-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GMbi0DPu70zyOsYf/cwgriEJjJ24HUMdcYp4MCCYWmC97kK+PUrQN2i7WBRFmbIA OqZYT75CHbSKd0zKNsuq/Q== 0000950137-99-001515.txt : 19990512 0000950137-99-001515.hdr.sgml : 19990512 ACCESSION NUMBER: 0000950137-99-001515 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INDUSTRIAL LP CENTRAL INDEX KEY: 0001033128 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363924586 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-21873 FILM NUMBER: 99617412 BUSINESS ADDRESS: STREET 1: 311 S WACKER DR STREET 2: STE 4000 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3123444300 MAIL ADDRESS: STREET 1: 150 N WACKER DR STREET 2: STE 150 CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------- Commission File Number 333-21873 -------------------------- FIRST INDUSTRIAL, L.P. (Exact Name of Registrant as Specified in its Charter) DELAWARE 36-3924586 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606 (Address of Principal Executive Offices) (312) 344-4300 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 2 FIRST INDUSTRIAL, L.P. FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1999 INDEX PAGE ---- PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998........................................... 2 Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and March 31, 1998.............. 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and March 31, 1998..................... 4 Notes to Consolidated Financial Statements.................. 5-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 14-21 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................. 21 PART II: OTHER INFORMATION Item 1. Legal Proceedings....................................... 22 Item 2. Changes in Securities................................... 22 Item 3. Defaults Upon Senior Securities......................... 22 Item 4. Submission of Matters to a Vote of Security Holders..... 22 Item 5. Other Information....................................... 22 Item 6. Exhibits and Report on Form 8-K/A....................... 22 SIGNATURE........................................................... 23 EXHIBIT INDEX....................................................... 24 1 3 PART I. FINANCIAL INFORMATION ----------------------------- ITEM 1. FINANCIAL STATEMENTS FIRST INDUSTRIAL, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (UNAUDITED)
March 31, December 31, 1999 1998 ----------- ----------- ASSETS Assets: Investment in Real Estate: Land............................................. 322,380 $ 323,363 Buildings and Improvements....................... 1,803,961 1,794,611 Furniture, Fixtures and Equipment................ 1,353 1,353 Construction in Progress......................... 15,224 14,138 Less: Accumulated Depreciation................ (156,967) (145,435) ----------- ----------- Net Investment in Real Estate........... 1,985,951 1,988,030 Investment in Other Real Estate Partnerships................................... 383,105 368,364 Cash and Cash Equivalents........................ --- 13,946 Restricted Cash.................................. 10,341 7,680 Tenant Accounts Receivable, Net.................. 12,643 9,755 Investment in Joint Venture...................... 5,154 4,458 Deferred Rent Receivable......................... 12,627 11,150 Deferred Financing Costs, Net.................... 10,356 10,458 Prepaid Expenses and Other Assets, Net........... 59,554 56,820 ----------- ----------- Total Assets............................ $ 2,479,731 $ 2,470,661 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage Loans Payable, Net...................... $ 65,641 $ 66,065 Senior Unsecured Debt, Net....................... 948,618 948,595 Acquisition Facility Payable..................... 141,600 134,800 Accounts Payable and Accrued Expenses............ 75,025 68,198 Rents Received in Advance and Security Deposits....................................... 17,947 16,363 Distributions Payable............................ 27,157 27,081 ----------- ----------- Total Liabilities....................... 1,275,988 1,261,102 ----------- ----------- Commitments and Contingencies....................... --- --- Partners' Capital: General Partner Preferred Units.................. 336,990 336,990 General Partner Units............................ 686,950 689,923 Unamortized Value of General Partnership Restricted Units............................... (4,889) (3,312) Limited Partners Units........................... 184,692 185,958 ----------- ----------- Total Partners' Capital................. 1,203,743 1,209,559 ----------- ----------- Total Liabilities and Partners' Capital............................... $ 2,479,731 $ 2,470,661 =========== ===========
The accompanying notes are an integral part of the financial statements. 2 4 FIRST INDUSTRIAL, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA) (UNAUDITED) Three Months Three Months Ended Ended March 31, 1999 March 31, 1998 -------------- -------------- Revenues: Rental Income............................. $ 64,251 $ 51,334 Tenant Recoveries and Other Income........ 16,707 11,744 ----------- ----------- Total Revenues................... 80,958 63,078 ----------- ----------- Expenses: Real Estate Taxes......................... 13,048 10,808 Repairs and Maintenance................... 5,069 2,979 Property Management....................... 2,380 2,485 Utilities................................. 2,196 1,944 Insurance................................. 193 179 Other..................................... 895 852 General and Administrative................ 3,095 2,619 Interest.................................. 19,318 14,069 Amortization of Deferred Financing Costs.. 248 161 Depreciation and Other Amortization....... 14,592 11,617 ----------- ----------- Total Expenses................... 61,034 47,713 ----------- ----------- Income from Operations Before Equity in Income of Other Real Estate Partnerships and Equity in Income of Joint Venture..... 19,924 15,365 Equity in Income of Other Real Estate Partnerships.............................. 6,408 8,757 Equity in Income of Joint Venture............ 126 --- ----------- ----------- Income from Operations....................... 26,458 24,122 Gain on Sales of Real Estate................. 1,545 43 ----------- ----------- Net Income................................... 28,003 24,165 Less: Preferred Unit Distributions.......... (7,231) (4,998) ----------- ----------- Net Income Available to Unitholders.......... $ 20,772 $ 19,167 =========== =========== Net Income Available to Unitholders per Weighted Average Unit Outstading: Basic................................... $ .46 $ .45 =========== =========== Diluted................................ $ .46 $ .45 =========== =========== The accompanying notes are an integral part of the financial statements. 3 5 FIRST INDUSTRIAL, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED) Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income............................ $ 28,003 $ 24,165 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation....................... 13,335 10,642 Amortization of Deferred Financing Costs.............................. 248 161 Other Amortization................. 1,295 1,228 Equity in Income of Joint Venture.. (126) --- Gain on Sales of Real Estate....... (1,545) (43) Equity in Income of Other Real Estate Partnerships.............. (6,408) (8,757) Increase in Tenant Accounts Receivable and Prepaid Expenses and Other Assets................. (7,220) (6,412) Increase in Deferred Rent Receivable....................... (1,520) (956) Increase in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits................ 7,473 8,366 ---------- ----------- Net Cash Provided by Operating Activities..................... 33,535 28,394 ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases and Additions to Investment in Real Estate and Closing Costs of Sales of Real Estate........................... (33,914) (147,445) Contributions to Investment in Other Real Estate Partnerships... (21,588) (43,175) Distributions from Investment in Other Real Estate Partnerships... 13,255 5,744 Contributions to and Investments in Joint Venture................. (750) --- Distributions from Joint Venture... 180 --- Proceeds from Sales of Investment in Real Estate................... 23,926 1,798 Repayment of Mortgage Loans Receivable....................... 87 16 Increase in Restricted Cash........ (2,661) --- ---------- ----------- Net Cash Used in Investing Activities..................... (21,465) (183,062) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Unit Distributions................. (27,074) (22,004) Preferred Unit Contributions....... --- 192,700 Preferred Unit Distributions....... (7,231) (4,784) Repayments on Mortgage Loans Payable.......................... (406) (363) Proceeds from Acquisition Facilities Payable............... 29,300 164,900 Repayments on Acquisition Facilities Payable............... (22,500) (276,500) Proceeds from Senior Unsecured Debt............................. --- 99,753 Other Proceeds from Senior Unsecured Debt............................. --- 2,760 Other Costs of Senior Unsecured Debt............................. --- (2,565) Book Overdraft..................... 2,125 --- Debt Issuance Costs and Prepayment Fees............................. (230) (1,195) ---------- ----------- Net Cash (Used in) Provided by Financing Activities........ (26,016) 152,702 ---------- ----------- Net Decrease in Cash and Cash Equivalents...................... (13,946) (1,966) Cash and Cash Equivalents, Beginning of Period.............. 13,946 4,995 ---------- ----------- Cash and Cash Equivalents, End of Period........................... $ --- $ 3,029 ========== =========== The accompanying notes are an integral part of the financial statements. 4 6 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 1. ORGANIZATION AND FORMATION OF COMPANY First Industrial, L.P. (the "Operating Partnership") was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the "Company") with an approximate 84.0% ownership interest at March 31, 1999. The Company also owns preferred units with an aggregate liquidation priority of $350,000. The Company is a real estate investment trust (REIT) as defined in the Internal Revenue Code. The Company's operations are conducted primarily through the Operating Partnership. The limited partners of the Operating Partnership own approximately a 16.0% aggregate ownership interest at March 31, 1999. The Operating Partnership is the sole member of limited liability companies (the "L.L.C.s"), owns a 95% economic interest in FR Development Services, Inc. as well as a 99% limited partnership interest (subject in one case, as described below, to a preferred limited partnership interest) in each of eight limited partnerships (together, the "Other Real Estate Partnerships"). The Operating Partnership, through wholly owned limited liability companies in which it is the sole member, also owns a 10% equity interest in and provides asset and property management services to a joint venture which invests in industrial properties (the "September 1998 Joint Venture"). The general partners of the Other Real Estate Partnerships are separate corporations, each with a one percent general partnership interest in the Other Real Estate Partnership for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly owned subsidiary of the Company. First Industrial Securities Corporation, the general partner of one of the Other Real Estate Partnerships (First Industrial Securities, L.P.), also owns a preferred limited partnership interest in the First Industrial Securities L.P. which entitles it to receive a fixed quarterly distribution, and results in it being allocated income in the same amount, equal to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value, Series A Cumulative Preferred Stock. The consolidated financial statements of the Operating Partnership report the L.L.C.s and FR Development Services, Inc. on a consolidated basis (hereinafter defined as the "Consolidated Operating Partnership") and the Other Real Estate Partnerships are accounted for under the equity method of accounting. The minority ownership interest in FR Development Services, Inc. is not reflected in the consolidated financial statements due to its immateriality. As of March 31, 1999, the Consolidated Operating Partnership owned 876 in-service properties containing an aggregate of approximately 57.0 million square feet of gross leasable area ("GLA"). On a combined basis, as of March 31, 1999, the Other Real Estate Partnerships owned 102 in-service properties containing an aggregate of approximately 11.8 million square feet of GLA. Profits, losses and distributions of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships are allocated to the general partner and the limited partners, or the members, as applicable, in accordance with the provisions contained within the partnership agreements or operating agreements, as applicable, of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships. 5 7 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying interim financial statements have been prepared in accordance with the accounting policies described in the financial statements and related notes included in the Operating Partnership's 1998 Form 10-K and should be read in conjunction with such financial statements and related notes. The following notes to these interim financial statements highlight significant changes to the notes included in the December 31, 1998 audited financial statements included in the Operating Partnership's 1998 Form 10-K and present interim disclosures as required by the Securities and Exchange Commission. In order to conform with generally accepted accounting principles, management, in preparation of the Consolidated Operating Partnership's financial statements, is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of March 31, 1999 and December 31, 1998, and the reported amounts of revenues and expenses for the three months ended March 31, 1999 and 1998. Actual results could differ from those estimates. In the opinion of management, all adjustments consist of normal recurring adjustments necessary to present fairly the financial position of the Consolidated Operating Partnership as of March 31, 1999, the results of its operations and its cash flows for each of the three months ended March 31, 1999 and 1998. Tenant Accounts Receivable, Net: The Consolidated Operating Partnership provides an allowance for doubtful accounts against the portion of tenant accounts receivable which is estimated to be uncollectible. Tenant accounts receivable in the consolidated balance sheets are shown net of an allowance for doubtful accounts of $1,649 as of March 31, 1999 and December 31, 1998. 6 8 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 3. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS The Investment in Other Real Estate Partnerships reflects the Operating Partnership's 99% limited partnership equity interest in the entities described in Note 1 to these financial statements. Summarized condensed financial information as derived from the financial statements of the Other Real Estate Partnerships is presented below: Condensed Combined Balance Sheets: March 31, December 31, 1999 1998 --------- --------- ASSETS Assets: Investment in Real Estate, Net....... $ 434,775 $ 419,117 Other Assets......................... 40,017 41,198 --------- --------- Total Assets............... $ 474,792 $ 460,315 ========= ========= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage Loans Payable............... $ 42,283 $ 42,422 Other Liabilities.................... 5,765 5,901 --------- --------- Total Liabilities.......... 48,048 48,323 --------- --------- Partners' Capital.................... 426,744 411,992 --------- --------- Total Liabilities and Partners' Capital........ $ 474,792 $ 460,315 ========= ========= Condensed Combined Statements of Operations: Three Months Ended --------------------------- March 31, March 31, 1999 1998 --------- --------- Total Revenues............................. $ 14,440 $ 13,123 Property Expenses.......................... (3,733) (2,805) Interest Expense........................... (761) (692) Amortization of Deferred Financing Costs... (17) (17) Depreciation and Other Amortization........ (2,476) (2,100) Gain on Sales of Real Estate............... --- 2,317 --------- --------- Net Income................................. $ 7,453 $ 9,826 ========= ========= 7 9 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 4. INVESTMENT IN JOINT VENTURE During the three months ended March 31, 1999, the Consolidated Operating Partnership received approximately $728 (net of the intercompany elimination) in acquisition, asset management and property management fees from the September 1998 Joint Venture. The Operating Partnership, through a wholly owned limited liability company in which it is the sole member, also contributed $714 and received distributions of $180 from the September 1998 Joint Venture. As of March 31, 1999, the September 1998 Joint Venture owned 146 industrial properties comprising approximately 7.5 million square feet of GLA. 5. REAL ESTATE HELD FOR SALE The Consolidated Operating Partnership has an active sales program through which it is continually engaged in identifying and evaluating its current portfolio for potential sales candidates in order to redeploy capital. At March 31, 1999, the Consolidated Operating Partnership had 24 industrial properties comprising approximately 3.9 million square feet of GLA held for sale. Twenty-three of 24 of these properties were identified as held for sale during the three months ended March 31, 1999. There can be no assurance that such properties held for sale will be sold. The following table discloses certain information regarding the 24 industrial properties held for sale by the Consolidated Operating Partnership. THREE MONTHS ENDED MARCH 31, --------------------------- 1999 1998 --------- --------- Total Revenues $ 5,237 $ 4,076 Operating Expenses (1,453) (1,473) Depreciation and Amortization (756) (756) --------- --------- Income from Operations $ 3,028 $ 1,847 ========= ========= Net Carrying Value $ 93,108 ========= 8 10 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 6. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION FACILITY PAYABLE The following table discloses certain information regarding the Consolidated Operating Partnership's mortgage loans, senior unsecured debt and acquisition facility payable:
ACCRUED INTEREST OUTSTANDING BALANCE AT PAYABLE AT INTEREST RATE AT ------------------------ ------------------------ ---------------- -------- MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, MATURITY 1999 1998 1999 1998 1999 DATE ---------- ------------ --------- ------------ --------------- -------- MORTGAGE LOANS PAYABLE, NET CIGNA Loan ......................... $ 35,117 $ 35,220 $ 219 $ -- 7.500% 4/01/03 Assumed Loans ...................... 8,584 8,661 -- -- 9.250% 1/01/13 LB Mortgage Loan II ................ 705 705 -- -- 8.000% (1) Acquisition Mortgage Loan I ........ 3,798 3,864 -- -- 8.500% 8/01/08 Acquisition Mortgage Loan II ....... 7,769 7,828 -- 51 7.750% 4/01/06 Acquisition Mortgage Loan III ...... 3,444 3,485 -- 26 8.875% 6/01/03 Acquisition Mortgage Loan IV ....... 2,469 2,488 -- 19 8.950% 10/01/06 Acquisition Mortgage Loan VI ....... 1,014 (2) 1,024 -- 7 8.875% 11/01/06 Acquisition Mortgage Loan VII ...... 1,434 (2) 1,450 -- 11 9.750% 3/15/02 Acquisition Mortgage Loan VIII ..... 1,307 1,340 -- 9 8.450% 7/01/09 -------- -------- ----- ----- Total .............................. $ 65,641 $ 66,065 $ 219 $ 123 ======== ======== ===== ===== SENIOR UNSECURED DEBT, NET 2005 Notes ...................... $ 50,000 $ 50,000 $ 1,246 $ 383 6.900% 11/21/05 2006 Notes ...................... 150,000 150,000 3,500 875 7.000% 12/01/06 2007 Notes ...................... 149,957 (3) 149,956 4,307 1,457 7.600% 5/15/07 2011 Notes ...................... 99,435 (3) 99,424 2,786 942 7.375% 5/15/11 (4) 2017 Notes ...................... 99,821 (3) 99,818 2,500 625 7.500% 12/01/17 2027 Notes ...................... 99,863 (3) 99,862 2,701 914 7.150% 5/15/27 (5) 2028 Notes ...................... 199,770 (3) 199,768 3,209 7,051 7.600% 7/15/28 2011 Drs ........................ 99,772 (3) 99,767 3,178 1,553 6.500% (7) (6) ................................. 4/05/11 ---------- ------------ -------- ---------- Total .......................... $ 948,618 $ 948,595 $ 23,427 $ 13,800 ========== ============ ======== ========== ACQUISITION FACILITY PAYABLE 1997 Unsecured Acquisition Facility............ $ 141,600 $ 134,800 $ 695 $ 690 5.838% 4/30/01 ========== ============ ======== ==========
(1) The maturity date of the LB Mortgage Loan II is based on a contingent event relating to the environmental status of the property collateralizing the loan. (2) The Acquisition Mortgage Loan VI and the Acquisition Mortgage Loan VII are net of unamortized premiums of $64 and $86, respectively. (3) The 2007 Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs. are net of unamortized discounts of $43, $565, $179, $137, $230 and $228, respectively. (4) The 2011 Notes are redeemable at the option of the holder thereof, on May 15, 2004. (5) The 2027 Notes are redeemable at the option of the holders thereof, on May 15, 2002. (6) The 2011 Drs. are required to be redeemed by the Operating Partnership on April 5, 2001 if the Remarketing Dealer elects not to remarket the 2011 Drs. (7) The 2011 Drs. bear interest at an annual rate of 6.50% to the Remarketing Date. If the holder of the Call Option calls the 2011 Drs. and elects to remarket the 2011 Drs., then after the Remarketing Date, the interest rate on the 2011 Drs. will be reset at a fixed rate until April 5, 2011 based on a predetermined formula as disclosed in the related Prospectus Supplement. The following is a schedule of the stated maturities of the mortgage loans, senior unsecured debt and acquisition facility payable for the next five years ending December 31, and thereafter: Amount ------------- 1999 $ 1,335 2000 1,901 2001 143,664 2002 3,463 2003 36,620 Thereafter 969,403 ------------- Total $ 1,156,386 ============= The maturity date of the LB Mortgage Loan II is based on a contingent event. As a result, this loan is not included in the preceding table. 9 11 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 7. PARTNERS' CAPITAL The Operating Partnership has issued general partnership units, limited partnership units (together, the "Units") and preferred general partnership units. The general partnership units resulted from capital contributions from the Company. The limited partnership units are issued in conjunction with the acquisition of certain properties. The preferred general partnership units resulted from preferred capital contributions from the Company. The Operating Partnership will be required to make all required distributions on the preferred general partnership units prior to any distribution of cash or assets to the holders of the general and limited partnership units except for distributions required to enable the Company to maintain its qualification as a REIT. Unit Contributions: During the three months ended March 31, 1999, the Company awarded 72,100 shares of restricted common stock to certain employees and 837 shares of restricted common stock to certain Directors. Other employees of the Company converted certain employee stock options to 1,129 shares of restricted common stock. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of $1,937 on the date of grant. The restricted common stock vests over periods from five to ten years. Compensation expense will be charged to earnings over the respective vesting period. Distributions: On January 18, 1999, the Operating Partnership paid a fourth quarter 1998 distribution of $.60 per Unit, totaling approximately $27,081. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $54.688 per unit on its Series B Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $53.906 per unit on its Series C Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $49.687 per unit on its Series D Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $49.375 per unit on its Series E Cumulative Preferred Units. The preferred unit distributions paid on March 31, 1999 totaled, in the aggregate, approximately $7,231. 8. ACQUISITION OF REAL ESTATE During the three months ended March 31, 1999, the Consolidated Operating Partnership acquired one existing industrial property and several land parcels. The aggregate purchase price for these acquisitions totaled approximately $6,405, excluding costs incurred in conjunction with the acquisition of the properties. 9. SALES OF REAL ESTATE During the three months ended March 31, 1999, the Consolidated Operating Partnership sold ten existing industrial properties and one land parcel. Gross proceeds from these sales were approximately $23,926. Approximately $4,759 of the gross proceeds from the sales of these properties was received from the September 1998 Joint Venture (the Consolidated Operating Partnership sold two of the ten properties to the September 1998 Joint Venture at the Consolidated Operating Partnership's net book value). The gain on sales of real estate was approximately $1,545. 10 12 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 10. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Three Months Ended ------------------------ March 31, March 31, 1999 1998 --------- --------- Interest paid, net of capitalized interest.............................. $ 9,590 $ 1,991 ========= ========= Interest capitalized.................... $ 1,229 $ 935 ========= ========= SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Distribution payable on Units........... $ 27,157 $ 22,709 ========= ========= EXCHANGE OF LIMITED PARTNERSHIP UNITS FOR GENERAL PARTNERSHIP UNITS: Limited Partnership Units............... $ (255) $ (2,574) General Partnership Units............... 255 2,574 --------- --------- $ --- $ --- ========= ========= IN CONJUNCTION WITH THE PROPERTY ACQUISITIONS, THE FOLLOWING ASSETS AND LIABILITIES WERE ASSUMED AND OPERATING PARTNERSHIP UNITS WERE EXCHANGED: Purchase of real estate ................ $ 6,405 $ 127,689 Prepaid(Accrued) real estate taxes and security deposits ................ 17 (1,782) Operating Partnership Units............. --- (1,971) --------- --------- $ 6,422 $ 123,936 ========= ========= IN CONJUNCTION WITH THE DISTRIBUTION OF 173 PROPERTIES FROM THE FINANCING PARTNERSHIP TO THE OPERATING PARTNERSHIP ON JANUARY 2, 1998, THE FOLLOWING ASSETS AND LIABILITIES WERE ASSUMED: Investment in real estate net........... $ 382,190 Tenant accounts receivable.............. 3,017 Deferred rent receivable................ 4,689 Other assets............................ 6,209 Accounts payable and accrued expenses... (5,920) Rents received in advance and security deposits.............................. (2,538) --------- Investment in other real estate partnerships.......................... $ 387,647 ========= 11 13 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 11. EARNINGS PER UNIT Net income per weighted average Units - Basic, is based on the weighted average Units outstanding. Net Income per weighted average Unit - Diluted, is based on the weighted average Units outstanding plus the effect of in-the-money employee stock options that result in the issuance of general partnership units. The computation of basic and diluted EPU is presented below: Three Months Three Months Ended Ended March 31, March 31, 1999 1998 ----------- ----------- Numerator: ---------- Net Income............................ $ 28,003 $ 24,165 Less: Preferred Distributions......... (7,231) (4,998) ----------- ----------- Net Income Available to Unitholders - For Basic and Diluted EPS.......... $ 20,772 $ 19,167 =========== =========== Denominator: ------------ Weighted Average Units - Basic........ 45,193,231 42,388,857 Effect of Dilutive Securities: Employee and Director Common Stock Options of the Company that result in the issuance of general partnership units.................. 84,166 374,177 ----------- ----------- Weighted Average Units - Diluted...... 45,277,397 42,763,034 =========== =========== Basic EPS: ---------- Net Income Available to Unitholders... $ .46 $ .45 =========== =========== Diluted EPS: ------------ Net Income Available to Unitholders... $ .46 $ .45 =========== =========== 12 14 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 12. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Consolidated Operating Partnership is involved in legal actions arising from the ownership of its properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, operations or liquidity of the Consolidated Operating Partnership. The Consolidated Operating Partnership has committed to the construction of seven development projects totaling approximately .6 million square feet of GLA. These developments are expected to be funded with cash flow from operations as well as borrowings under the Operating Partnership's $300,000 unsecured revolving credit facility. 13. SUBSEQUENT EVENTS From April 1, 1999 to May 7, 1999, the Consolidated Operating Partnership sold four industrial properties for approximately $13,036 of gross proceeds. On April 19, 1999, the Operating Partnership paid a first quarter 1999 distribution of $.60 per Unit, totaling approximately $27,157. 13 15 FIRST INDUSTRIAL, L.P. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of First Industrial, L.P.'s (the "Operating Partnership") financial condition and results of operations should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Operating Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Operating Partnership, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Operating Partnership's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Operating Partnership on a consolidated basis include, but are not limited to, changes in: economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of REITs), availability of capital, interest rates, competition, supply and demand for industrial properties in the Operating Partnership's current and proposed market areas, general accounting principles, policies and guidelines applicable to REITs and status of Year 2000 compliance. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Operating Partnership and its business, including additional factors that could materially affect the Operating Partnership's financial results, is included herein and in the Operating Partnership's other filings with the Securities and Exchange Commission. The Operating Partnership was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the "Company") with an approximate 84.0% ownership interest at March 31, 1999. The Company also owns preferred units with an aggregate liquidation priority of $350 million. The Company is a real estate investment trust (REIT) as defined in the Internal Revenue Code. The Company's operations are conducted primarily through the Operating Partnership. The limited partners of the Operating Partnership own approximately a 16.0% aggregate ownership interest at March 31, 1999. The Operating Partnership is the sole member of 23 limited liability companies (the "L.L.C.s"), owns a 95% economic interest in FR Development Services, Inc. as well as a 99% limited partnership interest (subject in one case, as described below, to a preferred limited partnership interest) in each of eight limited partnerships (together, the "Other Real Estate Partnerships"). The financial statements of the Operating Partnership report the L.L.C.s and FR Development Services, Inc. on a consolidated basis (hereinafter defined as the "Consolidated Operating Partnership") and the Other Real Estate Partnerships are accounted for under the equity method of accounting. The minority ownership interest in FR Development Services, Inc. is not reflected in the consolidated financial statements due to its immateriality. The general partners of the Other Real Estate Partnerships are separate corporations, each with a one percent general partnership interest in the Other Real Estate Partnership for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly owned subsidiary of the Company. First Industrial Securities Corporation, the general partner of the of one of the Other Real Estate Partnerships (First Industrial Securities, L.P.), also owns a preferred limited partnership interest in the First Industrial Securities L.P. which entitles it to receive a fixed quarterly distribution, and results in 14 16 it being allocated income in the same amount, equal to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value, Series A Cumulative Preferred Stock (the "Series A Preferred Stock"). Profits, losses and distributions of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships are allocated to the general partner and the limited partners, or members, as applicable, in accordance with the provisions contained within the partnership agreements or operating agreements, as applicable, of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships. RESULTS OF OPERATIONS At March 31, 1999, the Consolidated Operating Partnership owned 876 in-service properties with approximately 57.0 million square feet of gross leasable area ("GLA"), compared to 746 in-service properties with approximately 50.8 million square feet of GLA at March 31, 1998. The addition of 176 properties acquired or developed between April 1, 1998 and March 31, 1999 included the acquisitions of 167 properties totaling approximately 7.2 million square feet of GLA and the completed development of nine properties totaling approximately 1.3 million square feet of GLA. The Consolidated Operating Partnership also sold 45 in-service properties totaling approximately 2.2 million square feet of GLA and several land parcels. The Consolidated Operating Partnership also took one property out of service that was under redevelopment comprising approximately .1 million square feet of GLA. COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 TO THREE MONTHS ENDED MARCH 31, 1998 Rental income and tenant recoveries and other income increased by approximately $17.9 million or 28.4% due primarily to the properties acquired or developed after December 31, 1997. Approximately $.7 million of this increase is due to acquisition, asset management and property management fees received from the September 1998 Joint Venture. Revenues from properties owned prior to January 1, 1998, increased by approximately $3.0 million or 4.9% due primarily to general rent increases and an increase in recoverable income related to an increase in recoverable property expenses as discussed below. Property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, increased by approximately $4.5 million or 23.6% due primarily to the properties acquired or developed after December 31, 1997. Expenses from properties owned prior to January 1, 1998, increased by approximately $1.6 million or 9.2% due primarily to an increase in snow removal and related expenses incurred during the three months ended March 31, 1999 as compared to the three months ended March 31, 1998 for properties located in certain of the Consolidated Operating Partnership's metropolitan areas. General and administrative expense increased by approximately $.5 million due primarily to the adoption of Emerging Issues Task Force Issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate Acquisitions" ("EITF 97-11"). EITF 97-11, effective March 19, 1998, requires that internal costs of preacquisition activities incurred in connection with the acquisition of an operating property be expensed as incurred. Prior to March 19, 1998, the Consolidated Operating Partnership capitalized internal costs of preacquisition activities incurred in connection with the acquisition of operating properties. Interest expense increased by approximately $5.2 million for the three months ended March 31, 1999 compared to the three months ended March 31, 1998 due primarily to a higher average debt balance outstanding resulting from the issuance of senior unsecured debt to fund the acquisition of additional properties. The average debt balances outstanding for the three months ended March 31, 1999 and 1998 were approximately $1.2 billion and $.8 billion, respectively. Amortization of deferred financing costs increased by approximately $.1 million due primarily to additional amortization of deferred financing costs related to the issuance of additional senior unsecured debt. 15 17 Depreciation and other amortization increased by approximately $3.0 million due primarily to the additional depreciation and amortization related to the properties acquired after December 31, 1997. Equity in Income of Other Real Estate Partnerships decreased by approximately $2.3 million due primarily to a decrease in gain on sales of real estate. During the three months ended March 31, 1999, the Other Real Estate Partnerships did not sell any industrial properties. During the three months ended March 31, 1998, the Other Real Estate Partnerships sold five industrial properties and one land parcel for a gain of approximately $2.3 million. Equity in income of joint venture of approximately $.1 million for the three months ended March 31, 1999 represents the Consolidated Operating Partnership's 10% income interest in the September 1998 Joint Venture. The $1.5 million gain on sales of properties for the three months ended March 31, 1999 resulted from the sale of ten existing industrial properties and one land parcel. Gross proceeds from these sales were approximately $23.9 million. The $.04 million gain on sales of properties for the three months ended March 31, 1998 resulted from the sale of one existing industrial property and one land parcel. Gross proceeds from these sales were approximately $1.8 million. LIQUIDITY AND CAPITAL RESOURCES On March 31, 1999, the Consolidated Operating Partnership's restricted cash totaled approximately $10.3 million. Restricted cash was comprised of approximately $10.3 million of net proceeds from the sales of certain properties. These sales proceeds will be disbursed as the Operating Partnership exchanges into properties under Section 1031 of the Internal Revenue Code. THREE MONTHS ENDED MARCH 31, 1999 Net cash provided by operating activities of approximately $33.5 million for the three months ended March 31, 1999 was comprised primarily of net income of approximately $28.0 million, adjustments for non-cash items of approximately $5.3 million and the net change in operating assets and liabilities of approximately $.2 million. The adjustments for the non-cash items are primarily comprised of depreciation and amortization, offset by equity in income of Other Real Estate Partnerships, equity in income of the September 1998 Joint Venture, the gain on sales of real estate and the effect of the straight-lining of rental income. Net cash used in investing activities of approximately $21.5 million for the three months ended March 31, 1999 was comprised primarily of the acquisition of real estate, development of real estate, capital expenditures related to the expansion and improvement of existing real estate, closing costs from the sales of real estate, contributions to investment in Other Real Estate Partnerships, contributions to and investments in the September 1998 Joint Venture and an increase in restricted cash from sales proceeds deposited with an intermediary for Section 1031 exchange purposes, offset by distributions from investment in Other Real Estate Partnerships, distributions from investment in the September 1998 Joint Venture, proceeds from the sales of real estate and the repayment of mortgage loans receivable. Net cash provided by financing activities of approximately $26.0 million for the three months ended March 31, 1999 was comprised primarily of Unit (defined below) and preferred general partnership unit distributions, repayments on mortgage loans payable and debt issuance costs, offset by net borrowings under the Operating Partnership's $300.0 million unsecured revolving credit facility (the "1997 Unsecured Acquisition Facility") and a book overdraft. The general partner of the Operating Partnership manages the cash of the Consolidated Operating Partnership and the Other Real Estate Partnerships on a 16 18 consolidated basis. On a consolidated basis, the Consolidated Operating Partnership and the Other Real Estate Partnerships have a positive cash balance as of March 31, 1999. THREE MONTHS ENDED MARCH 31, 1998 Net cash provided by operating activities of approximately $28.4 million for the three months ended March 31, 1998 was comprised primarily of net income of approximately $24.2 million, adjustments for non-cash items of approximately $2.3 million and the net change in operating assets and liabilities of approximately $1.9 million. The adjustments for the non-cash items are primarily comprised of depreciation and amortization, offset by equity in income of Other Real Estate Partnerships, the gain on sales of real estate and the effect of the straight-lining of rental income. Net cash used in investing activities of approximately $183.1 million for the three months ended March 31, 1998 was comprised primarily of the acquisition of real estate, development of real estate, capital expenditures related to the expansion and improvement of existing real estate, closing costs from the sales of real estate and contributions to investment in Other Real Estate Partnerships, offset by the proceeds from sales of real estate, distributions from investment in Other Real Estate Partnerships and the repayment of mortgage loans receivable. Net cash provided by financing activities of approximately $152.7 million for the three months ended March 31, 1998 was comprised primarily of preferred general partnership unit contributions and the net proceeds from the issuance of senior unsecured debt, offset by net repayments under the Operating Partnership's 1997 Unsecured Acquisition Facility, Unit (defined below) and preferred general partnership unit distributions and repayments on mortgage loans payable. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges and preferred unit distributions was 1.70 for the three months ended March 31, 1999 compared to 1.90 for the three months ended March 31, 1998. The decrease is primarily due to additional interest expense and preferred general partnership unit distributions incurred during the three months ended March 31, 1999 from additional debt issued and preferred general partner contributions, respectively, to fund property acquisitions and developments, which is partially offset by higher net operating income from property acquisitions as discussed in "Results of Operations" above. MARKET RISK The following discussion about the Consolidated Operating Partnership's risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. This analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by the Consolidated Operating Partnership at March 31, 1999 that are sensitive to changes in the interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast. In the normal course of business, the Consolidated Operating Partnership also faces risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis. At March 31, 1999, $141.6 million (approximately 12% of total debt at March 31, 1999) of the Consolidated Operating Partnership's debt was variable rate debt (all of the variable rate debt relates to the Operating Partnership's 1997 Unsecured Acquisition Facility) and $1,014.3 million (approximately 88% of total debt at March 31, 1999) was fixed rate debt. The Consolidated Operating Partnership also had outstanding a written put and a written call option (collectively, the "Written Options") which were 17 19 issued in conjunction with the initial offering of two tranches of senior unsecured debt. The Consolidated Operating Partnership's past practice has been to lock into fixed interest rates at issuance or fix the rate of variable rate debt through the use of interest rate protection agreements when interest rate market conditions dictate it is advantageous to do so. Currently, the Consolidated Operating Partnership does not enter into financial instruments for trading or other speculative purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not earnings or cash flows of the Consolidated Operating Partnership. Conversely, for variable rate debt, changes in the interest rate generally do not impact the fair value of the debt, but would affect the Consolidated Operating Partnership's future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on the Consolidated Operating Partnership until the Consolidated Operating Partnership is required to refinance such debt. See Note 6 to the consolidated financial statements for a discussion of the maturity dates of the Consolidated Operating Partnership's various fixed rate debt. Based upon the amount of variable rate debt outstanding at March 31, 1999, a 10% increase or decrease in the interest rate on the Consolidated Operating Partnership's variable rate debt would decrease or increase, respectively, future net income and cash flows by approximately $.8 million per year. A 10% increase in interest rates would decrease the fair value of the fixed rate debt at March 31, 1999 by approximately $52.0 million to $1,116.6 million. A 10% decrease in interest rates would increase the fair value of the fixed rate debt at March 31, 1999 by approximately $57.4 million to $1,226.0 million. A 10% increase in interest rates would decrease the fair value of the Written Options at March 31, 1999 by approximately $2.7 million to $5.6 million. A 10% decrease in interest rates would increase the fair value of the Written Options at March 31, 1999 by approximately $3.3 million to $11.6 million. INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE During the three months ended March 31, 1999, the Consolidated Operating Partnership acquired one existing industrial property and several land parcels. The aggregate purchase price for these acquisitions totaled approximately $6.4 million, excluding costs incurred in conjunction with the acquisition of the properties. The Consolidated Operating Partnership has committed to the construction of seven development projects totaling approximately .6 million square feet of GLA. These developments are expected to be funded with cash flow from operations as well as borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility. During the three months ended March 31, 1999, the Consolidated Operating Partnership sold ten existing industrial properties and one land parcel. Gross proceeds from these sales were approximately $23.9 million. Approximately $4.8 million of the gross proceeds from the sales of these properties was received from the September 1998 Joint Venture (the Consolidated Operating Partnership sold two of the ten properties to the September 1998 Joint Venture at the Consolidated Operating Partnership's net book value). From April 1, 1999 to May 7, 1999, the Consolidated Operating Partnership sold four industrial properties for approximately $13.0 million of gross proceeds. REAL ESTATE HELD FOR SALE The Consolidated Operating Partnership has an active sales program through which it is continually engaged in identifying and evaluating its current portfolio for potential sales candidates in order to redeploy capital. At March 31, 1999, the Consolidated Operating Partnership had 24 industrial properties comprising approximately 3.9 million square feet of GLA held for sale. Income from operations of the 24 industrial properties held for sale for the three months ended March 31, 1999 and 1998 is $3.0 million and 18 20 $1.8 million, respectively. Net carrying value of the 24 industrial properties held for sale at March 31, 1999 is approximately $93.1 million. Twenty-three of 24 of these properties were identified as held for sale during the three months ended March 31, 1999. There can be no assurance that such properties held for sale will be sold. INVESTMENT IN JOINT VENTURE During the three months ended March 31, 1999, the Operating Partnership, through a wholly owned limited liability company in which it is the sole member, contributed $.7 million to and received distributions of $.2 million from the September 1998 Joint Venture. As of March 31, 1999, the September 1998 Joint Venture owned 146 industrial properties comprising approximately 7.5 million square feet of GLA. GENERAL PARTNERSHIP, LIMITED PARTNERSHIP AND PREFERRED GENERAL PARTNERSHIP UNIT CONTRIBUTIONS The Operating Partnership has issued general partnership units, limited partnership units (together, the "Units") and preferred general partnership units. The general partnership units resulted from capital contributions from the Company. The limited partnership units are issued in conjunction with the acquisition of certain properties. The preferred general partnership units resulted from preferred capital contributions from the Company. The Operating Partnership will be required to make all required distributions on the preferred general partnership units prior to any distribution of cash or assets to the holders of the general and limited partnership units except for distributions required to enable the Company to maintain its qualification as a REIT. Unit Contributions: During the three months ended March 31, 1999, the Company awarded 72,100 shares of restricted common stock to certain employees and 837 shares of restricted common stock to certain Directors. Other employees of the Company converted certain employee stock options to 1,129 shares of restricted common stock. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of $1.9 million on the date of grant. The restricted common stock vests over periods from five to ten years. Compensation expense will be charged to earnings over the respective vesting period. DISTRIBUTIONS On January 18, 1999, the Operating Partnership paid a fourth quarter 1998 distribution of $.60 per Unit, totaling approximately $27.1 million. On April 19, 1999, the Operating Partnership paid a first quarter 1999 distribution of $.60 per Unit, totaling approximately $27.2 million. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $54.688 per unit on its Series B Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $53.906 per unit on its Series C Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $49.687 per unit on its Series D Cumulative Preferred Units. On March 31, 1999, the Operating Partnership paid a first quarter distribution of $49.375 per unit on its Series E Cumulative Preferred Units. The preferred unit distributions paid on March 31, 1999 totaled, in the aggregate, approximately $7.2 million. SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS The Consolidated Operating Partnership has considered its short-term (one year or less) liquidity needs and the adequacy of its estimated cash flow from operations and other expected liquidity sources to meet these needs. The Consolidated Operating Partnership believes that its principal short-term liquidity needs are to fund normal recurring expenses, debt service requirements and the minimum distribution 19 21 required by the Company to maintain the Company's REIT qualification under the Internal Revenue Code. The Consolidated Operating Partnership anticipates that these needs will be met with cash flows provided by operating activities. The Consolidated Operating Partnership expects to meet long-term (greater than one year) liquidity requirements such as property acquisitions, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through long-term secured and unsecured indebtedness and the issuance of additional Units and preferred units. The Consolidated Operating Partnership is also actively considering acquisition and development joint ventures with institutional partners and the disposition of select assets as additional financing strategies. As of March 31, 1999 and May 7, 1999, $100.0 million of debt securities was registered and unissued under the Securities Act of 1933, as amended. The Consolidated Operating Partnership may finance the development or acquisition of additional properties through borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility. At March 31, 1999, borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility bore interest at a weighted average interest rate of 5.84%. As of May 7, 1999, the Operating Partnership had approximately $139.4 million available for additional borrowings under the 1997 Unsecured Acquisition Facility. YEAR 2000 COMPLIANCE The Year 2000 compliance issue concerns the inability of computerized information systems and non-information systems to accurately calculate, store or use a date after 1999. This could result in computer systems failures or miscalculations causing disruptions of operations. The Year 2000 issue affects almost all companies and organizations. The Consolidated Operating Partnership has discussed its software applications and internal operational programs with its current information systems' vendor and, based on such discussions, believes that such applications and programs will properly recognize calendar dates beginning in the year 2000. The Consolidated Operating Partnership is discussing with its material third-party service providers, such as its banks, payroll processor and telecommunications provider, their Year 2000 compliance and is assessing what effect their possible non-compliance might have on the Consolidated Operating Partnership. In addition, the Consolidated Operating Partnership is discussing with its material vendors the possibility of any interface difficulties and/or electrical or mechanical problems relating to the year 2000 which may affect properties owned by the Consolidated Operating Partnership. The Consolidated Operating Partnership has also surveyed substantially all of its tenants to determine the status of their Year 2000 compliance and what effect their possible non-compliance might have on the Consolidated Operating Partnership. The Consolidated Operating Partnership is currently processing the information obtained from such tenant surveys and remains in discussions with its material vendors and third-party service providers. Of the tenant surveys processed to date, all have stated that they are Year 2000 compliant or will be Year 2000 compliant by the end of 1999. The Consolidated Operating Partnership plans to complete its assessment of Year 2000 compliance by such parties by June 30, 1999. Until such time the Consolidated Operating Partnership cannot estimate any potential adverse impact resulting from the failure of tenants, vendors or third-party service providers to address their Year 2000 issues; however, to date, no significant Year 2000-related conditions have been identified. Because the Consolidated Operating Partnership's evaluation of its Year 2000 issues has been conducted by its own personnel or by its vendors in connection with their servicing operations, the Consolidated Operating Partnership believes that its expenditures for assessing its Year 2000 issues, though difficult to quantify, to date have not been material. In addition, the Consolidated Operating Partnership is not aware of any Year 2000-related conditions that it believes would likely require any material expenditures by the Consolidated Operating Partnership in the future. Based on its current information, the Consolidated Operating Partnership believes that the risk posed by any foreseeable Year 2000-related problem with its internal systems and the systems at its 20 22 properties (including both information and non-information systems) or with its vendors or tenants is minimal. Year 2000-related problems with the Consolidated Operating Partnership's software applications and internal operational programs or with the electrical or mechanical systems at its properties are unlikely to cause more than minor disruptions in the Consolidated Operating Partnership's operations. The Consolidated Operating Partnership believes that the risk posed by Year 2000-related problems at certain of its third-party service providers, such as its banks, payroll processor and telecommunications provider is marginally greater, though, based on its current information, the Consolidated Operating Partnership does not believe any such problems would have a material effect on its operations. Any Year 2000 related problems at such third-party service providers could delay the processing of financial transactions and the Consolidated Operating Partnership's payroll and could disrupt the Consolidated Operating Partnership's internal and external communications. At this time, the Consolidated Operating Partnership has not developed and does not anticipate developing any contingency plans with respect to Year 2000 issues. In addition, the Consolidated Operating Partnership has no plans to seek independent verification or review of its assessment of its Year 2000 issues. The Consolidated Operating Partnership does intend to complete its assessment of, and to continue to monitor, its Year 2000 issues and will develop contingency plans if, and to the extent, deemed necessary. While the Consolidated Operating Partnership believes that it will be Year 2000 compliant by December 31, 1999, there can be no assurance that the Consolidated Operating Partnership has been or will be successful in identifying and assessing Year 2000 issues, or that, to the extent identified, the Consolidated Operating Partnership's efforts to remediate such issues will be effective such that Year 2000 issues will not have a material adverse effect on the Consolidated Operating Partnership's business, financial condition or results of operation. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Response to this item is included in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" above. 21 23 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORT ON FORM 8-K/A Exhibit No Description ---------- ----------- 27 * Financial Data Schedule * Filed herewith. Report on Form 8-K/A: --------------------- Report on Form 8-K/A No. 1, dated November 6, 1998, filed January 11, 1999 relating to (i) the acquisition of 70 industrial properties by the Operating Partnership, (ii) four industrial properties by the Other Real Estate Partnerships and (iii) the acquisition of 111 industrial properties by a joint venture arrangement, entered into on September 28, 1998, between the Operating Partnership, through a limited liability company in which it is the sole member, and an institutional investor. The report includes Combined Historical Statements of Revenues and Certain Expenses for the acquired properties and Pro Forma Balance Sheet and Pro Forma Statements of Operations for the Operating Partnership. 22 24 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST INDUSTRIAL, L.P. BY: FIRST INDUSTRIAL REALTY TRUST, INC. ITS SOLE GENERAL PARTNER Date: May 11, 1999 By: /s/ Michael J. Havala ----------------------------------------- Michael J. Havala Chief Financial Officer (Principal Financial and Accounting Officer) 23 25 EXHIBIT INDEX Exhibit No Description - ---------- ----------- 27 * Financial Data Schedule * Filed herewith. 24 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRST INDUSTRIAL, L.P. FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 0 0 14,292 (1,649) 0 12,643 2,142,918 (156,967) 2,479,731 102,182 1,155,859 0 0 0 1,203,743 2,479,731 0 80,958 0 (23,781) (17,935) 0 (19,318) 28,003 0 28,003 0 0 0 28,003 .46 .46
-----END PRIVACY-ENHANCED MESSAGE-----