-----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, RsismOM2M42KZeg8GHC8003OIkRHQ6vbIx6Bh4X1BOWdA5M3Gnj9nfNdm521rDW6 52AwxaM+RKN/zIAnakji0w== /in/edgar/work/20000814/0000950137-00-003710/0000950137-00-003710.txt : 20000921 0000950137-00-003710.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950137-00-003710 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INDUSTRIAL LP CENTRAL INDEX KEY: 0001033128 STANDARD INDUSTRIAL CLASSIFICATION: [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: 700752 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 e10-q.txt QUARTERLY REPORT 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------- Commission File Number 333-21873 -------------------------- FIRST INDUSTRIAL, L.P. (Exact Name of Registrant as Specified in its Charter) DELAWARE 36-3924586 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606 (Address of Principal Executive Offices) (312) 344-4300 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / 2 FIRST INDUSTRIAL, L.P. FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2000 INDEX PAGE ---- PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999.............................................. 2 Consolidated Statements of Operations for the Six Months Ended June 30, 2000 and June 30, 1999................................ 3 Consolidated Statements of Operations for the Three Months Ended June 30, 2000 and June 30, 1999.......................... 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and June 30, 1999................................ 5 Notes to Consolidated Financial Statements .................... 6-13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................... 14-20 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................................ 21 PART II: OTHER INFORMATION Item 1. Legal Proceedings ......................................... 21 Item 2. Changes in Securities ..................................... 21 Item 3. Defaults Upon Senior Securities............................ 21 Item 4. Submission of Matters to a Vote of Security Holders ....... 21 Item 5. Other Information ......................................... 21 Item 6. Exhibits and Report on Form 8-K............................ 21 SIGNATURE .......................................................... 22 EXHIBIT INDEX....................................................... 23 1 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FIRST INDUSTRIAL, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (UNAUDITED)
June 30, December 31, 2000 1999 ----------- ------------ ASSETS Assets: Investment in Real Estate: Land .............................................................. $ 285,625 $ 311,149 Buildings and Improvements ........................................ 1,492,986 1,776,217 Furniture, Fixtures and Equipment ................................. 1,353 1,353 Construction in Progress .......................................... 22,133 42,715 Less: Accumulated Depreciation .................................... (169,002) (179,293) ----------- ----------- Net Investment in Real Estate ............................. 1,633,095 1,952,141 Real Estate Held for Sale, Net of Accumulated Depreciation and Amortization of $33,442............................................ 354,774 -- Investments in and Advances to Other Real Estate Partnerships ........ 402,143 380,774 Cash and Cash Equivalents ............................................ 2,547 22 Restricted Cash ...................................................... 11,887 927 Tenant Accounts Receivable, Net ...................................... 10,060 8,986 Investments in Joint Ventures ........................................ 6,078 6,408 Deferred Rent Receivable ............................................. 13,751 13,777 Deferred Financing Costs, Net......................................... 11,318 9,905 Prepaid Expenses and Other Assets, Net ............................... 72,471 71,047 ----------- ----------- Total Assets .............................................. $ 2,518,124 $ 2,443,987 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage Loans Payable, Net .......................................... $ 62,166 $ 63,059 Senior Unsecured Debt, Net ........................................... 948,735 948,688 Acquisition Facility Payable ......................................... 161,800 94,000 Accounts Payable and Accrued Expenses ................................ 77,762 75,397 Rents Received in Advance and Security Deposits ...................... 19,943 19,329 Distributions Payable ................................................ 28,601 28,164 ----------- ----------- Total Liabilities ......................................... 1,299,007 1,228,637 ----------- ----------- Commitments and Contingencies ........................................... -- -- Partners' Capital: General Partner Preferred Units ...................................... 336,990 336,990 General Partner Units ................................................ 708,868 694,899 Unamortized Value of General Partnership Restricted Units ............ (11,787) (4,087) Limited Partners' Units .............................................. 185,046 187,548 ----------- ----------- Total Partners' Capital ................................... 1,219,117 1,215,350 ----------- ----------- Total Liabilities and Partners' Capital ................... $ 2,518,124 $ 2,443,987 =========== ===========
The accompanying notes are an integral part of the financial statements. 2 4 FIRST INDUSTRIAL, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA) (UNAUDITED)
Six Months Six Months Ended Ended June 30, 2000 June 30, 1999 ------------- ------------- Revenues: Rental Income ........................................................ $ 124,668 $ 126,806 Tenant Recoveries and Other Income ................................... 33,421 33,241 --------- --------- Total Revenues ............................................. 158,089 160,047 --------- --------- Expenses: Real Estate Taxes .................................................... 25,603 25,621 Repairs and Maintenance .............................................. 7,863 8,789 Property Management .................................................. 6,154 4,706 Utilities ............................................................ 3,808 3,945 Insurance ............................................................ 549 360 Other ................................................................ 2,410 1,793 General and Administrative ........................................... 7,426 6,456 Interest Expense ..................................................... 38,559 38,775 Amortization of Deferred Financing Costs ............................. 865 570 Depreciation and Other Amortization .................................. 29,638 29,163 --------- --------- Total Expenses ............................................. 122,875 120,178 --------- --------- Income from Operations Before Equity in Income of Other Real Estate Partnerships and Equity in Income of Joint Ventures .......... 35,214 39,869 Equity in Income of Other Real Estate Partnerships ...................... 18,131 12,929 Equity in Income of Joint Ventures ...................................... 119 246 --------- --------- Income from Operations .................................................. 53,464 53,044 Gain on Sales of Real Estate ............................................ 12,145 8,395 --------- --------- Net Income .............................................................. 65,609 61,439 Less: Preferred Unit Distributions ..................................... (14,462) (14,462) --------- --------- Net Income Available to Unitholders ..................................... $ 51,147 $ 46,977 ========= ========= Net Income Available to Unitholders per Weighted Average Unit Outstanding: Basic ........................................................ $ 1.12 $ 1.04 ========= ========= Diluted ...................................................... $ 1.11 $ 1.04 ========= =========
The accompanying notes are an integral part of the financial statements. 3 5 FIRST INDUSTRIAL, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA) (UNAUDITED)
Three Months Three Months Ended Ended June 30, 2000 June 30, 1999 ------------- ------------- Revenues: Rental Income ........................................................ $ 62,281 $ 62,555 Tenant Recoveries and Other Income ................................... 16,041 16,534 -------- -------- Total Revenues ............................................. 78,322 79,089 -------- -------- Expenses: Real Estate Taxes .................................................... 12,256 12,573 Repairs and Maintenance .............................................. 3,882 3,720 Property Management .................................................. 3,329 2,326 Utilities ............................................................ 1,802 1,749 Insurance ............................................................ 398 167 Other ................................................................ 1,208 898 General and Administrative ............................................ 3,872 3,361 Interest Expense ..................................................... 19,533 19,457 Amortization of Deferred Financing Costs ............................. 453 322 Depreciation and Other Amortization .................................. 14,754 14,571 -------- -------- Total Expenses ............................................. 61,487 59,144 -------- -------- Income from Operations Before Equity in Income of Other Real Estate Partnerships and Equity in Income of Joint Ventures .......... 16,835 19,945 Equity in Income of Other Real Estate Partnerships ...................... 11,323 6,521 Equity in Income of Joint Ventures ...................................... 88 120 -------- -------- Income from Operations .................................................. 28,246 26,586 Gain on Sales of Real Estate ............................................ 6,257 6,850 -------- -------- Net Income .............................................................. 34,503 33,436 Less: Preferred Unit Distributions ..................................... (7,231) (7,231) -------- -------- Net Income Available to Unitholders ..................................... $ 27,272 $ 26,205 ======== ======== Net Income Available to Unitholders per Weighted Average Unit Outstanding: Basic ........................................................ $ .59 $ .58 ======== ======== Diluted ...................................................... $ .59 $ .58 ======== ========
The accompanying notes are an integral part of the financial statements. 4 6 FIRST INDUSTRIAL, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
Six Months Ended Six Months Ended June 30, 2000 June 30, 1999 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ........................................................ $ 65,609 $ 61,439 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation ..................................................... 26,655 26,574 Amortization of Deferred Financing Costs ......................... 865 570 Other Amortization ............................................... 4,362 2,744 Provision for Bad Debts .......................................... 50 -- Equity in Income of Joint Ventures ............................... (119) (246) Distributions from Joint Ventures ................................ 119 246 Gain on Sales of Properties ...................................... (12,145) (8,395) Equity in Income of Other Real Estate Partnerships ............... (18,131) (12,929) Distributions from Investment in Other Real Estate Partnerships .. 18,131 12,929 Increase in Tenant Accounts Receivable and Prepaid Expenses and Other Assets, Net .............................. (18,620) (5,592) Increase in Deferred Rent Receivable ............................. (519) (2,288) Increase (Decrease) in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits ............. 2,762 (5,188) --------- --------- Net Cash Provided by Operating Activities ................... 69,019 69,864 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of and Additions to Investment in Real Estate .......... (150,545) (67,701) Net Proceeds from Sales of Investment in Real Estate ............. 103,013 76,567 Investments in and Advances to Other Real Estate Partnerships ................................................... (43,799) (39,507) Distributions from Other Real Estate Partnerships ................ 22,430 22,733 Contributions to and Investments in Joint Venture ................ (37) (778) Distributions from Joint Venture ................................. 367 119 Repayment of Mortgage Loans Receivable ........................... 12,813 199 Increase in Restricted Cash ...................................... (10,960) (27,917) --------- --------- Net Cash Used in Investing Activities ....................... (66,718) (36,285) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Unit Contributions ................................................ 6,667 59 Unit Distributions ................................................ (56,626) (54,227) Preferred Unit Distributions ...................................... (14,462) (14,462) Repayments on Mortgage Loans Payable .............................. (875) (829) Proceeds from Acquisition Facilities Payable ...................... 111,000 56,600 Repayments on Acquisition Facilities Payable ...................... (43,200) (33,300) Debt Issuance Costs ............................................... (2,280) (651) --------- --------- Net Cash Provided by (Used in) Financing Activities .......... 224 (46,810) --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents .............. 2,525 (13,231) Cash and Cash Equivalents, Beginning of Period .................... 22 13,946 --------- --------- Cash and Cash Equivalents, End of Period .......................... $ 2,547 $ 715 ========= =========
The accompanying notes are an integral part of the financial statements. 5 7 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 1. ORGANIZATION AND FORMATION OF COMPANY First Industrial, L.P. (the "Operating Partnership") was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the "Company") with an approximate 84.3% ownership interest at June 30, 2000. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $350,000. The Company is a real estate investment trust ("REIT") as defined in the Internal Revenue Code. The Company's operations are conducted primarily through the Operating Partnership. The limited partners of the Operating Partnership own approximately a 15.7% aggregate ownership interest at June 30, 2000. The Operating Partnership is the sole member of several limited liability companies (the "L.L.C.s"), owns a 95% economic interest in FR Development Services, Inc. as well as a limited partnership interest (subject in one case, as described below, to a preferred limited partnership interest) in each of eight limited partnerships (together, the "Other Real Estate Partnerships"). The Operating Partnership, through separate wholly-owned limited liability companies in which it is the sole member, also owns 10% equity interests in and provides asset and property management services to, two joint ventures which invest in industrial properties (the "September 1998 Joint Venture" and the "September 1999 Joint Venture"). The general partners of the Other Real Estate Partnerships are separate corporations, each with at least a .01% general partnership interest in the Other Real Estate Partnership for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of the Company. First Industrial Securities Corporation, the general partner of one of the Other Real Estate Partnerships (First Industrial Securities, L.P.), also owns a preferred limited partnership interest in First Industrial Securities L.P. which entitles it to receive a fixed quarterly distribution, and results in it being allocated income in the same amount, equal to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value, Series A Cumulative Preferred Stock. The consolidated financial statements of the Operating Partnership report the L.L.C.s and FR Development Services, Inc. (hereinafter defined as the "Consolidated Operating Partnership") on a consolidated basis. The Other Real Estate Partnerships, the September 1998 Joint Venture and the September 1999 Joint Venture are accounted for under the equity method of accounting. The minority ownership interest in FR Development Services, Inc. is not reflected in the consolidated financial statements due to its immateriality. As of June 30, 2000, the Consolidated Operating Partnership owned 876 in-service properties containing an aggregate of approximately 56.4 million square feet of gross leasable area ("GLA"). On a combined basis, as of June 30, 2000, the Other Real Estate Partnerships owned 99 in-service properties containing an aggregate of approximately 11.9 million square feet of GLA. Profits, losses and distributions of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships are allocated to the general partner and the limited partners, or the members, as applicable, in accordance with the provisions contained within the partnership agreements or ownership agreements, as applicable, of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships. 6 8 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim financial statements have been prepared in accordance with the accounting policies described in the financial statements and related notes included in the Operating Partnership's 1999 Form 10-K and should be read in conjunction with such financial statements and related notes. The following notes to these interim financial statements highlight significant changes to the notes included in the December 31, 1999 audited financial statements included in the Operating Partnership's 1999 Form 10-K and present interim disclosures as required by the Securities and Exchange Commission. In order to conform with generally accepted accounting principles, management, in preparation of the Consolidated Operating Partnership's financial statements, is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of June 30, 2000 and December 31, 1999, and the reported amounts of revenues and expenses for each of the six months and three months ended June 30, 2000 and 1999. Actual results could differ from those estimates. In the opinion of management, all adjustments consist of normal recurring adjustments necessary for a fair statement of the financial position of the Consolidated Operating Partnership as of June 30, 2000 and the results of its operations and its cash flows for each of the six months and three months ended June 30, 2000 and 1999. Tenant Accounts Receivable, Net: The Consolidated Operating Partnership provides an allowance for doubtful accounts against the portion of tenant accounts receivable which is estimated to be uncollectible. Tenant accounts receivable in the consolidated balance sheets are shown net of an allowance for doubtful accounts of $1,707 and $1,657 as of June 30, 2000 and December 31, 1999, respectively. Reclassification: Certain 1999 items have been reclassified to conform to the 2000 presentation. 7 9 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 3. INVESTMENTS IN AND ADVANCES TO OTHER REAL ESTATE PARTNERSHIPS The investments in and advances to Other Real Estate Partnerships reflects the Operating Partnership's limited partnership equity interests in and advances to the entities referred to in Note 1 to these financial statements. Summarized condensed financial information as derived from the financial statements of the Other Real Estate Partnerships is presented below: Condensed Combined Balance Sheets:
June 30, December 31, 2000 1999 --------- ------------ ASSETS Assets: Investment in Real Estate, Net ................................. $ 432,555 $ 433,970 Other Assets, Net .............................................. 53,528 38,491 --------- --------- Total Assets ........................................... $ 486,083 $ 472,461 ========= ========= LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgage Loans Payable ........................................ $ 41,617 $ 41,891 Other Liabilities .............................................. 36,221 35,620 --------- --------- Total Liabilities ..................................... 77,838 77,511 --------- --------- Partners' Capital .............................................. 408,245 394,950 --------- --------- Total Liabilities and Partners' Capital ............... $ 486,083 $ 472,461 ========= =========
Condensed Combined Statements of Operations:
Six Months Ended ----------------------- June 30, June 30, 2000 1999 --------- ---------- Total Revenues ......................................................... $ 31,284 $ 29,325 Property Expenses ...................................................... (7,639) (7,481) General and Administrative ............................................. (112) -- Interest Expense ....................................................... (1,517) (1,527) Amortization of Deferred Financing Costs ............................... (34) (34) Depreciation and Other Amortization .................................... (5,524) (5,210) Gain (Loss) on Sales of Real Estate .................................... 3,786 (53) --------- --------- Net Income ............................................................. $ 20,244 $ 15,020 ========= =========
8 10 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 4. INVESTMENTS IN JOINT VENTURES During the six months ended June 30, 2000, the Consolidated Operating Partnership, through wholly-owned limited liability companies in which the Operating Partnership is the sole member, received, in the aggregate, approximately $1,412 in asset management and property management fees from the September 1998 Joint Venture and the September 1999 Joint Venture. The Operating Partnership, through a wholly-owned limited liability company in which it is the sole member, received distributions of approximately $486 from the September 1998 Joint Venture. As of June 30, 2000, the September 1998 Joint Venture owned 146 industrial properties comprising approximately 7.5 million square feet of GLA and the September 1999 Joint Venture owned 39 industrial properties comprising approximately 1.2 million square feet of GLA. 5. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION FACILITY PAYABLE Acquisition Facilities: In June 2000, the Operating Partnership amended and restated the 1997 Unsecured Acquisition Facility and entered into a $300,000 unsecured revolving credit facility (the "2000 Unsecured Acquisition Facility") which initially bears interest at LIBOR plus .80% or the Prime Rate at the Operating Partnership's election and provides for interest only payments until maturity. Under the 2000 Unsecured Acquisition Facility, the Operating Partnership has the right, subject to certain conditions, to increase the aggregate commitment under the 2000 Unsecured Acquisition Facility up to $400,000. The Operating Partnership may borrow under the 2000 Unsecured Acquisition Facility to finance the acquisition and development of additional properties and for other corporate purposes, including to obtain additional working capital. The 2000 Unsecured Acquisition Facility contains certain financial covenants relating to debt service coverage, market value net worth, dividend payout ratio and total funded indebtedness. The 2000 Unsecured Acquisition Facility matures on June 30, 2003. 9 11 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 5. MORTGAGE LOANS, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION FACILITY PAYABLE, CONTINUED The following table discloses certain information regarding the Consolidated Operating Partnership's mortgage loans, senior unsecured debt and acquisition facility payable:
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT INTEREST RATE AT ------------------------------ --------------------------- ---------------------- JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, MATURITY 2000 1999 2000 1999 2000 DATE --------- ------------ ---------- ------------ -------- ---------- MORTGAGE LOANS PAYABLE, NET CIGNA Loan ....................... $ 34,300 $ 34,636 $ 214 $ 216 7.500% 4/01/03 Assumed Loans .................... 8,173 8,343 -- -- 9.250% 1/01/13 LB Mortgage Loan II ............. 705 705 -- -- 8.000% (1) Acquisition Mortgage Loan I ...... 3,446 3,591 -- -- 8.500% 8/01/08 Acquisition Mortgage Loan II ..... 7,533 7,630 -- -- 7.750% 4/01/06 Acquisition Mortgage Loan III .... 3,284 3,350 -- -- 8.875% 6/01/03 Acquisition Mortgage Loan IV ..... 2,392 2,423 -- -- 8.950% 10/01/06 Acquisition Mortgage Loan VI ..... 974 (2) 991 (2) -- -- 8.875% 11/01/06 Acquisition Mortgage Loan VII .... 1,359 (2) 1,390 (2) -- -- 9.750% 3/15/02 --------- --------- --------- --------- Total ............................ $ 62,166 $ 63,059 $ 214 $ 216 ========= ========= ========= ========= SENIOR UNSECURED DEBT, NET 2005 Notes ....................... $ 50,000 $ 50,000 $ 383 $ 383 6.900% 11/21/05 2006 Notes ....................... 150,000 150,000 875 875 7.000% 12/01/06 2007 Notes ....................... 149,964 (3) 149,961 (3) 1,457 1,457 7.600% 5/15/07 2011 Notes ....................... 99,494 (3) 99,470 (3) 942 942 7.375% 5/15/11 (4) 2017 Notes ....................... 99,833 (3) 99,828 (3) 625 625 7.500% 12/01/17 2027 Notes ....................... 99,869 (3) 99,867 (3) 914 914 7.150% 5/15/27 (5) 2028 Notes ....................... 199,779 (3) 199,776 (3) 7,009 7,009 7.600% 7/15/28 2011 Drs ......................... 99,796 (3) 99,786 (3) 1,553 1,553 6.500% (7) 4/05/11 (6) Total ............................ $ 948,735 $ 948,688 $ 13,758 $ 13,758 ========= ========= ========= ========= ACQUISITION FACILITY PAYABLE 1997 Unsecured Acquisition Facility ......................... $ -- $ 94,000 $ -- $ 663 (8) (8) ========= ========= ========= ========= 2000 Unsecured Acquisition Facility ...................... $ 161,800 $ -- $ 34 $ -- 7.5400% 6/30/03 ========= ========= ========= =========
(1) The maturity date of the LB Mortgage Loan II is based on a contingent event relating to the environmental status of the property collateralizing the loan. (2) At June 30, 2000, the Acquisition Mortgage Loan VI and the Acquisition Mortgage Loan VII are net of unamortized premiums of $53 and $49, respectively. At December 31, 1999, the Acquisition Mortgage Loan VI and the Acquisition Mortgage Loan VII are net of unamortized premiums of $57 and $64, respectively. (3) At June 30, 2000, the 2007 Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs. are net of unamortized discounts of $36, $506, $167, $131, $221 and $204, respectively. At December 31, 1999, the 2007 Notes, 2011 Notes, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs. are net of unamortized discounts of $39, $530, $172, $133, $224 and $214, respectively. (4) The 2011 Notes are redeemable at the option of the holder thereof, on May 15, 2004. (5) The 2027 Notes are redeemable at the option of the holders thereof, on May 15, 2002. (6) The 2011 Drs. are required to be redeemed by the Operating Partnership on April 5, 2001 if the Remarketing Dealer elects not to remarket the 2011 Drs. (7) The 2011 Drs. bear interest at an annual rate of 6.50% to the Remarketing Date. If the holder of the Call Option calls the 2011 Drs. and elects to remarket the 2011 Drs., then after the Remarketing Date, the interest rate on the 2011 Drs. will be reset at a fixed rate until April 5, 2011 based on a predetermined formula as disclosed in the related Prospectus Supplement. (8) The 1997 Unsecured Acquisition Facility was amended and restated in June 2000. The following is a schedule of the stated maturities and scheduled principal payments of the mortgage loans, senior unsecured debt and acquisition facility payable for each of the next five years ending December 31, and thereafter: Amount ----------- Remainder of 2000 $ 912 2001 1,940 2002 3,325 2003 198,332 2004 1,319 Thereafter 967,331 ----------- Total $ 1,173,159 =========== The maturity date of the LB Mortgage Loan II is based on a contingent event. As a result, this loan is not included in the preceding table. 10 12 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 6. PARTNERS' CAPITAL The Operating Partnership has issued general partnership units, limited partnership units (together, the "Units") and preferred general partnership units. The general partnership units resulted from capital contributions from the Company. The limited partnership units are issued in conjunction with the acquisition of certain properties. The preferred general partnership units resulted from preferred capital contributions from the Company. The Operating Partnership will be required to make all required distributions on the preferred general partnership units prior to any distribution of cash or assets to the holders of the general and limited partnership units except for distributions required to enable the Company to maintain its qualification as a REIT. Unit Contributions: During the six months ended June 30, 2000, the Company awarded 355,139 shares of restricted common stock to certain employees and 1,833 shares of restricted common stock to certain Directors. Other employees of the Company converted certain in-the-money employee stock options to 14,903 shares of restricted common stock. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of approximately $9,634 on the date of grant. The restricted common stock vests over periods from one to ten years. Compensation expense will be charged to earnings over the respective vesting periods. Distributions: On January 24, 2000, the Operating Partnership paid a fourth quarter 1999 distribution of $.62 per Unit, totaling approximately $28,164. On April 17, 2000 the Operating Partnership paid a first quarter 2000 distribution of $.62 per Unit, totaling approximately $28,462. On March 31, 2000, the Operating Partnership paid a first quarter 2000 distribution of $54.688 per unit on its Series B Cumulative Preferred Units, $53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on its Series D Cumulative Preferred Units and $49.375 per unit on its Series E Cumulative Preferred Units. The preferred unit distributions paid on March 31, 2000 totaled, in the aggregate, approximately $7,231. On June 30, 2000, the Operating Partnership paid a second quarter 2000 distribution of $54.688 per unit on its Series B Cumulative Preferred Units, $53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on its Series D Cumulative Preferred Units and $49.375 per unit on its Series E Cumulative Preferred Units. The preferred unit distributions paid on June 30, 2000 totaled, in the aggregate, approximately $7,231. 7. ACQUISITION AND DEVELOPMENT OF REAL ESTATE During the six months ended June 30, 2000, the Consolidated Operating Partnership acquired 28 industrial properties and several land parcels. The aggregate purchase price for these acquisitions totaled approximately $90,978, excluding costs incurred in conjunction with the acquisition of the properties and the land parcel. The Consolidated Operating Partnership also completed the development of 11 industrial properties comprising approximately 2.2 million square feet of GLA at a cost of approximately $71,646. 8. SALES OF REAL ESTATE During the six months ended June 30, 2000, the Consolidated Operating Partnership sold 32 industrial properties and several land parcels. Gross proceeds from these sales were approximately $112,488. The gain on sales of real estate was approximately $12,145. 11 13 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 9. REAL ESTATE HELD FOR SALE The Consolidated Operating Partnership has an active sales program through which it is continually engaged in identifying and evaluating its current portfolio for potential sales candidates. At June 30, 2000, the Consolidated Operating Partnership had 111 properties comprising approximately 9.8 million square feet of GLA held for sale (of which, 97 properties comprising approximately 9.0 million square feet of GLA are in the Consolidated Operating Partnership's exit markets). All of these industrial properties were identified as held for sale during the three months ended June 30, 2000. There can be no assurance that such properties held for sale will be sold. The following table discloses certain information regarding the 111 industrial properties held for sale by the Consolidated Operating Partnership. SIX MONTHS ENDED JUNE 30, ----------------------- 2000 1999 --------- -------- Total Revenues $ 29,600 $ 28,478 Operating Expenses (9,254) (9,235) Depreciation and Amortization (5,299) (4,788) --------- -------- Net Income $ 15,047 $ 14,455 ========= ======== 10. SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Six Months Ended --------------------- June 30, June 30, 2000 1999 -------- -------- Interest paid, net of capitalized interest ..................................... $ 39,190 $ 38,610 ======== ======== Interest capitalized ........................................................... $ 2,747 $ 2,464 ======== ======== Supplemental Schedule of Noncash Investing and Financing Activities: Distribution payable on Units ............................................... $ 28,601 $ 27,157 ======== ======== Exchange of Limited Partnership Units for General Partnership Units: Limited Partnership Units ................................................... (2,488) (638) General Partnership Units ................................................... 2,488 638 -------- -------- $ -- $ -- ======== ======== Issuance of Units in exchange for property ..................................... $ 869 $ -- ======== ======== In Conjunction with the Property and Land Acquisitions, the Following Assets and Liabilities Were Assumed: Purchase of real estate ..................................................... $ 90,978 $ 16,484 Accrued real estate taxes and security deposits ............................ (957) (42) -------- -------- $ 90,021 $ 16,442 ======== ======== In conjunction with certain property sales, the Operating Partnership provided seller financing on behalf of certain buyers: Notes receivable ............................................................ $ 5,149 $ -- ======== ========
12 14 FIRST INDUSTRIAL, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR UNIT AND PER UNIT DATA) 11. EARNINGS PER UNIT ("EPU") Net income per weighted average Unit - Basic, is based on the weighted average Units outstanding. Net income per weighted average Unit - Diluted, is based on the weighted average Units outstanding plus the effect of in-the-money employee stock options that result in the issuance of general partnership units. The computation of basic and diluted EPU is presented below:
Six Months Ended Three Months Ended ----------------------------- ----------------------------- June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 ------------- ------------- ------------- ------------- Numerator: Net Income ......................................... $ 65,609 $ 61,439 $ 34,503 $ 33,436 Less: Preferred Distributions ...................... (14,462) (14,462) (7,231) (7,231) -------- -------- -------- -------- Net Income Available to Unitholders - For Basic and Diluted EPU ...................... $ 51,147 $ 46,977 $ 27,272 $ 26,205 ======== ======== ======== ======== Denominator: Weighted Average Units - Basic ..................... 45,851 45,222 46,004 45,251 Effect of Dilutive Securities: Employee and Director Common Stock Options of the Company that result in the issuance of general partnership units ............................... 195 118 232 151 -------- -------- -------- -------- Weighted Average Units - Diluted ................... 46,046 45,340 46,236 45,402 ======== ======== ======== ======== Basic EPU: Net Income Available to Unitholders ................ $ 1.12 $ 1.04 $ .59 $ .58 ======== ======== ======== ======== Diluted EPU: Net Income Available to Unitholders ................ $ 1.11 $ 1.04 $ .59 $ .58 ======== ======== ======== ========
12. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Consolidated Operating Partnership is involved in legal actions arising from the ownership of its properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, operations or liquidity of the Consolidated Operating Partnership. The Consolidated Operating Partnership has committed to the construction of ten development projects totaling approximately 1.0 million square feet of GLA for an estimated investment of approximately $62.5 million. Of this amount, approximately $31.9 million remains to be funded. These developments are expected to be funded with cash flow from operations, borrowings under the 2000 Unsecured Acquisition Facility and proceeds from the sale of select properties. 13. SUBSEQUENT EVENTS From July 1, 2000 to August 10, 2000, the Consolidated Operating Partnership acquired several land parcels for an aggregate purchase price of approximately $5,278, excluding costs incurred in conjunction with the acquisition of these land parcels. The Consolidated Operating Partnership also sold 11 industrial properties for approximately $40,693 of gross proceeds. On July 17, 2000, the Operating Partnership paid a second quarter 2000 distribution of $.62 per Unit, totaling approximately $28,601. 13 15 FIRST INDUSTRIAL, L.P. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of First Industrial, L.P.'s (the "Operating Partnership") financial condition and results of operations should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q. This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Operating Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Operating Partnership, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. The Operating Partnership's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Operating Partnership on a consolidated basis include, but are not limited to, changes in: economic conditions generally and the real estate market specifically, legislative/regulatory changes (including changes to laws governing the taxation of real estate investment trusts), availability of capital, interest rates, competition, supply and demand for industrial properties in the Operating Partnership's current and proposed market areas and general accounting principles, policies and guidelines applicable to real estate investment trusts. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Operating Partnership and its business, including additional factors that could materially affect the Operating Partnership's financial results, is included herein and in the Operating Partnership's other filings with the Securities and Exchange Commission. The Operating Partnership was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner of the Operating Partnership is First Industrial Realty Trust, Inc. (the "Company") with an approximate 84.3% ownership interest at June 30, 2000. The Company also owns a preferred general partnership interest in the Operating Partnership with an aggregate liquidation priority of $350 million. The Company is a real estate investment trust ("REIT") as defined in the Internal Revenue Code. The Company's operations are conducted primarily through the Operating Partnership. The limited partners of the Operating Partnership own approximately a 15.7% aggregate ownership interest at June 30, 2000. The Operating Partnership is the sole member of several limited liability companies (the "L.L.C.s"), owns a 95% economic interest in FR Development Services, Inc. as well as a limited partnership interest (subject in one case, as described below, to a preferred limited partnership interest) in each of eight limited partnerships (together, the "Other Real Estate Partnerships"). The Operating Partnership, through separate wholly-owned limited liability companies in which it is the sole member, also owns 10% equity interests in and provides asset and property management services to, two joint ventures which invest in industrial properties (the "September 1998 Joint Venture" and the "September 1999 Joint Venture"). The financial statements of the Operating Partnership report the L.L.C.s and FR Development Services, Inc. (hereinafter defined as the "Consolidated Operating Partnership") on a consolidated basis. The Other Real Estate Partnerships, the September 1998 Joint Venture and the September 1999 Joint Venture are accounted for under the equity method of accounting. The minority ownership interest in FR Development Services, Inc. is not reflected in the consolidated financial statements due to its immateriality. The general partners of the Other Real Estate Partnerships are separate corporations, each with at least a .01% general partnership interest in the Other Real Estate Partnership for which it acts as a general partner. Each general partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of the Company. First Industrial Securities Corporation, the general partner of one of the Other Real Estate Partnerships (First Industrial Securities, L.P.), also owns a preferred limited partnership interest in the First Industrial Securities L.P. which entitles it to receive a fixed quarterly distribution, and results in it being allocated income in the same amount, equal to the fixed quarterly dividend the Company pays on its 9.5%, $.01 par value, Series A Cumulative Preferred Stock. Profits, losses and distributions of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships are allocated to the general partner and the limited partners, or members, as applicable, in accordance with the provisions contained within the partnership agreements or operating agreements, as applicable, of the Operating Partnership, the L.L.C.s and the Other Real Estate Partnerships. RESULTS OF OPERATIONS At June 30, 2000, the Consolidated Operating Partnership owned 876 in-service properties with approximately 56.4 million square feet of gross leasable area ("GLA"), compared to 867 in-service properties with approximately 55.7 million square feet of GLA at June 30, 1999. During the period between July 1, 1999 and June 30, 2000, the Consolidated Operating Partnership acquired 42 properties containing approximately 3.4 million square feet of GLA, completed development of 23 properties and expansion of one property totaling approximately 4.1 million square feet of GLA and sold 51 in-service properties totaling approximately 6.2 million square feet of GLA and several land parcels. The Consolidated Operating Partnership also took one property out of service which was subsequently sold comprising approximately .4 million square feet of GLA. In addition, during the period between July 1, 1999 and June 30, 2000, the Operating Partnership contributed four industrial properties comprising .2 million square feet of GLA to First Industrial Securities, L.P. The comparison of the six months ended June 30, 2000 to the six months ended June 30, 1999 and the comparison of the three months ended June 30, 2000 to the three months ended June 30, 1999 is shown net of property acquisitions, developments placed in service and property dispositions. COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999 Rental income and tenant recoveries and other income decreased by approximately $2.0 million or 1.2% due primarily to a decrease in average occupied GLA for the six months ended June 30, 2000, compared to the six months ended June 30, 1999, offset by an increase in same store revenue. Rental income and tenant recoveries and other income from properties owned prior to January 1, 1999, increased by approximately $5.3 million or 4.0% due primarily to general rent increases and an increase in recoverable income due to an increase in property expenses as discussed below. 14 16 Property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses increased by approximately $1.2 million or 2.6% due primarily to increases in property management expense and other expenses, offset by a decrease in repairs and maintenance expense. The increase in property management expense is primarily due to costs associated with the opening of a regional office in California during the third quarter of 1999 as well as general pay increases. Other expenses increased due primarily to an increase in master lease payments associated with 14 properties during the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. The decrease in repairs and maintenance expense is due to a decrease in snow removal and related expenses incurred during the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. Property expenses from properties owned prior to January 1, 1999 increased approximately $1.2 million or 3.2% primarily due to an increase in real estate taxes and property management expense offset by a decrease in repairs and maintenance. General and administrative expense increased by approximately $1.0 million due primarily to general pay increases and additional employees. Interest expense decreased by approximately $.2 million for the six months ended June 30, 2000 compared to the six months ended June 30, 1999 due primarily to a lower average debt balance outstanding and an increase in capitalized interest for the six months ended June 30, 2000 due to an increase in development activities. This was slightly offset by an increase in the weighted average interest rate for the six months ended June 30, 2000 (7.29%) compared to the six months ended June 30, 1999 (7.13%). The average debt balance outstanding for the six months ended June 30, 2000 and 1999 was approximately $1.14 billion and $1.17 billion, respectively. Amortization of deferred financing costs increased by approximately $.3 million due primarily to amortization of additional deferred financing costs relating to the Operating Partnership's $300 million unsecured line of credit (the "1997 Unsecured Acquisition Facility"). Depreciation and other amortization increased by approximately $.5 million due primarily to the additional depreciation related to tenant improvements incurred subsequent to December 31, 1998. Equity in income of Other Real Estate Partnerships increased by approximately $5.2 million due primarily to an increase in average occupied GLA and an increase in gain on sales of real estate for the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. During the six months ended June 30, 2000, the Other Real Estate Partnerships sold three industrial properties and one land parcel for a gain of approximately $3.8 million. During the six months ended June 30, 1999, the Other Real Estate Partnerships sold one land parcel for a loss of approximately $.1 million. Equity in income of joint ventures remained relatively unchanged. The $12.1 million gain on sales of properties for the six months ended June 30, 2000 resulted from the sale of 32 industrial properties and several land parcels. Gross proceeds from these sales were approximately $112.5 million. The $8.4 million gain on sales of properties for the six months ended June 30, 1999 resulted from the sale of 24 industrial properties and one land parcel. Gross proceeds from these sales were approximately $76.6 million. COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THREE MONTHS ENDED JUNE 30, 1999 Rental income and tenant recoveries and other income decreased by approximately $.8 million or 1.0% due primarily to a decrease in average occupied GLA for the three months ended June 30, 2000, compared to the three months ended June 30, 1999, offset by an increase in same store revenue. Rental income and tenant recoveries and other income from properties owned prior to April 1, 1999, increased by approximately $2.5 million or 3.8% due primarily to general rent increases and an increase in recoverable income due to an increase in property expenses as discussed below. 15 17 Property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses increased by approximately $1.4 million or 6.7% due primarily to an increase in property management expense and other expenses. The increase in property management expense is primarily due to costs associated with the opening of a regional office in California during the third quarter of 1999 as well as general pay increases. Other expenses increased due primarily to an increase in master lease payments associated with 11 properties during the three months ended June 30, 2000 as compared to the three months ended June 30, 1999. Property expenses from properties owned prior to April 1, 1999 increased approximately $.6 million or 3.2% due to an increase in real estate taxes; repairs and maintenance, property management expense and utilities expense. General and administrative expense increased by approximately $.5 million due primarily to general pay increases and additional employees. Interest expense remained relatively unchanged. Amortization of deferred financing costs increased by approximately $.1 million due primarily to amortization of additional deferred financing costs relating to the Operating Partnership's 1997 Unsecured Acquisition Facility. Depreciation and other amortization increased by approximately $.2 million due primarily to the additional depreciation related to tenant improvements incurred subsequent to March 31, 1999. Equity in income of Other Real Estate Partnerships increased by approximately $4.8 million due primarily to an increase in average occupied GLA and an increase in gain on sales of real estate for the three months ended June 30, 2000 as compared to the three months ended June 30, 1999. During the three months ended June 30, 2000, the Other Real Estate Partnerships sold three industrial properties for a gain of approximately $3.8 million. During the three months ended June 30, 1999, the Other Real Estate Partnerships sold one land parcel for a loss of approximately $.1 million. Equity in income of joint ventures remained relatively unchanged. The $6.3 million gain on sales of properties for the three months ended June 30, 2000 resulted from the sale of 21 industrial properties and several land parcels. Gross proceeds from these sales were approximately $57.8 million. The $6.9 million gain on sales of properties for the three months ended June 30, 1999 resulted from the sale of 14 industrial properties. Gross proceeds from these sales were approximately $ 52.7 million. LIQUIDITY AND CAPITAL RESOURCES On June 30, 2000, the Consolidated Operating Partnership's cash and cash equivalents was approximately $2.5 million and restricted cash totaled approximately $11.9 million. Restricted cash was comprised of gross proceeds from the sales of certain properties. These sales proceeds will be disbursed as the Consolidated Operating Partnership exchanges into properties under Section 1031 of the Internal Revenue Code. SIX MONTHS ENDED JUNE 30, 2000 Net cash provided by operating activities of approximately $69.0 million for the six months ended June 30, 2000 was comprised primarily of net income of approximately $65.6 million and adjustments for non-cash items of approximately $19.3 million, offset by the net change in operating assets and liabilities of approximately $15.9 million. The adjustments for the non-cash items of approximately $19.3 million are primarily comprised of depreciation and amortization of approximately $31.8 million and a provision for bad debts of approximately $.1 million, offset by the gain on sales of real estate of 16 18 approximately $12.1 million and the effect of the straight-lining of rental income of approximately $.5 million. Net cash used in investing activities of approximately $66.7 million for the six months ended June 30, 2000 was comprised primarily of the acquisition of real estate, development of real estate, capital expenditures related to the expansion and improvement of existing real estate, investments in and advances to the Other Real Estate Partnerships, contributions to and investments in the September 1998 Joint Venture and an increase in restricted cash from sales proceeds deposited with an intermediary for Section 1031 exchange purposes, offset by distributions from investment in Other Real Estate Partnerships, distributions from investment in the September 1998 Joint Venture, net proceeds from the sales of real estate and the repayment of mortgage loans receivable. Net cash provided by financing activities of approximately $.2 million for the six months ended June 30, 2000 was comprised primarily of Unit (defined below) and preferred general partnership unit distributions, repayments on mortgage loans payable and debt issuance costs incurred in conjunction with the 2000 Unsecured Acquisition Facility (defined below), offset by the net borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility and 2000 Unsecured Acquisition Facility (defined below) and Unit contributions. SIX MONTHS ENDED JUNE 30, 1999 Net cash provided by operating activities of approximately $69.9 million for the six months ended June 30, 1999 was comprised primarily of net income of approximately $61.4 million, adjustments for non-cash items of approximately $19.2 million, offset by the net change in operating assets and liabilities of approximately $10.7 million. The adjustments for the non-cash items of approximately $19.2 million are primarily comprised of depreciation and amortization of approximately $29.9 million, offset by the gain on sales of real estate of approximately $8.4 million and the effect of the straight-lining of rental income of approximately $2.3 million. Net cash used in investing activities of approximately $36.3 million for the six months ended June 30, 1999 was comprised primarily of the acquisition of real estate, development of real estate, capital expenditures related to the expansion and improvement of existing real estate, and investments in and advances to the Other Real Estate Partnerships, contributions to and investments in the September 1998 Joint Venture and an increase in restricted cash from sales proceeds deposited with an intermediary for Section 1031 exchange purposes, offset by distributions from the Other Real Estate Partnerships, distributions from investment in the September 1998 Joint Venture, net proceeds from the sales of real estate and the repayment of mortgage loans receivable. Net cash used in financing activities of approximately $46.8 million for the six months ended June 30, 1999 was comprised primarily of Unit (defined below) and preferred general partnership unit distributions, repayments on mortgage loans payable and debt issuance costs, offset by net borrowings under the Operating Partnership's 1997 Unsecured Acquisition Facility and Unit (defined below) contributions. MARKET RISK The following discussion about the Consolidated Operating Partnership's risk-management activities includes "forward-looking statements" that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. 17 19 This analysis presents the hypothetical gain or loss in earnings, cash flows or fair value of the financial instruments and derivative instruments which are held by the Consolidated Operating Partnership at June 30, 2000 that are sensitive to changes in the interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast. In the normal course of business, the Consolidated Operating Partnership also faces risks that are either non-financial or non-quantifiable. Such risks principally include credit risk and legal risk and are not represented in the following analysis. At June 30, 2000, $161.8 million (approximately 13.8% of total debt at June 30, 2000) of the Consolidated Operating Partnership's debt was variable rate debt (all of the variable rate debt relates to the Operating Partnership's 2000 Unsecured Acquisition Facility (defined below)) and $1,010.9 million (approximately 86.2% of total debt at June 30, 2000) was fixed rate debt. The Consolidated Operating Partnership also had outstanding a written put and a written call option (collectively, the "Written Options") which were issued in conjunction with the initial offering of two tranches of senior unsecured debt. The Consolidated Operating Partnership's past practice has been to lock into fixed interest rates at issuance or fix the rate of variable rate debt through the use of interest rate protection agreements when interest rate market conditions dictate it is advantageous to do so. Currently, the Consolidated Operating Partnership does not enter into financial instruments for trading or other speculative purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt, but not earnings or cash flows of the Consolidated Operating Partnership. Conversely, for variable rate debt, changes in the interest rate generally do not impact the fair value of the debt, but would affect the Consolidated Operating Partnership's future earnings and cash flows. The interest rate risk and changes in fair market value of fixed rate debt generally do not have a significant impact on the Consolidated Operating Partnership until the Consolidated Operating Partnership is required to refinance such debt. See Note 5 to the consolidated financial statements for a discussion of the maturity dates of the Consolidated Operating Partnership's various fixed rate debt. Based upon the amount of variable rate debt outstanding at June 30, 2000, a 10% increase or decrease in the interest rate on the Consolidated Operating Partnership's variable rate debt would decrease or increase, respectively, future net income and cash flows by approximately $1.2 million per year. A 10% increase in interest rates would decrease the fair value of the fixed rate debt at June 30, 2000 by approximately $47.8 million to $901.9 million. A 10% decrease in interest rates would increase the fair value of the fixed rate debt at June 30, 2000 by approximately $53.2 million to $1,002.9 million. A 10% increase in interest rates would decrease the fair value of the Written Options at June 30, 2000 by approximately $2.1 million to $3.1 million. A 10% decrease in interest rates would increase the fair value of the Written Options at June 30, 2000 by approximately $3.5 million to $8.7 million. INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE During the six months ended June 30, 2000, the Consolidated Operating Partnership acquired 28 industrial properties and several land parcels. The aggregate purchase price for these acquisitions totaled approximately $91.0 million, excluding costs incurred in conjunction with the acquisition of the properties and the land parcel. The Consolidated Operating Partnership also completed the development of 11 industrial properties comprising approximately 2.2 million square feet of GLA at a cost of approximately $71.6 million. During the six months ended June 30, 2000, the Consolidated Operating Partnership sold 32 industrial properties and several land parcels. Gross proceeds from these sales were approximately $112.5 million. The Consolidated Operating Partnership has committed to the construction of ten development projects totaling approximately 1.0 million square feet of GLA for an estimated investment of 18 20 approximately $62.5 million. Of this amount, approximately $31.9 million remains to be funded. These developments are expected to be funded with cash flow from operations, borrowings under the Operating Partnership's 2000 Unsecured Acquisition Facility (defined below) and proceeds from the sale of select properties. REAL ESTATE HELD FOR SALE The Consolidated Operating Partnership has an active sales program through which it is continually engaged in identifying and evaluating its current portfolio for potential sales candidates. At June 30, 2000, the Consolidated Operating Partnership had 111 industrial properties comprising approximately 9.8 million square feet of GLA held for sale (of which, 97 properties comprising approximately 9.0 million square feet of GLA are in the Consolidated Operating Partnership's exit markets). Income from operations of the 111 industrial properties held for sale for the six months ended June 30, 2000 and 1999 is approximately $15.0 million and $14.5 million, respectively. Net carrying value of the 111 industrial properties held for sale at June 30, 2000 is approximately $354.8 million. All of these properties were identified as held for sale during the three months ended June 30, 2000. There can be no assurance that such properties held for sale will be sold. INVESTMENTS IN JOINT VENTURES During the six months ended June 30, 2000, the Consolidated Operating Partnership, through wholly-owned limited liability companies in which the Operating Partnership is the sole member, received, in the aggregate, approximately $1.4 million in asset management and property management fees from the September 1998 Joint Venture and the September 1999 Joint Venture. The Operating Partnership, through a wholly-owned limited liability company in which it is the sole member, received distributions of approximately $.5 million from the September 1998 Joint Venture. As of June 30, 2000, the September 1998 Joint Venture owned 146 industrial properties comprising approximately 7.5 million square feet of GLA and the September 1999 Joint Venture owned 39 industrial properties comprising approximately 1.2 million square feet of GLA. ACQUISITION FACILITY PAYABLE In June 2000, the Operating Partnership amended and restated the 1997 Unsecured Acquisition Facility and entered into a $300.0 million unsecured revolving credit facility (the "2000 Unsecured Acquisition Facility") which initially bears interest at LIBOR plus .80% or the Prime Rate at the Operating Partnership's election, and provides for interest only payments until maturity. Under the 2000 Unsecured Acquisition Facility, the Operating Partnership has the right, subject to certain conditions, to increase the aggregate commitment under the 2000 Unsecured Acquisition Facility up to $400.0 million. The Operating Partnership may borrow under the 2000 Unsecured Acquisition Facility to finance the acquisition and development of additional properties and for other corporate purposes, including to obtain additional working capital. The 2000 Unsecured Acquisition Facility contains certain financial covenants relating to debt service coverage, market value net worth, dividend payout ratio and total funded indebtedness. The 2000 Unsecured Acquisition Facility matures on June 30, 2003. GENERAL PARTNERSHIP, LIMITED PARTNERSHIP AND PREFERRED GENERAL PARTNERSHIP UNIT CONTRIBUTIONS The Operating Partnership has issued general partnership units, limited partnership units (together, the "Units") and preferred general partnership units. The general partnership units resulted from capital contributions from the Company. The limited partnership units are issued in conjunction with the acquisition of certain properties. The preferred general partnership units resulted from preferred capital contributions from the Company. The Operating Partnership will be required to make all required distributions on the preferred general partnership units prior to any distribution of cash or assets to the holders of the general and limited partnership units except for distributions required to enable the Company to maintain its qualification as a REIT. 19 21 Unit Contributions: During the six months ended June 30, 2000, the Company awarded 355,139 shares of restricted common stock to certain employees and 1,833 shares of restricted common stock to certain Directors. Other employees of the Company converted certain in-the-money employee stock options to 14,903 shares of restricted common stock. The Operating Partnership issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of approximately $9.6 million on the date of grant. The restricted common stock vests over periods from one to ten years. Compensation expense will be charged to earnings over the respective vesting periods. DISTRIBUTIONS On January 24, 2000, the Operating Partnership paid a fourth quarter 1999 distribution of $.62 per Unit, totaling approximately $28.2 million. On April 17, 2000, the Operating Partnership paid a first quarter 2000 distribution of $.62 per Unit, totaling approximately $28.5 million. On March 31, 2000, the Operating Partnership paid a first quarter 2000 distribution of $54.688 per unit on its Series B Cumulative Preferred Units, $53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on its Series D Cumulative Preferred Units and $49.375 per unit on its Series E Cumulative Preferred Units. The preferred unit distributions paid on March 31, 2000 totaled, in the aggregate, approximately $7.2 million. On June 30, 2000, the Operating Partnership paid a second quarter 2000 distribution of $54.688 per unit on its Series B Cumulative Preferred Units, $53.906 per unit on its Series C Cumulative Preferred Units, $49.687 per unit on its Series D Cumulative Preferred Units and $49.375 per unit on its Series E cumulative Preferred Units. The preferred unit distributions paid on June 30, 2000, totaled, in the aggregate, approximately $7.2 million. SUBSEQUENT EVENTS From July 1, 2000 to August 10, 2000, the Consolidated Operating Partnership acquired several land parcels for an aggregate purchase price of approximately $5.3 million, excluding costs incurred in conjunction with the acquisition of these land parcels. The Consolidated Operating Partnership also sold 11 industrial properties for approximately $40.7 million of gross proceeds. On July 17, 2000, the Operating Partnership paid a second quarter 2000 distribution of $.62 per Unit, totaling approximately $28.6 million. SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS The Consolidated Operating Partnership has considered its short-term (one year or less) liquidity needs and the adequacy of its estimated cash flow from operations and other expected liquidity sources to meet these needs. The Consolidated Operating Partnership believes that its principal short-term liquidity needs are to fund normal recurring expenses, debt service requirements and the minimum distribution required by the Company to maintain the Company's REIT qualification under the Internal Revenue Code. The Consolidated Operating Partnership anticipates that these needs will be met with cash flows provided by operating activities. The Consolidated Operating Partnership expects to meet long-term (greater than one year) liquidity requirements such as property acquisitions, developments, scheduled debt maturities, major renovations, expansions and other nonrecurring capital improvements through the disposition of select assets, long-term secured and unsecured indebtedness and the issuance of additional Units and preferred units. As of June 30, 2000 and August 10, 2000, $100.0 million of debt securities was registered and unissued under the Securities Act of 1933, as amended. The Consolidated Operating Partnership also may finance the development or acquisition of additional properties through borrowings under the Operating Partnership's 2000 Unsecured Acquisition Facility. At June 30, 2000, borrowings under the Operating Partnership's 2000 Unsecured Acquisition Facility bore interest at a weighted average interest rate of 7.54%. As of August 10, 2000 the Operating Partnership had approximately $104.1 million available for additional borrowings under the 2000 Unsecured Acquisition Facility. 20 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Response to this item is included in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" above. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES During the six months ended June 30, 2000, the Operating Partnership issued an aggregate of 30,413 Units having an aggregate market value of approximately $.9 million in exchange for property. The above Units were issued in a private placement in reliance on Section 4 (2) of the Securities Act of 1933, as amended, including Regulation D promulgated thereunder, to individuals or entities holding real property or interests therein. No underwriters were used in connection with such issuance. Subject to lock-up periods and certain adjustments, Units are generally convertible into common stock, par value $.01, of the Company on a one-for-one basis. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
Exhibit No. Description - ----------- ----------- 3.1 Twelfth Amendment, dated as of June 27, 2000, to Sixth Amended and Restated Limited Partnership Agreement of First Industrial, L.P., dated March 18, 1998 (incorporated by reference to Exhibit 10.2 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 4.1 Amended and restated Unsecured Revolving Credit Agreement, dated as of June 30, 2000 among First Industrial, L.P., First Industrial Realty Trust, Inc. and Bank One, N.A., UBS AG, Stamford Branch, Bank of America, N.A. and certain other banks (incorporated by reference to Exhibit 10.1 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 10.1 Employment Agreement, dated July 19, 2000, between First Industrial Realty Trust, Inc. and Michael J. Havala (incorporated by reference to Exhibit 10.3 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 10.2 Employment Agreement, dated July 26, 2000, between First Industrial Realty Trust, Inc. and Johannson L. Yap (incorporated by reference to Exhibit 10.4 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 27* Financial Data Schedule
* Filed herewith. Report on Form 8-K: None. 21 23 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST INDUSTRIAL, L.P. BY: FIRST INDUSTRIAL REALTY TRUST, INC. ITS SOLE GENERAL PARTNER Date: August 10, 2000 By: /s/ Michael J. Havala ---------------------------------- Michael J. Havala Chief Financial Officer (Principal Financial and Accounting Officer) 22 24 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 3.1 Twelfth Amendment, dated as of June 27, 2000, to Sixth Amended and Restated Limited Partnership Agreement of First Industrial, L.P., dated March 18, 1998 (incorporated by reference to Exhibit 10.2 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 4.1 Amended and restated Unsecured Revolving Credit Agreement, dated as of June 30, 2000 among First Industrial, L.P., First Industrial Realty Trust, Inc. and Bank One, N.A., UBS AG, Stamford Branch, Bank of America, N.A. and certain other banks (incorporated by reference to Exhibit 10.1 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 10.1 Employment Agreement, dated July 19, 2000, between First Industrial Realty Trust, Inc. and Michael J. Havala (incorporated by reference to Exhibit 10.3 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 10.2 Employment Agreement, dated July 26, 2000, between First Industrial Realty Trust, Inc. and Johannson L. Yap (incorporated by reference to Exhibit 10.4 of First Industrial Realty Trust, Inc.'s Form 10-Q for the quarter ended June 30, 2000, File No. 1-13102) 27 * Financial Data Schedule
* Filled herewith. 23 EX-27 2 ex27.txt FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRST INDUSTRIAL, L.P. FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 2,547 0 11,767 (1,707) 0 12,607 2,183,318 (200,189) 2,518,124 106,363 1,172,701 0 0 0 1,219,117 2,518,124 0 158,089 0 (46,387) (37,929) 0 (38,559) 65,609 0 65,609 0 0 0 65,609 1.12 1.12
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