
Form 10-Q
filing was derived from the audited financial statements in our
2010
Form 10-K,
but does not include all disclosures required by accounting
principles generally accepted in the United States of America
(GAAP). The following notes to these interim
financial statements highlight significant changes to the notes
included in the December 31, 2010 audited financial
statements included in our 2010
Form 10-K
and present interim disclosures as
7
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
required by the Securities and Exchange Commission. In order to
conform with GAAP, we, in preparation of our financial
statements, are 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, 2011 and December 31, 2010, and the reported
amounts of revenues and expenses for the three months ended
March 31, 2011 and March 31, 2010. Actual results
could differ from those estimates. In our opinion, the
accompanying unaudited interim financial statements reflect all
adjustments necessary for a fair statement of our financial
position as of March 31, 2011 and December 31, 2010,
and the results of our operations and comprehensive income for
each of the three months ended March 31, 2011 and
March 31, 2010, and our cash flows for each of the three
months ended March 31, 2011 and March 31, 2010, and
all adjustments are of a normal recurring nature.
|
|
3.
|
Investment
in Real Estate
|
Sales
and Discontinued Operations
During the three months ended March 31, 2011, we sold 12
industrial properties comprising approximately 0.6 million
square feet of GLA. Gross proceeds from the sales of the 12
industrial properties were approximately $14,817. The gain on
sale of real estate was approximately $2,742, all of which is
shown in discontinued operations. The 12 sold industrial
properties meet the criteria to be included in discontinued
operations. Therefore the results of operations and gain on sale
of real estate for the 12 sold industrial properties are
included in discontinued operations.
At March 31, 2011, we had 161 industrial properties
comprising approximately 13.8 million square feet of GLA
and several land parcels held for sale. The results of
operations of the 161 industrial properties held for sale at
March 31, 2011 are included in discontinued operations.
There can be no assurance that such industrial properties or
land parcels held for sale will be sold.
Income from discontinued operations, net of income taxes, for
the three months ended March 31, 2010 reflects the results
of operations of the 12 industrial properties that were sold
during the three months ended March 31, 2011, the results
of operations of 10 industrial properties and one land parcel
that received ground rental revenues that were sold during the
year ended December 31, 2010, the results of operations of
the 161 industrial properties identified as held for sale at
March 31, 2011 and the gain on sale of real estate relating
to three industrial properties and one land parcel that received
ground rental revenues that were sold during the three months
ended March 31, 2010.
The following table discloses certain information regarding the
industrial properties included in our discontinued operations
for the three months ended March 31, 2011 and
March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Total Revenues
|
|
$
|
13,259
|
|
|
$
|
14,038
|
|
Property Expenses
|
|
|
(5,663
|
)
|
|
|
(6,635
|
)
|
Impairment of Real Estate, Net
|
|
|
(1,147
|
)
|
|
|
(9,155
|
)
|
Depreciation and Amortization
|
|
|
(969
|
)
|
|
|
(6,317
|
)
|
Interest Expense
|
|
|
(13
|
)
|
|
|
(18
|
)
|
Gain on Sale of Real Estate
|
|
|
2,742
|
|
|
|
4,008
|
|
Provision for Income Taxes
|
|
|
(720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued Operations
|
|
$
|
7,489
|
|
|
$
|
(4,079
|
)
|
|
|
|
|
|
|
|
|
|
At March 31, 2011 and December 31, 2010, we had notes
receivables outstanding of approximately $51,109 and $58,803,
net of a discount of $367 and $383, respectively, which are
included as a component of Prepaid
8
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Expenses and Other Assets, Net. At March 31, 2011 and
December 31, 2010, the fair values of the notes receivables
were $53,590 and $60,944, respectively. The fair values of our
notes receivables were determined by discounting the future cash
flows using the current rates at which similar loans with
similar remaining maturities would be made to other borrowers.
Impairment
Charges
On October 22, 2010, we amended our unsecured revolving
credit facility (as amended, the Unsecured Credit
Facility). In conjunction with the amendment, management
identified a pool of real estate assets (the Non-Strategic
Assets) that it intends to market and sell.
At March 31, 2011, the Non-Strategic Assets consisted of
166 industrial properties comprising approximately
14.6 million square feet of GLA and land parcels comprising
approximately 598 gross acres. The Non-Strategic Assets
(except six industrial properties comprising approximately
0.8 million square feet of GLA) were classified as held for
sale as of March 31, 2011. During the three months ended
March 31, 2011, we recorded a net non-cash impairment
charge of $1,147 relating to certain of the Non-Strategic Assets
held for sale. The $1,147 net impairment charge was
calculated as the difference of the carrying value of the
properties over the fair value less costs to sell due to their
classification as held for sale at March 31, 2011. The net
impairment charge of $1,147 is due to updated fair market values
for certain of the Non-Strategic Assets whose estimated fair
market values have changed since December 31, 2010. The
fair market values were determined using widely accepted
valuation techniques including discounted cash flow analyses on
expected cash flows, internal valuations of real estate and
third party offers.
The net impairment charge of $1,147 relating to the
Non-Strategic Assets held for sale is offset by $318 of reversal
of impairment charges related to certain industrial properties
and land parcels that were classified as held for sale at
December 31, 2010 but no longer qualify to be classified as
held for sale at March 31, 2011. If an asset no longer
qualifies to be classified as held for sale, the carrying value
must be reestablished at the lower of the estimated fair market
value of the asset or the carrying value of the asset prior to
held for sale classification, adjusted for any depreciation and
amortization that would have been recorded if the asset had not
been classified as held for sale. There are seven industrial
properties comprising approximately 0.5 million square feet
of GLA and one land parcel comprising approximately
38 acres that were previously classified as held for sale
but no longer meet the criteria for held for sale classification
at March 31, 2011. We recorded
catch-up
depreciation and amortization on the seven industrial properties
as that resulted in a lower value than the fair market value of
these assets at March 31, 2011. We reversed impairment of
$318 that was previously recorded while we held for sale six
industrial properties comprising approximately 0.3 million
square feet of GLA. While the assets were classified as held for
sale, we had recorded impairment in order to adjust the carrying
value of the assets to fair market value less costs to sell. We
reversed impairment previously recorded because the carrying
value of each asset, adjusted for depreciation and amortization,
was greater than the fair market value less costs to sell.
During the three months ended March 31, 2010, we recorded
an impairment charge in the amount of $9,155 related to a
certain property comprised of 0.3 million square feet of
GLA located in Grand Rapids, Michigan (Grand Rapids
Property) in connection with the negotiation of a new
lease. The non-cash impairment charge related to the Grand
Rapids Property was based upon the difference between the fair
value of the property and its carrying value. The valuation of
the Grand Rapids Property was determined based upon a discounted
cash flow analysis on expected cash flows and the income
capitalization approach considering prevailing market
capitalization rates. The $9,155 impairment loss is included in
discontinued operations for the three months ended
March 31, 2010.
The guidance for the fair value measurement provisions for the
impairment of long lived assets recorded at fair value
establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
9
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables present information about our assets that
were measured at fair value on a non-recurring basis during the
three months ended March 31, 2011 and 2010. The tables
indicate the fair value hierarchy of the valuation techniques we
utilized to determine fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements on a
|
|
|
|
|
|
|
Non-Recurring Basis Using:
|
|
|
|
|
Three Months
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Ended
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
Total
|
|
|
March 31,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
|
Gains
|
Description
|
|
2011
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
(Losses)
|
|
Long-lived Assets Held for Sale
|
|
$
|
126,904
|
|
|
|
|
|
|
|
|
|
|
$
|
126,904
|
|
|
$
|
(1,147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements on a
|
|
|
|
|
|
|
Non-Recurring Basis Using:
|
|
|
|
|
Three Months
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Ended
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
Total
|
|
|
March 31,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
|
Gains
|
Description
|
|
2010
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
(Losses)
|
|
Long-lived Assets Held and Used
|
|
$
|
4,122
|
|
|
|
|
|
|
|
|
|
|
$
|
4,122
|
|
|
$
|
(9,155
|
)
|
|
|
4.
|
Investments
in and Advances to Other Real Estate Partnerships
|
The investments in and advances to Other Real Estate
Partnerships reflect our limited partnership equity interests in
the entities referred to in Note 1 to these consolidated
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,
|
|
|
|
2011
|
|
|
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Investment in Real Estate, Net
|
|
$
|
234,235
|
|
|
$
|
221,450
|
|
Real Estate and Other Assets Held for Sale, Net of Accumulated
Depreciation and Amortization of $13,414 and $16,804 at
March 31, 2011 and December 31, 2010, respectively
|
|
|
31,483
|
|
|
|
47,938
|
|
Note Receivable
|
|
|
240,494
|
|
|
|
239,453
|
|
Other Assets, Net
|
|
|
49,891
|
|
|
|
51,875
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
556,103
|
|
|
$
|
560,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS CAPITAL
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Mortgage Loans Payable
|
|
$
|
50,902
|
|
|
$
|
54,771
|
|
Other Liabilities
|
|
|
8,198
|
|
|
|
8,547
|
|
Leasing Intangibles Held for Sale, Net of Accumulated
Amortization of $27 and $26 at March 31, 2011 and
December 31, 2010, respectively
|
|
|
6
|
|
|
|
7
|
|
Partners Capital
|
|
|
496,997
|
|
|
|
497,391
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Partners Capital
|
|
$
|
556,103
|
|
|
$
|
560,716
|
|
|
|
|
|
|
|
|
|
|
10
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed Combined Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Total Revenues (including Interest Income)
|
|
$
|
12,799
|
|
|
$
|
13,129
|
|
Property Expenses
|
|
|
(2,700
|
)
|
|
|
(2,733
|
)
|
Interest Expense
|
|
|
(940
|
)
|
|
|
(652
|
)
|
Amortization of Deferred Financing Costs
|
|
|
(34
|
)
|
|
|
(29
|
)
|
Impairment of Real Estate
|
|
|
595
|
|
|
|
|
|
Loss from Early Retirement of Debt
|
|
|
(160
|
)
|
|
|
|
|
Depreciation and Other Amortization
|
|
|
(3,015
|
)
|
|
|
(3,300
|
)
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
6,545
|
|
|
|
6,415
|
|
Income from Discontinued Operations (Including Gain on Sale of
Real Estate of $1,062 and $0 for the Three Months Ended
March 31, 2011 and March 31, 2010, respectively)
|
|
|
1,926
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
8,471
|
|
|
$
|
6,677
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
Investments
in Joint Ventures
|
At March 31, 2011, the 2003 Net Lease Joint Venture owned
nine industrial properties comprising approximately
4.9 million square feet of GLA. The 2003 Net Lease Joint
Venture is considered a variable interest entity in accordance
with the Financial Accounting Standards Boards (the
FASB) guidance on the consolidation of variable
interest entities. However, we continue conclude that we are not
the primary beneficiary of this venture. As of March 31,
2011, our investment in the 2003 Net Lease Joint Venture is
$2,494. Our maximum exposure to loss is equal to our investment
plus any future contributions we make to the venture. We
continue to hold our 10% equity interest in the 2007 Europe
Joint Venture. As of March 31, 2011, the 2007 Europe Joint
Venture did not own any properties.
At March 31, 2011 and December 31, 2010, we have
receivables from the Joint Ventures (and/or our former Joint
Venture partners) in the aggregate amount of $3,033 and $2,857,
respectively. These receivable amounts are included in Prepaid
Expenses and Other Assets, Net. During the three months ended
March 31, 2011 and March 31, 2010, we invested the
following amounts in, as well as received distributions from,
our Joint Ventures and recognized fees from our Joint Ventures
(and/or our former Joint Venture partners) in the following
amounts:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Three Months
|
|
|
Ended
|
|
Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2011
|
|
2010
|
|
Contributions
|
|
$
|
4
|
|
|
$
|
225
|
|
Distributions
|
|
$
|
|
|
|
$
|
1,225
|
|
Fees
|
|
$
|
310
|
|
|
$
|
2,067
|
|
11
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table discloses certain information regarding our
indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
Outstanding
|
|
|
Interest
|
|
Interest
|
|
|
|
|
Balance at
|
|
|
Rate at
|
|
Rate at
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
March 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
2011
|
|
Maturity Date
|
|
Mortgage and Other Loans Payable, Net*
|
|
$
|
400,108
|
|
|
$
|
431,284
|
|
|
5.00%-9.25%
|
|
4.93%-9.25%
|
|
January 2012-
October 2020
|
Unamortized Premiums*
|
|
|
(336
|
)
|
|
|
(358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage and Other Loans Payable, Gross
|
|
$
|
399,772
|
|
|
$
|
430,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Notes, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Notes
|
|
$
|
159,913
|
|
|
$
|
159,899
|
|
|
5.750%
|
|
5.91%
|
|
01/15/16
|
2017 Notes
|
|
|
87,197
|
|
|
|
87,195
|
|
|
7.500%
|
|
7.52%
|
|
12/01/17
|
2027 Notes
|
|
|
13,559
|
|
|
|
13,559
|
|
|
7.150%
|
|
7.11%
|
|
05/15/27
|
2028 Notes
|
|
|
189,871
|
|
|
|
189,869
|
|
|
7.600%
|
|
8.13%
|
|
07/15/28
|
2012 Notes
|
|
|
61,784
|
|
|
|
61,774
|
|
|
6.875%
|
|
6.85%
|
|
04/15/12
|
2032 Notes
|
|
|
34,671
|
|
|
|
34,667
|
|
|
7.750%
|
|
7.87%
|
|
04/15/32
|
2014 Notes
|
|
|
87,105
|
|
|
|
86,792
|
|
|
6.420%
|
|
6.54%
|
|
06/01/14
|
2011 Exchangeable Notes
|
|
|
128,391
|
|
|
|
128,137
|
|
|
4.625%
|
|
5.53%
|
|
09/15/11
|
2017 II Notes
|
|
|
117,645
|
|
|
|
117,637
|
|
|
5.950%
|
|
6.37%
|
|
05/15/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
880,136
|
|
|
$
|
879,529
|
|
|
|
|
|
|
|
Unamortized Discounts
|
|
|
6,373
|
|
|
|
6,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Notes, Gross
|
|
$
|
886,509
|
|
|
$
|
886,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Credit Facility
|
|
$
|
286,108
|
|
|
$
|
376,184
|
|
|
3.480%
|
|
3.480%
|
|
09/28/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Excludes $944 and $1,008, respectively, of Mortgage Loan Payable
on Real Estate Held for Sale and $45 and $48, respectively, of
unamortized premiums as of March 31, 2011 and
December 31, 2010. |
On February 10, 2011, we paid off and retired prior to
maturity our secured mortgage loan originally maturing in
September 2012 in the amount of $14,520. On March 9, 2011,
we paid off and retired prior to maturity our secured mortgage
loan originally maturing in December 2014 in the amount of
$14,980. In connection with the early payoffs, we recorded a
loss on early retirement of debt of $866 related to prepayment
premiums and the write-off of unamortized loan fees.
Included in Mortgage and Other Loans Payable is a $5,040 loan
payable related to a non-recourse mortgage loan that matured on
March 1, 2011. We are currently working with the lender to
transfer title of the industrial building that serves as
collateral in satisfaction of the loan. However, there can be no
assurance that we will be successful in these efforts.
As of March 31, 2011, Mortgage and Other Loans Payable are
collateralized by, and in some instances cross-collateralized
by, industrial properties with a net carrying value of $557,560
and one letter of credit in the amount of $889.
The following is a schedule of the stated maturities and
scheduled principal payments as of March 31, 2011 of our
indebtedness, inclusive of maturities and scheduled principal
payments of Mortgage Loan Payable on Real
12
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estate Held for Sale and exclusive of premiums and discounts,
for the next five years ending December 31, and thereafter:
|
|
|
|
|
|
|
Amount
|
|
|
Remainder of 2011
|
|
$
|
139,182
|
|
2012
|
|
|
357,742
|
|
2013
|
|
|
7,949
|
|
2014
|
|
|
185,794
|
|
2015
|
|
|
55,871
|
|
Thereafter
|
|
|
826,750
|
|
|
|
|
|
|
Total
|
|
$
|
1,573,288
|
|
|
|
|
|
|
The Unsecured Credit Facility and the indentures under which our
senior unsecured indebtedness is, or may be, issued contain
certain financial covenants, including, among other things,
coverage ratios and limitations on our ability to incur total
indebtedness and secured and unsecured indebtedness. Consistent
with our prior practice, we will, in the future, continue to
interpret and certify our performance under these covenants in a
good faith manner that we deem reasonable and appropriate.
However, these financial covenants are complex and there can be
no assurance that these provisions would not be interpreted by
our noteholders or lenders in a manner that could impose and
cause us to incur material costs. Any violation of these
covenants would subject us to higher finance costs and fees, or
accelerated maturities. In addition, our credit facilities and
senior debt securities contain certain cross-default provisions,
which are triggered in the event that our other material
indebtedness is in default. Under the Unsecured Credit Facility,
an event of default can also occur if the lenders, in their good
faith judgment, determine that a material adverse change has
occurred which could prevent timely repayment or materially
impair our ability to perform our obligations under the loan
agreement. We believe that we were in compliance with our
financial covenants as of March 31, 2011, and we anticipate
that we will be able to operate in compliance with our financial
covenants throughout 2011.
Fair
Value
At March 31, 2011 and December 31, 2010, the fair
values of our indebtedness were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Mortgage and Other Loans Payable
|
|
$
|
401,052
|
|
|
$
|
446,239
|
|
|
$
|
432,292
|
|
|
$
|
486,758
|
|
Senior Unsecured Notes
|
|
|
880,136
|
|
|
|
874,912
|
|
|
|
879,529
|
|
|
|
851,771
|
|
Unsecured Credit Facility
|
|
|
286,108
|
|
|
|
286,108
|
|
|
|
376,184
|
|
|
|
376,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,567,296
|
|
|
$
|
1,607,259
|
|
|
$
|
1,688,005
|
|
|
$
|
1,714,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of our mortgage and other loans payable were
determined by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining
maturities. The fair value of the senior unsecured notes was
determined by quoted market prices for the same or similar
issuances. The fair value of the Unsecured Credit Facility was
determined by discounting the future cash flows using current
rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining term, assuming
no repayment until maturity.
On March 3, 2011, the Company sold in an underwritten
public offering 8,900,000 shares of the Companys
common stock at a price of $11.40 per share to the public. Gross
offering proceeds from the issuance were $101,460
13
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
in the aggregate. Proceeds to the Company, net of
underwriters discount of $890 and total expenses of $166,
were approximately $100,404. These proceeds were contributed to
us in exchange for Units and are reflected in our financial
statements as a general partner contribution.
On February 28, 2011, the Company entered into distribution
agreements with sales agents to sell up to
10,000,000 shares of the Companys common stock, for
up to $100,000 aggregate gross sale proceeds, from time to time
in
at-the-market
offerings (the ATM). During the three months ended
March 31, 2011, the Company did not issue any shares under
the ATM. Under the terms of the ATM, sales are to be made
primarily in transactions that are deemed to be
at-the-market
offerings, including sales made directly on the New York Stock
Exchange or sales made through a market maker other than on an
exchange or by privately negotiated transactions.
During the three months ended March 31, 2011 and
March 31, 2010, the Company awarded 292,339 and
573,198 shares, respectively, of restricted common stock to
certain employees. We issued Units to the Company in the same
amounts. The restricted common stock had a fair value of
approximately $3,248 and $3,336, respectively, on the date of
approval by the Compensation Committee of the Board of
Directors. The restricted common stock vests over a three year
period. Compensation expense will be charged to earnings over
the vesting period for the shares expected to vest.
We recognized $645 and $1,499 for the three months ended
March 31, 2011 and March 31, 2010, respectively, in
compensation expense related to restricted stock/unit awards. At
March 31, 2011, we have $8,439 in unrecognized compensation
related to unvested restricted stock/unit awards. The weighted
average period that the unrecognized compensation is expected to
be recognized is 1.11 years.
Distributions:
The coupon rate of our Series F Preferred Stock resets
every quarter at 2.375% plus the greater of (i) the
30 year U.S. Treasury rate, (ii) the 10 year
U.S. Treasury rate or
(iii) 3-month
LIBOR. For the first quarter of 2011, the new coupon rate was
6.795%. See Note 11 for additional derivative information
related to the Series F Preferred Stock coupon rate reset.
The following table summarizes distributions accrued during the
three months ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31, 2011
|
|
|
Distribution
|
|
Total
|
|
|
per Unit
|
|
Distribution
|
|
Series F Preferred Units
|
|
$
|
1,698.75
|
|
|
$
|
850
|
|
Series G Preferred Units
|
|
$
|
1,809.00
|
|
|
$
|
452
|
|
Series J Preferred Units
|
|
$
|
4,531.30
|
|
|
$
|
2,719
|
|
Series K Preferred Units
|
|
$
|
4,531.30
|
|
|
$
|
906
|
|
14
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
Supplemental
Information to Statements of Cash Flows
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Supplemental schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Exchange of limited partnership units for general partnership
units:
|
|
|
|
|
|
|
|
|
Limited partnership units
|
|
$
|
|
|
|
$
|
(18
|
)
|
General partnership units
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of fully depreciated assets
|
|
$
|
(12,531
|
)
|
|
$
|
(12,414
|
)
|
|
|
|
|
|
|
|
|
|
In conjunction with certain property sales, we provided seller
financing:
|
|
|
|
|
|
|
|
|
Mortgage notes receivable
|
|
$
|
1,029
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Earnings
Per Unit (EPU)
|
The computation of basic and diluted EPU is presented below:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations, Net of Income Tax
|
|
$
|
(11,890
|
)
|
|
$
|
(15,403
|
)
|
Gain on Sale of Real Estate, Net of Income Tax
|
|
|
|
|
|
|
679
|
|
Preferred Unit Distributions
|
|
|
(4,927
|
)
|
|
|
(4,960
|
)
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to Unitholders
|
|
$
|
(16,817
|
)
|
|
$
|
(19,684
|
)
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued Operations, Net of Income Tax
Available to Unitholders
|
|
$
|
7,489
|
|
|
$
|
(4,079
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders
|
|
$
|
(9,328
|
)
|
|
$
|
(23,763
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted Average Units Basic and Diluted
|
|
|
76,001,749
|
|
|
|
67,186,934
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPU:
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to Unitholders
|
|
$
|
(0.22
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued Operations Available to
Unitholders
|
|
$
|
0.10
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Available to Unitholders
|
|
$
|
(0.12
|
)
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
|
|
|
|
15
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Participating securities include Units that correspond to the
Companys unvested restricted stock awards outstanding that
participate in non-forfeitable distributions of the Operating
Partnership.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
|
Allocation
|
|
|
|
|
of Net
|
|
|
|
of Net
|
|
|
|
|
Income
|
|
|
|
Income
|
|
|
|
|
Available to
|
|
|
|
Available to
|
|
|
|
|
Participating
|
|
|
|
Participating
|
|
|
|
|
Securities for the
|
|
|
|
Securities for the
|
|
|
Outstanding
|
|
Three Months Ended
|
|
Outstanding
|
|
Three Months Ended
|
|
|
at March 31,
|
|
March 31,
|
|
at March 31,
|
|
March 31,
|
|
|
2011
|
|
2011
|
|
2010
|
|
2010
|
|
Participating Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units Corresponding to Restricted Stock Awards
|
|
|
696,360
|
|
|
$
|
|
|
|
|
773,034
|
|
|
$
|
|
|
Participating security holders are not obligated to share in
losses. Therefore, none of the loss was allocated to
participating securities for the three months ended
March 31, 2011 and March 31, 2010.
The number of weighted average units diluted is the
same as the number of weighted average units basic
for the three months ended March 31, 2011 and
March 31, 2010, as the effect of Units corresponding to the
Companys stock options and restricted stock unit awards
(that do not participate in non-forfeitable dividends of the
Company) was excluded as its inclusion would have been
antidilutive to the loss from continuing operations available to
Unitholders. Unit corresponding to the following awards of the
Company were anti-dilutive and could be dilutive in future
periods:
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Number
|
|
|
At March 31,
|
|
At March 31,
|
|
|
2011
|
|
2010
|
|
Non-Participating Securities:
|
|
|
|
|
|
|
|
|
Units Corresponding to Restricted Stock Unit Awards
|
|
|
993,250
|
|
|
|
1,218,800
|
|
Units Corresponding to Options
|
|
|
41,901
|
|
|
|
139,700
|
|
The 2011 Exchangeable Notes are convertible into shares of
common stock of the Company at a price of $50.93 per share and
the Units corresponding to the shares issuable upon conversion
were not included in the computation of diluted EPU as the
Companys average stock price did not exceed the strike
price of the conversion feature.
We committed the Operating Partnership to a plan to reduce
organizational and overhead costs in October 2008 and have
subsequently modified that plan with the goal of further
reducing these costs. For the three months ended March 31,
2011, we recorded as restructuring costs a pre-tax charge of
$1,160 to provide for costs associated with the termination of
certain office leases ($1,044) and other costs ($116) associated
with implementing the restructuring plan. For the three months
ended March 31, 2010, we recorded as restructuring costs a
pre-tax charge of $264 to provide for costs associated with the
termination of certain office leases ($75) and other costs
($189) associated with implementing the restructuring plan.
At March 31, 2011 and December 31, 2010, we have
$2,830 and $1,574, respectively, included in Accounts Payable,
Accrued Expenses and Other Liabilities, Net primarily related to
remaining lease payments under certain lease obligations.
Our objectives in using interest rate derivatives are to add
stability to interest expense and to manage our cash flow
volatility and exposure to interest rate movements. To
accomplish this objective, we primarily use interest rate
16
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
swaps as part of our interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the
receipt of variable-rate amounts from a counterparty in exchange
for fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.
Our Series F Preferred Stock is subject to a coupon rate
reset. The coupon rate resets every quarter at 2.375% plus the
greater of i) the 30 year U.S. Treasury rate,
ii) the 10 year U.S. Treasury rate or
iii) 3-month
LIBOR. For the first quarter of 2011 the new coupon rate was
6.795%. In October 2008, we entered into an interest rate swap
agreement with a notional value of $50,000 to mitigate our
exposure to floating interest rates related to the forecasted
reset rate of the coupon rate of our Series F Preferred
Stock (the Series F Agreement). The
Series F Agreement fixes the
30-year
U.S. Treasury rate at 5.2175%. Accounting guidance for
derivatives does not permit hedge accounting treatment related
to equity instruments and therefore the mark to market gains or
losses related to this agreement are recorded in the statement
of operations. For the three months ended March 31, 2011
and March 31, 2010, $44 and $(134), respectively, is
recognized as
Mark-to-Market
Gain (Loss) on Interest Rate Protection Agreements. Quarterly
payments or receipts are treated as a component of the mark to
market gains or losses and for the three months ended
March 31, 2011 and March 31, 2010, totaled $99 and
$76, respectively.
The effective portion of changes in the fair value of
derivatives designated and that qualify as cash flow hedges is
recorded in Other Comprehensive Income (OCI) is
subsequently reclassified to earnings through interest expense
over the life of the derivative or over the life of the debt. In
the next 12 months, we will amortize approximately $2,313
into net income by increasing interest expense for interest rate
protection agreements we settled in previous periods.
The following is a summary of the terms of our derivatives and
their fair values, which are included in Accounts Payable,
Accrued Expenses or Other Liabilities, Net on the accompanying
consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value As of
|
|
Fair Value As of
|
Hedge Product
|
|
Notional Amount
|
|
Strike
|
|
Trade Date
|
|
Maturity Date
|
|
March 31, 2011
|
|
December 31, 2010
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F Agreement*
|
|
$
|
50,000
|
|
|
|
5.2175
|
%
|
|
|
October 2008
|
|
|
|
October 1, 2013
|
|
|
$
|
(380
|
)
|
|
$
|
(523
|
)
|
|
|
|
* |
|
Fair value excludes quarterly settlement payment due on
Series F Agreement. As of March 31, 2011 and
December 31, 2010, the outstanding payable was $99 and
$194, respectively. |
The following is a summary of the impact of the derivatives in
cash flow hedging relationships on the statement of operations
and the statement of OCI for the three months ended
March 31, 2011 and March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
March 31,
|
Interest Rate Products
|
|
Location on Statement
|
|
2011
|
|
2010
|
|
Loss Recognized in OCI (Effective Portion)
|
|
Mark-to-Market on Interest
Rate Protection Agreements (OCI)
|
|
$
|
|
|
|
$
|
(567
|
)
|
Amortization Reclassified from OCI into Income
|
|
Interest Expense
|
|
$
|
(556
|
)
|
|
$
|
(505
|
)
|
Our agreements with our derivative counterparties contain
provisions where if we default on any of our indebtedness, then
we could also be declared in default on our derivative
obligations subject to certain thresholds.
The guidance for fair value measurement of financial instruments
includes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
17
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth our financial liabilities that
are accounted for at fair value on a recurring basis as of
March 31, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2011 Using:
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
|
March 31,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description
|
|
2011
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F Agreement
|
|
$
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2010 Using:
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
|
December 31,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description
|
|
2010
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F Agreement
|
|
$
|
(523
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(523
|
)
|
The valuation of the Series F Agreement is determined using
widely accepted valuation techniques including discounted cash
flow analysis on the expected cash flows of the instrument. This
analysis reflects the contractual terms of the agreements
including the period to maturity. In adjusting the fair value of
the interest rate protection agreements for the effect of
nonperformance risk, we have considered the impact of netting
and any applicable credit enhancements. To comply with the
provisions of fair value measurement, we incorporated a credit
valuation adjustment (CVA) to appropriately reflect
both our own nonperformance risk and the respective
counterpartys nonperformance risk in the fair value
measurements. However, assessing significance of inputs is a
matter of judgment that should consider a variety of factors.
One factor we consider is the CVA and its materiality to the
overall valuation of the derivatives on the balance sheet and to
their related changes in fair value. We consider the
Series F Agreement to be classified as Level 3 in the
fair value hierarchy due to a significant number of unobservable
inputs. The Series F Agreement swaps a fixed rate 5.2175%
for floating rate payments based on
30-year
Treasury. No market observable prices exist for long-dated
Treasuries past 30 years. Therefore, we have classified the
Series F Agreement in its entirety as a Level 3.
The following table presents a reconciliation of our assets
classified as Level 3 at March 31, 2011:
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
Using Significant
|
|
|
|
Unobservable Inputs
|
|
|
|
(Level 3)
|
|
|
|
Derivatives
|
|
|
Beginning liability balance at December 31, 2010
|
|
$
|
(523
|
)
|
Total unrealized gains:
|
|
|
|
|
Mark-to-Market
of the Series F Agreement
|
|
|
143
|
|
|
|
|
|
|
Ending liability balance at March 31, 2011
|
|
$
|
(380
|
)
|
|
|
|
|
|
|
|
12.
|
Commitments
and Contingencies
|
In the normal course of business, we are involved in legal
actions arising from the ownership of our industrial properties.
In our opinion, the liabilities, if any, that may ultimately
result from such legal actions are not expected to have a
materially adverse effect on our consolidated financial
position, operations or liquidity.
18
FIRST
INDUSTRIAL, L.P.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
From April 1, 2011 to April 29, 2011, we sold three
industrial properties for approximately $11,616. There were no
industrial properties acquired during this period.
On April 1, 2011, we paid off and retired a secured
mortgage loan originally maturing in October 2014 in the amount
of $27,389.
On May 2, 2011, the Operating Partnership obtained four
secured mortgage loans aggregating to $132,463. The mortgage
loans are cross-collateralized by 22 industrial properties
totaling approximately 4.4 million square feet of GLA. The
mortgage loans bear interest at a fixed rate of 4.45%, are
amortized over 30 years and mature in June 2018.
Prepayments are prohibited for twelve months after loan
origination, after which prepayment premiums are calculated at
the greater of yield maintenance or 1% of the outstanding loan
balance.
On May 2, 2011, the Other Real Estate Partnerships obtained
four secured mortgage loans aggregating to $45,837. The mortgage
loans are cross-collateralized by ten industrial properties
totaling approximately 1.5 million square feet of GLA. The
mortgage loans bear interest at a fixed rate of 4.45%, are
amortized over 30 years and mature in June 2018.
Prepayments are prohibited for twelve months after loan
origination, after which prepayment premiums are calculated at
the greater of yield maintenance or 1% of the outstanding loan
balance.
19
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion and analysis of our 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
and Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act). We intend 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 are including this statement
for purposes of complying with those safe harbor provisions.
Forward-looking statements, which are based on certain
assumptions and describe our future plans, strategies and
expectations, are generally identifiable by use of the words
believe, expect, intend,
anticipate, estimate,
project, seek, target,
potential, focus, may,
should, or similar expressions. Our ability to
predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a
materially adverse effect on our operations and future prospects
include, but are not limited to: changes in national,
international, regional and local economic conditions generally
and real estate markets specifically; changes in
legislation/regulation (including changes to laws governing the
taxation of real estate investment trusts) and actions of
regulatory authorities (including the Internal Revenue Service);
our ability to qualify and maintain our status as a real estate
investment trust; the availability and attractiveness of
financing (including both public and private capital) to us and
to our potential counterparties; the availability and
attractiveness of terms of additional debt repurchases; interest
rates; our credit agency ratings; our ability to comply with
applicable financial covenants; competition; changes in supply
and demand for industrial properties (including land, the supply
and demand for which is inherently more volatile than other
types of industrial property) in the Companys current and
proposed market areas; difficulties in consummating acquisitions
and dispositions; risks related to our investments in properties
through joint ventures; environmental liabilities; slippages in
development or
lease-up
schedules; tenant creditworthiness;
higher-than-expected
costs; changes in asset valuations and related impairment
charges; changes in general accounting principles, policies and
guidelines applicable to real estate investment trusts;
international business risks and those additional factors
described under the heading Risk Factors and
elsewhere in the Operating Partnerships annual report on
Form 10-K
for the year ended December 31, 2010 (2010
Form 10-K)
and in this quarterly report. We caution you not to place undue
reliance on forward looking statements, which reflect our
analysis only and speak only as of the date of this report or
the dates indicated in the statements. We assume no obligation
to update or supplement forward-looking statements. Unless the
context otherwise requires, the term Operating
Partnership refers to First Industrial, L.P. and the terms
we, us, and our refer to
First Industrial, L.P. and its controlled subsidiaries.
GENERAL
First Industrial, L.P. (the Operating Partnership)
was organized as a limited partnership in the state of Delaware
on November 23, 1993. The sole general partner is First
Industrial Realty Trust, Inc. (the Company) which
owns common units in the Operating Partnership
(Units) representing an approximate 93.6% ownership
interest at March 31, 2011. The Company also owns a
preferred general partnership interest in the Operating
Partnership represented by preferred units (Preferred
Units) with an aggregate liquidation priority of
$275 million. The Company is a real estate investment trust
(REIT) as defined in the Internal Revenue Code of
1986 (the Code). The Companys operations are
conducted primarily through the Operating Partnership. The
limited partners of the Operating Partnership own, in the
aggregate, an approximate 6.4% interest in the Operating
Partnership at March 31, 2011.
The Operating Partnership is the sole member of several limited
liability companies (the L.L.C.s) and the sole
shareholder of the new taxable REIT subsidiaries, (together with
the Operating Partnership and the L.L.C.s, the
Consolidated Operating Partnership), the operating
data of which is consolidated with that of the Operating
Partnership as presented herein. We also hold at least a 99%
limited partnership interest in each of eight limited
partnerships (together, the Other Real Estate
Partnerships).
The general partners of the Other Real Estate Partnerships are
separate corporations, each with at least a .01% general
partnership interest in the Other Real Estate Partnership for
which it acts as a general partner. Each general partner of the
Other Real Estate Partnerships is a wholly-owned subsidiary of
the Company.
20
As of March 31, 2011, we owned 694 industrial properties
located in 27 states in the United States and one province
in Canada, containing an aggregate of approximately
60.2 million square feet of gross leasable area
(GLA).
We also own noncontrolling equity interests in, and provide
services to, two joint ventures (the 2003 Net Lease Joint
Venture and the 2007 Europe Joint Venture).
During 2010, we provided various services to, and ultimately
disposed of our equity interests in, five joint ventures (the
2005Development/Repositioning Joint Venture, the
2005 Core Joint Venture, the 2006 Net Lease
Co-Investment Program, the 2006 Land/Development
Joint Venture, and the 2007 Canada Joint
Venture; together with the 2003 Net Lease Joint Venture
and the 2007 Europe Joint Venture, the Joint
Ventures). The 2007 Europe Joint Venture does not own any
properties. See Note 5 to the Consolidated Financial
Statements for more information on the Joint Ventures.
The Other Real Estate Partnerships and the Joint Ventures are
accounted for under the equity method of accounting.
Accordingly, the operating data of the Other Real Estate
Partnerships and the Joint Ventures are not consolidated with
that of the Consolidated Operating Partnership as presented
herein.
We maintain a website at www.firstindustrial.com. Information on
this website shall not constitute part of this
Form 10-Q.
Copies of our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to such reports are available without charge on
our website as soon as reasonably practicable after such reports
are filed with or furnished to the Securities and Exchange
Commission. In addition, our Corporate Governance Guidelines,
Code of Business Conduct and Ethics, Audit Committee Charter,
Compensation Committee Charter, Nominating/Corporate Governance
Committee Charter, along with supplemental financial and
operating information prepared by us, are all available without
charge on our website or upon request to us. Amendments to, or
waivers from, our Code of Business Conduct and Ethics that apply
to our executive officers or directors will also be posted to
our website. We also post or otherwise make available on our
website from time to time other information that may be of
interest to our investors. Please direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 3900
Chicago, IL 60606
Attn: Investor Relations
MANAGEMENTS
OVERVIEW
We believe our financial condition and results of operations
are, primarily, a function of our performance in four key areas:
leasing of industrial properties, acquisition and development of
additional industrial properties, disposition of industrial
properties, debt reduction and access to external capital.
We generate revenue primarily from rental income and tenant
recoveries from long-term (generally three to six years)
operating leases of our industrial properties. Such revenue is
offset by certain property specific operating expenses, such as
real estate taxes, repairs and maintenance, property management,
utilities and insurance expenses, along with certain other costs
and expenses, such as depreciation and amortization costs and
general and administrative and interest expenses. Our revenue
growth is dependent, in part, on our ability to
(i) increase rental income, through increasing either or
both occupancy rates and rental rates at our properties,
(ii) maximize tenant recoveries and (iii) minimize
operating and certain other expenses. Revenues generated from
rental income and tenant recoveries are a significant source of
funds, in addition to income generated from gains/losses on the
sale of our properties (as discussed below), for our liquidity.
The leasing of property, in general, and occupancy rates, rental
rates, operating expenses and certain non-operating expenses, in
particular, are impacted, variously, by property specific,
market specific, general economic and other conditions, many of
which are beyond our control. The leasing of property also
entails various risks, including the risk of tenant default. If
we were unable to maintain or increase occupancy rates and
rental rates at our properties or to maintain tenant recoveries
and operating and certain other expenses consistent with
historical levels and proportions, our revenue would decline.
Further, if a significant number of our tenants were unable to
pay rent (including tenant recoveries) or if we were unable to
rent
21
our properties on favorable terms, our financial condition,
results of operations, cash flow and the Companys ability
to pay dividends on, and the market price of, the Companys
common stock would be adversely affected.
Our revenue growth is also dependent, in part, on our ability to
acquire existing, and acquire and develop new, additional
industrial properties on favorable terms. The Consolidated
Operating Partnership seeks to identify opportunities to acquire
existing industrial properties on favorable terms, and, when
conditions permit, also seeks to identify opportunities to
acquire and develop new industrial properties on favorable
terms. Existing properties, as they are acquired, and acquired
and developed properties, as they are leased, generate revenue
from rental income, tenant recoveries and fees, income from
which, as discussed above, is a source of funds for our
distributions. The acquisition and development of properties is
impacted, variously, by property specific, market specific,
general economic and other conditions, many of which are beyond
our control. The acquisition and development of properties also
entails various risks, including the risk that our investments
may not perform as expected. For example, acquired existing and
acquired and developed new properties may not sustain
and/or
achieve anticipated occupancy and rental rate levels. With
respect to acquired and developed new properties, we may not be
able to complete construction on schedule or within budget,
resulting in increased debt service expense and construction
costs and delays in leasing the properties. Also, we face
significant competition for attractive acquisition and
development opportunities from other well-capitalized real
estate investors, including both publicly-traded REITs and
private investors. Further, as discussed below, we may not be
able to finance the acquisition and development opportunities we
identify. If we were unable to acquire and develop sufficient
additional properties on favorable terms or if such investments
did not perform as expected, our revenue growth would be limited
and our financial condition, results of operations, cash flow
and the Companys ability to pay dividends on, and the
market price of, the Companys common stock would be
adversely affected.
We also generate income from the sale of our properties
(including existing buildings, buildings which we have developed
or re-developed on a merchant basis and land). The gain/loss on,
and fees from, the sale of such properties are included in our
income and can be a significant source of funds, in addition to
revenues generated from rental income and tenant recoveries, for
our operations. Currently, a significant portion of our proceeds
from sales are being used to repay outstanding debt. Market
conditions permitting, however, a portion of our proceeds from
such sales may also be used to fund the acquisition of existing,
and the acquisition and development of new, industrial
properties. The sale of properties is impacted, variously, by
property specific, market specific, general economic and other
conditions, many of which are beyond our control. The sale of
properties also entails various risks, including competition
from other sellers and the availability of attractive financing
for potential buyers of our properties. Further, our ability to
sell properties is limited by safe harbor rules applying to
REITs under the Code which relate to the number of properties
that may be disposed of in a year, their tax bases and the cost
of improvements made to the properties, along with other tests
which enable a REIT to avoid punitive taxation on the sale of
assets. If we were unable to sell properties on favorable terms,
our income growth would be limited and our financial condition,
results of operations, cash flow and the Companys ability
to pay dividends on, and the market price of, the Companys
common stock would be adversely affected.
We utilize a portion of the net sales proceeds from property
sales, borrowings under our unsecured credit facility (the
Unsecured Credit Facility) and proceeds from the
issuance, when and as warranted, of additional debt and equity
securities to refinance debt, finance future acquisitions and
developments. Access to external capital on favorable terms
plays a key role in our financial condition and results of
operations, as it impacts our cost of capital and our ability
and cost to refinance existing indebtedness as it matures and to
fund acquisitions and developments or through the issuance, when
and as warranted, of additional equity securities. Our ability
to access external capital on favorable terms is dependent on
various factors, including general market conditions, interest
rates, credit ratings on our capital stock and debt, the
markets perception of our growth potential, our current
and potential future earnings and cash distributions and the
market price of the Companys capital stock. If we were
unable to access external capital on favorable terms, our
financial condition, results of operations, cash flow and the
Companys ability to pay dividends on, and the market price
of, the Companys common stock would be adversely affected.
22
RESULTS
OF OPERATIONS
Comparison
of Three Months Ended March 31, 2011 to Three Months Ended
March 31, 2010
Our net loss available to unitholders and participating
securities was $9.3 million and $23.8 million for the
three months ended March 31, 2011 and March 31, 2010,
respectively. Basic and diluted net loss available to
unitholders were $0.12 per Unit for the three months ended
March 31, 2011 and $0.35 per Unit for the three months
ended March 31, 2010.
The tables below summarize our revenues, property expenses and
depreciation and other amortization by various categories for
the three months ended March 31, 2011 and March 31,
2010. Same store properties are properties owned prior to
January 1, 2010 and held as an operating property through
March 31, 2011, and developments and redevelopments that
were placed in service prior to January 1, 2010 or were
substantially completed for 12 months prior to
January 1, 2010. Properties which are at least 75% occupied
at acquisition are placed in service. All other properties are
placed in service as they reach the earlier of
a) stabilized occupancy (generally defined as 90%
occupied), or b) one year subsequent to acquisition or
development completion. Acquired properties are properties that
were acquired subsequent to December 31, 2009 and held as
an operating property through March 31, 2011. Sold
properties are properties that were sold subsequent to
December 31, 2009. (Re)Developments and land are land
parcels and developments and redevelopments that were not
a) substantially complete 12 months prior to
January 1, 2010 or b) placed in service prior to
January 1, 2010. Other revenues are derived from the
operations of our maintenance company, fees earned from our
Joint Ventures and other miscellaneous revenues. Construction
revenues and expenses represent revenues earned and expenses
incurred in connection with certain subsidiaries of the
Operating Partnership acting as development manager to construct
industrial properties. Other expenses are derived from the
operations of our maintenance company and other miscellaneous
regional expenses.
Our future financial condition and results of operations,
including rental revenues, may be impacted by the future
acquisition and sale of properties. Our future revenues and
expenses may vary materially from historical rates.
For the three months ended March 31, 2011 and
March 31, 2010, the occupancy rates of our same store
properties were 83.5% and 79.8%, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
73,370
|
|
|
$
|
74,048
|
|
|
$
|
(678
|
)
|
|
|
(0.9
|
)%
|
Acquired Properties
|
|
|
512
|
|
|
|
|
|
|
|
512
|
|
|
|
|
|
Sold Properties
|
|
|
471
|
|
|
|
1,236
|
|
|
|
(765
|
)
|
|
|
(61.9
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
141
|
|
|
|
86
|
|
|
|
55
|
|
|
|
64.0
|
%
|
Other
|
|
|
1,440
|
|
|
|
3,427
|
|
|
|
(1,987
|
)
|
|
|
(58.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,934
|
|
|
$
|
78,797
|
|
|
$
|
(2,863
|
)
|
|
|
(3.6
|
)%
|
Discontinued Operations
|
|
|
(13,259
|
)
|
|
|
(14,038
|
)
|
|
|
779
|
|
|
|
(5.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Revenues
|
|
$
|
62,675
|
|
|
$
|
64,759
|
|
|
$
|
(2,084
|
)
|
|
|
(3.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Revenues
|
|
|
|
|
|
|
270
|
|
|
|
(270
|
)
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
62,675
|
|
|
$
|
65,029
|
|
|
$
|
(2,354
|
)
|
|
|
(3.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from same store properties remained relatively
unchanged. Revenues from acquired properties increased
$0.5 million due to the three industrial properties
acquired subsequent to December 31, 2009 totaling
approximately 0.5 million square feet of GLA. Revenues from
sold properties decreased $0.8 million due to the
22 industrial properties and one leased land parcel sold
subsequent to December 31, 2009 totaling approximately
1.6 million square feet of GLA. Revenues from
(re)developments and land remained relatively unchanged. Other
23
revenues decreased $2.0 million due primarily to a decrease
in asset management and property management fees earned from our
Joint Ventures due to the disposition of our equity interests in
five of our Joint Ventures. Construction revenues decreased
$0.3 million primarily due to the substantial completion
prior to March 31, 2010 of certain development projects for
which we were acting in the capacity of development manager.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
PROPERTY AND CONSTRUCTION EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
25,341
|
|
|
$
|
25,197
|
|
|
$
|
144
|
|
|
|
0.6
|
%
|
Acquired Properties
|
|
|
96
|
|
|
|
|
|
|
|
96
|
|
|
|
|
|
Sold Properties
|
|
|
83
|
|
|
|
495
|
|
|
|
(412
|
)
|
|
|
(83.2
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
333
|
|
|
|
328
|
|
|
|
5
|
|
|
|
1.5
|
%
|
Other
|
|
|
2,359
|
|
|
|
3,312
|
|
|
|
(953
|
)
|
|
|
(28.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,212
|
|
|
$
|
29,332
|
|
|
$
|
(1,120
|
)
|
|
|
(3.8
|
)%
|
Discontinued Operations
|
|
|
(5,663
|
)
|
|
|
(6,635
|
)
|
|
|
972
|
|
|
|
(14.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
22,549
|
|
|
$
|
22,697
|
|
|
$
|
(148
|
)
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Expenses
|
|
|
|
|
|
|
209
|
|
|
|
(209
|
)
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Construction Expenses
|
|
$
|
22,549
|
|
|
$
|
22,906
|
|
|
$
|
(357
|
)
|
|
|
(1.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other
property related expenses. Property expenses from same store
properties remained relatively unchanged. Property expenses from
acquired properties increased $0.1 million due to
properties acquired subsequent to December 31, 2009.
Property expenses from sold properties decreased
$0.4 million due to properties sold subsequent to
December 31, 2009. Property expenses from (re)developments
and land remained relatively unchanged. The $1.0 million
decrease in other expense is primarily attributable to decrease
in compensation resulting from a reduction in employee
headcount. Construction expenses decreased $0.2 million
primarily due to the substantial completion prior to
March 31, 2010 of certain development projects for which we
were acting in the capacity of development manager.
General and administrative expense decreased $3.6 million,
or 40.9%, due primarily to a decrease in lawsuit settlement
expense and a decrease in compensation expense resulting from
the reduction in employee headcount that occurred during 2010.
For the three months ended March 31, 2011, we incurred
$1.2 million in restructuring charges to provide for costs
associated with the termination of a certain office lease
($1.1 million) and other costs ($0.1 million)
associated with implementing our restructuring plan. Due to the
timing of certain related expenses, we expect to record a total
of approximately $0.3 million of additional restructuring
charges in subsequent quarters.
For the three months ended March 31, 2010, we incurred
$0.3 million in restructuring charges to provide for costs
associated with the termination of certain office leases
($0.1 million) and other costs ($0.2 million)
associated with implementing our restructuring plan.
On October 22, 2010, we amended our Unsecured Credit
Facility. In conjunction with the amendment, management
identified a pool of real estate assets (the Non-Strategic
Assets) that it intends to market and sell. During the
three months ended March 31, 2011, we recorded a net
non-cash impairment charge of $1.1 million relating to
certain of the Non-Strategic Assets held for sale. The net
impairment charge is due to updated fair market values based
upon recent market information, including receipt of third party
offers. The net impairment charge of $1.1 million relating
to the Non-Strategic Assets held for sale is offset by
$0.3 million of reversal of impairment related to six
industrial properties comprising approximately 0.3 million
square feet of GLA that no longer qualify to be classified as
for held for sale. While the assets were classified as held for
sale, we had recorded impairment in order to adjust the carrying
value of the assets to fair market value less costs to sell. We
reversed impairment
24
previously recorded because the carrying value of each asset,
adjusted for depreciation and amortization, was greater than the
fair market value less costs to sell.
In connection with our periodic review of the carrying values of
our properties and the negotiation of a new lease, we determined
in the first quarter of 2010 that an impairment loss in the
amount of $9.2 million should be recorded on one property
in Grand Rapids, Michigan. The $9.2 million impairment loss
is included in discontinued operations for the three months
ended March 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
DEPRECIATION and OTHER AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
24,574
|
|
|
$
|
29,382
|
|
|
$
|
(4,808
|
)
|
|
|
(16.4
|
)%
|
Acquired Properties
|
|
|
244
|
|
|
|
|
|
|
|
244
|
|
|
|
|
|
Sold Properties
|
|
|
9
|
|
|
|
451
|
|
|
|
(442
|
)
|
|
|
(98.0
|
)%
|
(Re)Developments and Land, Not Included Above and Other
|
|
|
101
|
|
|
|
99
|
|
|
|
2
|
|
|
|
2.0
|
%
|
Corporate Furniture, Fixtures and Equipment
|
|
|
405
|
|
|
|
506
|
|
|
|
(101
|
)
|
|
|
(20.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,333
|
|
|
$
|
30,438
|
|
|
$
|
(5,105
|
)
|
|
|
(16.8
|
)%
|
Discontinued Operations
|
|
|
(969
|
)
|
|
|
(6,317
|
)
|
|
|
5,348
|
|
|
|
(84.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other Amortization
|
|
$
|
24,364
|
|
|
$
|
24,121
|
|
|
$
|
243
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
decreased $4.8 million primarily due to the cessation of
depreciation and amortization of the Non-Strategic Assets that
qualified for held for sale classification during the first
quarter of 2011. Depreciation and other amortization from
acquired properties increased $0.2 million due to
properties acquired subsequent to December 31, 2009.
Depreciation and other amortization from sold properties
decreased $0.4 million due to properties sold subsequent to
December 31, 2009. Depreciation and other amortization for
(re)developments and land and other remained relatively
unchanged. Depreciation and other amortization for corporate
furniture, fixtures and equipment decreased $0.1 million
primarily due to assets becoming fully depreciated.
Interest income remained relatively unchanged.
Interest expense, inclusive of $0.01 million and
$0.02 million of interest expense included in discontinued
operations for the three months ended March 31, 2011 and
March 31, 2010, respectively, decreased $1.2 million,
or 4.4%, primarily due to a decrease in the weighted average
debt balance outstanding for the three months ended
March 31, 2011 ($1,659.1 million), as compared to the
three months ended March 31, 2010 ($1,918.4 million),
partially offset by an increase in the weighted average interest
rate for the three months ended March 31, 2011 (6.32%), as
compared to the three months ended March 31, 2010 (5.72%).
Amortization of deferred financing costs increased
$0.3 million or 32.7%, primarily due to an increase in
financing costs related to the amendment of our Unsecured Credit
Facility in October 2010 and the origination of mortgage
financings during 2010, partially offset by a reduction in
deferred financings costs due to the write-off of loan fees
related to the retirement of certain of our mortgage loans
payable during 2011 and our unsecured notes during 2010.
In October 2008, we entered into an interest rate swap agreement
(the Series F Agreement) to mitigate our
exposure to floating interest rates related to the coupon reset
of the Companys Series F Preferred Stock. The
Series F Agreement has a notional value of
$50.0 million and is effective through October 1,
2013. The Series F Agreement fixes the
30-year
U.S. Treasury rate at 5.2175%. We recorded
$0.04 million in mark to market gain, inclusive of the
reset payment, which is included in
Mark-to-Market
Gain (Loss) on Interest Rate Protection Agreements for the three
months ended March 31, 2011, as compared to
$0.1 million in mark to market loss, which is included in
Mark to Market Gain (Loss) on Interest Rate Protection
Agreements, for the three months ended March 31, 2010.
25
For the three months ended March 31, 2011, we recognized a
net loss from early retirement of debt of $0.9 million due
to prepayment penalties and the write off of unamortized loan
costs associated with the early payoff of certain mortgage
loans. For the three months ended March 31, 2010, we
recognized a net gain from early retirement of debt of
$0.4 million due to the partial repurchase of certain
series of our senior unsecured notes.
Equity in income of Other Real Estate Partnerships increased
$2.0 million, or 71.4%, primarily due to an increase in
gain on sale of real estate for the Other Real Estate
Partnerships for the three months ended March 31, 2011.
For the three months ended March 31, 2011, Equity in Income
of Joint Ventures was $0.04 million, as compared to Equity
in Loss of Joint Ventures of $0.5 million for the three
months ended March 31, 2010. The variance of
$0.5 million is due primarily to the sale of our interest
in certain Joint Ventures during 2010.
Income tax provision of $0.4 million (included in
continuing operations and discontinued operations) for the three
months ended March 31, 2011 and of $0.5 million
(included in continuing operations and gain on sale of real
estate) for the three months ended March 31, 2010 primarily
relates to the gain on sale of real estate in our taxable REIT
subsidiaries.
The following table summarizes certain information regarding the
industrial properties included in our discontinued operations
for the three months ended March 31, 2011 and
March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2011
|
|
|
March 31, 2010
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
13,259
|
|
|
$
|
14,038
|
|
Property Expenses
|
|
|
(5,663
|
)
|
|
|
(6,635
|
)
|
Impairment of Real Estate, Net
|
|
|
(1,147
|
)
|
|
|
(9,155
|
)
|
Depreciation and Amortization
|
|
|
(969
|
)
|
|
|
(6,317
|
)
|
Interest Expense
|
|
|
(13
|
)
|
|
|
(18
|
)
|
Gain on Sale of Real Estate
|
|
|
2,742
|
|
|
|
4,008
|
|
Provision for Income Taxes
|
|
|
(720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued Operations
|
|
$
|
7,489
|
|
|
$
|
(4,079
|
)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations for the three months ended
March 31, 2011 reflects the results of operations and gain
on sale of real estate relating to 12 industrial properties that
were sold during the three months ended March 31, 2011 and
the results of operations of 161 industrial properties that were
identified as held for sale at March 31, 2011.
Loss from discontinued operations for the three months ended
March 31, 2010 reflects the gain on sale of real estate
relating to three industrial properties and one land parcel that
received ground rental revenues that were sold during the three
months ended March 31, 2010 and reflects the results of
operations of the 10 industrial properties and one land parcel
that received ground rental revenues that were sold during the
year ended December 31, 2010, 12 industrial properties that
were sold during the three months ended March 31, 2011 and
161 industrial properties identified as held for sale at
March 31, 2011.
The $1.1 million gain on sale of real estate for the three
months ended March 31, 2010 resulted from the sale of
several land parcels that do not meet the criteria for inclusion
in discontinued operations.
LIQUIDITY
AND CAPITAL RESOURCES
At March 31, 2011 our cash and cash equivalents was
approximately $10.8 million. We also had
$112.6 million available for additional borrowings under
our Unsecured Credit Facility, subject to certain restrictions.
We have considered our short-term (through March 31,
2012) liquidity needs and the adequacy of our estimated
cash flow from operations and other expected liquidity sources
to meet these needs. Our 4.625% Notes due in 2011, in the
aggregate principal amount of $128.9 million, are due on
September 15, 2011 (the 2011
26
Exchangeable Notes). We expect to satisfy the payment
obligations on the 2011 Exchangeable Notes with proceeds from
property dispositions, the issuance of additional secured debt
(see Subsequent Events) and the issuance of common equity,
subject to market conditions. With the exception of the 2011
Exchangeable Notes, we believe that our principal short-term
liquidity needs are to fund normal recurring expenses, property
acquisitions, developments, renovations, expansions and other
nonrecurring capital improvements, debt service requirements,
mortgage financing maturities and the minimum distributions
required to maintain the Companys REIT qualification under
the Code. We anticipate that these needs will be met with cash
flows provided by operating and investing activities, including
the disposition of select assets. In addition, we plan to retain
capital by making per Unit distributions equivalent to the per
share distributions the Company is required to make to meet its
minimum distribution requirements as a REIT. We have not paid c
distributions to date in 2011 and may not pay distributions in
future quarters in 2011 depending on the Companys taxable
income. If the Company is required to pay common stock dividends
in 2011, we may elect to satisfy this obligation by distributing
a combination of cash and common Units,
and/or
shares of the Companys common stock.
We expect to meet long-term (after March 31,
2012) 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 and
secured indebtedness and the issuance of additional equity
securities, subject to market conditions.
We also have financed the development or acquisition of
additional properties through borrowings under our Unsecured
Credit Facility and may finance the development or acquisition
of additional properties through such borrowings, to the extent
capacity is available, in the future. At March 31, 2011,
borrowings under our Unsecured Credit Facility bore interest at
a weighted average interest rate of 3.480%. Our Unsecured Credit
Facility is comprised of a $200.0 million term loan and a
$200.0 million revolving credit facility. The interest rate
on the term loan is LIBOR plus 325 basis points or a base
rate plus 225 basis points, at our election. The revolving
credit facility currently bears interest at a floating rate of
LIBOR plus 275 basis points or a base rate plus
175 basis points, at our election. As of April 29,
2011, we had approximately $59.9 million available for
additional borrowings under the Unsecured Credit Facility,
subject to certain restrictions. Our Unsecured Credit Facility
contains certain financial covenants including limitations on
incurrence of debt and debt service coverage. Our access to
borrowings may be limited if we fail to meet any of these
covenants. We believe that we were in compliance with our
financial covenants as of March 31, 2011, and we anticipate
that we will be able to operate in compliance with our financial
covenants for the remainder of 2011.
Our senior unsecured notes have been assigned credit ratings
from Standard & Poors, Moodys and Fitch
Ratings of BB-/Ba3/BB-, respectively. In the event of a
downgrade, we believe we would continue to have access to
sufficient capital; however, our cost of borrowing would
increase and our ability to access certain financial markets may
be limited.
Three
Months Ended March 31, 2011
Net cash provided by operating activities of approximately
$4.9 million for the three months ended March 31, 2011
was comprised primarily of the non-cash adjustments of
approximately $24.9 million, offset by a net loss of
approximately $4.4 million, prepayment premiums associated
with the early retirement of debt of approximately
$0.4 million and a net change in operating assets and
liabilities of approximately $15.2 million. The adjustments
for the non-cash items of approximately $24.9 million are
primarily comprised of depreciation and amortization of
approximately $28.0 million, the provision for bad debt of
approximately $0.2 million, the loss on the early
retirement of debt of approximately $0.9 million, the
impairment of real estate of $0.8 million, offset by the
gain on sale of real estate of approximately $2.7 million,
the effect of the straight-lining of rental income of
approximately $2.2 million and the mark to market gain
related to the Series F Agreement and equity in income of
Joint Ventures of approximately $0.1 million.
Net cash provided by investing activities of approximately
$11.0 million for the three months ended March 31,
2011 was comprised primarily of net proceeds from the sale of
real estate, distributions from the Other Real Estate
Partnerships and the repayments on our mortgage loan
receivables, offset by capital expenditures related to the
27
improvement of existing real estate, payments related to leasing
activities and investments in and advances to the Other Real
Estate Partnerships.
During the three months ended March 31, 2011, we sold 12
industrial properties comprising approximately 0.6 million
square feet of GLA. Proceeds from the sales of the 12 industrial
properties, net of closing costs and seller financing, were
approximately $13.3 million.
Net cash used in financing activities of approximately
$27.6 million for the three months ended March 31,
2011 was comprised primarily of repayments on our mortgage loans
payable, net repayments on our Unsecured Credit Facility,
preferred general partnership Unit distributions, the repurchase
and retirement of Units corresponding to awards of restricted
stock of the Company and payments on the interest rate swap
agreement, offset by the net contributions from the Company
resulting from the issuance of common stock.
During the three months ended March 31, 2011, the Company
issued 8,900,000 shares of its common stock through a
public offering, resulting in net proceeds of approximately
$100.6 Million. These proceeds were contributed to us in
exchange for an equivalent number of Units.
Market
Risk
The following discussion about our 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. Our
business subjects us to market risk from interest rates, and to
a much lesser extent, foreign currency fluctuations.
Interest
Rate Risk
In the normal course of business, we also face 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, 2011, approximately $1,281.2 million
(approximately 81.7% of total debt at March 31,
2011) of our debt was fixed rate debt and approximately
$286.1 million (approximately 18.3% of total debt at
March 31, 2011) was variable rate debt.
For fixed rate debt, changes in interest rates generally affect
the fair value of the debt, but not our earnings or cash flows.
Conversely, for variable rate debt, changes in the base interest
rate used to calculate the all-in interest rate generally do not
impact the fair value of the debt, but would affect our 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 us until we are required to refinance such
debt. See Note 6 to the Consolidated Financial Statements
for a discussion of the maturity dates of our various fixed rate
debt.
Based upon the amount of variable rate debt outstanding at
March 31, 2011, a 10% increase or decrease in the interest
rate on our variable rate debt would decrease or increase,
respectively, future net income and cash flows by approximately
$1.0 million per year. The foregoing calculation assumes an
instantaneous increase or decrease in the rates applicable to
the amount of borrowings outstanding under our Unsecured Credit
Facility at March 31, 2011. Changes in LIBOR could result
in a greater than 10% increase to such rates. In addition, the
calculation does not account for our option to elect the lower
of two different interest rates under our borrowings or other
possible actions, such as prepayment, that we might take in
response to any rate increase.
The use of derivative financial instruments allows us to manage
risks of increases in interest rates with respect to the effect
these fluctuations would have on our earnings and cash flows. As
of March 31, 2011, we had one outstanding derivative with a
notional amount of $50.0 million which mitigates our
exposure to floating interest rates related to the reset rate of
our Series F Preferred Stock (see Note 11 to the
Consolidated Financial Statements).
Foreign
Currency Exchange Rate Risk
Owning, operating and developing industrial property outside of
the United States exposes the Company to the possibility of
volatile movements in foreign exchange rates. Changes in foreign
currencies can affect the operating results of international
operations reported in U.S. dollars and the value of the
foreign assets reported in U.S. dollars.
28
The economic impact of foreign exchange rate movements is
complex because such changes are often linked to variability in
real growth, inflation, interest rates, governmental actions and
other factors. At March 31, 2011, we owned several land
parcels for which the U.S. dollar was not the functional
currency. These land parcels are located in Ontario, Canada and
use we the Canadian dollar as their functional currency.
Subsequent
Events
From April 1, 2011 to May 2, 2011, we sold three
industrial properties for approximately $11.6 million.
There were no industrial properties acquired during this period.
On April 1, 2011, we paid off and retired a secured
mortgage loan originally maturing in October 2014 in the amount
of $27.4 million.
On May 2, 2011, the Operating Partnership obtained four
secured mortgage loans aggregating to $132.5 million. The
mortgage loans are cross-collateralized by 22 industrial
properties totaling approximately 4.4 million square feet
of GLA. The mortgage loans bear interest at a fixed rate of
4.45%, are amortized over 30 years and mature in June 2018.
Prepayments are prohibited for twelve months after loan
origination, after which prepayment premiums are calculated at
the greater of yield maintenance or 1% of the outstanding loan
balance.
On May 2, 2011, the Other Real Estate Partnerships obtained
four secured mortgage loans aggregating to $45.8 million.
The mortgage loans are cross-collateralized by ten industrial
properties totaling approximately 1.5 million square feet
of GLA. The mortgage loans bear interest at a fixed rate of
4.45%, are amortized over 30 years and mature in June 2018.
Prepayments are prohibited for twelve months after loan
origination, after which prepayment premiums are calculated at
the greater of yield maintenance or 1% of the outstanding loan
balance.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Response to this item is included in Item 2,
Managements Discussion and Analysis of Financial
Condition and Results of Operations above.
|
|
Item 4.
|
Controls
and Procedures
|
Our principal executive officer and principal financial officer,
in evaluating the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
as of the end of the period covered by this report, based on the
evaluation of these controls and procedures required by Exchange
Act
Rules 13a-15(b)
or
15d-15(b),
have concluded that as of the end of such period our disclosure
controls and procedures were effective.
There has been no change in our internal control over financial
reporting that occurred during the fiscal quarter covered by
this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
29
PART II:
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
None.
None.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
(Removed
and Reserved)
|
Not applicable.
|
|
Item 5.
|
Other
Information
|
None.
30
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer of First
Industrial Realty Trust, Inc., registrants sole general
partner, pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer of First
Industrial Realty Trust, Inc., registrants sole general
partner, pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer of First Industrial Realty Trust,
Inc., registrants sole general partner, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
31
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
Scott A. Musil
Chief Financial Officer
(Principal Financial Officer)
Date: May 2, 2011
32
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer of First
Industrial Realty Trust, Inc., registrants sole general
partner, pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer of First
Industrial Realty Trust, Inc., registrants sole general
partner, pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer of First Industrial Realty Trust,
Inc., registrants sole general partner, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
33