e8vk

-----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, GKeaaDoDa2UKXVT4MHThZRAGQRLUZ9F9Rr01Ct/ITJtCO/pibvGmnIbzhkBu1TDp r7nqLCVnFcCmfoKKaSu2KA== 0000950137-04-006045.txt : 20040730 0000950137-04-006045.hdr.sgml : 20040730 20040730172803 ACCESSION NUMBER: 0000950137-04-006045 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040730 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040730 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-21873 FILM NUMBER: 04943204 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 8-K 1 c86481e8vk.htm CURRENT REPORT e8vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 30, 2004

Commission File Number 333-21873

FIRST INDUSTRIAL, L.P.

(Exact name of Registrant as specified in its Charter)


Delaware (State or other jurisdiction of incorporation or organization)		36-3924586 (I.R.S. Employer Identification No.)


311 S. Wacker Drive, Suite 4000, Chicago, Illinois (Address of principal executive offices)		60606 (Zip Code)

(312) 344-4300
(Registrant’s telephone number, including area code)

Item 5. Other Events

During the period January 1, 2004 to March 31, 2004, First Industrial, L.P. (the “Consolidated Operating Partnership”) sold 18 industrial properties comprising approximately 1.9 million square feet of Gross Leasable Area (“GLA”) that meet the criteria established by FAS 144 (defined hereinafter) to be included in discontinued operations. At March 31, 2004, the Consolidated Operating Partnership had two industrial properties comprising approximately .1 million square feet of GLA classified as held for sale. In accordance with FAS 144 (defined hereinafter), the results of operations of the two industrial properties held for sale at March 31, 2004 are included in discontinued operations.

This Form 8-K is being filed to reflect the impact of the classification of the results of operations relating to these industrial properties as discontinued operations in accordance with the Financial Accounting Standards Board’s Statement of financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”).

In compliance with FAS 144, the Consolidated Operating Partnership has reported the results of operations and gains/(losses) on the sale of industrial properties sold and the results of operations from properties that are classified as held for sale at March 31, 2004 as income from discontinued operations for each period presented in its quarterly report filed on Form 10-Q for the first quarter ended March 31, 2004. The Consolidated Operating Partnership is filing this Form 8-K to reclassify the results of operations of the sold industrial properties and the industrial properties held for sale at March 31, 2004 as discontinued operations in the Consolidated Operating Partnership’s historical financial statements for each of the years ended December 31, 2003, 2002, and 2001. Although these financial statements relate to periods prior to the sale of the 18 industrial properties and the date that industrial properties were classified as held for sale, the Consolidated Operating Partnership is required to restate such financial statements to be current as of the filing date when such financial statements are incorporated by reference as part of a 1933 Act filing. This reclassification has no effect on the Consolidated Operating Partnership’s reported net income available to common shareholders.

This report on Form 8-K updates Items 6, 7, 8 and 15 of the Consolidated Operating Partnership’s 2003 Form 10-K to reflect the reclassification of operations from properties sold from January 1, 2004 to March 31, 2004 and industrial properties held for sale at March 31, 2004 as discontinued operations for all periods presented. All other items of the 2003 Form 10-K remain unchanged. No attempt has been made to update matters in the Consolidated Operating Partnership’s 2003 Form 10-K except to reflect the requirements of FAS 144. Readers should refer to the Consolidated Operating Partnership’s quarterly report on Form 10-Q and current reports on Form 8-K for periods subsequent to December 31, 2003.

Item 7. Financial Statements and Exhibits


Exhibit No.		Description
12.1 *		Computation of ratios of earnings to fixed changes of First Industrial, L.P.

23.1 *		Consent of PricewaterhouseCoopers LLP

99.1 *		Revised “Item 6. Selected Financial Data” of the Consolidated Operating Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 to reflect the impact of the reclassification described in Item 5 of this Form 8-K.

99.2 *		Revised “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations” of the Consolidated Operating Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 to reflect the impact of the reclassification described in Item 5 of this Form 8-K.

99.3 *		Revised “Item 8. Financial Statements and Supplementary Data” of the Consolidated Operating Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 to reflect the impact of the reclassification described in Item 5 of this Form 8-K.

* Filed herewith.

SIGNATURES

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.
		as general partner

Date: July 30, 2004	By:		/s/ Michael W. Brennan

			Michael W. Brennan President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date: July 30, 2004	By:		/s/ Michael J. Havala

			Michael J. Havala
			Chief Financial Officer
			(Principal Financial Officer)

Date: July 30, 2004	By:		/s/ Scott A. Musil

			Scott A. Musil
			Senior Vice President, Controller, Treasurer and Assistant Secretary
			(Principal Accounting Officer)

EX-12.1 2 c86481exv12w1.htm COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES exv12w1

Exhibit 12.1

FIRST INDUSTRIAL, L.P.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

(DOLLARS IN THOUSANDS)


	Year Ended December 31,
	2003 (b)		2002 (b)		2001 (b)
Income from Continuing Operations	$	42,212	$	74,745	$	106,047
Plus: Interest Expense and Amortization of Deferred Financing Costs		96,959		89,297		80,583

Earnings Before Fixed Charges	$	139,171	$	164,042	$	186,630

Fixed Charges	$	97,720	$	97,089	$	90,533

Ratio of Earnings to Fixed Charges (a)		1.42x		1.69x		2.06x

(a) For purposes of computing the ratios of earnings to fixed charges, earnings have been calculated by adding fixed charges (excluding capitalized interest) to income from continuing operations. Fixed charges consist of interest costs, whether expensed or capitalized and amortization of deferred financing costs.

(b) During the three months ended March 31, 2004, the Operating Partnership sold 18 industrial properties that met the criteria established by the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets’ (“FAS 144”) to be included in discontinued operations. At March 31, 2004, the Operating Partnership also owned two industrial properties classified as held for sale that met the criteria established by FAS 144 to be included in discontinued operations. In accordance with FAS 144, the results of operations of the 18 industrial properties sold during the three months ended March 31, 2004 and the two industrial properties held for sale at March 31, 2004 are included in discontinued operations. Income from continuing operations for the years ended December 31, 2001 through 2003 reported in the table above has been restated to reflect the reclassification of the net income attributable to these properties from continuing operations to discontinued operations. As a result, income from continuing operations and ratio of earnings to fixed charges reported in the table above will not agree to the income from continuing operations and ratio of earnings to fixed charges reported in Operating Partnership’s 2003 Form 10-K.

EX-23.1 3 c86481exv23w1.htm CONSENT OF PRICEWATERHOUSECOOPERS LLP exv23w1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-57992), Form S-8 (File No. 333-100630) and Form S-4 (File No. 333-63052) of First Industrial, L.P. of our report dated March 9, 2004, except for Note 9 and Note 11, as to which the date is July 30, 2004, relating to the financial statements and of our report dated March 9, 2004, except for Note 7, as to which the date is July 30, 2004, relating to the combined financial statements of the Other Real Estate Partnerships, which appear in this Form 8-K.

PricewaterhouseCoopers LLP

Chicago, Illinois
July 30, 2004

EX-99.1 4 c86481exv99w1.htm SELECTED FINANCIAL DATA exv99w1

Exhibit 99.1

Selected Financial Data

The following sets forth selected financial and operating data for the Consolidated Operating Partnership on a historical basis. The following data should be read in conjunction with the financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. The historical statements of operations for the years ended December 31, 2003, 2002 and 2001 include the results of operations of the Consolidated Operating Partnership as derived from the Consolidated Operating Partnership’s audited financial statements. The historical statements of operations for the years ended December 31, 2000 and 1999 include the results of operations of the Consolidated Operating Partnership as derived from the Consolidated Operating Partnership’s audited financial statements except that the results of operations of properties that were sold subsequent to December 31, 2001 that were not classified as held for sale at December 31, 2001 and the results of operations of properties that were classified as held for sale subsequent to December 31, 2001 are presented in discontinued operations if such properties met both of the following criteria: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Consolidated Operating Partnership as a result of the disposition and (b) the Consolidated Operating Partnership will not have any significant involvement in the operations of the property after the disposal transaction. The historical balance sheet data and other data as of December 31, 2003, 2002, 2001, 2000 and 1999 include the balances of the Consolidated Operating Partnership as derived from the Consolidated Operating Partnership’s audited financial statements.


	Year			Year			Year			Year			Year
	Ended			Ended			Ended			Ended			Ended
	12/31/03			12/31/02			12/31/01			12/31/00			12/31/99
	(In thousands, except per share and property data)
Statement of Operations Data:
Total Revenues	$	268,383		$	250,842		$	260,898		$	267,838		$	271,229
Interest Income		1,698			121			265			1,970			1,030
Property Expenses		(90,665	)		(81,408	)		(78,777	)		(80,306	)		(74,493	)
General and Administrative Expense		(25,607	)		(19,230	)		(17,990	)		(16,971	)		(12,961	)
Interest Expense		(95,198	)		(87,439	)		(78,841	)		(80,885	)		(76,799	)
Amortization of Deferred Financing Costs		(1,761	)		(1,858	)		(1,742	)		(1,683	)		(1,295	)
Depreciation and Other Amortization		(67,870	)		(55,305	)		(51,067	)		(47,060	)		(49,902	)
Loss from Early Retirement of Debt (b)		—			(888	)		(10,309	)		—			—
Valuation Provision on Real Estate (a)		—			—			(6,490	)		(2,169	)		—
Equity in Income of Other Real Estate Partnerships		43,332			53,038			47,949			33,049			45,714
Equity in Income (Loss) of Joint Ventures		539			463			(791	)		571			302

Income from Continuing Operations		32,851			58,336			63,105			74,354			102,825
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $74,428 and $33,439 for the Year Ended December 31, 2003 and 2002) (c)		88,844			61,673			31,916			30,046			23,248
Gain on Sale of Real Estate		9,361			16,409			42,942			25,416			11,904

Net Income		131,056			136,418			137,963			129,816			137,977
Redemption of Series B Preferred Units		—			(3,707	)		—			—			—
Preferred Unit Distributions		(20,176	)		(23,432	)		(28,924	)		(28,924	)		(28,924	)

Net Income Available to Unitholders	$	110,880		$	109,279		$	109,039		$	100,892		$	109,053

Income from Continuing Operations Available to Unitholders Per Weighted Average Unit Share Outstanding:
Basic	$	0.49		$	1.04		$	1.68		$	1.56		$	1.90

Diluted	$	0.48		$	1.03		$	1.67		$	1.55		$	1.90

Net Income Available to Unitholders Per Weighted Average Unit Outstanding:
Basic (e)	$	2.45		$	2.38		$	2.37		$	2.22		$	2.42

Diluted (e)	$	2.44		$	2.37		$	2.36		$	2.21		$	2.41

Distributions Per Unit	$	2.7400		$	2.7250		$	2.6525		$	2.5175		$	2.4200

Weighted Average Number of Units Outstanding:
Basic (e)		45,322			45,841			45,949			45,422			45,084

Diluted (e)		45,443			46,079			46,258			45,714			45,186

Net Income	$	131,056		$	136,418		$	137,963		$	129,816		$	137,977
Other Comprehensive Income (Loss):
Cumulative Transition Adjustment		—			—			(14,920	)		—			—
Settlement of Interest Rate Protection Agreements		—			1,772			(191	)		—			—
Mark-to-Market of Interest Rate Protection Agreements		—			—			—			—			—
and Interest Rate Swap Agreements		251			(126	)		(231	)		—			—
Write-off of Unamortized Interest Rate Protection Agreements Due to Early Retirement of Debt		—			—			2,156			—			—
Amortization of Interest Rate Protection Agreements		198			176			805			—			—

Comprehensive Income	$	131,505		$	138,240		$	125,582		$	129,816		$	137,977


	Year			Year			Year			Year			Year
	Ended			Ended			Ended			Ended			Ended
	12/31/03			12/31/02			12/31/01			12/31/00			12/31/99
	(In thousands, except per share and property data)
Balance Sheet Data (End of Peroid):
Real Estate, Before Accumulated Depreciation	$	2,354,791		$	2,316,970		$	2,311,883		$	2,020,552		$	2,131,434
Real Estate, After Accumulated Depreciation		2,059,103			2,055,595			2,082,590			1,838,072			1,952,141
Real Estate Held for Sale, Net		—			7,040			28,702			190,379			—
Investment in and Advances to Other Real Estate Partnerships		374,906			377,776			378,350			381,231			380,774
Total Assets		2,633,262			2,585,805			2,580,652			2,539,407			2,443,987
Mortgage Loans Payable, Net, Unsecured Lines of Credit and Senoir Unsecured Debt, Net		1,451,269			1,402,069			1,277,722			1,180,023			1,105,747
Total Liabilities		1,570,195			1,525,587			1,400,727			1,329,576			1,228,637
Partners’ Capital		1,063,067			1,060,218			1,179,925			1,209,831			,215,350
Other Data:
Cash Flow From Operating Activities	$	87,670		$	137,212		$	145,943		$	151,889		$	183,533
Cash Flow From Investing Activities		21,711			12,248			(80,193	)		(85,152	)		(15,798	)
Cash Flow From Financing Activities		(109,381	)		(149,460	)		(69,394	)		(63,115	)		(181,659	)
Total Properties (d)		729			798			812			865			868
Total GLA, in Square Feet (d)		48,527,601			49,867,755			52,214,832			55,615,111			54,788,585
Occupancy Percentage (d)		90	%		89	%		91	%		95	%		96	%

(a) Represents a valuation provision on real estate relating to certain properties located in Columbus, Ohio, Des Moines, Iowa and Grand Rapids, Michigan.

(b) On January 1, 2003, the Company adopted the Financial Accounting Standards Board’s Statement of Financial Accounting Standard’s No.145. “Rescission of FASB Statements No.4,44 and 64, Amendment of FASB Statement No.13, and Technical Corrections” (“FAS 145”). FAS 145 rescinds FAS 4, FAS 44 and FAS 64 and amends FAS 13 to modify the accounting for sales-leaseback transactions. FAS 4 required the classification of gains and losses resulting from the extinguishment of debt to be classified as extraordinary items. Pursuant to the adoption of FAS 145, the Company reclassified amounts shown as extraordinary for the year ended December 31, 2002 and 2001 to continuing operations. In 2002, the Consolidated Operating Partnership paid off and retired certain senior unsecured debt. The Consolidated Operating Partnership recorded a loss from the early retirement of debt of approximately $.9 million which is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of pro rata unamortized deferred financing costs and legal costs. In 2001, the Consolidated Operating Partnership, paid off and retired certain mortgage loans and certain senior unsecured debt. The Consolidated Operating Partnership recorded a loss from the early retirement of debt of approximately $10.3 million, which is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of unamortized deferred financing costs, the write-off of the unamortized portion of an interest rate protection agreement which was used to fix the interest rate on the senior unsecured debt prior to issuance, the settlement of an interest rate protection agreement used to fix the retirement price of the senior unsecured debt, prepayment fees, legal costs and other expenses.

(c) On January 1, 2002, the Consolidated Operating Partnership adopted the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”). FAS 144 addresses financial accounting and reporting for the disposal of long lived assets. FAS 144 requires that the results of operations and gains or losses on the sale of property sold subsequent to December 31, 2001 that were not classified as held for sale at December 31, 2001 as well as the results of operations from properties that were classified as held for sale subsequent to December 31, 2001 be presented in discontinued operations if both of the following criteria are met: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Consolidated Operating Partnership as a result of the disposal transaction and (b) the Consolidated Operating Partnership will not have any significant continuing involvement in the operations of the property after the disposal transaction. FAS 144 also requires prior period results of operations for these properties to be restated and presented in discontinued operations in prior consolidated statements of operations. In compliance with FAS 144, the Consolidated Operating Partnership has reported the results of operations and gains/(losses) on the sale of industrial properties sold and the results of operations from properties that are classified as held for sale at March 31, 2004 as income from discontinued operations for each period presented in its quarterly report filed on Form 10-Q for the first quarter ended March 31, 2004.

(d) As of end of period and excludes properties under development.

(e) In accordance with FASB’s Statement of Financial Accounting Standards No. 128, “Earnings Per Share”, the basic weighted average units outstanding for 2002, 2001, 2000 and 1999 have been adjusted to exclude restricted stock issued that has not vested. The diluted weighted average units outstanding for 2002, 2001 2000 and 1999 have been adjusted to exclude restricted stock issued that has not vested except for the impact of the dilution related to restricted stock outstanding. Due to these adjustments, basic and diluted earnings per unit available to unitholders for the years ended December 31, 2002, 2001, and 2000 exceeds the basic and diluted earnings per unit available to unitholders reported in 2002’s Form 10-K by $.01 per unit, $.02 per unit, and $.02 per unit, respectively and $.01 per unit, for basic earnings per unit available to unitholders for the year ended December 31, 1999.

EX-99.2 5 c86481exv99w2.htm MANAGEMENT DISCUSSION AND ANALYSIS & RESULTS OF OPERATIONS exv99w2

Exhibit 99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with “Selected Financial Data” and the historical Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

First Industrial, L.P. (the “Operating Partnership”) was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner is First Industrial Realty Trust, Inc. (the “Company”) with an approximate 85.6% ownership interest at December 31, 2003. The Company also owns a preferred general partnership interest in the Operating Partnership (“Preferred Units”) with an aggregate liquidation priority of $250.0 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, in the aggregate, approximately a 14.4% interest in the Operating Partnership at December 31, 2003.

The Operating Partnership is the sole member of several limited liability companies (the “L.L.C.s”) and the sole stockholder of First Industrial Development Services, Inc., and holds at least a 99% limited partnership interest in First Industrial Financing Partnership, L.P. (the “Financing Partnership”), First Industrial Securities, L.P. (the “Securities Partnership”), First Industrial Mortgage Partnership, L.P (the “Mortgage Partnership”), First Industrial Pennsylvania, L.P. (the “Pennsylvania Partnership”), First Industrial Harrisburg, L.P. (the “Harrisburg Partnership”), First Industrial Indianapolis, L.P. (the “Indianapolis Partnership”), TK-SV, LTD., and FI Development Services, L.P. (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 minority equity interests in, and provides asset and property management services to, two joint ventures which invest in industrial properties. The Consolidated Operating Partnership, through a wholly-owned limited liability company of which the Operating Partnership is the sole member, also owned a minority equity interest in and provided asset and property management services to a third joint venture which invested in industrial properties (the “September 1999 Joint Venture”). During the year ended December 31, 2003, the September 1999 Joint Venture sold its remaining property. In conjunction with this final property sale, the final distribution was made to the partners. In May 2003, the Consolidated Operating Partnership through wholly-owned limited liability companies of which the Operating Partnership is the sole member, entered into a joint venture arrangement (the “May 2003 Joint Venture”) with an institutional investor to invest in industrial properties. As of December 31, 2003, the May 2003 Joint Venture did not own any industrial properties.

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 Partnerships 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.

The financial statements of the Operating Partnership report the L.L.C.s and First Industrial Development Services, Inc. on a consolidated basis (hereinafter defined as the “Consolidated Operating Partnership”) and the Other Real Estate Partnerships and three joint ventures are accounted for under the equity method of accounting. 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.

As of December 31, 2003, the Consolidated Operating Partnership owned 729 in-service industrial properties, containing an aggregate of approximately 48.5 million square feet of gross leasable area (“GLA”). On a combined basis, as of December 31, 2003, the Other Real Estate Partnerships owned 105 in-service industrial properties, containing an aggregate of approximately 9.4 million square feet of GLA. Of the 105 industrial properties owned by the Other Real Estate Partnerships at December 31, 2003, 19 are held by the Financing Partnership, 15 are held by the Securities Partnership, 15 are held by the Mortgage Partnership, 41 are held by the Pennsylvania Partnership, 10 are held by the Harrisburg Partnership, four are held by the Indianapolis Partnership and one is held by TK-SV, LTD.

Management believes the Consolidated Operating Partnership’s financial condition and results of operations are, primarily, a function of the Consolidated Operating Partnership’s performance in four key areas: leasing of industrial properties, acquisition and development of additional industrial properties, redeployment of internal capital and access to external capital.

The Consolidated Operating Partnership generates revenue primarily from rental income and tenant recoveries from the lease of industrial properties under long-term (generally three to six years) operating leases. Such

revenue is offset by certain property specific operating expenses, such as real estate taxes, repairs and maintenance, property management, utilities and insurance expenses, along with certain other costs and expenses, such as depreciation and amortization costs and general and administrative and interest expenses. The Consolidated Operating Partnership’s revenue growth is dependent, in part, on its ability to (i) increase rental income, through increasing, either or both, occupancy rates and rental rates at the Consolidated Operating Partnership’s properties, (ii) maximize tenant recoveries and (iii) minimize operating and certain other expenses. Revenues generated from rental income and tenant recoveries are a significant source of funds, in addition to income generated from gains/losses on the sale of the Consolidated Operating Partnership’s properties (as discussed below), for the Consolidated Operating Partnership’s distributions. The leasing of property, in general, and occupancy rates, rental rates, operating expenses and certain non-operating expenses, in particular, are impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The leasing of property also entails various risks, including the risk of tenant default. If the Consolidated Operating Partnership were unable to maintain or increase occupancy rates and rental rates at the Consolidated Operating Partnership’s properties or to maintain tenant recoveries and operating and certain expenses consistent with historical levels and proportions, the Consolidated Operating Partnership’s revenue growth would be limited. Further, if a significant number of the Consolidated Operating Partnership’s tenants were unable to pay rent (including tenant recoveries) or if the Consolidated Operating Partnership were unable to rent its properties on favorable terms, the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

The Consolidated Operating Partnership’s revenue growth is also dependent, in part, on its ability to acquire existing, and acquire and develop new, additional industrial properties on favorable terms. The Consolidated Operating Partnership continually seeks to acquire existing industrial properties on favorable terms, and, when conditions permit, also seeks to acquire and develop new industrial properties on favorable terms. Existing properties, as they are acquired, and acquired and developed properties, as they lease-up, generate revenue from rental income and tenant recoveries, income from which, as discussed above, is a source of funds for the Consolidated Operating Partnership’s distributions. The acquisition and development of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The acquisition and development of properties also entails various risks, including the risk that the Consolidated Operating Partnership’s investments may not perform as expected. For example, acquired existing and acquired and developed new properties may not sustain and/or achieve anticipated occupancy and rental rate levels. With respect to acquired and developed new properties, the Consolidated Operating Partnership may not be able to complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing the properties. Also, the Consolidated Operating Partnership faces significant competition for attractive acquisition and development opportunities from other well-capitalized real estate investors, including both publicly-traded real estate investment trusts and private investors. Further, as discussed below, the Consolidated Operating Partnership may not be able to finance the acquisition and development opportunities it identifies. If the Company were unable to acquire and develop sufficient additional properties on favorable terms or if such investments did not perform as expected, the Consolidated Operating Partnership’s revenue growth would be limited and its financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

The Consolidated Operating Partnership also generates income from the sale of properties (including existing buildings, buildings which the Consolidated Operating Partnership has developed or re-developed on a merchant basis and land). The Consolidated Operating Partnership is continually engaged in, and its income growth is dependent, in part, on systematically redeploying its capital from properties and other assets with lower yield potential into properties and other assets with higher yield potential. As part of that process, the Consolidated Operating Partnership sells, on an ongoing basis, select stabilized properties or properties offering lower potential returns relative to their market value. The gain/loss on the sale of such properties is included in the Consolidated Operating Partnership’s income and is a significant source of funds, in addition to revenues generated from rental income and tenant recoveries, for the Consolidated Operating Partnership’s distributions. Also, a significant portion of the proceeds from such sales is used to fund the acquisition of existing, and the acquisition and development of new, industrial properties. The sale of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond the control of the Consolidated Operating Partnership. The sale of properties also entails various risks, including competition from other sellers and the availability of attractive financing for potential buyers of the Consolidated Operating Partnership’s properties. Further, the Consolidated Operating Partnership’s ability to sell properties is limited by safe harbor rules applying to REITs under the Code which relate to the number of properties that may be disposed of in a year, their tax bases and the cost of improvements made to the properties, along with other tests which enable a REIT to avoid punitive taxation on the sale of assets. If the Consolidated Operating Partnership were unable to sell properties on favorable terms, the Consolidated Operating Partnership’s income

growth would be limited and its financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

Currently, the Consolidated Operating Partnership utilizes a portion of the net sales proceeds from property sales, as well as borrowings under its $300 million unsecured line of credit (the “Unsecured Line of Credit”), to finance future acquisitions and developments. Nonetheless, access to external capital on favorable terms plays a key role in the Consolidated Operating Partnership’s financial condition and results of operations, as it impacts the Consolidated Operating Partnership’s cost of capital and its ability, and cost, to refinance existing indebtedness as it matures and to fund future acquisitions and developments, if the Consolidated Operating Partnership chooses to do so, through the issuance of additional equity securities. The Company’s ability to access external capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on the Company’s capital stock and debt, the market’s perception of the Company’s growth potential, the Company’s current and potential future earnings and cash distributions and the market price of the Company’s capital stock. If the Company were unable to access external capital on favorable terms, the Company’s financial condition, results of operations, cash flow and ability to pay dividends on, and the market price of, the Company’s common stock would be adversely affected.

CRITICAL ACCOUNTING POLICIES

The Consolidated Operating Partnership’s significant accounting policies are described in more detail in Note 3 to the Consolidated Financial Statements. The Consolidated Operating Partnership believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

• The Consolidated Operating Partnership maintains an allowance for doubtful accounts which is based on estimates of potential losses which could result from the inability of the Consolidated Operating Partnership’s tenants to satisfy outstanding billings with the Consolidated Operating Partnership. The allowance for doubtful accounts is an estimate based on the consolidated operating partnership’s assessment of the creditworthiness of its tenants.

• Properties are classified as held for sale when the Consolidated Operating Partnership has entered into a binding contract to sell such assets. When properties are classified as held for sale, the Consolidated Operating Partnership ceases depreciating the properties and values of such properties and measures them at the lower of depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and, as a result, the Consolidated Operating Partnership decides not to sell a property previously classified as held for sale, the Consolidated Operating Partnership will reclassify such property as held and used. The Consolidated Operating Partnership estimates the value of such property and measures it at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

• The Consolidated Operating Partnership reviews its properties on a quarterly basis for impairment and provides a provision if impairments are determined. The Consolidated Operating Partnership utilizes the guidelines established under Financial Accounting Standards Board’s Statement of Financial Accounting Standards (“FAS”) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”) to determine if impairment conditions exist. The Consolidated Operating Partnership reviews the expected undiscounted cash flows of each property to determine if there are any indications of impairment. The review of anticipated cash flows involves assumptions of estimated occupancy and rental rates and ultimate residual value; accordingly, the anticipated cash flows may not ultimately be achieved.

• The Consolidated Operating Partnership is engaged in the acquisition of individual properties as well as multi-property portfolios. In accordance with FAS No.141, “Business Combinations” (“FAS 141”), the Consolidated Operating Partnership is required to allocate purchase price between land, building, tenant improvements, leasing commissions, intangible assets and above and below market leases. Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rents for each corresponding in-place lease. Acquired above and below market leases are amortized over the remaining non-cancelable terms of the respective leases. The Consolidated Operating Partnership also must allocate purchase price on multi-property portfolios to individual properties. The allocation of purchase price is based on the Consolidated Operating Partnership’s assessment of various characteristics of the markets where the property is located and the expected cash flows of the property.

RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002

At December 31, 2003, the Consolidated Operating Partnership owned 729 in-service industrial properties with approximately 48.5 million square feet of GLA, compared to 798 in-service industrial properties with approximately 49.9 million square feet of GLA at December 31, 2002. During 2003, the Consolidated Operating Partnership acquired 62 industrial properties containing approximately 6.3 million square feet of GLA, completed development of 11 industrial properties totaling approximately 1.3 million square feet of GLA and sold 116 in-service industrial properties totaling approximately 6.0 million square feet of GLA, five out-of-service industrial properties and several land parcels. The Consolidated Operating Partnership also took 29 industrial properties out-of-service comprising approximately 3.3 million square feet of GLA, and placed in-service six industrial properties comprising approximately ..5 million square feet of GLA. During the period between January 1, 2003 and December 31, 2003, the Consolidated Operating Partnership contributed two industrial properties comprising approximately .1 million square feet of GLA to First Industrial Harrisburg, L.P. and contributed one industrial property comprising approximately .1 million square feet of GLA to First Industrial Financing, L.P.

The tables below summarize the Consolidated Operating Partnership’s revenues, property expenses and depreciation and amortization by source. Same store properties are in-service properties owned prior to January 1, 2002. Acquired properties are in-service properties that were acquired subsequent to December 31, 2001. During 2003 and 2002, the Consolidated Operating Partnership acquired 129 industrial properties totaling approximately 10.5 million square feet of GLA at a total purchase price of $400.6 million. Sold properties are properties that were sold subsequent to December 31, 2001. During 2003 and 2002, the Consolidated Operating Partnership sold 217 industrial properties totaling approximately 15.3 million square feet of GLA and several land parcels for gross sales proceeds of $743.5 million. Properties that are not placed in-service are properties that have not been placed in-service as of December 31, 2001. These properties are placed in-service as they reach stabilized occupancy. Other revenues are derived from the operations of the Consolidated Operating Partnership’s maintenance company, fees earned from the Consolidated Operating Partnership’s joint ventures, fees earned for developing properties for third parties and other miscellaneous revenues. Other expenses are derived from the operations of the Consolidated Operating Partnership’s maintenance company and other miscellaneous expenses.

The Consolidated Operating Partnership’s future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition and sale of properties. The future revenues and expenses may vary materially from historical rates.

In 2003, the Consolidated Operating Partnership’s revenues were impacted by a soft leasing market attributable to a weak economy. For the five years ended December 31, 2003, industrial properties in the United States recorded occupancy rates ranging from 88.4% to 93.4%, with an occupancy rate of 88.4% at December 31, 2003 and rental rate growth ranging from (4.1%) to 9.8%, with an annual rental rate growth rate of (4.0%) for 2003.1 At December 31, 2003 and 2002, the occupancy rates of the Consolidated Operating Partnership’s in-service properties were 88.4% and 88.8%, respectively.

Revenues from same store properties decreased $7.6 million, or 3.3% due primarily to a decrease in occupancy and rental rates on new leases. Revenues from acquired properties increased $19.9 million, or 233.4% due to properties acquired subsequent to December 31, 2001. Revenues from sold properties decreased $32.0 million, or 59.4% due to properties sold subsequent to December 31, 2001.


	2003			2002			$ Change			% Change
REVENUES ($ in 000’s)
Same Store Properties	$	224,338		$	231,904		$	(7,566	)		-3.3	%
Acquired Properties		28,445			8,531			19,914			233.4	%
Sold Properties		21,911			53,908			(31,997	)		-59.4	%
Properties Not Placed in-service		16,586			6,491			10,095			155.5	%
Other		8,179			6,543			1,636			25.0	%

		299,459			307,377			(7,918	)		-2.6	%
Discontinued Operations		(31,076	)		(56,535	)		25,459			-45.0	%

Total Revenues	$	268,383		$	250,842		$	17,541			7.0	%

¹ Source: Torto Wheaton Research

Property expenses, which include real estate taxes, repairs and maintenance, property management, utilities, insurance and other expenses, increased by approximately $10.3 million or 12.2%. The increase in property expenses from same store properties is due primarily to an increase in repairs and maintenance expense, utilities expense and insurance expense, partially offset by a decrease in real estate tax expense. Due to a harsh winter in many of the Operating Partnership’s markets in 2003, the Operating Partnership experienced an increase in repairs and maintenance due primarily to an increase in snow removal, as well as an increase in utility usage and utility rates. The increase in insurance expense is due primarily to an increase in insurance premiums. The decrease in real estate tax expense is due to a decrease in real estate taxes in certain of the Operating Partnership’s markets. Property expenses from acquired properties increased by $5.5 million, or 295.7% due to properties acquired subsequent to December 31, 2001. Property expenses from sold properties decreased by $10.1 million, or 57.8% due to properties sold subsequent to December 31, 2001.


	2003			2002			$ Change			% Change
PROPERTY EXPENSES ($ in 000’s)
Same Store Properties	$	74,610		$	72,954		$	1,656			2.3	%
Acquired Properties		7,305			1,846			5,459			295.7	%
Sold Properties		7,369			17,457			(10,088	)		-57.8	%
Properties Not Placed in-service		6,588			2,235			4,353			194.8	%
Other		5,007			3,856			1,151			29.8	%

		100,879			98,348			2,531			2.6	%
Discontinued Operations		(10,214	)		(16,940	)		6,726			-39.7	%

Total Property Expenses	$	90,665		$	81,408		$	9,257			11.4	%

General and administrative expense increased by approximately $6.4 million due primarily to increases in employee compensation and additional employees for the year ended December 31, 2003 as compared to the year ended December 31, 2002 as well an increase in the Operating Partnership’s state taxes.

Amortization of deferred financing costs remained relatively unchanged.

The increase in depreciation and other amortization for the same store properties is primarily due to a net increase in leasing commissions and tenant improvements paid in 2003 and 2002. Depreciation and other amortization from acquired properties increased by $5.1 million, or 341.7% due to properties acquired subsequent to December 31, 2001. Depreciation and other amortization from sold properties decreased by $5.6 million, or 57.2% due to properties sold subsequent to December 31, 2001.


	2003			2002			$ Change			% Change
DEPRECIATION and OTHER AMORTIZATION ($ in 000’s)
Same Store Properties	$	57,327		$	52,801		$	4,526			8.6	%
Acquried Properties		6,528			1,478			5,050			341.7	%
Sold Properties		4,182			9,782			(5,600	)		-57.2	%
Properties Not in-service and Other		5,059			1,250			3,809			304.7	%
Corporate FF&E		1,220			1,355			(135	)		-10.0	%

		74,316			66,666			7,650			11.5	%
Discontinued Operations		(6,446	)		(11,361	)		4,915			-43.3	%

Total Depreciation and Other Amortization	$	67,870		$	55,305		$	12,565			22.7	%

Interest income increased by approximately $1.6 million primarily due to an increase in seller financing in 2003.

Interest expense increased by approximately $7.8 million for the year ended December 31, 2003 as compared to the year ended December 31, 2002 due primarily to an increase in average debt balance outstanding for the year ended December 31, 2003 ($1,452.0 million) as compared to the year ended December 31, 2002 ($1,392.6 million) and a decrease in capitalized interest for the year ended December 31, 2003 due to a decrease in development activities. This was offset by a decrease in the weighted average interest rate for the year ended December 31, 2003 (6.61%) as compared to the year ended December 31, 2002 (6.84%).

The approximate $.9 million loss on early retirement of debt for the year ended December 31, 2002 is due to the early retirement of senior unsecured debt. The loss on early retirement of debt is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of pro rata unamortized deferred financing costs and legal costs.

Equity in income of Other Real Estate Partnerships decreased by approximately $9.7 million due primarily to a decrease in gain on sale of real estate, partially offset by an approximate $10.7 million lease termination fee received from a tenant during the year ended December 31, 2003.

Equity in income of joint ventures increased by approximately $.1 million due primarily to the increase in gain on sale of real estate of one of the Company’s joint ventures and the Company recognizing its proportionate interest in net income in one of the Company’s joint ventures during the year ended December 31, 2002, offset by a loss on the sale of real estate of one of the Company’s joint ventures.

Income from discontinued operations of approximately $88.8 million for the year ended December 31, 2003 reflects the results of operations and gain on sale of real estate of 18 industrial properties that were sold from January 1, 2004 to March 31, 2004, two properties classified as held for sale at March 31, 2004 and 113 industrial properties that were sold during the year ended December 31, 2003. Gross proceeds from the sales of the 113 industrial properties were approximately $304.1 million, resulting in a gain on sale of real estate of approximately $74.4 million.

Income from discontinued operations of approximately $61.7 million for the year ended December 31, 2002 reflects the results of operations of the 18 industrial properties that were sold from January 1, 2004 to March 31, 2004, two properties classified as held for sale at March 31, 2004, 113 industrial properties that were sold during the year ended December 31, 2003 and 69 industrial properties that were sold during the year ended December 31, 2002 as well as the gain on sale of real estate from the 69 industrial properties which were sold during the year ended December 31, 2002. Gross proceeds from the sales of the 69 industrial properties were approximately $233.7 million, resulting in a gain on sale of real estate of approximately $33.4 million.


	Year Ended December 31,
	2003			2002
Total Revenues	$	31,076		$	56,535
Operating Expenses		(10,214	)		(16,940	)
Depreciation and Amortization		(6,446	)		(11,361	)
Gain on Sale of Real Estate		74,428			33,439

Income from Discontinued Operations	$	88,844		$	61,673

The $9.4 million gain on sale of real estate for the year ended December 31, 2003 resulted from the sale of eight industrial properties and several land parcels that do not meet the criteria established by FAS 144 for inclusion in discontinued operations. The $16.4 million gain on sale of real estate for the year ended December 31, 2002 resulted from the sale of 27 industrial properties and several land parcels that do not meet the criteria established by FAS 144 for inclusion in discontinued operations.

Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

At December 31, 2002, the Consolidated Operating Partnership owned 798 in-service industrial properties with approximately 49.9 million square feet of GLA, compared to 812 in-service industrial properties with approximately 52.2 million square feet of GLA at December 31, 2001. During 2002, the Consolidated Operating Partnership acquired 67 in-service industrial properties containing approximately 4.2 million square feet of GLA, completed development of 17 industrial properties totaling approximately 3.2 million square feet of GLA and sold 92 in-service industrial properties totaling approximately 8.5 million square feet of GLA, four out of service industrial properties and several land parcels. The Consolidated Operating Partnership also took eight industrial properties out of service comprising approximately 1.4 million square feet of GLA, and placed in-service two industrial properties comprising approximately ..2 million square feet of GLA.

million square feet of GLA at a total purchase price of $386.2 million. Sold properties are properties that were sold subsequent to December 31, 2000. During 2002 and 2001, the Consolidated Operating Partnership sold 220 industrial properties totaling approximately 16.2 million square feet of GLA and several land parcels for gross sales proceeds of $703.7 million. Properties that are not placed in-service are properties that have not been placed in-service as of December 31, 2000. These properties will be placed in-service when they have reached stabilized occupancy. Other revenues are derived from the operations of the Consolidated Operating Partnership’s maintenance company, fees earned from the Consolidated Operating Partnership’s joint ventures, fees earned for developing properties for third parties and other miscellaneous revenues. Other expenses are derived from the operations of the Consolidated Operating Partnership’s maintenance company and other miscellaneous expenses.

In 2002, the Consolidated Operating Partnership’s revenues were impacted by a soft leasing market attributable to a weak economy. For the five years ended December 31, 2002, industrial properties in the United States recorded occupancy rates ranging from 88.9% to 93.4%, with an occupancy rate of 88.9% at December 31, 2002 and rental rate growth ranging from (4.1%) to 9.8%, with an annual rental rate growth rate of (4.1%) for 2002 2. At December 31, 2002 and 2001, the occupancy rates of the Consolidated Operating Partnership’s in-service properties were 88.8% and 90.3%, respectively.

Revenues from same store properties decreased $4.9 million, or 2.0% due primarily to a decrease in occupancy and rental rates on new leases. Revenues from acquired properties increased $20.9 million, or 206.2% due to properties acquired subsequent to December 31, 2000. Revenues from sold properties decreased $31.2 million, or 58.8% due to properties sold subsequent to December 31, 2000.


	2002			2001			$ Change			% Change
REVENUES ($ in 000’s)
Same Store Properties	$	237,517		$	242,455		$	(4,938	)		-2.0	%
Acquried Properties		30,983			10,117			20,866			206.2	%
Sold Properties		21,881			53,116			(31,235	)		-58.8	%
Properties Not Placed in-service		10,453			7,527			2,926			38.9	%
Other		6,543			9,317			(2,774	)		-29.8	%

		307,377			322,532			(15,155	)		-4.7	%
Discontinued Operations		(56,535	)		(61,634	)		5,099			-8.3	%

Total Revenues	$	250,842		$	260,898		$	(10,056	)		-3.9	%

Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased by approximately $3.5 million or 5.0% due primarily to an increase in repairs and maintenance expense, insurance expense and other expense. The increase in repairs and maintenance expense is due primarily to an increase in maintenance company expenses and related costs. The increase in insurance is due primarily to an increase in insurance premiums. The increase in other expense is primarily due to an increase in bad debt expense for the year ended December 31, 2003. Property expenses from acquired properties increased $5.8 or 222.7% due to properties acquired subsequent to December 31, 2000. Property expenses from sold properties decreased by $8.0 million or 51.8% due to properties sold subsequent to December 31, 2000.


	2002			2001			$ Change			% Change
PROPERTY EXPENSES ($ in 000’s)
Same Store Properties	$	74,643		$	71,095		$	3,548			5.0	%
Acquried Properties		8,459			2,621			5,838			222.7	%
Sold Properties		7,460			15,482			(8,022	)		-51.8	%
Properties Not Placed in-service		3,930			2,767			1,163			42.0	%
Other		3,856			3,926			(70	)		-1.8	%

		98,348			95,891			2,457			2.6	%
Discontinued Operations		(16,940	)		(17,114	)		174			-1.0	%

Total Property Expenses	$	81,408		$	78,777		$	2,631			3.3	%

General and administrative expense increased by approximately $1.2 million due primarily to increases in employee compensation and additional employees for the year ended December 31, 2002 as compared to the year

² Source: Torto Wheaton Research

ended December 31, 2001, partially offset by the write-off of the Consolidated Operating Partnership’s technology initiative investment of approximately $.7 million during the year ended December 31, 2001.

Amortization of deferred financing costs remained relatively unchanged.

The increase in depreciation and other amortization for the same store properties is primarily due to a net increase in leasing commissions and tenant improvements paid in 2003 and 2002. Depreciation and other amortization from acquired properties increased $3.8 million, or 223.7% due to properties acquired subsequent to December 31, 2000. Depreciation and other amortization from sold properties decreased by $5.0 million, or 59.9% due to properties sold subsequent to December 31, 2000.


	2002			2001			$ Change			% Change
DEPRECIATION and OTHER AMORTIZATION ($ in 000’s)
Same Store Properties	$	54,548		$	50,091		$	4,457			8.9	%
Acquired Properties		5,451			1,684			3,767			223.7	%
Sold Properties		3,334			8,310			(4,976	)		-59.9	%
Properties Not in service and Other		1,978			2,403			(425	)		-17.7	%
Other		1,355			1,183			172			14.5	%

		66,666			63,671			2,995			4.7	%
Discontinued Operations		(11,361	)		(12,604	)		1,243			-9.9	%

Total Depreciation and Other Amortization	$	55,305		$	51,067		$	4,238			8.3	%

Interest income remained relatively unchanged.

Interest expense increased by approximately $8.6 million for the year ended December 31, 2002 as compared to the year ended December 31, 2001 due primarily to an increase in the weighted average debt balance outstanding for the year ended December 31, 2002 ($1,392.6 million) as compared to the year ended December 31, 2001 ($1,269.3 million) and a decrease in capitalized interest for the year ended December 31, 2002 due to a decrease in development activities. This was partially offset by a decrease in the weighted average interest rate for the year ended December 31, 2002 (6.84%) as compared to the year ended December 31, 2001 (7.05%).

The valuation provision on real estate of approximately $6.5 million for the year ended December 31, 2001 represents a valuation provision on certain properties located in the Columbus, Ohio and Des Moines, Iowa markets.

The approximate $.9 million loss on early retirement of debt for the year ended December 31, 2002 is due to the early retirement of senior unsecured debt. The loss is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of pro rata unamortized deferred financing costs and legal costs.

The $10.3 million loss on early retirement of debt for the year ended December 31, 2001 is due to the early retirement of senior unsecured debt and various mortgage loans. The loss is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of unamortized deferred financing costs, the write-off of the unamortized portion of an interest rate protection agreement which was used to fix the interest rate on the senior unsecured debt prior to issuance, the settlement of an interest rate protection agreement used to fix the retirement price of the senior unsecured debt, prepayment fees, legal costs and other expenses.

Equity in income of Other Real Estate Partnerships increased by approximately $5.1 million due primarily to an increase in gain on sale of real estate (whether classified as continuing operations or discontinued operations), offset by a decrease in net operating income (whether classified as continuing operations or discontinued operations) and a preferred distribution made by one of the Other Real Estate Partnerships in 2001.

Equity in income of joint ventures increased by approximately $1.3 million due primarily to the increase in gain on sale of real estate of one of the Consolidated Operating Partnership’s joint ventures, the start up of one of the Consolidated Operating Partnership’s joint ventures in December 2001 and the Consolidated Operating Partnership recognizing its proportionate interest in a valuation provision recognized in one of the Consolidated Operating Partnership’s joint ventures during the year ended December 31, 2001, offset by a loss on the sale of real estate of one of the Consolidated Operating Partnership’s joint ventures.

Income from discontinued operations of approximately $31.9 million for the year ended December 31, 2001 reflects the results of operations of the 18 industrial properties that were sold from January 1, 2004 to March 31, 2004, two properties classified as held for sale at March 31, 2004, 113 industrial properties that were sold during the year ended December 31, 2003 and 69 industrial properties that were sold during the year ended December 31, 2002.

The approximate $16.4 million gain on sale of real estate for the year ended December 31, 2002 resulted from the sale of 12 industrial properties that were identified as held for sale at December 31, 2001, 15 industrial properties that were sold to one of the Consolidated Operating Partnership’s joint ventures and several land parcels. Gross proceeds from these sales were approximately $152.4 million.

The $42.9 million gain on sale of real estate for the year ended December 31, 2001 resulted from the sale of 124 industrial properties and several land parcels. Gross proceeds from these sales were approximately $317.6 million.


	Year Ended December 31,
	2002			2001
Total Revenues	$	56,535		$	61,634
Operating Expenses		(16,940	)		(17,114	)
Depreciation and Amortization		(11,361	)		(12,604	)
Gain on Sale of Real Estate		33,439			—

Income from Discontinued Operations	$	61,673		$	31,916

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2003, the Consolidated Operating Partnership’s restricted cash was approximately $60.9 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.

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 Company’s 7.375% Notes due in 2011, in aggregate principal amount of $100 million (the “Trust Notes”), are redeemable on May 15, 2004 at the option of the holder in the event that the holder of a call option with respect to the Trust Notes fails to exercise such option on or before May 1, 2004. In the event the Trust Notes are redeemed, the Company would satisfy such redemption through the issuance of additional debt. With the exception of the Trust Notes, 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 unsecured indebtedness and the issuance of additional Units and preferred Units. As of December 31, 2003 and March 5, 2004, $250.0 million of debt securities was registered and unissued under the Securities Act of 1933, as amended. The Consolidated Operating Partnership may also finance the development or acquisition of additional properties through borrowings under the Unsecured Line of Credit. At December 31, 2003, borrowings under the Unsecured Line of Credit bore interest at a weighted average interest rate of 2.207%. As of March 5, 2004, the Consolidated Operating Partnership, through the Operating Partnership, had approximately $70.9 million available in additional borrowings under the Unsecured Line of Credit. The Unsecured Line of Credit bears interest at a floating rate of LIBOR plus .70% or the Prime Rate, at the Company’s election. The Unsecured Line of Credit contains certain financial covenants relating to debt service coverage, market value net worth, dividend payout ratio and total funded indebtedness. The Consolidated Operating Partnership’s access to borrowings may be limited if it fails to meet any of these covenants. Also, the Consolidated Operating Partnership’s borrowing rate on its Unsecured Line of Credit may increase in the event of a downgrade on the Consolidated Operating Partnership’s unsecured notes by the rating agencies.

The Consolidated Operating Partnership currently has credit ratings from Standard & Poor’s, Moody’s and Fitch Ratings of BBB/Baa2/BBB, respectively. The Consolidated Operating Partnership’s goal is to maintain its existing credit ratings. In the event of a downgrade, management believes the Consolidating Operating Partnership would continue to have access to sufficient liquidity; however, the Consolidated Operating Partnership’s cost of borrowing would increase and its ability to access certain financial markets may be limited.

Year Ended December 31, 2003

Net cash provided by operating activities of approximately $87.7 million for the year ended December 31, 2003 was comprised primarily of net income of approximately $131.1 million, offset by adjustments for non-cash items of approximately $5.4 million and by the net change in operating assets and liabilities of approximately $38.0 million. The adjustments for the non-cash items of approximately $5.4 million are primarily comprised of the gain on sale of real estate of approximately $83.8 million, a decrease of the bad debt provision of approximately $.2 million, and the effect of the straight-lining of rental income of approximately $2.6 million, offset by depreciation and amortization of approximately $81.2 million.

Net cash provided by investing activities of approximately $21.7 million for the year ended December 31, 2003 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 Other Real Estate Parterships, offset by the net proceeds from the sale of real estate, distributions from the Operating Partnership’s joint ventures, the repayment of mortgage loans receivable and a decrease in restricted cash from sales proceeds deposited with an intermediary for Section 1031 exchange purposes.

During the year ended December 31, 2003, the Consolidated Operating Partnership sold 121 industrial properties comprising approximately 6.3 million square feet of GLA and several land parcels. Eight of the 121 sold

industrial properties comprising approximately .7 million square feet of GLA were sold to the December 2001 Joint Venture. Gross proceeds from the sales of the 121 industrial properties and several land parcels were approximately $357.4 million.

During the year ended December 31, 2003, the Consolidated Operating Partnership acquired 62 industrial properties comprising, in the aggregate, approximately 6.3 million square feet of GLA and several land parcels for an aggregate purchase price of approximately $219.1 million, excluding costs incurred in conjunction with the acquisition of the properties. The Consolidated Operating Partnership also completed the development of 11 industrial properties comprising approximately 1.3 million square feet of GLA at a cost of approximately $64.9 million.

The Operating Partnership, through wholly-owned limited liability companies in which it is the sole member, invested approximately $5.6 million in one of the industrial joint ventures and received distributions of approximately $3.4 million from three of the Consolidated Operating Partnership’s industrial real estate joint ventures. As of December 31, 2003, the Consolidated Operating Partnership’s industrial real estate joint ventures owned 80 industrial properties comprising approximately 8.0 million square feet of GLA.

Net cash used in financing activities of approximately $109.4 million for the year ended December 31, 2003 was comprised primarily of Unit and preferred general partnership unit distributions, the purchase of general partnership Units and restricted Units, repayments on mortgage loans payable and debt issuance costs incurred in conjunction with the Operating Partnership’s Unsecured Line of Credit, offset by the net borrowings under the Operating Partnership’s Unsecured Line of Credit, Unit contributions and a book overdraft.

On May 1, 2003, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the principal amount of $14,157 (the “Acquisition Mortgage Loan X”). The Acquisition Mortgage Loan X is collateralized by one property in Hagerstown, Maryland, bears interest at a fixed rate of 8.25% and provides for monthly principal and interest payments based on a 30-year amortization schedule. The Acquisition Mortgage Loan X matures on December 1, 2010. In conjunction with the assumption of the Acquisition Mortgage Loan X, the Consolidated Operating Partnership recorded a premium in the amount of $2,927 which will be amortized over the remaining life of the Acquisition Mortgage Loan X as an adjustment to interest expense.

On September 12, 2003, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the amount of $4,269 (the “Acquisition Mortgage Loan XI”). The Acquisition Mortgage Loan XI is collateralized by one property in Downers Grove, Illinois, bears interest at a fixed rate of 7.61% and provides for monthly principal and interest payments based on a 30 — year amortization schedule. The Acquisition Mortgage Loan XI matures on May 1, 2012. In conjunction with the assumption of the Acquisition Mortgage Loan XI, the Consolidated Operating Partnership recorded a premium in the amount of $621 which will be amortized over the remaining life of the Acquisition Mortgage Loan XI as an adjustment to interest expense.

On September 12, 2003, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the amount of $2,325 (the “Acquisition Mortgage Loan XII”). The Acquisition Mortgage Loan XII is collateralized by one property in Indianapolis, Indiana, bears interest at a fixed rate of 7.54% and provides for monthly principal and interest payments based on a 30 — year amortization schedule. The Acquisition Mortgage Loan XII matures on January 1, 2012. In conjunction with the assumption of the Acquisition Mortgage Loan XII, the Consolidated Operating Partnership recorded a premium in the amount of $317 which will be amortized over the remaining life of the Acquisition Mortgage Loan XII as an adjustment to interest expense.

On March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003, the Company paid first, second, third and fourth quarter 2003 distributions of $53.906 per unit on its 8 5/8%, $.01 par value, Series C Cumulative Preferred Units (the “Series C Preferred Units”), $49.688 per share on its 7.95%, $.01 par value, Series D Cumulative Preferred Units (the “Series D Preferred Units”) and $49.375 per share on its 7.90%, $.01 par value, Series E Cumulative Preferred Units (the “Series E Preferred Units”). The preferred unit distributions paid on March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 totaled approximately $5.0 million per quarter.

On January 27, 2003, the Operating Partnership paid a fourth quarter 2002 distribution of $.6850 per Unit, totaling approximately $31.1 million. On April 21, 2003, the Operating Partnership paid a first quarter 2002 distribution of $.6850 per Unit, totaling approximately $31.5 million. On July 21, 2003, the Operating Partnership paid a second quarter 2003 distribution of $.6850 per Unit, totaling approximately $31.6 million. On October 20, 2003, the Operating Partnership paid a third quarter 2003 distribution of $.6850 per Unit, totaling approximately $31.7 million.

During the year ended December 31, 2003, the Company repurchased 37,300 shares of its common stock at a weighted average price of approximately $26.73 per share. The Operating Partnership repurchased general partnership units from the Company in the same amount.

During the year ended December 31, 2003, the Company awarded 692,888 shares of restricted common stock to certain employees and 11,956 shares of restricted common stock to certain Directors. The Consolidated Operating Partnership, through the Operating Partnership, issued Units to the Company in the same amount. These shares of restricted common stock had a fair value of approximately $20.6 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.

For the year ended December 31, 2003, certain employees of the Company exercised 531,473 non-qualified employee stock options. Gross proceeds to the Company were approximately $14.8 million. The Consolidated Operating Partnership, through the Operating Partnership, issued 531,473 Units to the Company.

Contractual Obligations and Commitments

The following table lists our contractual obligations and commitments as of December 31, 2003 (In Thousands):


	Payments Due by Period
			Less than						Over
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Operating and Ground Leases*	$	51,252	$	1,924	$	3,367	$	2,020	$	43,941
Deferred Purchase Price – Property		10,425		10,425		—		—		—
Real Estate Development*		33,854		33,854		—		—		—
Long-term Debt		1,450,612		1,198		400,469		153,013		895,932
Interest Expense on Long Term Debt*		999,006		96,484		182,481		136,694		583,347

Total	$	2,545,149	$	143,885	$	586,317	$	291,727	$	1,523,220

* Not on balance sheet.

Off-Balance Sheet Arrangements

Letters of credit are issued in most cases as pledges to governmental entities for development purposes or to support purchase obligations. At December 31, 2003 the Consolidated Operating Partnership has $ 17.8 million in outstanding letters of credit, of which $7.4 million are not reflected as liabilities on the Consolidated Operating Partnership’s balance sheet. The Consolidated Operating Partnership has no other off-balance sheet arrangements other than those disclosed on the previous Contractual Obligations and Commitments table.

Environmental

The Consolidated Operating Partnership incurred environmental costs of approximately $.1 and $.1 million in 2003 and 2002, respectively. The Consolidated Operating Partnership estimates 2004 costs of approximately $.1 million. The Consolidated Operating Partnership estimates that the aggregate cost which needs to be expended in 2004 and beyond with regard to currently identified environmental issues will not exceed approximately $1.3 million, a substantial amount of which will be the primary responsibility of the tenant, the seller to the Consolidated Operating Partnership or another responsible party. This estimate was determined by a third party evaluation.

Inflation

For the last several years, inflation has not had a significant impact on the Consolidated Operating Partnership because of the relatively low inflation rates in the Consolidated Operating Partnership’s markets of operation. Most of the Consolidated Operating Partnership’s leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Consolidated Operating

Partnership’s exposure to increases in costs and operating expenses resulting from inflation. In addition, many of the outstanding leases expire within six years which may enable the Consolidated Operating Partnership to replace existing leases with new leases at higher base rentals if rents of existing leases are below the then-existing market rate.

Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges was 1.42, 1.69 and 2.06 for the years ended December 31, 2003, 2002 and 2001, respectively. The decrease in earnings to fixed charges between fiscal years 2003 and 2002 is primarily due to a decrease in income from continuing operations in fiscal year 2003 due to a decrease in rental income and tenant recoveries and other income and an increase in depreciation and amortization expense for fiscal year 2003 as compared to fiscal year 2002 as discussed in “Results of Operations” above. The decrease in earnings to fixed charges between fiscal years 2002 and 2001 is primarily due to a decrease in income from continuing operations in fiscal year 2002 due to a decrease in rental income and tenant recoveries and other income, an increase in depreciation and amortization expense, slightly offset by a valuation provision on real estate recognized in fiscal year 2001 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 December 31, 2002 that are sensitive to changes in the interest rates. While this analysis may have some use as a benchmark, it should not be viewed as a forecast.

In the normal course of business, the 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 December 31, 2003, $1,255.4 million (approximately 86.5% of total debt at December 31, 2003) of the Consolidated Operating Partnership’s debt was fixed rate debt and $195.9 million (approximately 13.5% of total debt at December 31, 2003) of the Consolidated Operating Partnership’s debt was variable rate debt. The Consolidated Operating Partnership also had outstanding a written put option (the “Written Option”) which was issued in conjunction with the initial offering of one tranche of senior unsecured debt. 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 December 31, 2003, 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 $.4 million per year. A 10% increase in interest rates would decrease the fair value of the fixed rate debt at December 31, 2003 by approximately $47.5 million, to $1,331.7 million. A 10% decrease in interest rates would increase the fair value of the fixed rate debt at December 31, 2003 by approximately $51.4 million, to $1,430.6 million. A 10% increase in interest rates would decrease the fair value of the Written Option at December 31, 2003 by approximately $2.8 million, to $13.5 million. A 10% decrease in interest rates would increase the fair value of the Written Option at December 31, 2003 by approximately $2.9 million, to $19.2 million.

Subsequent Events

On January 20, 2004, the Operating Partnership paid a fourth quarter 2003 distribution of $.6850 per Unit, totaling approximately $31.9 million.

On February 25, 2004, the Operating Partnership declared a first quarter 2004 distribution of $.6850 per Unit which was paid on April 19, 2004. The Operating Partnership also declared first quarter 2004 distributions of $53.906 per Unit, $49.688 per Unit and $49.375 per Unit on its Series C Preferred Units, Series D Preferred Units and Series E Preferred Units, respectively, totaling, in the aggregate, approximately $5.0 million, which was paid on March 31, 2004.

From January 1, 2004 to March 5, 2004, the Company awarded 1,221 shares of restricted common stock to certain Directors. These shares of restricted common stock had a fair value of approximately $.04 million on the date of grant. The Consolidated Operating Partnership, through the Operating Partnership, issued Units to the Company in the same amount. The restricted common stock vests over ten years. Compensation expense will be charged to earnings in the Operating Partnership’s consolidated statements of operations over the respective vesting period.

From January 1, 2004 to March 5, 2004, the Consolidated Operating Partnership acquired or completed development of nine industrial properties for a total estimated investment of approximately $48.1 million.

Related Party Transactions

The Consolidated Operating Partnership periodically engages in transactions for which CB Richard Ellis, Inc. acts as a broker. A relative of Michael W. Brennan, the President and Chief Executive Officer and a director of the Company, is an employee of CB Richard Ellis, Inc. For the year ended December 31, 2003, this relative received approximately $.1 million in brokerage commissions paid by the Consolidated Operating Partnership.

Other

In January 2003, the FASB issued FIN 46, which provides guidance on how to identify a variable interest entity (VIE) and determines when the assets, liabilities, non-controlling interests, and results of operations of a VIE are to be included in an entity’s consolidated financial statements. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. In December 2003, the FASB reissued FIN 46 with certain modifications and clarifications. Application of this guidance was effective for interests in certain VIEs commonly referred to as special-purpose entities (“SPEs”) as of December 31, 2003. Application for all other types of entities is required for periods ending after March 15, 2004, unless previously applied. The Consolidated Operating Partnership does not believe that the application of FIN 46 will have an impact on its financial position, results of operations, or liquidity.

On January 1, 2003, the Consolidated Operating Partnership adopted the FASB’s Statement of Financial Accounting Standard No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“FAS 145”). FAS 145 rescinds FAS 4, FAS 44 and FAS 64 and amends FAS 13 to modify the accounting for sales-leaseback transactions. FAS 4 required the classification of gains and losses resulting from extinguishment of debt to be classified as extraordinary items. Pursuant to the adoption of FAS 145, the Consolidated Operating Partnership reclassified amounts shown as extraordinary for the years ended December 31, 2002 and 2001 to continuing operations.

In July 2003, the Securities and Exchange Commission (the “SEC”) issued a clarification on Emerging Issues Task Force (“EITF”) Abstract, Topic No. D 42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock” (“EITF 42”). This clarification of EITF 42, states for the purpose of calculating the excess of (1) fair value of the consideration transferred to the holders of the preferred stock over (2) the carrying amount of the preferred stock in the balance sheet, the carrying amount of the preferred stock should be reduced by the issuance costs of the preferred stock. This clarification was effective in the first fiscal period ending after June 15, 2003 and requires prior periods presented to be restated. Pursuant to EITF 42, the Consolidated Operating Partnership restated net income available to unitholders and net income available to unitholders per unit amounts for the year ended December 31, 2002 by reducing net income available to unitholders for the initial issuance costs related to the redemption of the Consolidated Operating Partnership’s 8.75%, $.01 par

value, Series B Cumulative Preferred Units on May 14, 2002. The impact of the adoption of EITF 42 for the year ended December 31, 2002 was a reduction of basic and diluted Earnings Per Unit (“EPU”) of $.08.

Risk Factors

The Consolidated Operating Partnership’s operations involve various risks that could adversely affect its financial condition, results of operations, cash flow, ability to pay distributions on its Units and the market value of its Units. These risks, among others contained in the Consolidated Operating Partnership’s other filings with the Securities and Exchange Commission, include:

Real estate investments’ value fluctuates depending on conditions in the general economy and the real estate business. These conditions may limit the Consolidated Operating Partnership’s revenues and available cash.

The factors that affect the value of the Consolidated Operating Partnership’s real estate and the revenues the Consolidated Operating Partnership derives from its properties include, among other things:

• general economic climate;

• local conditions such as oversupply or a reduction in demand in the area;

• the attractiveness of the properties to tenants;

• tenant defaults;

• zoning or other regulatory restrictions;

• competition from other available real estate;

• our ability to provide adequate maintenance and insurance; and

• increased operating costs, including insurance premiums and real estate taxes.

Many real estate costs are fixed, even if income from properties decreases.

The Consolidated Operating Partnership’s financial results depend on leasing space in the Consolidated Operating Partnership’s real estate properties to tenants on terms favorable to the Consolidated Operating Partnership. The Consolidated Operating Partnership’s income and funds available for distribution to its unitholders will decrease if a significant number of the Consolidated Operating Partnership’s tenants cannot pay their rent or the Consolidated Operating Partnership is unable to rent properties on favorable terms. In addition, if a tenant does not pay its rent, the Consolidated Operating Partnership might not be able to enforce its rights as landlord without delays and the Consolidated Operating Partnership might incur substantial legal costs. Costs associated with real estate investment, such as real estate taxes and maintenance costs, generally are not reduced when circumstances cause a reduction in income from the investment. For the year ended December 31, 2003, approximately 75.1% of the Consolidated Operating Partnership’s gross revenues from continuing operations came from rentals of real property.

The Consolidated Operating Partnership may be unable to sell properties when appropriate because real estate investments are not as liquid as certain other types of assets.

Real estate investments generally cannot be sold quickly and, therefore, will tend to limit the Consolidated Operating Partnership’s ability to vary its property portfolio promptly in response to changes in economic or other conditions. The inability to respond promptly to changes in the performance of the Consolidated Operating Partnership’s property portfolio could adversely affect the Consolidated Operating Partnership’s financial condition and ability to service debt and make distributions to its unitholders. In addition, like other companies qualifying as REITs under the Internal Revenue Code, the Company must comply with the safe harbor rules relating to the number of properties disposed of in a year, their tax bases and the cost of improvements made to the properties, or meet other tests which enable a REIT to avoid punitive taxation on the sale of assets. Thus, the Consolidated Operating Partnership’s ability at any time to sell assets may be restricted.

The Consolidated Operating Partnership may be unable to sell or contribute properties on advantageous terms.

The Consolidated Operating Partnership has sold to third parties a significant number of properties in recent years and, as part of its business, the Consolidated Operating Partnership intends to continue to sell properties to third parties. The Consolidated Operating Partnership’s ability to sell properties on advantageous terms depends on factors beyond the Consolidated Operating Partnership’s control, including competition from other sellers and the availability of attractive financing for potential buyers of the Consolidated Operating Partnership’s properties. If the Consolidated Operating Partnership is unable to sell properties on favorable terms or redeploy the proceeds of property sales in

accordance with the Consolidated Operating Partnership’s business strategy, then the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay distributions on, and the market value of, the Consolidated Operating Partnership’s Units could be adversely affected.

The Consolidated Operating Partnership has also sold to its joint ventures a significant number of properties in recent years and, as part of its business, the Consolidated Operating Partnership intends to continue to sell properties to its joint ventures as opportunities arise. If the Consolidated Operating Partnership does not have sufficient properties available that meet the investment criteria of current or future joint ventures, or if the joint ventures have reduced or no access to capital on favorable terms, then such sales could be delayed or prevented, adversely affecting the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay distributions on, and the market value of, the Consolidated Operating Partnership’s Units.

For the year ended December 31, 2003, gains on sales or contributions of properties accounted for approximately 63.9% of the Consolidated Operating Partnership’s net income.

The Consolidated Operating Partnership may be unable to acquire properties on advantageous terms or acquisitions may not perform as the Consolidated Operating Partnership expects.

The Consolidated Operating Partnership acquires and intends to continue to acquire primarily industrial properties. The acquisition of properties entails various risks, including the risks that the Consolidated Operating Partnership’s investments may not perform as expected and that the Consolidated Operating Partnership’s cost estimates for bringing an acquired property up to market standards may prove inaccurate. Further, the Consolidated Operating Partnership faces significant competition for attractive investment opportunities from other well-capitalized real estate investors, including both publicly-traded real estate investment trusts and private investors. This competition increases as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, the Consolidated Operating Partnership may be unable to acquire additional properties as it desires or the purchase price may be significantly elevated. In addition, the Company expects to finance future acquisitions through a combination of borrowings under the Consolidated Operating Partnership’s Unsecured Line of Credit, proceeds from equity or debt offerings by the Consolidated Operating Partnership and proceeds from property sales, which may not be available and which could adversely affect the Consolidated Operating Partnership’s cash flow. Any of the above risks could adversely affect the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay distributions on, and the market price of, the Consolidated Operating Partnership’s Units.

The Consolidated Operating Partnership may be unable to complete development and re-development projects on advantageous terms.

As part of its business, the Consolidated Operating Partnership develops new and re-develops existing properties. In addition, the Consolidated Operating Partnership has sold to third parties or sold to the Company’s joint ventures a significant number of development and re-development properties in recent years and the Consolidated Operating Partnership intends to continue to sell such properties to third parties or to sell such properties to the Consolidated Operating Partnership’s joint ventures as opportunities arise. The real estate development and re-development business involves significant risks that could adversely affect the Consolidated Operating Partnership’s financial condition, results of operations, cash flow and ability to pay distributions on, and the market value of, the Consolidated Operating Partnership’s Units which include:

• the Consolidated Operating Partnership may not be able to obtain financing for development projects on favorable terms and complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing the properties and generating cash flow;

• the Consolidated Operating Partnership may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;

• the properties may perform below anticipated levels, producing cash flow below budgeted amounts and limiting the Consolidated Operating Partnership’s ability to sell such properties to third parties or to sell or contribute such properties to the Consolidated Operating Partnership’s joint ventures;

The Consolidated Operating Partnership may be unable to renew leases or find other lessees.

The Consolidated Operating Partnership is subject to the risks that, upon expiration, leases may not be renewed, the space subject to such leases may not be relet or the terms of renewal or reletting, including the cost of required renovations, may be less favorable than expiring lease terms. If the Consolidated Operating Partnership were unable to promptly renew a significant number of expiring leases or to promptly relet the space covered by such leases, or if the rental rates upon renewal or reletting were significantly lower than the then current rates, the Consolidated Operating Partnership’s cash funds from operations and ability to make expected distributions to stockholders might be adversely affected. As of December 31, 2003, leases with respect to approximately 11.7 million, 9.2 million and 7.0 million square feet of GLA, representing 26.7%, 21.0% and 16.0%, of GLA expire in the remainder of 2004, 2005 and 2006, respectively.

The Company might fail to qualify or remain qualified as a REIT.

First Industrial Realty Trust, Inc. intends to operate so as to qualify as a REIT under the Code. Although the Consolidated Operating Partnership believes that First Industrial Realty Trust, Inc. is organized and will operate in a manner so as to qualify as a REIT, qualification as a REIT involves the satisfaction of numerous requirements, some of which must be met on a recurring basis. These requirements are established under highly technical and complex Code provisions of which there are only limited judicial or administrative interpretations, and involve the determination of various factual matters and circumstances not entirely within the Company’s control. If First Industrial Realty Trust, Inc. were to fail to qualify as a REIT in any taxable year, First Industrial Realty Trust, Inc. would be subject to federal income tax, including any applicable alternative minimum tax, on First Industrial Realty Trust, Inc.’s taxable income at corporate rates. This could result in a discontinuation or substantial reduction in distributions to unitholders. Unless entitled to relief under certain statutory provisions, First Industrial Realty Trust, Inc. also would be disqualified from treatment as a REIT for the four taxable years that follow.

Certain property transfers may generate prohibited transaction income, resulting in a penalty tax on the gain attributable to the transaction.

As part of its business, the Consolidated Operating Partnership sells properties to third parties or sells properties to the Consolidated Operating Partnership’s joint ventures as opportunities arise. Under the Code, a 100% penalty tax could be assessed on the gain resulting from sales of properties that are deemed to be prohibited transactions. The question of what constitutes a prohibited transaction is based on the facts and circumstances surrounding each transaction. The Internal Revenue Service could contend that certain sales of properties by the Company are prohibited transactions. While the Consolidated Operating Partnership’s management does not believe that the Internal Revenue Service, would prevail in such a dispute, if the matter was successfully argued by the Internal Revenue Service, the 100% penalty tax could be assessed against the profits from these transactions. In addition, any income from a prohibited transaction may adversely affect the Company’s ability to satisfy the income tests for qualification as a REIT.

The REIT distribution requirements may require the Company to turn to external financing sources.

First Industrial Realty Trust, Inc. could, in certain instances, have taxable income without sufficient cash to enable First Industrial Realty Trust, Inc. to meet the distribution requirements of the REIT provisions of the Code. In that situation, the Company could be required to borrow funds or sell properties on adverse terms in order to meet those distribution requirements. In addition, because First Industrial Realty Trust, Inc. must distribute to its stockholders at least 90% of the Company’s REIT taxable income each year, the Company’s ability to accumulate capital may be limited. Thus, in connection with future acquisitions, First Industrial Realty Trust, Inc. may be more dependent on outside sources of financing, such as debt financing or issuances of additional capital stock, which may or may not be available on favorable terms. Additional debt financings may substantially increase the Consolidated Operating Partnership’s leverage and additional equity offerings may result in substantial dilution of unitholders’ interests.

Debt financing, the degree of leverage and rising interest rates could reduce the Consolidated Operating Partnership’s cash flow.

Where possible, the Consolidated Operating Partnership intends to continue to use leverage to increase the rate of return on the Consolidated Operating Partnership’s investments and to allow the Consolidated Operating Partnership to make more investments than it otherwise could. The Consolidated Operating Partnership’s use of

leverage presents an additional element of risk in the event that the cash flow from the Consolidated Operating Partnership’s properties is insufficient to meet both debt payment obligations and the Company’s distribution requirements of the REIT provisions of the Code. In addition, rising interest rates would reduce the Consolidated Operating Partnership’s cash flow by increasing the amount of interest due on its floating rate debt and on its fixed rate debt as it matures and is refinanced.

Cross-collateralization of mortgage loans could result in foreclosure on substantially all of the Consolidated Operating Partnership’s properties if the Consolidated Operating Partnership is unable to service its indebtedness.

If the Operating Partnership determines to obtain additional debt financing in the future, it may do so through mortgages on some or all of its properties. These mortgages may be on recourse, non-recourse or cross-collateralized bases. Cross-collateralization makes all of the subject properties available to the lender in order to satisfy the Consolidated Operating Partnership’s debt. Holders of indebtedness that is so secured will have a claim against these properties. To the extent indebtedness is cross collateralized, lenders may seek to foreclose upon properties that are not the primary collateral for their loan, which may, in turn, result in acceleration of other indebtedness secured by properties. Foreclosure of properties would result in a loss of income and asset value to the Consolidated Operating Partnership, making it difficult for it to meet both debt payment obligations and the Company’s distribution requirements of the REIT provisions of the Code. As of December 31, 2003, none of the Consolidated Operating Partnership’s current indebtedness was cross-collateralized.

The Consolidated Operating Partnership may have to make lump-sum payments on its existing indebtedness.

The Consolidated Operating Partnership is required to make the following lump-sum or “balloon” payments under the terms of some of its indebtedness, including:

• $50 million aggregate principal amount of 7.75% Notes due 2032 (the “2032 Notes”)

• $200 million aggregate principal amount of 7.60% Notes due 2028 (the “2028 Notes”)

• approximately $15 million aggregate principal amount of 7.15% Notes due 2027 (the “2027 Notes”)

• $100 million aggregate principal amount of 7.50% Notes due 2017 (the “2017 Notes”)

• $200 million aggregate principal amount of 6.875% Notes due 2012 (the “2012 Notes”)

• $100 million aggregate principal amount of 7.375% Notes due 2011 (the “Trust Notes”)

The trust to which the Trust Notes were issued must exercise its right to require the Consolidated Operating Partnership, to redeem the Trust Notes on May 15, 2004 if the holder of a call option with respect to the Trust Notes fails to give written notice on or before May 1, 2004 that it intends to exercise such option.

• $200 million aggregate principal amount of our 7.375% Notes due 2011(the “2011 Notes”)

• $150 million aggregate principal amount of 7.60% Notes due 2007 (the “2007 Notes”)

• $150 million aggregate principal amount of 7.00% Notes due 2006 (the “2006 Notes”)

• $50 million aggregate principal amount of 6.90% Notes due 2005 (the “2005 Notes”) and

• a $300 million unsecured revolving credit facility (the “Unsecured Line of Credit”) under which Consolidated Operating Partnership may borrow to finance the acquisition of additional properties and for other corporate purposes, including working capital.

The Unsecured Line of Credit provides for the repayment of principal in a lump-sum or “balloon” payment at maturity in 2005. Under the Unsecured Line of Credit, the Operating Partnership has the right, subject to certain conditions, to increase the aggregate commitment under the Unsecured Line of Credit by up to $100 million. As of December 31, 2003, $195.9 million was outstanding under the Unsecured Line of Credit at a weighted average interest rate of 2.207%.

The Consolidated Operating Partnership’s ability to make required payments of principal on outstanding indebtedness, whether at maturity or otherwise, may depend on its ability either to refinance the applicable indebtedness or to sell properties. The Consolidated Operating Partnership has no commitments to refinance the 2005 Notes, the 2006 Notes, the 2007 Notes, the 2011 Notes, the 2012 Notes, the Trust Notes, the 2017 Notes, the 2027 Notes, the 2028 Notes, the 2032 Notes or the Unsecured Line of Credit. Some of the existing debt obligations, other than those discussed above, Consolidated Operating Partnership, are secured by the Consolidated Operating Partnership’s properties, and therefore such obligations will permit the lender to foreclose on those properties in the event of a default.

There is no limitation on debt in the Consolidated Operating Partnership’s organizational documents.

As of December 31, 2003, the Company’s ratio of debt to its total market capitalization was 44.4%. The organizational documents of First Industrial Realty Trust, Inc., however, do not contain any limitation on the amount or percentage of indebtedness the Company may incur. Accordingly, the Consolidated Operating Partnership could become more highly leveraged, resulting in an increase in debt service that could adversely affect the Consolidated Operating Partnership’s ability to make expected distributions to Unitholders and in an increased risk of default on the Consolidated Operating Partnership’s obligations.

The Company computes that percentage by calculating its total consolidated debt as a percentage of the aggregate market value of all outstanding shares of the Company’s common stock, assuming the exchange of all limited partnership units of the Operating Partnership for common stock, plus the aggregate stated value of all outstanding shares of preferred stock and total consolidated debt.

Rising interest rates on the Consolidated Operating Partnership’s Unsecured Line of Credit could decrease the Consolidated Operating Partnership’s available cash.

The Consolidated Operating Partnership’s Unsecured Line of Credit bears interest at a floating rate. As of December 31, 2003, the Company’s Unsecured Line of Credit had an outstanding balance of $195.9 million at a weighted average interest rate of 2.207%. Currently, the Consolidated Operating Partnership’s Unsecured Line of Credit bears interest at the Prime Rate or at the London Interbank Offered Rate plus .70%. Based on an outstanding balance on our Unsecured Line of Credit as of December 31, 2003, a 10% increase in interest rates would increase interest expense by $.4 million on an annual basis. Increases in the interest rate payable on balances outstanding under the Unsecured Line of Credit would decrease the Consolidated Operating Partnership’s cash available for distribution to unitholders.

Earnings and cash dividends, asset value and market interest rates affect the price of the Company’s common stock.

As a real estate investment trust, the market value of the Company’s common stock, in general, is based primarily upon the market’s perception of the Company’s growth potential and its current and potential future earnings and cash dividends. The market value of the Company’s common stock is based secondarily upon the market value of the Company’s underlying real estate assets. For this reason, shares of the Company’s common stock may trade at prices that are higher or lower than our net asset value per share. To the extent that the Company retains operating cash flow for investment purposes, working capital reserves, or other purposes, these retained funds, while increasing the value of the Company’s underlying assets, may not correspondingly increase the market price of the Company’s common stock. The Company’s failure to meet the market’s expectations with regard to future earnings and cash dividends likely would adversely affect the market price of the Company’s common stock. Further, the distribution yield on the common stock (as a percentage of the price of the common stock) relative to market interest rates may also influence the price of the Company’s common stock. An increase in market interest rates might lead prospective purchasers of the Company’s common stock to expect a higher distribution yield, which would adversely affect the market price of the Company’s common stock. Additionally, if the market price of the Company’s common stock declines significantly, then the Company might breach certain covenants with respect to its debt obligations, which could adversely affect the Company’s liquidity and ability to make future acquisitions and the Company’s ability to pay dividends to its stockholders.

The Consolidated Operating Partnership may incur unanticipated costs and liabilities due to environmental problems.

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be liable for the costs of clean-up of certain conditions relating to the presence of hazardous or toxic materials on, in or emanating from the property, and any related damages to natural resources. Environmental laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous or toxic materials. The presence of such materials, or the failure to address those conditions properly, may adversely affect the ability to rent or sell the property or to borrow using the property as collateral. Persons who dispose of or arrange for the disposal or treatment of hazardous or toxic materials may also be liable for the costs of clean-up of such materials, or for related natural resource damages, at or from an off-site disposal or treatment facility, whether or not the facility is owned or operated by those persons. No assurance can be given that existing environmental assessments with respect to any of the Consolidated Operating Partnership’s properties reveal all environmental liabilities, that any prior owner or operator of any of the properties did not create any material environmental condition

not known to the Consolidated Operating Partnership or that a material environmental condition does not otherwise exist as to any of the Consolidated Operating Partnership’s properties.

The Consolidated Operating Partnership’s insurance coverage does not include all potential losses.

The Consolidated Operating Partnership currently carries comprehensive insurance coverage including property, boiler & machinery, liability, fire, flood, terrorism, earthquake, extended coverage and rental loss as appropriate for the markets where each of the Consolidated Operating Partnership’s properties and their business operations are located. The insurance coverage contains policy specifications and insured limits customarily carried for similar properties and business activities. The Consolidated Operating Partnership believes its properties are adequately insured. However, there are certain losses, including losses from earthquakes, hurricanes, floods, pollution, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed to be economically feasible or prudent to do so. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of the Consolidated Operating Partnership’s properties, the Consolidated Operating Partnership could experience a significant loss of capital invested and potential revenues in these properties, and could potentially remain obligated under any recourse debt associated with the property.

EX-99.3 6 c86481exv99w3.htm FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA exv99w3

Exhibit 99.3

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FIRST INDUSTRIAL, L.P.

INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets of First Industrial, L.P. as of December 31, 2003 and 2002

Consolidated Statements of Operations and Comprehensive Income (Loss) of First Industrial L. P. for the Years Ended December 31, 2003, 2002 and 2001

Consolidated Statements of Changes in Partners’ Capital of First Industrial L.P. for the Years Ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows of First Industrial L.P. for the Years Ended December 31, 2003, 2002 and 2001

Notes to the Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of
First Industrial, L.P.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of changes in partners’ capital and of cash flows present fairly, in all material respects, the financial position of First Industrial, L.P. and its subsidiaries (the “Operating Partnership”) at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Operating Partnership’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, on January 1, 2002, the Operating Partnership adopted the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.

PricewaterhouseCoopers LLP

Chicago, Illinois
March 9, 2004, except for Notes 9 and 11, as to which the date is July 30, 2004

FIRST INDUSTRIAL, L.P.
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)


	December 31,			December 31,
	2003			2002
ASSETS
Assets:
Investment in Real Estate:
Land	$	392,916		$	363,543
Buildings and Improvements		1,845,139			1,829,922
Furniture, Fixtures and Equipment		801			1,174
Construction in Progress		115,935			122,331
Less: Accumulated Depreciation		(295,688	)		(261,375	)

Net Investment in Real Estate		2,059,103			2,055,595

Real Estate Held for Sale, Net of Accumulated Depreciation and Amortization of $2,135 at December 31, 2002		—			7,040
Investments in and Advances to Other Real Estate Partnerships		374,906			377,776
Restricted Cash		60,875			28,350
Tenant Accounts Receivable, Net		7,769			9,523
Investments in Joint Ventures		14,606			12,545
Deferred Rent Receivable		12,903			12,765
Deferred Financing Costs, Net		9,809			11,449
Prepaid Expenses and Other Assets, Net		93,291			70,762

Total Assets	$	2,633,262		$	2,585,805

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	43,217		$	19,909
Senior Unsecured Debt, Net		1,212,152			1,211,860
Unsecured Line of Credit		195,900			170,300
Accounts Payable and Accrued Expenses		62,382			66,874
Rents Received in Advance and Security Deposits		24,655			25,538
Dividends Payable		31,889			31,106

Total Liabilities		1,570,195			1,525,587

Commitments and Contingencies		—			—
Partners’ Capital:
General Partner Preferred Units (100,000 units issued and outstanding at December 31, 2003 and 2002, respectively		240,697			240,697
General Partner Units (39,850,370 and 38,598,321 units issued and outstanding at December 31, 2003 and 2002, respectively		687,721			665,647
Unamortized Value of General Partnership Restricted Units		(19,035	)		(4,307	)
Limited Partners’ Units 6,704,012 and 6,811,956 units issued and outstanding at December 31, 2003 and 2002, respectively		163,794			168,740
Accumulated Other Comprehensive Loss		(10,110	)		(10,559	)

Total Partners’ Capital		1,063,067			1,060,218

Total Liabilities and Partners’ Capital	$	2,633,262		$	2,585,805

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Revenues:
Rental Income	$	201,556		$	189,989		$	196,477
Tenant Recoveries and Other Income		66,827			60,853			64,421

Total Revenues		268,383			250,842			260,898

Expenses:
Real Estate Taxes		41,930			38,523			41,267
Repairs and Maintenance		21,119			17,654			14,711
Property Management		10,081			9,308			8,984
Utilities		8,211			6,506			6,848
Insurance		2,805			2,061			1,542
Other		6,519			7,356			5,425
General and Administrative		25,607			19,230			17,990
Amortization of Deferred Financing Costs		1,761			1,858			1,742
Depreciation and Other Amortization		67,870			55,305			51,067
Valuation Provision on Real Estate		—			—			6,490

Total Expenses		185,903			157,801			156,066

Other Income/Expense:
Interest Income		1,698			121			265
Interest Expense		(95,198	)		(87,439	)		(78,841	)
Loss From Early Retirement of Debt		—			(888	)		(10,309	)

Total Other Income/Expense		(93,500	)		(88,206	)		(88,885	)
(Loss) Income from Continuing Operations Before Equity in Income of Other Real Estate Partnerships, Equity of Income in Joint Ventures and Gain on Sale of Real Estate		(11,020	)		4,835			15,947
Equity in Income of Other Real Estate Partnerships		43,332			53,038			47,949
Equity in Income (Loss) of Joint Ventures		539			463			(791	)

Income from Continuing Operations		32,851			58,336			63,105
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $74,428 and $33,439 for the Years Ended December 31, 2003 and 2002, respectively)		88,844			61,673			31,916

Income Before Gain on Sale of Real Estate		121,695			120,009			95,021
Gain on Sale of Real Estate		9,361			16,409			42,942

Net Income		131,056			136,418			137,963
Less: Preferred Unit Distributions		(20,176	)		(23,432	)		(28,924	)
Less: Redemption of Series B Preferred Units		—			(3,707	)		—

Net Income Available to Unitholders	$	110,880		$	109,279		$	109,039

Income from Continuing Operations Available to Unitholders Per Weighted Average Unit Outstanding:
Basic	$	0.49		$	1.04		$	1.68

Diluted	$	0.48		$	1.03		$	1.67

Net Income Available to Unitholders Per Weighted Average Unit Outstanding:
Basic	$	2.45		$	2.38		$	2.37

Diluted	$	2.44		$	2.37		$	2.36

Net Income	$	131,056		$	136,418		$	137,963
Other Comprehensive Income (Loss):
Cumulative Transition Adjustment		—			—			(14,920	)
Settlement of Interest Rate Protection Agreement		—			1,772			(191	)
Mark-to-Market of Interest Rate Protection Agreements and Interest Rate Swap Agreements		251			(126	)		(231	)
Write-Off of Unamortized Interest Rate Protection Agreement Due to Early Retirement of Debt		—			—			2,156
Amortization of Interest Rate Protection Agreements		198			176			805

Comprehensive Income	$	131,505		$	138,240		$	125,582

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(Dollars in thousands, except for per share data)


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
General Partner Preferred Units - Beginning of Year	$	240,697		$	336,990		$	336,990
Distributions		(20,176	)		(23,432	)		(28,924	)
Redemption of Series B Preferred Units		—			(96,293	)		—
Net Income		20,176			23,432			28,924

General Partner Units - End of Year	$	240,697		$	240,697		$	336,990

General Partner Units - Beginning of Year	$	665,647		$	686,544		$	698,247
Contributions		15,117			16,247			18,894
Issuance of General Partner Restricted Units		20,641			3,232			3,133
Purchase of General Partnership Units		(997	)		(29,493	)		(28,399	)
Repurchase and Retirement of Restricted Units		(1,865	)		(2,037	)		(1,944	)
Redemption of Series B Preferred Units		—			(3,148	)		—
Amortization of Stock Based Compensation		54			646			899
Distributions		(108,171	)		(107,020	)		(104,407	)
Unit Conversions		2,750			4,616			7,797
Net Income		94,545			96,060			92,324

General Partner Units - End of Year	$	687,721		$	665,647		$	686,544

Unamort. Value of Gen. Partner Restricted Units - Beg. Of Year	$	(4,307	)	$	(6,247	)	$	(8,812	)
Issuance of General Partner Restricted Units		(20,641	)		(3,232	)		(3,133	)
Amortization of General Partner Restricted Units		5,913			5,172			5,698

Unamort. Value of Gen. Partner Restricted Units - End Of Year	$	(19,035	)	$	(4,307	)	$	(6,247	)

Limited Partners Units - Beginning of Year	$	168,740		$	175,019		$	183,406
Contributions					735			1,406
Redemption of Series B Preferred Units		—			(559	)		—
Distributions		(18,531	)		(18,765	)		(18,711	)
Unit Conversions		(2,750	)		(4,616	)		(7,797	)
Net Income		16,335			16,926			16,715

Limited Partners Units - End of Year	$	163,794		$	168,740		$	175,019

Accum. Other Comprehensive Income (Loss) - Beginning of Year	$	(10,559	)	$	(12,381	)	$	—
Cumulative Transition Adjustment		—			—			(14,920	)
Settlement of Interest Rate Protection Agreements		—			1,772			(191	)
Mark to Market of Interest Rate Protection Agreements		251			(126	)		(231	)
Write-Off of Unamortized Interest Rate Protection Agreement Due to the Early Retirement of Debt		—			—			2,156
Amortization of Interest Rate Protection Agreements		198			176			805

Accum. Other Comprehensive Income (Loss) - End of Year	$	(10,110	)	$	(10,559	)	$	(12,381	)

Total Partners’ Capital at End of Year	$	1,063,067		$	1,060,218		$	1,179,925

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	131,056		$	136,418		$	137,963
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		63,281			56,762			54,623
Amortization of Deferred Financing Costs		1,761			1,858			1,742
Other Amortization		16,174			13,986			14,229
Provision for Bad Debt		(160	)		—			—
Valuation Provision on Real Estate		—			—			6,490
Equity in (Income) Loss of Joint Ventures		(539	)		(463	)		791
Distributions from Joint Ventures		539			463			—
Gain on Sale of Real Estate		(83,789	)		(49,848	)		(42,942	)
Loss on Early Retirement of Debt		—			888			10,309
Equity in Income of Other Real Estate Partnerships		(43,332	)		(53,038	)		(47,949	)
Distributions from Investment in Other Real Estate Partnerships		43,332			53,038			47,949
Increase in Tenant Accounts Receivable and Prepaid Expenses and Other Assets, Net		(23,076	)		(11,025	)		(5,846	)
Increase in Deferred Rent Receivable		(2,629	)		(2,575	)		(3,268	)
Decrease in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits		(14,948	)		(9,252	)		(28,148	)

Net Cash Provided by Operating Activities		87,670			137,212			145,943

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate		(280,049	)		(289,405	)		(399,242	)
Net Proceeds from Sales of Investments in Real Estate		306,767			322,079			301,032
Investments in and Advances to Other Real Estate Partnerships		(59,430	)		(103,628	)		(163,666	)
Distributions/Repayments from Other Real Estate Partnerships		62,300			104,202			166,546
Contributions to and Investments in Joint Ventures		(5,711	)		(8,207	)		(6,025	)
Distributions from Joint Ventures		2,859			2,260			1,524
Repayment of Mortgage Loans Receivable		27,500			6,903			3,005
(Increase) Decrease in Restricted Cash		(32,525	)		(21,956	)		16,633

Net Cash Provided by (Used In) Investing Activities		21,711			12,248			(80,193	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Unit Contributions		14,799			15,895			18,521
Unit Distributions		(125,916	)		(125,875	)		(122,203	)
Purchase of General Partner Units		(997	)		(29,493	)		(28,399	)
Repurchase of Restricted Units		(1,865	)		(2,037	)		(1,944	)
Redemption of Preferred Units		—			(100,000	)		—
Preferred Unit Distributions		(20,176	)		(23,432	)		(36,155	)
Repayments on Mortgage Loans Payable		(1,018	)		(38,626	)		(14,476	)
Proceeds from Senior Unsecured Debt		—			247,950			199,390
Other Proceeds from Senior Unsecured Debt		—			1,772			—
Repayment of Senior Unsecured Debt		—			(84,930	)		(100,000	)
Proceeds from Unsecured Lines of Credit		264,300			500,100			398,300
Repayments on Unsecured Lines of Credit		(238,700	)		(512,300	)		(385,800	)
Book Overdraft		312			5,336			12,335
Cost of Debt Issuance and Prepayment Fees		(120	)		(3,820	)		(8,963	)

Net Cash Used in Financing Activities		(109,381	)		(149,460	)		(69,394	)

Net (Decrease) Increase in Cash and Cash Equivalents		—			—			(3,644	)
Cash and Cash Equivalents, Beginning of Period		—			—			3,644

Cash and Cash Equivalents, End of Period	$	—		$	—		$	—

The accompanying notes are an integral part of the financial statements.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

1. Organization and Formation of Partnership

First Industrial, L.P. (the “Operating Partnership”) was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner is First Industrial Realty Trust, Inc. (the “Company”) with an approximate 85.6% and 85.0% ownership interest at December 31, 2003 and 2002, respectively. The Company also owns a preferred general partnership interest in the Operating Partnership (“Preferred Units”) with an aggregate liquidation priority of $250,000. 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, in the aggregate, approximately a 14.4% and 15.0% interest in the Operating Partnership at December 31, 2003 and 2002, respectively.

The Operating Partnership is the sole member of several limited liability companies (the “L.L.C.s”) and the sole stockholder of First Industrial Development Services, Inc., and holds at least a 99% limited partnership interest in First Industrial Financing Partnership, L.P. (the “Financing Partnership”), First Industrial Securities, L.P. (the “Securities Partnership”), First Industrial Mortgage Partnership, L.P, (the “Mortgage Partnership”), First Industrial Pennsylvania, L.P. (the “Pennsylvania Partnership”), First Industrial Harrisburg, L.P. (the “Harrisburg Partnership”), First Industrial Indianapolis, L.P. (the “Indianapolis Partnership”), TK-SV, LTD. and FI Development Services, L.P. (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 minority equity interests in and provides asset and property management services to, two joint ventures which invest in industrial properties, the September 1998 Joint Venture (hereinafter defined) and the December 2001 Joint Venture (hereinafter defined). The Consolidated Operating Partnership (hereinafter defined), through a wholly-owned limited liability company of which the Operating Partnership is the sole member, also owned a minority equity interest in and provided asset and property management services to a third joint venture which invested in industrial properties (the “September 1999 Joint Venture”). During September 2003, the September 1999 Joint Venture sold its remaining property. In conjunction with this final property sale, the final distribution was made to the partners. In May 2003, the Consolidated Operating Partnership (hereinafter defined), through wholly-owned limited liability companies of which the Operating Partnership is the sole member, entered into a joint venture arrangement (the “May 2003 Joint Venture”) with an institutional investor to invest in industrial properties. As of December 31, 2003, the May 2003 Joint Venture did not own any industrial properties.

As of December 31, 2003, the Operating Partnership, the L.L.C.s and First Industrial Development Services, Inc. (hereinafter defined as the “Consolidated Operating Partnership”) owned 729 in-service industrial properties, containing an aggregate of approximately 48.5 million square feet (unaudited) of gross leasable area (“GLA”). On a combined basis, as of December 31, 2003, the Other Real Estate Partnerships owned 105 in-service industrial properties, containing an aggregate of approximately 9.4 million square feet (unaudited) of GLA. Of the 105 industrial properties owned by the Other Real Estate Partnerships at December 31, 2003, 15 are held by the Mortgage Partnership, 41 are held by the Pennsylvania Partnership, 15 are held by the Securities Partnership, 19 are held by the Financing Partnership, 10 are held by the Harrisburg Partnership, four are held by the Indianapolis Partnership and one is held by TK-SV, LTD.

Profits, losses and distributions of the Operating Partnership, the L.L.C.s and 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.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

2. Basis of Presentation

The consolidated financial statements of the Consolidated Operating Partnership at December 31, 2003 and 2002 and for each of the years ended December 31, 2003, 2002 and 2001 include the accounts and operating results of the Operating Partnership, the L.L.C.s and First Industrial Development Services, Inc. on a consolidated basis. Such financial statements present the Operating Partnership’s limited partnership interests in each of the Other Real Estate Partnerships and the Operating Partnership’s minority equity interests in the September 1998 Joint Venture (hereinafter defined), the September 1999 Joint Venture (hereinafter defined) and the December 2001 Joint Venture (hereinafter defined) under the equity method of accounting. All intercompany transactions have been eliminated in consolidation.

3. Summary of Significant Accounting Policies

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 December 31, 2003 and 2002, and the reported amounts of revenues and expenses for each of the years ended December 31, 2003, 2002 and 2001. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and liquid investments with an initial maturity of three months or less. The carrying amount approximates fair value due to the short maturity of these investments.

Restricted Cash

At December 31, 2003 and 2002, restricted cash includes gross proceeds from the sales of certain properties. These sales proceeds will be disbursed as the Company exchanges into properties under Section 1031 of the Internal Revenue Code. The carrying amount approximates fair value due to the short term maturity of these investments.

Investment in Real Estate and Depreciation

Investment in Real Estate is carried at cost. The Consolidated Operating Partnership reviews its properties on a quarterly basis for impairment and provides a provision if impairments are found. To determine if an impairment may exist, the Consolidated Operating Partnership reviews its properties and identifies those which have had either an event of change or event of circumstances warranting further assessment of recoverability (such as a decrease in occupancy). If further assessment of recoverability is needed, the Consolidated Operating Partnership estimates the future net cash flows expected to result from the use of the property and its eventual disposition, on an individual property basis. If the sum of the expected future net cash flows (undiscounted and without interest charges) is less than the carrying amount of the property, on an individual property basis, the Consolidated Operating Partnership will recognize an impairment loss based upon the estimated fair value of such property. For properties management considers held for sale, the Consolidated Operating Partnership ceases depreciating the properties and values the properties at the lower of depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and, as a result, the Consolidated Operating Partnership decides not to sell a property previously classified as held for sale, the Consolidated Operating Partnership will reclassify such property as held and used. Such property is measured at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Interest costs, real estate taxes, compensation costs of development personnel and other directly related costs incurred during construction periods are capitalized and depreciated commencing with the date placed in service, on the same basis as the related assets. Depreciation expense is computed using the straight-line method based on the following useful lives:


	Years
Buildings and Improvements		31.5 to 40
Land Improvements		15
Furniture, Fixtures and Equipment		5 to 10

Construction expenditures for tenant improvements, leasehold improvements and leasing commissions (inclusive of compensation costs of leasing personnel) are capitalized and amortized over the terms of each specific lease. Repairs and maintenance are charged to expense when incurred. Expenditures for improvements are capitalized.

The Consolidated Operating Partnership accounts for all acquisitions entered into subsequent to June 30, 2001 in accordance with Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 141, “Business Combinations” (“FAS 141”). Upon acquisition of a property, the Consolidated Operating Partnership allocates the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, buildings, tenant improvements, leasing commissions and intangible assets including in-place leases and above market and below market leases. The Consolidated Operating Partnership allocates the purchase price to the fair value of the tangible assets of an acquired property determined by valuing the property as if it were vacant. Acquired above and below market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates over the remaining lease term. The purchase price is further allocated to in-place lease values based on management’s evaluation of the specific characteristics of each tenants lease and the Consolidated Operating Partnership’s overall relationship with the respective tenant. Acquired above and below market leases are amortized over the remaining non-cancelable terms of the respective leases. The value of in-place lease intangibles, which is included as a component of Other Assets, is amortized to expense over the remaining lease term and expected renewal periods of the respective lease. If a tenant terminates its lease early, the unamortized portion of leasing commissions, tenant improvements, above and below market leases and the in-place lease value is immediately charged to expense.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain long-term financing. These fees and costs are being amortized over the terms of the respective loans. Accumulated amortization of deferred financing costs was $8,930 and $7,169 at December 31, 2003 and 2002, respectively. Unamortized deferred financing costs are written-off when debt is retired before the maturity date.

Investment in and Advances to Other Real Estate Partnerships

Investment in and Advances to Other Real Estate Partnerships represents the Consolidated Operating Partnership’s limited partnership interests in and advances to, through the Operating Partnership, the Other Real Estate Partnerships. As discussed in Note 1, the Operating Partnership is the limited partner in the Other Real Estate Partnerships. In accordance with Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” the general partner of the Other Real Estate Partnerships, the majority voting partner, accounts for the Other Real Estate Partnerships as a consolidated subsidiary. Accordingly, the Operating Partnership accounts for its Investment in and Advances to Other Real Estate Partnerships under the equity method of accounting. Under the equity method of accounting, the Operating Partnership’s share of earnings or losses of the Other Real Estate Partnerships is reflected in income as earned and contributions or distributions increase or decrease, respectively, the Operating Partnership’s Investment in and Advances to Other Real Estate Partnerships as paid or received, respectively.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Investments in Joint Ventures

Investments in Joint Ventures represents the Operating Partnership’s limited partnership interests in the September 1998 Joint Venture (hereinafter defined), the September 1999 Joint Venture (hereinafter defined) and the December 2001 Joint Venture (hereinafter defined). The Operating Partnership accounts for its Investments in Joint Ventures under the equity method of accounting, as the Operating Partnership does not have operational control or a majority voting interest. Under the equity method of accounting, the Operating Partnership’s share of earnings or losses of the September 1998 Joint Venture (hereinafter defined), the September 1999 Joint Venture (hereinafter defined) and the December 2001 Joint Venture (hereinafter defined) is reflected in income as earned and contributions or distributions increase or decrease, respectively, the Operating Partnership’s Investments in Joint Ventures as paid or received, respectively. Differences between the Operating Partnership’s carrying value of its investments in joint ventures and the Operating Partnership’s underlying equity of such joint ventures are amortized over the respective lives of the underlying assets, as applicable.

Employee Benefit Plans

At December 31, 2003, the Company has three stock incentive employee compensation plans, which are described more fully in Note 13. Prior to January 1, 2003, the Consolidated Operating Partnership accounted for its stock incentive plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Under APB 25, compensation expense is not recognized for options issued in which the strike price is equal to the fair value of the Company’s stock on the date of grant. Certain options issued in 2000 were issued with a strike price less than the fair value of the Company’s stock on the date of grant. Compensation expense is being recognized for the intrinsic value of these options determined at the date of grant over the vesting period. On January 1, 2003, the Consolidated Operating Partnership adopted the fair value recognition provisions of the Financial Accounting Standards Board’s (“FASB”) Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (“FAS 123”), as amended by Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. The Consolidated Operating Partnership is applying the fair value recognition provisions of FAS 123 prospectively to all employee option awards granted after December 31, 2002. The Consolidated Operating Partnership has not awarded options to employees or directors of the Company during the year ended December 31, 2003, therefore no stock-based employee compensation expense, except for expense related to restricted stock, is included in net income available to common stockholders related to the fair value recognition provisions of FAS 123.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Had compensation expense for the Company’s Stock Incentive Plans been determined based upon the fair value at the grant date for awards under the stock incentive plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended by FAS 148, net income and earnings per unit would have been the pro forma amounts indicated in the table below:


	For the Year Ended
	2003			2002			2001
Net Income Available to Unitholders - as reported	$	110,880		$	109,279		$	109,039
Add: Stock-Based Employee Compensation Expense Included in Net Income Available to Unitholders - as reported		54			237			256
Less: Total Stock-Based Employee Compensation Expense - - Determined Under the Fair Value Method		(1,350	)		(1,154	)		(786	)

Net Income Available to Unitholders - pro forma	$	109,584		$	108,362		$	108,509

Net Income Available to Unitholders per Unit - as reported – Basic	$	2.45		$	2.38		$	2.37
Net Income Available to Unitholders per Unit - pro forma – Basic	$	2.42		$	2.36		$	2.36
Net Income Available to Unitholders per Unit - as reported – Diluted	$	2.44		$	2.37		$	2.36
Net Income Available to Unitholders per Unit - pro forma – Diluted	$	2.41		$	2.35		$	2.35

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


Expected dividend yield	N/A	8.28	%	8.22	%
Expected stock price volatility	N/A	20.94	%	20.75	%
Risk-free interest rate	N/A	3.58	%	4.91	%
Expected life of options	N/A	3.00		3.03

The weighted average fair value of options granted during 2002 and 2001 is $1.97 and $2.49 per option, respectively. No options were granted during 2003.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Revenue Recognition

Rental income is recognized on a straight-line method under which contractual rent increases are recognized evenly over the lease term. Tenant recovery income includes payments from tenants for taxes, insurance and other property operating expenses and is recognized as revenue in the same period the related expenses are incurred by the Consolidated Operating Partnership.

Revenue is recognized on payments received from tenants for early lease terminations after the Consolidated Operating Partnership determines that all the necessary criteria have been met in accordance with the FASB Statement of Financial Accounting Standards No. 13 “Accounting for Leases” (FAS 13”).

The Consolidated Operating Partnership provides an allowance for doubtful accounts against the portion of tenant accounts receivable which is estimated to be uncollectible. Accounts receivable in the consolidated balance sheets are shown net of an allowance for doubtful accounts of $1,547 and $1,707 as of December 31, 2003 and 2002. For accounts receivable the Consolidated Operating Partnership deems uncollectible, the Consolidated Operating Partnership uses the direct write-off method.

Gain on Sale of Real Estate

Gain on sale of real estate is recognized using the full accrual method, when appropriate. Gains relating to transactions which do not meet the full accrual method of accounting are deferred and recognized when the full accrual method of accounting criteria are met or by using the installment or deposit methods of profit recognition, as appropriate in the circumstances. As the assets are sold, their costs and related accumulated depreciation are removed from the accounts with resulting gains or losses reflected in net income or loss. Estimated future costs to be incurred by the Consolidated Operating Partnership after completion of each sale are included in the determination of the gains on sales.

Income Taxes

In accordance with partnership taxation, each of the partners are responsible for reporting their share of taxable income or loss. The Consolidated Operating Partnership is subject to certain state and local income, excise and franchise taxes. The provision for such state and local taxes has been reflected in general and administrative expense in the statements of operations and comprehensive income and has not been separately stated due to its insignificance.

Earnings Per Unit (“EPU”)

Net income per weighted average general partnership and limited partnership unit (the “Units”) — basic is based on the weighted average Units outstanding (excluding restricted units that have not yet vested). Net income per weighted average Unit — diluted is based on the weighted average Units outstanding (excluding restricted units that have not yet vested) plus the dilutive effect of the Company’s in-the-money employee stock options and restricted stock that result in the issuance of general partnership units. See Note 11 for further disclosure about earnings per unit.

Fair Value of Financial Instruments

The Consolidated Operating Partnership’s financial instruments include short-term investments, tenant accounts receivable, mortgage notes receivable, accounts payable, other accrued expenses, mortgage loans payable, unsecured line of credit, senior unsecured debt and the Put Option (defined hereinafter) issued in conjunction with an initial offering of certain unsecured debt.

The fair values of the short-term investments, tenant accounts receivable, mortgage notes receivable, accounts payable and other accrued expenses were not materially different from their carrying or contract values. See Note 6 for the fair values of the mortgage loans payable, unsecured line of credit, senior unsecured debt and the Put Option (defined hereinafter) issued in conjunction with an initial offering of certain unsecured debt.

Derivative Financial Instruments

Historically, the Consolidated Operating Partnership, through the Operating Partnership, has used interest rate protection agreements (the “Agreements”) to fix the interest rate on anticipated offerings of senior unsecured

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

debt or convert floating rate debt to fixed rate debt. Receipts or payments that result from the settlement of Agreements used to fix the interest rate on anticipated offerings of senior unsecured debt are amortized over the life of the senior unsecured debt. Receipts or payments resulting from Agreements used to convert floating rate debt to fixed rate debt are recognized as a component of interest expense. Agreements which qualify for hedge accounting are marked-to-market and any gain or loss is recognized in other comprehensive income (partners’ capital). Any agreements which no longer qualify for hedge accounting are marked-to-market and any gain or loss is recognized in net income immediately. The credit risks associated with the Agreements are controlled through the evaluation and monitoring of the creditworthiness of the counterparty. In the event that the counterparty fails to meet the terms of the Agreements, the Consolidated Operating Partnership’s exposure is limited to the current value of the interest rate differential, not the notional amount, and the Consolidated Operating Partnership’s carrying value of the Agreements on the balance sheet. See Note 6 for more information on the Agreements.

Discontinued Operations

On January 1, 2002, the Consolidated Operating Partnership adopted the FASB Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”). FAS 144 addresses financial accounting and reporting for the disposal of long lived assets. FAS 144 requires that the results of operations and gains or losses on the sale of property sold subsequent to December 31, 2001 that were not classified as held for sale at December 31, 2001 as well as the results of operations from properties that were classified as held for sale subsequent to December 31, 2001 be presented in discontinued operations if both of the following criteria are met: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Consolidated Operating Partnership as a result of the disposal transaction and (b) the Consolidated Operating Partnership will not have any significant continuing involvement in the operations of the property after the disposal transaction. FAS 144 also requires prior period results of operations for these properties to be restated and presented in discontinued operations in prior consolidated statements of operations.

Segment Reporting

Management views the Consolidated Operating Partnership as a single segment.

Recent Accounting Pronouncements

In January 2003, the FASB issued FIN 46, which provides guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE are to be included in an entity’s consolidated financial statements. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. In December 2003, the FASB reissued FIN 46 with certain modifications and clarifications. Application of this guidance was effective for interests in certain VIEs commonly referred to as special-purpose entities (SPEs) as of December 31, 2003. Application for all other types of entities is required for periods ending after March 15, 2004, unless previously applied. The Consolidated Operating Partnership does not believe that the application of FIN 46 will have an impact on its financial position, results of operations, or liquidity.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Reclassification

On January 1, 2003, the Operating Partnership adopted the FASB’s Statement of Financial Accounting Standard No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“FAS 145”). FAS 145 rescinds FAS 4, FAS 44 and FAS 64 and amends FAS 13 to modify the accounting for sales-leaseback transactions. FAS 4 required the classification of gains and losses resulting from extinguishment of debt to be classified as extraordinary items. Pursuant to the adoption of FAS 145, the Operating Partnership reclassified amounts shown as extraordinary for the years ended December 31, 2002 and 2001 to continuing operations.

In July 2003, the Securities and Exchange Commission (the “SEC”) issued a clarification on Emerging Issues Task Force (“EITF”) Abstract, Topic No. D 42, “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock” (“EITF 42”). This clarification of EITF 42, states for the purpose of calculating the excess of (1) fair value of the consideration transferred to the holders of the preferred stock over (2) the carrying amount of the preferred stock in the balance sheet, the carrying amount of the preferred stock should be reduced by the issuance costs of the preferred stock. This clarification was effective in the first fiscal period ending after June 15, 2003 and requires prior periods presented to be restated. Pursuant to EITF 42, the Operating Partnership restated net income available to unitholders and net income available to unitholders per share amounts for the year ended December 31, 2002 by reducing net income available to unitholders for the initial issuance costs related to the redemption of the Operating Partnership’s 8.75%, $.01 par value, Series B Cumulative Preferred Units (the “Series B Preferred Units”) on May 14, 2002. The impact of the adoption of EITF 42 for the year ended December 31, 2002 was a reduction of basic and diluted EPU of $.08.

Certain 2002 and 2001 items have been reclassified to conform to the 2003 presentation.

4. 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 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:


	December 31,		December 31,
	2003		2002
ASSETS
Assets:
Investment in Real Estate, Net	$	332,371	$	332,552
Other Assets, Net		70,524		102,784

Total Assets		402,895		435,336

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage Loans Payable	$	2,529	$	40,080
Other Liabilities		22,193		14,126

Total Liablilites		24,722		54,206
Partners’ Capital		378,173		381,130

Total Liabilities and Partners’ Capital	$	402,895	$	435,336

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

4. Investments in and Advances to Other Real Estate Partnerships, continued

Condensed Combined Statements of Operations:


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Total Revenues (including Interest Income)	$	60,483		$	54,456		$	51,354
Property Expenses		(14,818	)		(13,580	)		(14,689	)
Interest Expense		(256	)		(2,948	)		(3,739	)
Amortization of Deferred Financing Costs		(3	)		(67	)		(67	)
Depreciation and Other Amortization		(11,857	)		(10,484	)		(9,789	)
Valuation Provision on Real Estate		—			—			(3,010	)
Loss on Early Retirement of Debt		(1,466	)		—			—
Gain on Sale of Real Estate		6,243			67			21,405
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $4,644 and $21,218 for the years ended December 31, 2003 and 2002		5,319			26,043			7,997

Net Income	$	43,645		$	53,487		$	49,462

5. Investments in Joint Ventures

On September 28, 1998, the Consolidated Operating Partnership, through a wholly-owned limited liability company in which the Operating Partnership is its sole member, entered into a joint venture arrangement (the “September 1998 Joint Venture”) with an institutional investor to invest in industrial properties. The Consolidated Operating Partnership, through wholly-owned limited liability companies in which the Operating Partnership is the sole member, owns a ten percent equity interest in the September 1998 Joint Venture and provides property and asset management services to the September 1998 Joint Venture. On or after October 2000, under certain circumstances, the Operating Partnership has the right to purchase all of the properties owned by the September 1998 Joint Venture at a price to be determined in the future. The Consolidated Operating Partnership has not exercised this right.

On September 2, 1999, the Consolidated Operating Partnership, through a wholly-owned limited liability company in which the Operating Partnership is its sole member, entered into a joint venture arrangement (the “September 1999 Joint Venture”) with an institutional investor to invest in industrial properties. The Consolidated Operating Partnership, through wholly-owned limited liability companies in which the Operating Partnership is the sole member, owns a ten percent equity interest in the September 1999 Joint Venture and provides property and asset management services to the September 1999 Joint Venture. During September 2003, the September 1999 Joint Venture sold its remaining property. In conjunction with this final sale, the final distribution was made to the partners.

On December 28, 2001, the Consolidated Operating Partnership, through a wholly-owned limited liability company in which the Operating Partnership is the sole member, entered into a joint venture arrangement (the “December 2001 Joint Venture”) with an institutional investor to invest in industrial properties. The Consolidated Operating Partnership, through wholly-owned limited liability companies of the Operating Partnership, owns a 15% equity interest in the December 2001 Joint Venture and provides property management services to the December 2001 Joint Venture accounting. As of December 31, 2003 the December 2001 Joint Venture had economic interests in 36 industrial properties. Twenty-seven of the 36 industrial properties were purchased from the Consolidated Operating Partnership. The Consolidated Operating Partnership deferred 15% of the gain resulting from these sales which is equal to the Consolidated Operating Partnership’s economic interest in the December 2001 Joint Venture. The 15% gain deferral is netted against the Consolidated Operating Partnership’s investment in joint ventures on the balance sheet. The 15% gain deferral reduced the Consolidated Operating Partnership’s investment in joint ventures and is amortized into income over the useful life of the related building, which is typically 40 years. If the December 2001 Joint Venture sells any of the 27 properties that the Consolidated Operating Partnership sold to the December

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

5. Investments in Joint Ventures, continued

2001 Joint venture to a third party, the Consolidated Operating Partnership will recognize the unamortized portion of the deferred gain as gain on sale of real estate. If the Consolidated Operating Partnership repurchases any of the 27 properties that it sold to the December 2001 Joint Venture, the 15% gain deferral will be netted against the basis of the property purchased (which reduces the basis of the property).

During the years ended December 2003, 2002 and 2001, the Consolidated Operating Partnership invested the following amounts in its three joint ventures as well as received distributions and recognized fees from acquisition, disposition, property management and asset management services in the following amounts:


	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2003		2002		2001
Contributions	$	5,558	$	8,207	$	6,025
Distributions	$	3,398	$	2,723	$	1,524
Fees	$	2,173	$	1,863	$	2,377

The combined summarized financial information of the investments in joint ventures is as follow:


	December 31,			December 31,
	2003			2002
Condensed Combined Balance Sheets
Gross Real Estate Investment	$	348,030		$	295,470
Less: Accumulated Depreciation		(15,330	)		(11,482	)

Net Real Estate		332,700			283,988
Other Assets		16,750			19,379

Total Assets	$	349,450		$	303,367

Long Term Debt	$	217,413		$	184,010
Other Liabilities		6,596			7,974
Equity		125,441			111,383

Total Liabilities and Equity	$	349,450		$	303,367

Consolidated Operating Partnership’s Share of Equity	$	18,205		$	15,113
Basis Differentials (1)		(3,599	)		(2,568	)

Carrying Value of the Consolidated Operating Partnership’s Investments in Joint Ventures	$	14,606		$	12,545

(1) This amount represents the aggregate difference between the Consolidated Operating Partnership’s historical cost basis and the basis reflected at the joint venture level. Basis differentials are primarily comprised of gain defferals related to properties the Consolidated Operating Partnership sold to the joint ventures and certain acquisition costs which are not reflected in the net assets at the joint venture level.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

5. Investments in Joint Ventures, continued


	Year Ended December 31,
	2003			2002		2001
Condensed Combined Statements of Operations
Total Revenues	$	35,603		$	34,635	$	38,983
Expenses:
Operating and Other		9,693			14,482		13,473
Interest		7,353			10,554		15,377
Depreciation and Amortization		8,711			6,955		6,354

Total Expenses		25,757			31,991		35,204
Gain (Loss) on Sale of Real Estate		(2,069	)		8,231		(6,024	)

Net Income (Loss)	$	7,777		$	10,875	$	(2,245	)

Consolidated Operating Partnership’s Share of Net Income (Loss)	$	539		$	463	$	(791	)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit

Mortgage Loans Payable, Net

On March 20, 1996, the Consolidated Operating Partnership, through the Operating Partnership, assumed a $6,424 mortgage loan and a $2,993 mortgage loan (together, the “Assumed Loans”) that are collateralized by 12 properties in Indianapolis, Indiana and one property in Indianapolis, Indiana, respectively. The Assumed Loans bear interest at a fixed rate of 9.25% and provide for monthly principal and interest payments based on a 16.75-year amortization schedule. The Assumed Loans mature on January 1, 2013. The Assumed Loans may be prepaid only after December 1999 in exchange for the greater of a 1% prepayment fee or a yield maintenance premium.

On April 16, 1998, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the principal amount of $2,525 (the “Acquisition Mortgage Loan IV”). The Acquisition Mortgage Loan IV is collateralized by one property in Baltimore, Maryland, bears interest at a fixed rate of 8.95% and provides for monthly principal and interest payments based on a 20-year amortization schedule. The Acquisition Mortgage Loan IV matures on October 1, 2006. The Acquisition Mortgage Loan IV may be prepaid only after October 2001 in exchange for the greater of a 1% prepayment fee or a yield maintenance premium.

On April 1, 2002, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the principal amount of $5,814 (the “Acquisition Mortgage Loan VIII”). The Acquisition Mortgage Loan VIII is collateralized by one property in Rancho Dominguez, California, bears interest at a fixed rate of 8.26% and provides for monthly principal and interest payments based on a 22-year amortization schedule. The Acquisition Mortgage Loan VIII matures on December 1, 2019. The Acquisition Mortgage Loan VIII may be prepaid only after November 2004 in exchange for the greater of a 1% prepayment fee or yield maintenance premium.

On April 1, 2002, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the principal amount of $6,030 (the “Acquisition Mortgage Loan IX”). The Acquisition Mortgage Loan IX is collateralized by one property in Rancho Dominguez, California, bears interest at a fixed rate of 8.26% and provides for monthly principal and interest payments based on a 22-year amortization schedule. The Acquisition Mortgage Loan IX matures on December 1, 2019. The Acquisition Mortgage Loan IX may be prepaid only after November 2004 in exchange for the greater of a 1% prepayment fee or yield maintenance premium.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit, continued

On September 12, 2003, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the amount of $4,269 (the “Acquisition Mortgage Loan XI”). The Acquisition Mortgage Loan XI is collateralized by one property in Downers Grove, Illinois, bears interest at a fixed rate of 7.61% and provides for monthly principal and interest payments based on a 30–year amortization schedule. The Acquisition Mortgage Loan XI matures on May 1, 2012. In conjunction with the assumption of the Acquisition Mortgage Loan XI, the Consolidated Operating Partnership recorded a premium in the amount of $621 which will be amortized over the remaining life of the Acquisition Mortgage Loan XI as an adjustment to interest expense.

On September 12, 2003, the Consolidated Operating Partnership, through the Operating Partnership, assumed a mortgage loan in the amount of $2,325 (the “Acquisition Mortgage Loan XII”). The Acquisition Mortgage Loan XII is collateralized by one property in Indianapolis, Indiana, bears interest at a fixed rate of 7.54% and provides for monthly principal and interest payments based on a 30–year amortization schedule. The Acquisition Mortgage Loan XII matures on January 1, 2012. In conjunction with the assumption of the Acquisition Mortgage Loan XII, the Consolidated Operating Partnership recorded a premium in the amount of $317 which will be amortized over the remaining life of the Acquisition Mortgage Loan XII as an adjustment to interest expense.

Senior Unsecured Debt, Net

On May 13, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $150,000 of senior unsecured debt which matures on May 15, 2007 and bears a coupon interest rate of 7.60% (the “2007 Notes”). The issue price of the 2007 Notes was 99.965%. Interest is paid semi-annually in arrears on May 15 and November 15. The Consolidated Operating Partnership, through the Operating Partnership, also entered into an interest rate protection agreement which was used to fix the interest rate on the 2007 Notes prior to issuance. The Consolidated Operating Partnership, through, the Operating Partnership, settled the interest rate protection agreement for a payment of approximately $41, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreement are being amortized over the life of the 2007 Notes as an adjustment to interest expense. The 2007 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage.

On May 13, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $100,000 of senior unsecured debt which matures on May 15, 2027, and bears a coupon interest rate of 7.15% (the “2027 Notes”). The issue price of the 2027 Notes was 99.854%. The 2027 Notes were redeemable, at the option of the holders thereof, on May 15, 2002. The Operating Partnership received redemption notices from holders representing $84,930 of the 2027 Notes outstanding. On May 15, 2002, the Consolidated Operating Partnership, through the Operating Partnership, paid off and retired $84,930 of the 2027 Notes. Due to the partial pay off of the 2027 Notes, the Consolidated Operating Partnership has recorded a loss from the early retirement of debt in 2002 of approximately $888 comprised of the amount paid above the carrying amount of the 2027 Notes, the write-off of the pro rata unamortized deferred financing costs and legal costs. Interest is paid semi-annually in arrears on May 15 and November 15. The Consolidated Operating Partnership, through the Operating Partnership, also entered into an interest rate protection agreement which was used to fix the interest rate on the 2027 Notes prior to issuance. The Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreement for approximately $597 of proceeds, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreement are being amortized over the life of the 2027 Notes as an adjustment to interest expense. The 2027 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage.

On May 22, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $100,000 of senior unsecured debt which matures on May 15, 2011 and bears a coupon interest rate of 7.375% (the “2011 PATS”). The issue price of the 2011 PATS was 99.348%. Interest is paid semi-annually in arrears on May 15 and November 15. The 2011 PATS are redeemable, at the option of the holder thereof, on May 15, 2004 (the “Put Option”). If the 2011 PATS are not redeemed on May 15, 2004, the 2011 PATS will be reissued and the interest rate on the 2011 PATS will be reset at a fixed rate until May 15, 2011 based upon a predetermined formula. If the 2011 PATS are not redeemed on May 15, 2004, the 2011 PATS will be reset at a fixed rate until May 15, 2011 based upon a predetermined formula. The Consolidated Operating Partnership received approximately $1,781 of proceeds from the holder of the 2011 PATS as consideration for the Put Option. The Consolidated Operating Partnership amortizes the Put Option amount over the life of the Put Option as an adjustment to interest expense. The Consolidated

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit, continued

Operating Partnership, through the Operating Partnership, also entered into an interest rate protection agreement which was used to fix the interest rate on the 2011 PATS prior to issuance. The Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreement for a payment of approximately $90, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreement are being amortized over the life of the 2011 PATS as an adjustment to interest expense. The 2011 PATS contain certain covenants including limitation on incurrence of debt and debt service coverage.

On November 20, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $50,000 of senior unsecured debt which matures on November 21, 2005 and bears a coupon interest rate of 6.90% (the “2005 Notes”). The issue price of the 2005 Notes was 100%. Interest is paid semi-annually in arrears on May 21 and November 21. The 2005 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage.

On December 8, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $150,000 of senior unsecured debt which matures on December 1, 2006 and bears a coupon interest rate of 7.00% (the “2006 Notes”). The issue price of the 2006 Notes was 100%. Interest is paid semi-annually in arrears on June 1 and December 1. The Consolidated Operating Partnership, through the Operating Partnership, also entered into an interest rate protection agreement which was used to fix the interest rate on the 2006 Notes prior to issuance. The Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreement for a payment of approximately $2,162, which is included in other comprehensive income. The settlement amount of the interest rate protection agreement is being amortized over the life of the 2006 Notes as an adjustment to interest expense. The 2006 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage.

On December 8, 1997, the Consolidated Operating Partnership, through the Operating Partnership, issued $100,000 of senior unsecured debt which matures on December 1, 2017 and bears a coupon interest rate of 7.50% (the “2017 Notes”). The issue price of the 2017 Notes was 99.808%. Interest is paid semi-annually in arrears on June 1 and December 1. The Consolidated Operating Partnership is amortizing the debt issue discount over the life of the 2017 Notes as an adjustment to interest expense. The 2017 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage.

On March 31, 1998, the Consolidated Operating Partnership, through the Operating Partnership, issued $100,000 of Dealer remarketable securities which were to mature on April 5, 2011 and bore a coupon interest rate of 6.50% (the “2011 Drs.”). The issue price of the 2011 Drs. was 99.753%. The 2011 Drs. were callable at the option of J.P. Morgan, Inc., as Remarketing Dealer, on April 5, 2001. The Consolidated Operating Partnership received approximately $2,760 of proceeds from the Remarketing Dealer. The Consolidated Operating Partnership, through the Operating Partnership, entered into an interest rate protection agreement which was used to fix the interest rate on the 2011 Drs. prior to issuance. The Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreement for a payment of approximately $2,565, which is included in other comprehensive income. The Remarketing Dealer exercised its call option with respect to the 2011 Drs. On April 5, 2001, the Consolidated Operating Partnership repurchased and retired the 2011 Drs. from the Remarketing Dealer for approximately $105,565. In conjunction with the forecasted retirement of the 2011 Drs., the Consolidated Operating Partnership entered into an interest rate protection agreement which fixed the retirement price of the 2011 Drs., which it designated as a cash flow hedge. On April 2, 2001, this interest rate protection agreement was settled for a payment of approximately $562. Due to the retirement of the 2011 Drs., the Operating Partnership has recorded a loss from the early retirement of debt in 2001 of approximately $9,245 comprised of the amount paid above the 2011 Drs. carrying value, the write-off of unamortized deferred financing costs, the write-off of the unamortized portion of an interest rate protection agreement which was used to fix the interest rate on the 2011 Drs. prior to issuance, the settlement of the interest rate protection agreement as discussed above, legal costs and other expenses.

On July 14, 1998, the Consolidated Operating Partnership, through the Operating Partnership, issued $200,000 of senior unsecured debt which matures on July 15, 2028 and bears a coupon interest rate of 7.60% (the “2028 Notes”). The issue price of the 2028 Notes was 99.882%. Interest is paid semi-annually in arrears on January 15 and July 15. The Consolidated Operating Partnership, through the Operating Partnership, also entered into interest rate protection agreements which were used to fix the interest rate on the 2028 Notes prior to issuance. The

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit, continued

Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreements for a payment of approximately $11,504, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreements are being amortized over the life of the 2028 Notes as an adjustment to interest expense. The 2028 Notes contain certain covenants including limitation on incurrence of debt and debt service coverage. Approximately $50,000 of the 2028 Notes was purchased, through a broker/dealer, by an entity in which a Director of the Company owns less than a two percent interest.

On March 19, 2001, the Consolidated Operating Partnership, through the Operating Partnership, issued $200,000 of senior unsecured debt which matures on March 15, 2011 and bears a coupon interest rate of 7.375% (the “2011 Notes”). The issue price of the 2011 Notes was 99.695%. Interest is paid semi-annually in arrears on September 15 and March 15. The Consolidated Operating Partnership, through the Operating Partnership, also entered into an interest rate protection agreement which was used to fix the interest rate on the 2011 Notes prior to issuance, which it designated as a cash flow hedge. The Consolidated Operating Partnership, through the Operating Partnership, settled the interest rate protection agreement for approximately $371 of proceeds which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreement are being amortized over the life of the 2011 Notes as an adjustment to interest expense. The 2011 Notes contain certain covenants including limitations on incurrence of debt and debt service coverage.

On April 15, 2002, the Consolidated Operating Partnership, through the Operating Partnership, issued $200,000 of senior unsecured debt which matures on April 15, 2012 and bears a coupon interest rate of 6.875% (the “2012 Notes”). The issue price of the 2012 Notes was 99.310%. Interest is paid semi-annually in arrears on April 15 and October 15. The Operating Partnership also entered into interest rate protection agreements which were used to fix the interest rate on the 2012 Notes prior to issuance. The Operating Partnership settled the interest rate protection agreements for approximately $1,772 of proceeds, which is included in other comprehensive income. The debt issue discount and the settlement amount of the interest rate protection agreements are being amortized over the life of the 2012 Notes as an adjustment to interest expense. The 2012 Notes contain certain covenants including limitations on incurrence of debt and debt service coverage.

On April 15, 2002, the Consolidated Operating Partnership, through the Operating Partnership, issued $50,000 of senior unsecured debt which matures on April 15, 2032 and bears a coupon interest rate of 7.75% (the “2032 Notes”). The issue price of the 2032 Notes was 98.660%. Interest is paid semi-annually in arrears on April 15 and October 15. The debt issue discount is being amortized over the life of the 2032 Notes as an adjustment to interest expense. The 2032 Notes contain certain covenants including limitations on incurrence of debt and debt service coverage.

Unsecured Lines of Credit

In December 1997, the Operating Partnership entered into a $300,000 unsecured revolving credit facility (the “1997 Unsecured Line of Credit”) which bore interest at LIBOR plus .80% or a “Corporate Base Rate”, at the Operating Partnership’s election, and provided for interest only payments until maturity. In June 2000, the Operating Partnership amended the 1997 Unsecured Line of Credit which extended the maturity date to June 30, 2003 and included the right, subject to certain conditions, to increase the aggregate commitment up to $400,000 (the “2000 Unsecured Line of Credit”). On September 27, 2002, the Consolidated Operating Partnership, through the Operating Partnership, amended and restated the 2000 Unsecured Line of Credit (the “2002 Unsecured Line of Credit”). The 2002 Unsecured Line of Credit matures on September 30, 2005 and bears interest at a floating rate of LIBOR plus .70%, or the Prime Rate, at the Consolidated Operating Partnership’s election. The net unamortized deferred financing costs related to the 2000 Unsecured Line of Credit and any additional deferred financing costs incurred amending the 2002 Unsecured Line of Credit are being amortized over the life of the 2002 Unsecured Line of Credit in accordance with Emerging Issues Task Force Issue 98-14, “Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt Arrangements”. The 2002 Unsecured Line of Credit contains certain financial covenants relating to debt service coverage, market value net worth, dividend payout ratio and total funded indebtedness.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit, continued

The following table discloses certain information regarding the Consolidated Operating Partnership’s mortgage loans, senior unsecured debt and unsecured line of credit:


	Outstanding Balance at						Accrued Interest Payable at				Interest Rate at
	December 31,			December 31,			December 31,		December 31,		December 31,			Maturity
	2003			2002			2003		2002		2003			Date
Mortgage Loans Payable, Net
Assumed Loans		5,442			6,015			—		—		9.250	%		01/01/13
Acquisition Mortgage Loan IV		2,130			2,215			16		17		8.950	%		10/01/06
Acquisition Mortgage Loan VIII		5,603			5,733			39		39		8.260	%		12/01/19
Acquisition Mortgage Loan IX		5,811			5,946			40		41		8.260	%		12/01/19
Acquisition Mortgage Loan X		16,754	(1)		—			100		—		8.250	%		12/01/10
Acquisition Mortgage Loan XI		4,854	(1)		—			—		—		7.610	%		05/01/12
Acquisition Mortgage Loan XII		2,623	(1)		—			—		—		7.540	%		01/01/12

Total	$	43,217		$	19,909		$	195	$	97

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		149,982	(2)		149,977	(2)		1,457		1,457		7.600	%		05/15/07
2011 PATS		99,657	(2)		99,610	(2)		942		942		7.375	%		05/15/11	(3)
2017 Notes		99,866	(2)		99,857	(2)		625		625		7.500	%		12/01/17
2027 Notes		15,053	(2)		15,052	(2)		138		138		7.150	%		05/15/27
2028 Notes		199,807	(2)		199,799	(2)		7,009		7,009		7.600	%		07/15/28
2011 Notes		199,563	(2)		199,502	(2)		4,343		4,343		7.375	%		03/15/11
2012 Notes		198,856	(2)		198,717	(2)		2,903		2,903		6.875	%		04/15/12
2032 Notes		49,368	(2)		49,346	(2)		818		818		7.750	%		04/15/32

Total	$	1,212,152		$	1,211,860		$	19,493	$	19,493

Unsecured Line of Credit
2002 Unsecured Line of Credit	$	195,900		$	170,300		$	336	$	415		2.207	%		09/30/05

(1) At December 31, 2003, the Acquisition Mortgage Loan X, the Acquisition Mortgage Loan XI and the Acquisition Mortgage Loan XII include unamortized premiums of $2,673, $597 and $305, respectively.

(2) At December 31, 2003, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes, the 2011 Notes, 2012 Notes and the 2032 Notes are net of unamortized discounts of $18, $343, $134, $17, $193, $437, $1,144 and $632, respectively. At December 31, 2002, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Notes are net of unamortized discounts of $23, $390, $143, $18, $201, $498, $1,283 and $654, respectively.

(3) The 2011 PATS are redeemable at the option of the holder thereof, on May 15, 2004.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Mortgage Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured Lines of Credit, continued

The following is a schedule of the stated maturities and scheduled principal payments of the mortgage loans, senior unsecured debt and unsecured line of credit, exclusive of premiums and discounts, for the next five years ending December 31, and thereafter:


	Amount
2004	$	1,198
2005		247,212
2006		153,257
2007		151,442
2008		1,571
Thereafter		895,932

Total	$	1,450,612

Fair Value

At December 31, 2003 and 2002, the fair value of the Consolidated Operating Partnership’s mortgage loans payable, senior unsecured debt, unsecured lines of credit and Put Option were as follows:


	December 31, 2003				December 31, 2002
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Mortgage Loans Payable	$	43,217	$	46,180	$	19,909	$	23,282
Senior Unsecured Debt		1,212,152		1,332,958		1,211,860		1,325,937
Unsecured Line of Credit (Variable Rate)		195,900		195,900		95,300		95,300
Unsecured Line of Credit (Fixed Rate)		—		—		75,000		75,357
Put Option		95		16,320		350		16,480

Total	$	1,451,364	$	1,591,358	$	1,402,419	$	1,536,356

The fair value of the senior unsecured debt was determined by quoted market prices, if available. The fair values of the Consolidated Operating Partnership’s senior unsecured debt not valued by quoted market prices, mortgage loans payable, the fixed rate portion of the Unsecured Line of Credit and Put Option were determined by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. The fair value of the variable rate portion of the Unsecured Line of Credit was equal to its carrying value due to the variable interest rate nature of the loan.

Other Comprehensive Income

In conjunction with the prior issuances of senior unsecured debt, the Consolidated Operating Partnership, through the Operating Partnership, entered into interest rate protection agreements to fix the interest rate on anticipated offerings of senior unsecured debt (the “Interest Rate Protection Agreements”). In the next 12 months, the Consolidated Operating Partnership will amortize approximately $221 of the Interest Rate Protection Agreements into net income as an increase to interest expense.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

7. Partners’ Capital

The Operating Partnership has issued general partnership units and 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 (See discussion below). Subject to lock-up periods and certain adjustments, limited partnership units are convertible into common stock, $.01 par value, of the Company on a one-for-one basis or cash at the option of the Company. The preferred general partnership units result from preferred capital contributions from the Company. The preferred general partnership units have an aggregate liquidation priority of $250,000 as of December 31, 2003 and 2002. The Operating Partnership is 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 Units. The consent of the holder of the preferred general partnership units is required to alter such holder’s rights as to allocations and distributions, to alter or modify such holder’s rights with respect to redemption, to cause the early termination of the Operating Partnership, or to amend the provisions of the partnership agreement which requires such consent.

Unit Contributions:

For the year ended December 31, 2002, the Operating Partnership issued 18,203 Units valued, in the aggregate, at $633 in exchange for interests in certain properties. These contributions are reflected in the Consolidated Operating Partnership’s financial statements as limited partner contributions.

For the year ended December 31, 2001, the Operating Partnership issued 44,579 Units valued, in the aggregate, at $1,491 in exchange for interests in certain properties. These contributions are reflected in the Consolidated Operating Partnership’s financial statements as limited partner contributions.

For the year ended December 31, 2003, certain employees of the Company exercised 531,473 non-qualified employee stock options. Gross proceeds to the Company approximated $14,799. The gross proceeds from the option exercises were contributed to the Operating Partnership in exchange for Units and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner contribution.

For the year ended December 31, 2002, certain employees of the Company exercised 561,418 non-qualified employee stock options. Gross proceeds to the Company approximated $15,895. The gross proceeds from the option exercises were contributed to the Operating Partnership in exchange for Units and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner contribution.

For the year ended December 31, 2001, certain employees of the Company exercised 717,836 non-qualified employee stock options. Gross proceeds to the Company approximated $18,521. The gross proceeds from the option exercises were contributed to the Operating Partnership in exchange for Units and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner contribution.

Preferred Contributions:

On May 14, 1997 the Company issued 4,000,000 Depositary Shares, each representing 1/100^th of a share of the Company’s 8 ¾%, $.01 par value, Series B Cumulative Preferred Stock (the “Series B Preferred Stock”), at an initial offering price of $25 per Depositary Share. The net proceeds of approximately $96,293 received from the Series B Preferred Stock were contributed to the Operating Partnership in exchange for 8 ¾% Series B Cumulative Preferred Units (the “Series B Preferred Units”). On or after May 14, 2002, the Series B Preferred Stock became redeemable for cash at the option of the Company, in whole or in part, at a redemption price equivalent to $25 per Depositary Share, or $100,000 in the aggregate, plus dividends accrued and unpaid to the redemption date. On April 12, 2002, the

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

7. Partners’ Capital, continued

Company called for the redemption of all of its outstanding Series B Preferred Stock at the price of $25 per share, plus accrued and unpaid dividends. The Company redeemed the Series B Preferred Stock on May 14, 2002 and paid a prorated second quarter dividend of $.26736 per Depositary Share, totaling approximately $1,069. The Series B Cumulative Preferred Units were redeemed on May 14, 2002 as well.

On June 6, 1997, the Company issued 2,000,000 Depositary Shares, each representing 1/100^th of a share of the Company’s 8 5/8%, $.01 par value, Series C Cumulative Preferred Stock (the “Series C Preferred Stock”), at an initial offering price of $25 per Depositary Share. The net proceeds of $47,997 received from the Series C Preferred Stock were contributed to the Operating Partnership in exchange for 8 5/8% Series C Cumulative Preferred Units (the “Series C Preferred Units”) and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner preferred unit contribution.

On February 4, 1998, the Company issued 5,000,000 Depositary Shares, each representing 1/100^th of a share of the Company’s 7.95%, $.01 par value, Series D Cumulative Preferred Stock (the “Series D Preferred Stock”), at an initial offering price of $25 per Depositary Share. The net proceeds of $120,562 received from the Series D Preferred Stock were contributed to the Operating Partnership in exchange for 7.95% Series D Cumulative Preferred Units (the “Series D Preferred Units”) and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner preferred unit contribution.

On March 18, 1998, the Company issued 3,000,000 Depositary Shares, each representing 1/100^th of a share of the Company’s 7.90%, $.01 par value, Series E Cumulative Preferred Stock (the “Series E Preferred Stock”), at an initial offering price of $25 per Depositary Share. The net proceeds of $72,138 received from the Series E Preferred Stock were contributed to the Operating Partnership in exchange for 7.90% Series E Cumulative Preferred Units (the “Series E Preferred Units”) and are reflected in the Consolidated Operating Partnership’s financial statements as a general partner preferred unit contribution.

Distributions:

On January 27, 2003, the Operating Partnership paid a fourth quarter 2002 distribution of $.6850 per Unit, totaling approximately $31,106. On April 21, 2003, the Operating Partnership paid a first quarter 2003 distribution of $.6850 per Unit, totaling approximately $31,542. On July 21, 2003, the Operating Partnership paid a second quarter 2003 distribution of $.6850 per Unit, totaling approximately $31,607. On October 20, 2003, the Operating Partnership paid a third quarter 2003 distribution of $.6850 per Unit, totaling approximately $31,661.

On April 1, 2003, July 1, 2003, September 30, 2003 and December 31, 2003 the Operating Partnership paid second, third and fourth quarter distributions of $53.906 per Unit on its Series C Preferred Units, $49.688 per Unit on its Series D Preferred Units and $49.375 per Unit on its Series E Preferred Units. The preferred unit distributions paid on April 1, 2003, July 1, 2003, September 30, 2003 and December 31, 2003 totaled approximately $5,044, respectively.

Repurchase of Units:

In March 2000, the Company’s Board of Directors approved the repurchase of up to $100,000 of the Company’s common stock. The Company may make purchases from time to time, if price levels warrant, in the open market or in privately negotiated transactions. During the year ended December 31, 2003, the Company repurchased 37,300 shares of its common stock at a weighted average price of approximately $26.73 per share. The Operating Partnership repurchased general partnership units from the company in the same amount. During the year ended December 31, 2002, the Company repurchased 1,091,500 shares of its common stock at a weighted average price of approximately $27.02 per share. During the year ended December 31, 2001, the Company repurchased 1,003,300 shares of its common stock at a weighted average price of approximately $28.30 per share. The Operating Partnership repurchased general partnership units from the Company in the same amount.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

8. Acquisition and Development of Real Estate

In 2003, the Consolidated Operating Partnership acquired 62 in-service industrial properties comprising, in the aggregate, approximately 6.3 million square feet (unaudited) of GLA and several land parcels for a total purchase price of approximately $219,091, excluding costs incurred in conjunction with the acquisition of properties. The Consolidated Operating Partnership also completed the development of 11 properties comprising approximately 1.3 million square feet (unaudited) of GLA at a cost of approximately $64.9 million.

In 2002, the Consolidated Operating Partnership acquired 67 in-service industrial properties comprising, in the aggregate, approximately 4.2 million square feet (unaudited) of GLA and several land parcels for a total purchase price of approximately $181,553, excluding costs incurred in conjunction with the acquisition of the properties. Twenty-one of the 67 industrial properties acquired, comprising approximately .6 million square feet (unaudited) of GLA, were acquired from the September 1998 Joint Venture for an aggregate purchase price of approximately $19,340. Eight of the 67 industrial properties acquired, comprising approximately .2 million square feet (unaudited) of GLA, were acquired from the September 1999 Joint Venture for an aggregate purchase price of approximately $13,000. The Consolidated Operating Partnership also completed the development of 17 properties comprising approximately 3.2 million square feet (unaudited) of GLA at a cost of approximately $116,806.

In 2001, the Consolidated Operating Partnership acquired 70 industrial properties comprising approximately 3.8 million square feet (unaudited) of GLA and several land parcels for a total purchase price of approximately $204,609. Two of the 70 industrial properties acquired, comprising approximately .1 million square feet (unaudited) of GLA, were acquired from the September 1998 Joint Venture for an aggregate purchase price of approximately $5,845. The Consolidated Operating Partnership also completed the development of six properties comprising approximately .9 million square feet (unaudited) of GLA at a cost of approximately $39,639.

9. Sale of Real Estate

In 2003, the Consolidated Operating Partnership, through the Operating Partnership, sold 121 industrial properties comprising approximately 6.3 million square feet of (unaudited) GLA and several land parcels. Eight of the 121 industrial sold properties comprising approximately .7 million square feet (unaudited) of GLA were sold to the December 2001 Joint Venture. Gross proceeds from the sales of the 121 industrial properties and several land parcels were approximately $357,503. The gain on sale of real estate was approximately $83,789, of which $74,428 is shown in discontinued operations. In accordance with FAS 144, the results of operations and gain on sale of real estate for the 113 of the 121 sold properties that were not identified as held for sale at December 31, 2001, are included in discontinued operations.

In 2002, the Consolidated Operating Partnership sold 69 industrial properties comprising approximately 5.8 million square feet (unaudited) of GLA that were not classified as held for sale at December 31, 2001, 12 industrial properties comprising approximately .9 million square feet (unaudited) of GLA that were classified as held for sale at December 31, 2001, 15 industrial properties comprising approximately 2.3 million square feet (unaudited) of GLA that were sold to the December 2001 Joint Venture and several land parcels. Gross proceeds from these sales were approximately $386,101. The gain on sale of real estate was approximately $49,848, of which $33,439 is shown in discontinued operations. In accordance with FAS 144, the results of operations and gain on sale of real estate for the 69 of the 96 sold industrial properties that were not identified as held for sale at December 31, 2001, are included in discontinued operations.

The following table discloses certain information regarding the industrial properties included in discontinued operations by the Consolidated Operating Partnership for the years ended December 31, 2003, 2002 and 2001, inclusive of the 18 industrial properties the Company sold from January 1, 2004 to March 31, 2004 as well as the two industrial properties held for sale at March 31, 2004.


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Total Revenues	$	31,076		$	56,535		$	61,634
Operating Expenses		(10,214	)		(16,940	)		(17,114	)
Depreciation and Amortization		(6,446	)		(11,361	)		(12,604	)
Gain on Sale of Real Estate		74,428			33,439			—

Income from Discontinued Operations	$	88,844		$	61,673		$	31,916

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

9. Sale of Real Estate, continued

In conjunction with certain property sales, the Consolidated Operating Partnership provided seller financing on behalf of certain buyers. At December 31, 2003, the Consolidated Operating Partnership had mortgage notes receivable and accrued interest outstanding of approximately $29,336, which is included as a component of prepaid expenses and other assets. At December 31, 2002, the Consolidated Operating Partnership had a mortgage note receivable and accrued interest outstanding of approximately $29,103, which is included as a component of Prepaid Expenses and Other Assets.

In connection with the Consolidated Operating Partnership’s periodic review of the carrying values of its properties and due to the continuing softness of the economy in certain of its markets and indications of current market values for comparable properties, the Consolidated Operating Partnership determined in the fourth quarter of 2001 that an impairment valuation in the amount of approximately $6,490 should be recorded for certain properties located in the Columbus, Ohio and Des Moines, Iowa markets.

10. Supplemental Information to Statements of Cash Flows


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Interest paid, net of capitalized interest	$	95,180		$	84,791		$	76,835

Interest capitalized	$	761		$	7,792		$	9,950

Supplemental schedule of noncash investing and financing activities:
Distribution payable on common stock/units	$	31,889		$	31,106		$	31,196

Issuance of Units in exchange for property	$	—		$	633		$	1,491

Exchange of Limited partnership units for General partnership units:
Limited partnership units	$	(2,750	)	$	(4,616	)	$	(7,797	)
General partnership units		2,750			4,616			7,797

	$	—		$	—		$	—

In conjunction with the property and land acquisitions, the following assets and liabilities were assumed:
Purchase of real estate	$	219,091		$	181,553		$	204,609
Deferred purchase price		(10,425	)		—			—
Accounts payable and accrued expenses		(1,897	)		(2,140	)		(2,044	)
Mortgage debt		(20,751	)		(11,844	)		—

Acquisition of real estate	$	186,018		$	167,569		$	202,565

In conjunction with certain property sales, the Company provided seller financing:
Notes receivable	$	29,203		$	35,462		$	—

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

11. Earnings Per Unit

The computation of basic and diluted EPU is presented below:


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Numerator:
Income from Continuing Operations	$	32,851		$	58,336		$	63,105
Gain on Sale of Real Estate		9,361			16,409			42,942
Less: Preferred Unit Distributions		(20,176	)		(23,432	)		(28,924	)
Less: Redemption of Series B Preferred Units		—			(3,707	)		—

Income from Continuing Operations Available to Unitholders - For Basic and Diluted EPU		22,036			47,606			77,123
Discontinued Operations		88,844			61,673			31,916

Net Income Available to Unitholders - - For Basic and Diluted EPU	$	110,880		$	109,279		$	109,039

Denominator:
Weighted Average Units Outstanding - Basic		45,321,775			45,841,158			45,948,989
Effect of Dilutive Securities of the Company that Result in the Issuance of General Partner Units:
Employee and Director Common Stock Options		91,599			201,868			278,527
Employee and Director Shares of Restricted Stock		29,561			36,327			30,568

Weighted Average Units Outstanding - Diluted		45,442,935			46,079,353			46,258,084

Basic EPU:
Income from Continuing Operations Available to Unitholders	$	0.49		$	1.04		$	1.68

Discontinued Operations	$	1.96		$	1.35		$	0.69

Net Income Available to Unitholders	$	2.45		$	2.38		$	2.37

Diluted EPU:
Income from Continuing Operations Available to Unitholders	$	0.48		$	1.03		$	1.67

Discontinued Operations	$	1.96		$	1.34		$	0.69

Net Income Available to Unitholders	$	2.44		$	2.37		$	2.36

In accordance with FASB’s Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“FAS 128”), the basic weighted average units outstanding for 2002 and 2001 have been adjusted to exclude restricted stock issued that has not vested. The diluted weighted average units outstanding for 2002 and 2001 have been adjusted to exclude restricted stock issued that has not vested except that these amounts include the dilution related to restricted stock outstanding for each respective year. Due to these adjustments, basic and diluted earnings per unit available to unitholders for the years ended December 31, 2002 and 2001 do not agree with the basic and diluted earnings per unit available to unitholders reported in 2002’s Form 10-K. The basic and diluted earnings per unit available to unitholders reported in the table above for the years ended December 31, 2002 and 2001 exceeds the basic and diluted earnings per unit available to unitholders reported in 2002’s Form 10-K by $.01 per unit and $.02 per unit, respectively.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

12. Future Rental Revenues

The Consolidated Operating Partnership’s properties are leased to tenants under net and semi-net operating leases. Minimum lease payments receivable, excluding tenant reimbursements of expenses, under non-cancelable operating leases in effect as of December 31, 2003 are approximately as follows:


2004	$	190,022
2005		149,832
2006		107,049
2007		76,778
2008		53,616
Thereafter		78,203

Total	$	655,500

13. Employee Benefit Plans

The Company maintains three stock incentive plans, (the “Stock Incentive Plans”), which are administered by the Compensation Committee of the Board of Directors of the Company. There are approximately 10.0 million shares reserved under the Stock Incentive Plans. Only officers and other employees of the Company and its affiliates generally are eligible to participate in the Stock Incentive Plans. However, independent Directors of the Company have received automatic annual grants of options to purchase 10,000 shares at a per share exercise price equal to the fair market value of a share on the date of grant.

The Stock Incentive Plans authorize (i) the grant of stock options that qualify as incentive stock options under Section 422 of the Code, (ii) the grant of stock options that do not so qualify, (iii) restricted stock awards, (iv) performance share awards and (v) dividend equivalent rights. The exercise price of stock options is determined by the Compensation Committee. Special provisions apply to awards granted under the Stock Incentive Plans in the event of a change in control in the Company. As of December 31, 2003, stock options and restricted stock covering 3.4 million shares were outstanding and 3.1 million shares were available under the Stock Incentive Plans. The outstanding stock options generally vest over one to three year periods and have lives of ten years. Stock option transactions are summarized as follows:


				Weighted
				Average		Exercise Price
	Shares			Exercise Price		per Share
Outstanding at December 31, 2000		3,023,467		$	27.61	$	18.25-$31.13
Granted		1,030,900		$	32.98	$	31.05-$33.125
Exercised		(717,836	)	$	25.99	$	20.25-$31.125
Expired or Terminated		(387,086	)	$	30.13	$	21.125-$33.125

Outstanding at December 31, 2001		2,949,445		$	29.55	$	18.25-$31.125
Granted		945,600		$	30.72	$	30.53-$33.15
Exercised		(561,418	)	$	28.32	$	22.75-$33.125
Expired or Terminated		(190,992	)	$	30.52	$	25.125-$33.125

Outstanding at December 31, 2002		3,142,635		$	30.06	$	18.25-$33.15
Exercised		(531,473	)	$	27.99	$	20.25-$33.13
Expired or Terminated		(107,149	)	$	31.34	$	25.13-$33.13

Outstanding at December 31, 2003		2,504,013		$	30.45	$	18.25-$33.15

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

13. Employee Benefit Plans, continued

The following table summarizes currently outstanding and exercisable options as of December 31, 2003:


	Options Outstanding						Options Exercisable
			Weighted		Weighted				Weighted
			Average		Average				Average
	Number		Remaining		Exercise		Number		Exercise
Range of Exercise Price	Outstanding		Contractual Life		Price		Exercisable		Price
$18.25-$27.69		467,422		4.46	$	25.47		467,422	$	25.47
$30.00-$33.15		2,036,591		6.76	$	31.59		1,293,302	$	31.62

In September 1994, the Board of Directors approved and the Company adopted a 401(k)/Profit Sharing Plan. Under the Company’s 401(k)/Profit Sharing Plan, all eligible employees may participate by making voluntary contributions. The Company may make, but is not required to make, matching contributions. For the years ended December 31, 2003, 2002 and 2001, the Company, through the Operating Partnership, made matching contributions of approximately $109, $99 and $220, respectively.

During 2003, the Company awarded 692,888 shares of restricted Common Stock to certain employees and 11,956 shares of restricted Common Stock to certain Directors. These restricted shares of Common Stock had a fair value of approximately $20,640 on the date of grant. The restricted Common Stock vests over a period from one to ten years. Compensation expense will be charged to earnings in the Operating Partnership’s consolidated statements of operations over the vesting period.

During 2002, the Company awarded 90,260 shares of restricted Common Stock to certain employees and 3,720 shares of restricted Common Stock to certain Directors. The Operating Partnership issued Units to the Company in the same amount. These restricted shares of Common Stock had a fair value of approximately $3,232 on the date of grant. The restricted Common Stock vests over a period from one to ten years. Compensation expense will be charged to earnings in the Operating Partnership’s consolidated statements of operations over the vesting period.

During 2001, the Company awarded 94,450 shares of restricted Common Stock to certain employees and 3,699 shares of restricted Common Stock to certain Directors. These restricted shares of Common Stock had a fair value of approximately $3,133 on the date of grant. The restricted Common Stock vests over a period from one to ten years. Compensation expense will be charged to earnings in the Operating Partnership’s consolidated statements of operations over the vesting period.

14. Related Party Transactions

The Consolidated Operating Partnership periodically engages in transactions for which CB Richard Ellis, Inc. acts as a broker. A relative of one of the Company’s officers/Directors is an employee of CB Richard Ellis, Inc. For the years ended December 31, 2003, 2002 and 2001, this relative received brokerage commissions in the amount of $111, $51 and $17, respectively, from the Consolidated Operating Partnership.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

15. 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.

Six properties have leases granting the tenants options to purchase the property. Such options are exercisable at various times and at appraised fair market value or at a fixed purchase price generally in excess of the Consolidated Operating Partnership’s depreciated cost of the asset. The Consolidated Operating Partnership has no notice of any exercise of any tenant purchase option.

The Consolidated Operating Partnership has committed to the construction of 26 industrial properties totaling approximately 2.6 million square feet (unaudited) of GLA. The estimated total construction costs are approximately $156.1 million (unaudited). Of this amount, approximately $33.9 million remains to be funded. These developments are expected to be funded with proceeds from the sale of select properties, cash flows from operations and borrowings under the Consolidated Operating Partnership’s 2002 Unsecured Line of Credit. The Consolidated Operating Partnership expects to place in service 22 of the 26 development projects during the next twelve months. There can be no assurance that the Consolidated Operating Partnership will place these projects in service during the next twelve months or that the actual completion cost will not exceed the estimated completion cost stated above.

In connection with the acquisition of a property, the Consolidated Operating Partnership deferred $10,425 of the purchase price and provided a letter of credit for $10,425 which expires in January 2004. In January 2004, the Consolidated Operating Partnership paid the $10,425 of deferred purchase price and the letter of credit was returned to the Consolidated Operating Partnership. At December 31, 2003, the Consolidated Operating Partnership, through the Operating Partnership had 16 other letters of credit outstanding in the aggregate amount of $7,352. These letters of credit expire between March 2004 and December 2006.

Ground and Operating Lease Agreements

Future minimum rental payments under the terms of all non-cancelable ground and operating leases under which the Consolidated Operating Partnership is the lessee, as of December 31, 2003, are as follows:


2004	$	1,924
2005		1,594
2006		1,773
2007		1,084
2008		936
Thereafter		43,941

Total	$	51,252

16. Subsequent Events

On January 20, 2004, the Operating Partnership paid a fourth quarter 2003 distribution of $.6850 per Unit, totaling approximately $31,889.

On February 25, 2004, the Operating Partnership declared a first quarter 2004 distribution of $.6850 per Unit which is payable on April 19, 2004. The Operating Partnership also declared first quarter 2004 distributions of $53.906 per Unit, $49.688 per Unit and $49.375 per Unit on its Series C Preferred Units, Series D Preferred Units and Series E Preferred Units, respectively, totaling, in the aggregate, approximately $5,044, which is payable on March 31, 2004.

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

16. Subsequent Events, continued

From January 1, 2004 to March 5, 2004, the Company awarded 1,221 shares of restricted common stock to certain Directors. These shares of restricted common stock had a fair value of approximately $40 on the date of grant. The Consolidated Operating Partnership, through the Operating Partnership, issued Units to the Company in the same amount. The restricted common stock vests over ten years. Compensation expense will be charged to earnings in the Operating Partnership’s consolidated statements of operations over the respective vesting period.

17. Quarterly Financial Information (unaudited)

The following table summarizes quarterly financial information of the Consolidated Operating Partnership. The first, second and third fiscal quarters of 2003 and all fiscal quarters in 2002 have been restated in accordance with FAS 144. In compliance with FAS 144, the Consolidated Operating Partnership has reported the results of operations and gains/(losses) on the sale of industrial properties sold and the results of operations from properties that are classified as held for sale at March 31, 2004 as income from discontinued operations for each period presented in its quarterly report filed on Form 10-Q for the first quarter ended March 31, 2004. As a result, income from continuing operations and income from discontinued operations in this table will not agree to the income from continuing operations and income from discontinued operations presented in prior financial statements filed with the Securities and Exchange Commission.


	Year Ended December 31, 2003
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Total Revenues	$	63,575		$	65,506		$	68,756		$	70,546
Equity in Income (Loss) of Joint Ventures		174			270			261			(166	)
Equity in Income of Other Real estate Partnerships		17,228			8,044			6,516			11,544
Income from Continuing Operations		12,919			5,582			5,134			9,216
Income from Discontinued Operations		21,001			19,673			25,299			22,871
Gain on Sale of Real Estate		1,236			1,378			4,604			2,143
Net Income		35,156			26,633			35,037			34,230
Preferred Unit Distributions		(5,044	)		(5,044	)		(5,044	)		(5,044	)

Net Income Available to Unitholders	$	30,112		$	21,589		$	29,993		$	29,186

Income from Continuing Operations Available to Unitholders per Weighted Unit Outstanding:
Basic	$	0.20		$	0.04		$	0.10		$	0.14

Diluted	$	0.20		$	0.04		$	0.10		$	0.14

Net Income Available to Unitholders per Weighted Average Unit Outstanding:
Basic	$	0.67		$	0.48		$	0.66		$	0.64

Diluted	$	0.67		$	0.48		$	0.66		$	0.64

FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

17. Quarterly Financial Information (unaudited), continued


	Year Ended December 31, 2002
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Total Revenues	$	60,536		$	63,106		$	63,210		$	63,990
Equity in Income (Loss) of Joint Ventures		222			354			559			(672	)
Equity in Income of Other Real estate Partnerships		15,395			17,668			7,182			12,793
Income from Continuing Operations		19,546			18,475			10,214			10,101
Income from Discontinued Operations		9,861			11,879			13,811			26,122
Gain (Loss) on Sale of Real Estate		5,339			4,495			8,175			(1,600	)
Net Income		34,746			34,849			32,200			34,623
Preferred Unit Distributions		(7,231	)		(6,113	)		(5,044	)		(5,044	)
Redemption of Series B Preferred Units		—			(3,707	)		—			—

Net Income Available to Unitholders	$	27,515		$	25,029		$	27,156		$	29,579

Income from Continuing Operations Available to Unitholders per Weighted Unit Outstanding:
Basic	$	0.39		$	0.29		$	0.29		$	0.08

Diluted	$	0.38		$	0.28		$	0.29		$	0.08

Net Income Available to Unitholders per Weighted Average Unit Outstanding:
Basic	$	0.60		$	0.54		$	0.59		$	0.65

Diluted	$	0.60		$	0.54		$	0.59		$	0.65

Due to the adjustments to basic and diluted weighted average units (See Note 11), basic and diluted earnings per unit available to unitholders presented in the above table for the quarters ended March 31, 2002, June 30, 2003 and 2002, September 30, 2003 and December 2002 may not agree with the basic and diluted earnings per unit available to unitholders reported in the 2003 and 2002 Form 10Qs. The impact of the adjustments on earnings per unit available to unitholders in such quarters ranges from $.01 per unit to $.02 per unit.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

OTHER REAL ESTATE PARTNERSHIPS
INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Combined Balance Sheets of the Other Real Estate Partnerships as of December 31, 2003 and 2002

Combined Statements of Operations of the Other Real Estate Partnerships for the Years Ended December 31, 2003, 2002 and 2001

Combined Statements of Changes in Partners’ Capital of the Other Real Estate Partnerships for the Years Ended December 31, 2003, 2002 and 2001

Combined Statements of Cash Flows of the Other Real Estate Partnerships for the Years Ended December 31, 2003, 2002 and 2001

Notes to Combined Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of
the Other Real Estate Partnerships

In our opinion, the accompanying combined balance sheets and the related combined statements of operations, of changes in partners’ capital and of cash flows present fairly, in all material respects, the financial position of the Other Real Estate Partnerships at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Other Real Estate Partnerships’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the combined financial statements, on January 1, 2002, the Other Real Estate Partnerships adopted the provisions of Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets.”

PricewaterhouseCoopers LLP

Chicago, Illinois
March 9, 2004, except for Note 7, as to which the date is July 30, 2004

OTHER REAL ESTATE PARTNERSHIPS
COMBINED BALANCE SHEETS
(Dollars in thousands)


	December 31,			December 31,
	2003			2002
ASSETS
Assets:
Investment in Real Estate:
Land	$	51,026		$	52,055
Buildings and Improvements		334,825			327,526
Furniture, Fixtures and Equipment		84			84
Construction in Progress		—			—
Less: Accumulated Depreciation		(53,564	)		(47,113	)

Net Investment in Real Estate		332,371			332,552
Cash and Cash Equivalents		1,143			2,316
Restricted Cash		21,132			2,768
Tenant Accounts Receivable, Net		1,224			1,055
Deferred Rent Receivable		1,009			1,512
Deferred Financing Costs, Net		9			1,478
Prepaid Expenses and Other Assets, Net		46,007			93,655

Total Assets	$	402,895		$	435,336

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	2,529		$	40,080
Accounts Payable and Accrued Expenses		17,959			10,140
Rents Received in Advance and Security Deposits		4,234			3,986

Total Liabilities		24,722			54,206

Commitments and Contingencies		—			—
Partners’ Capital		378,173			381,130

Total Liabilities and Partners’ Capital	$	402,895		$	435,336

The accompanying notes are an integral part of the financial statements.

OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
(Dollars in thousands)


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Revenues:
Rental Income	$	48,590		$	41,872		$	39,922
Tenant Recoveries and Other Income		11,181			10,338			8,958

Total Revenues		59,771			52,210			48,880

Expenses:
Real Estate Taxes		6,622			6,320			6,296
Repairs and Maintenance		3,090			2,054			1,777
Property Management		1,648			1,714			1,644
Utilities		1,912			1,622			1,156
Insurance		416			417			281
Other		1,130			1,453			3,535
Amortization of Deferred Financing Costs		3			67			67
Depreciation and Other Amortization		11,857			10,484			9,789
Valuation Provision on Real Estate		—			—			3,010

Total Expenses		26,678			24,131			27,555

Other Income/Expense:
Interest Income		712			2,246			2,474
Interest Expense		(256	)		(2,948	)		(3,739	)
Loss from Early Retirement of Debt		(1,466	)		—			—

Total Other Income/Expense		(1,010	)		(702	)		(1,265	)

Income from Continuing Operations		32,083			27,377			20,060
Income from Discontinued Operations (Including Gain on Sale of Real Estate of $4,644 and $21,218 for the Years Ended December 31, 2003 and 2002)		5,319			26,043			7,997

Income Before Gain on Sale of Real Estate		37,402			53,420			28,057
Gain on Sale of Real Estate		6,243			67			21,405

Net Income	$	43,645		$	53,487		$	49,462

The accompanying notes are an integral part of the financial statements.

OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(Dollars in thousands)


	Total
Balance at December 31, 2000	$	387,235
Contributions		164,960
Distributions		(178,706	)
Redemption of Preferred Partnership Interest		(41,295	)
Net Income		49,462

Balance at December 31, 2001	$	381,656
Contributions		104,473
Distributions		(158,486	)
Net Income		53,487

Balance at December 31, 2002	$	381,130
Contributions		59,857
Distributions		(106,459	)
Net Income		43,645

Balance at December 31, 2003	$	378,173

The accompanying notes are an integral part of the financial statements.

OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in thousands)


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	43,645		$	53,487		$	49,462
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		10,621			10,763			11,321
Amortization of Deferred Financing Costs		3			67			67
Loss from Early Retirement of Debt		1,466			—			—
Valuation Provision on Real Estate		—			—			3,010
Other Amortization		1,672			1,309			1,236
Gain on Sale of Real Estate		(10,887	)		(21,285	)		(21,405	)
Increase in Tenant Accounts Receivable and Prepaid Expenses and Other Assets, Net		(3,054	)		(4,926	)		(13,802	)
Change in Deferred Rent Receivable		32			628			(231	)
Change in Accounts Payable and Accrued Expenses and Rents Received in Advance and Security Deposits		8,185			5,373			(16,954	)
Change in Restricted Cash		2,742			(102	)		(1,452	)

Net Cash Provided by Operating Activities		54,425			45,314			11,252

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate		(33,415	)		(47,269	)		(769	)
Net Proceeds from Sales of Investment in Real Estate		18,818			43,608			51,943
Repayment of Mortgage Loans Receivable		48,386			13,599			6,865
Change in Restricted Cash		(21,106	)		13,704			(13,730	)

Net Cash Provided by Investing Activities		12,683			23,642			44,309

CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions		59,857			104,473			185,514
Distributions		(106,459	)		(158,486	)		(199,260	)
Repayments on Mortgage Loans Payable		(37,511	)		(608	)		(566	)
Redemption of Preferred Units		—			—			(41,295	)
Proceeds From (Purchase of) U.S. Government Securities		15,832			(13,669	)		(1,123	)

Net Cash Used in Financing Activities		(68,281	)		(68,290	)		(56,730	)

Net Increase (Decrease) in Cash and Cash Equivalents		(1,173	)		666			(1,169	)
Cash and Cash Equivalents, Beginning of Period		2,316			1,650			2,819

Cash and Cash Equivalents, End of Period	$	1,143		$	2,316		$	1,650

The accompanying notes are an integral part of the financial statements.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

1. Organization and Formation of Partnerships

First Industrial, L.P. (the “Operating Partnership”) was organized as a limited partnership in the state of Delaware on November 23, 1993. The sole general partner is First Industrial Realty Trust, Inc. (the “Company”) with an approximate 85.6% partnership interest at December 31, 2003. 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, in the aggregate, approximately a 14.4% and 15.0% interest in the Operating Partnership at December 31, 2003 and 2002 respectively.

The Operating Partnership owns at least a 99% limited partnership interest in First Industrial Financing Partnership, L.P. (the “Financing Partnership”), First Industrial Securities, L.P. (the “Securities Partnership”), First Industrial Mortgage Partnership, L.P (the “Mortgage Partnership”), First Industrial Pennsylvania, L.P. (the “Pennsylvania Partnership”), First Industrial Harrisburg, L.P. (the “Harrisburg Partnership”), First Industrial Indianapolis, L.P. (the “Indianapolis Partnership”), TK-SV, LTD. and FI Development Services, L.P. (together, the “Other Real Estate Partnerships”).

On a combined basis, as of December 31, 2003, the Other Real Estate Partnerships owned 105 in-service industrial properties, containing an aggregate of approximately 9.4 million square feet (unaudited) of GLA. Of the 105 industrial properties owned by the Other Real Estate Partnerships at December 31, 2003, 15 are held by the Mortgage Partnership, 41 are held by the Pennsylvania Partnership, 15 are held by the Securities Partnership, 19 are held by the Financing Partnership, 10 are held by the Harrisburg Partnership, four are held by the Indianapolis Partnership and one is held by TK-SV, LTD.

Profits, losses and distributions of the Other Real Estate Partnerships are allocated to the general partner and the limited partners in accordance with the provisions contained within its restated and amended partnership agreement.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

2. Basis of Presentation

The combined financial statements of the Other Real Estate Partnerships at December 31, 2003 and 2002 and for each of the years ended December 31, 2003, 2002 and 2001 include the accounts and operating results of the Other Real Estate Partnerships on a combined basis.

3. Summary of Significant Accounting Policies

In order to conform with generally accepted accounting principles, management, in preparation of the Other Real Estate Partnerships’ 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 December 31, 2003 and 2002, and the reported amounts of revenues and expenses for each of the years ended December 31, 2003, 2002 and 2001. Actual results could differ from those estimates.

Cash and Cash Equivalents

Restricted Cash

At December 31, 2003 and 2002, restricted cash includes gross proceeds from the sales of certain properties. These sales proceeds will be disbursed as the Other Real Estate Partnerships exchanges into properties under Section 1031 of the Internal Revenue Code. At December 31, 2002 restricted cash also included cash reserves required to be set aside under the 1995 Mortgage Loan (hereinafter defined) for payment of real estate taxes, capital expenditures, interest, security deposit refunds, insurance and re-leasing costs. The carrying amount approximates fair value due to the short term maturity of these investments.

Investment in Real Estate and Depreciation

Purchase accounting has been applied when ownership interests in properties were acquired for cash. The historical cost basis of properties has been carried over when certain ownership interests were exchanged for Operating Partnership units on July 1, 1994, and purchase accounting has been used for all other properties that were subsequently acquired for Operating Partnership units.

Investment in Real Estate is carried at cost. The Other Real Estate Partnerships reviews its properties on a quarterly basis for impairment and provides a provision if impairments are found. To determine if an impairment may exist, the Other Real Estate Partnerships reviews its properties and identifies those that have had either an event of change or event of circumstances warranting further assessment of recoverability (such as a decrease in occupancy). If further assessment of recoverability is needed, the Other Real Estate Partnerships estimates the future net cash flows expected to result from the use of the property and its eventual disposition, on an individual property basis. If the sum of the expected future net cash flows (undiscounted and without interest charges) is less than the carrying amount of the property, on an individual property basis, the Other Real Estate Partnerships will recognize an impairment loss based upon the estimated fair value of such property. For properties management considers held for sale, the Other Real Estate Partnerships ceases depreciating the properties and values the properties at the lower of depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and as a result, the Other Real Estate Partnerships decides not to sell a property previously classified as held for sale, the Other Real Estate Partnerships will reclassify such property as held and used. Such property is measured at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Interest costs, real estate taxes, compensation costs of development personnel and other directly related expenses incurred during construction periods are capitalized and depreciated commencing with the date placed in service, on the same basis as the related assets. Depreciation expense is computed using the straight-line method based on the following useful lives:


		Years
Buildings and Improvements		31.5 to 40
Land Improvements		15
Furniture, Fixtures and Equipment		5 to 10

The Other Real Estate Partnerships account for all acquisitions entered into subsequent to June 30, 2001 in accordance with FAS 141. Upon acquisition of a property, the Other Real Estate Partnerships allocate the purchase price of the property based upon the fair value of the assets acquired, which generally consist of land, buildings, tenant improvements, leasing commissions and intangible assets including in-place leases and above market and below market leases. The Other Real Estate Partnerships allocate the purchase price to the fair value of the tangible assets of an acquired property determined by valuing the property as if it were vacant. Acquired above and below market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates over the remaining lease term. The purchase price is further allocated to in-place lease values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Other Real Estate Partnership’s overall relationship with the respective tenant. Acquired above and below market leases are amortized over the remaining non-cancelable terms of the respective leases. The value of in-place lease intangibles is amortized to expense over the remaining lease term and expected renewal periods in the respective lease and is included in other assets. If a tenant terminates its lease early, the unamortized portion of leasing commissions, tenant improvements, above and below market leases and the in-place lease value is immediately charged to expense.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain long-term financing. These fees and costs are being amortized over the terms of the respective loans. Accumulated amortization of deferred financing costs was $18 and $449 at December 31, 2003 and 2002, respectively. Unamortized deferred financing costs are written-off when debt is retired before the maturity date.

Revenue Recognition

Rental income is recognized on a straight-line method under which contractual rent increases are recognized evenly over the lease term. Tenant recovery income includes payments from tenants for taxes, insurance and other property operating expenses and is recognized as revenues in the same period the related expenses are incurred by the Other Real Estate Partnerships.

Revenue is recognized on payments received from tenants for early lease terminations after the Other Real Estate Partnerships determine that all the necessary criteria have been met in accordance with FAS 13 “Accounting for Leases”.

The Other Real Estate Partnerships provide an allowance for doubtful accounts against the portion of tenant accounts receivable which is estimated to be uncollectible. Accounts receivable in the combined balance sheets are shown net of an allowance for doubtful accounts of $343 as of December 31, 2003 and 2002, respectively. For accounts receivable the Other Real Estate Partnerships deem uncollectible, the Other Real Estate Partnerships uses the direct write-off method.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Gain on Sale of Real Estate

Gain on sale of real estate is recognized using the full accrual method. Gains relating to transactions which do not meet the full accrual method of accounting are deferred and recognized when the full accrual method of accounting criteria are met or by using the installment or deposit methods of profit recognition, as appropriate in the circumstances. As the assets are sold, their costs and related accumulated depreciation are removed from the accounts with resulting gains or losses reflected in net income or loss. Estimated future costs to be incurred by the Other Real Estate Partnerships after completion of each sale are included in the determination of the gains on sales.

Income Taxes

In accordance with partnership taxation, each of the partners are responsible for reporting their share of taxable income or loss. The Other Real Estate Partnerships are subject to certain state and local income, excise and franchise taxes. The provision for such state and local taxes has been reflected in general and administrative expense in the statement of operations and has not been separately stated due to its insignificance.

Fair Value of Financial Instruments

The Other Real Estate Partnerships’ financial instruments include short-term investments, tenant accounts receivable, net, mortgage notes receivable, accounts payable, other accrued expenses and mortgage loans payable. The fair values of the short-term investments, tenant accounts receivable, net, mortgage notes receivable, accounts payable and other accrued expenses were not materially different from their carrying or contract values. See Note 4 for the fair values of the mortgage loan payable.

Discontinued Operations

On January 1, 2002, the Other Real Estate Partnerships adopted FAS 144. FAS 144 addresses financial accounting and reporting for the disposal of long lived assets. FAS 144 requires that the results of operations and gains or losses on the sale of property sold subsequent to December 31, 2001 that were not classified as held for sale at December 31, 2001 as well as the results of operations from properties that were classified as held for sale subsequent to December 31, 2001 be presented in discontinued operations if both of the following criteria are met: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Other Real Estate Partnerships as a result of the disposal transaction and (b) the Other Real Estate Partnerships will not have any significant continuing involvement in the operations of the property after the disposal transaction. FAS 144 also requires prior period results of operations for these properties to be restated and presented in discontinued operations in prior consolidated statements of operations.

Segment Reporting

Management views the Other Real Estate Partnerships as a single segment.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

3. Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements

In January 2003, the FASB issued FIN 46, which provides guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, non-controlling interests, and results of operations of a VIE are to be included in an entity’s consolidated financial statements. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owing a controlling financial interest. In December 2003, the FASB reissued FIN 46 with certain modifications and clarifications. Application of this guidance was effective for interests in certain VIEs commonly referred to as special-purpose entities (SPEs) as of December 31, 2003. Application for all other types of entities is required for periods ending after March 15, 2004, unless previously applied. The Other Real Estate Partnerships do not believe that the application of FIN 46 will have an impact on its financial position, results of operations, or liquidity.

Reclassifications

Certain 2002 and 2001 items have been reclassified to conform to the 2003 presentation.

4. Mortgage Loans Payable, Net

On December 29, 1995 the Other Real Estate Partnerships, through the Mortgage Partnership, borrowed $40,200 under a mortgage loan (the “1995 Mortgage Loan”). The 1995 Mortgage Loan provided for monthly principal and interest payments based on a 28-year amortization schedule and was to mature on January 11, 2026. The interest rate under the 1995 Mortgage Loan was fixed at 7.22% per annum through January 11, 2003. After January 11, 2003, the interest rate was to adjust through a predetermined formula based on the applicable Treasury rate. At December 31, 2002, the 1995 Mortgage Loan was collateralized by 16 properties held by the Mortgage Partnership. On January 13, 2003, the Other Real Estate Partnerships, through the Mortgage Partnership, paid off and retired the 1995 Mortgage Loan.

Under the terms of the 1995 Mortgage Loan, certain cash reserves were required to be and were set aside for payments of tenant security deposit refunds, payments of capital expenditures, interest, real estate taxes, insurance and re-leasing costs. The amount of cash reserves segregated for security deposits was adjusted as tenants turn over. The amounts included in the cash reserves relating to payments of capital expenditures, interest, real estate taxes and insurance was determined by the lender and approximated the next periodic payment of such items. The amount included in the cash reserves relating to re-leasing costs resulted from a deposit of a lease termination fee that was to be used to cover costs of re-leasing that space. At December 31, 2002, these reserves totaled $2,742, and were included in restricted cash. Such cash reserves were invested in a money market fund at December 31, 2002. The maturity of these investments is one day; accordingly, cost approximates fair value. On January 13, 2003, the Other Real Estate Partnerships, through the Mortgage Partnership, paid off and retired the 1995 Mortgage Loan at which time such cash reserves were released to the Other Real Estate Partnerships.

On July 16, 1998, the Other Real Estate Partnerships, through TK-SV, LTD., assumed a mortgage loan in the principal amount of $2,566 (the “Acquisition Mortgage Loan V”). The Acquisition Mortgage Loan V is collateralized by one property in Tampa, Florida, bears interest at a fixed rate of 9.01% and provides for monthly principal and interest payments based on a 30-year amortization schedule. The Acquisition Mortgage Loan V matures on September 1, 2006. The Acquisition Mortgage Loan V may be prepaid only after August 2002 in exchange for the greater of a 1% prepayment fee or a yield maintenance premium.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

4. Mortgage Loans Payable, Net, continued

The following table discloses certain information regarding the Other Real Estate Partnerships’ mortgage loans:


	Outstanding Balance at						Accrued Interest Payable at				Interest Rate at
	December 31,			December 31,			December 31,		December 31,		December 31,			Maturity
	2003			2002			2003		2002		2003			Date
Mortgage Loans Payable
1995 Mortgage Loan	$	—	(1)	$	37,482	(1)	$	—	$	158			(1)			(1)
Acquisition Mortgage Loan V		2,529	(2)		2,598	(2)		18		—		9.010	%		09/01/06

Total	$	2,529		$	40,080		$	18	$	158

(1) The entire loan was paid off and retired on January 2003.

(2) At December 31, 2003 and 2002, the Acquisition Mortgage Loan V is net of an unamortized premium of $102 and $143, respectively.

The following is a schedule of maturities of the mortgage loan, exclusive of the related premium for the next three years ending December 31,:


	Amount
2004	$	34
2005		37
2006		2,356

Total	$	2,427

Fair Value:

At December 31, 2003 and 2002, the fair value of the Other Real Estate Partnerships’ mortgage loans payable were as follows:


	December 31, 2003				December 31, 2002
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Mortgage Loans Payable	$	2,598	$	2,759	$	40,080	$	40,069

Total	$	2,598	$	2,759	$	40,080	$	40,069

The fair value of the Other Real Estate Partnerships’ mortgage loans payable were determined by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

5. Partners’ Capital

Preferred Stock

In 1995, the Company issued 1,650,000 shares of 9.5%, $ .01 par value, Series A Cumulative Preferred Stock (the “Series A Preferred Stock”) at an initial offering price of $25 per share. The Other Real Estate Partnerships issued a preferred limited partnership interest to the Company in the same amount. On or after November 17, 2000, the Series A Preferred Stock became redeemable for cash at the option of the Company, in whole or in part, at $25 per share, or $41,250 in the aggregate, plus dividends accrued and unpaid to the redemption date. On March 9, 2001, the Company called for the redemption of all of the outstanding Series A Preferred Stock at the price of $25 per share, plus accrued and unpaid dividends. The Other Real Estate Partnerships redeemed their preferred limited partnership interest with the Company on April 9, 2001 and paid a prorated second quarter dividend of $.05872 per share, totaling approximately $97.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

6. Acquisition and Development of Real Estate

In 2003, the Other Real Estate Partnerships acquired two in-service industrial property comprising approximately .3 million square feet (unaudited) of GLA and several land parcels for a total purchase price of approximately $11,300, excluding costs incurred in conjunction with the acquisition of the properties.

In 2002, the Other Real Estate Partnerships acquired 23 in-service industrial properties comprising, in the aggregate, approximately 1.4 million square feet (unaudited) of GLA and several land parcels for a total purchase price of approximately $57,855, excluding costs incurred in conjunction with the acquisition of the properties.

In 2001, the Other Real Estate Partnerships acquired nine in-service industrial properties comprising approximately .6 million square feet (unaudited) of GLA for a total purchase price of approximately $22,905 and completed the development of one property comprising approximately .2 million square feet (unaudited) of GLA at a cost of approximately $8,352.

7. Sale of Real Estate and Real Estate Held For Sale

In 2003, the Other Real Estate Partnerships sold nine industrial properties comprising approximately 1.1 million square feet (unaudited) of GLA and several parcels of land. Two of the nine sold industrial properties comprising approximately .7 million square feet of GLA were sold to the December 2001 Joint Venture. Gross proceeds from the sales of the nine industrial properties and several land parcels totaled approximately $36,879. The gain on sale of real estate was approximately $10,887, of which $4,644 is shown in discontinued operations. In accordance with FAS 144, the results of operations and gain on sale of real estate for the seven of the nine sold industrial properties that were not identified as held for sale at December 31, 2001, are included in discontinued operations.

In 2002, the Other Real Estate Partnerships sold 17 industrial properties comprising approximately 2.8 million square feet (unaudited) of GLA that were not classified as held for sale at December 31, 2001, one industrial property comprising approximately .1 million square feet (unaudited) of GLA that was sold to the December 2001 Joint Venture, one land parcel and assigned to third parties the right to purchase certain properties. Gross proceeds from these sales were approximately $87,410. The gain on sale of real estate was approximately $21,285, of which $21,218 is shown in discontinued operations. In accordance with FAS 144, the results of operations and gain on sale of real estate for the 17 of the 18 sold industrial properties that were not identified as held for sale at December 31, 2001 and the gain associated with the assignment to third parties of the right to purchase certain properties are included in discontinued operations.

In 2001, the Other Real Estate Partnerships sold eight in-service industrial properties and several parcels of land. Gross proceeds from these sales totaled approximately $69,321. The gain on sales totaled approximately $21,405.

The following table discloses certain information regarding the industrial properties included in discontinued operations by the Other Real Estate Partnerships for the years ended December 31, 2003, 2002 and 2001, inclusive of the two industrial properties the Other Real estate Partnership sold from January 1, 2004 to March 31, 2004.


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2003			2002			2001
Total Revenues	$	2,327		$	9,554		$	14,932
Operating Expenses		(1,244	)		(3,102	)		(4,129	)
Depreciation and Amortization		(408	)		(1,627	)		(2,806	)
Gain on Sale of Real Estate		4,644			21,218			—

Income from Discontinued Operations	$	5,319		$	26,043		$	7,997

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

7. Sale of Real Estate and Real Estate Held For Sale, continued

In conjunction with certain property sales, the Other Real Estate Partnerships provides seller financing on behalf of certain buyers. At December 31, 2003 and 2002, the Other Real Estate Partnerships had mortgage notes receivable outstanding of approximately $23,585 and $55,572, respectively which is included as a component of prepaid expenses and other assets.

In connection with the Other Real Estate Partnerships’ periodic review of the carrying values of its properties and due to the continuing softness of the economy in certain of its markets and indications of current market values for comparable properties, the Other Real Estate Partnerships determined in 2001 that an impairment valuation in the amount of approximately $3,010 should be recorded for certain properties located in the Des Moines, Iowa and Indianapolis, Indiana markets.

8. Supplemental Information to Statements of Cash Flows

Supplemental disclosure of cash flow information:

Year Ended

December 31,

2003

2002

2001

Interest paid

415

2,932

3,742

In conjunction with the property and land acquisitions, the following liabilities were assumed:


Purchase of real estate	$	11,300		$	57,855		$	22,905
Accounts payable and accrued Expenses		(296	)		(364	)		(109	)

	$	11,004		$	57,491		$	22,796

In conjunction with certain property sales, the Other Real Estate Partnerships provided seller financing on behalf of certain buyers:


Notes Receivable	$	17,170	$	42,765	$	—

9. Future Rental Revenues

The Other Real Estate Partnerships’ properties are leased to tenants under net and semi-net operating leases. Minimum lease payments receivable, excluding tenant reimbursements of expenses, under noncancelable operating leases in effect as of December 31, 2003 are approximately as follows:


2004	$	31,605
2005		22,696
2006		16,178
2007		10,810
2008		7,976
Thereafter		14,425

Total	$	103,690

10. Related Party Transactions

Periodically, the Other Real Estate Partnerships utilizes real estate brokerage services from CB Richard Ellis, Inc., for which a relative of one of the Company’s officers/Directors is an employee. For the years ended December 31, 2003 and 2002, this relative received brokerage commissions in the amount of $5 and $23, respectively from the Other Real Estate Partnerships.

OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)

11. Commitments and Contingencies

In the normal course of business, the Other Real Estate Partnerships are 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 combined financial position, operations or liquidity of the Other Real Estate Partnerships.

One property has a lease granting the tenant an option to purchase the property. Such options are exercisable at various times and at appraised fair market value or at a fixed purchase price generally in excess of the Other Real Estate Partnerships’ depreciated cost of the asset. The Other Real Estate Partnerships have no notice of any exercise of this tenant purchase option.

12. Subsequent Events

During the period January 1, 2004 through March 5, 2004, the Other Real Estate Partnerships sold one parcel of land for approximately $173 of gross proceeds.

-----END PRIVACY-ENHANCED MESSAGE-----

	(a)		For purposes of computing the ratios of earnings to fixed charges, earnings have been calculated by adding fixed charges (excluding capitalized interest) to income from continuing operations. Fixed charges consist of interest costs, whether expensed or capitalized and amortization of deferred financing costs.

	(b)		During the three months ended March 31, 2004, the Operating Partnership sold 18 industrial properties that met the criteria established by the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets’ (“FAS 144”) to be included in discontinued operations. At March 31, 2004, the Operating Partnership also owned two industrial properties classified as held for sale that met the criteria established by FAS 144 to be included in discontinued operations. In accordance with FAS 144, the results of operations of the 18 industrial properties sold during the three months ended March 31, 2004 and the two industrial properties held for sale at March 31, 2004 are included in discontinued operations. Income from continuing operations for the years ended December 31, 2001 through 2003 reported in the table above has been restated to reflect the reclassification of the net income attributable to these properties from continuing operations to discontinued operations. As a result, income from continuing operations and ratio of earnings to fixed charges reported in the table above will not agree to the income from continuing operations and ratio of earnings to fixed charges reported in Operating Partnership’s 2003 Form 10-K.

(a)		Represents a valuation provision on real estate relating to certain properties located in Columbus, Ohio, Des Moines, Iowa and Grand Rapids, Michigan.

(b)		On January 1, 2003, the Company adopted the Financial Accounting Standards Board’s Statement of Financial Accounting Standard’s No.145. “Rescission of FASB Statements No.4,44 and 64, Amendment of FASB Statement No.13, and Technical Corrections” (“FAS 145”). FAS 145 rescinds FAS 4, FAS 44 and FAS 64 and amends FAS 13 to modify the accounting for sales-leaseback transactions. FAS 4 required the classification of gains and losses resulting from the extinguishment of debt to be classified as extraordinary items. Pursuant to the adoption of FAS 145, the Company reclassified amounts shown as extraordinary for the year ended December 31, 2002 and 2001 to continuing operations. In 2002, the Consolidated Operating Partnership paid off and retired certain senior unsecured debt. The Consolidated Operating Partnership recorded a loss from the early retirement of debt of approximately $.9 million which is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of pro rata unamortized deferred financing costs and legal costs. In 2001, the Consolidated Operating Partnership, paid off and retired certain mortgage loans and certain senior unsecured debt. The Consolidated Operating Partnership recorded a loss from the early retirement of debt of approximately $10.3 million, which is comprised of the amount paid above the carrying amount of the senior unsecured debt, the write-off of unamortized deferred financing costs, the write-off of the unamortized portion of an interest rate protection agreement which was used to fix the interest rate on the senior unsecured debt prior to issuance, the settlement of an interest rate protection agreement used to fix the retirement price of the senior unsecured debt, prepayment fees, legal costs and other expenses.

(c)		On January 1, 2002, the Consolidated Operating Partnership adopted the Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”). FAS 144 addresses financial accounting and reporting for the disposal of long lived assets. FAS 144 requires that the results of operations and gains or losses on the sale of property sold subsequent to December 31, 2001 that were not classified as held for sale at December 31, 2001 as well as the results of operations from properties that were classified as held for sale subsequent to December 31, 2001 be presented in discontinued operations if both of the following criteria are met: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Consolidated Operating Partnership as a result of the disposal transaction and (b) the Consolidated Operating Partnership will not have any significant continuing involvement in the operations of the property after the disposal transaction. FAS 144 also requires prior period results of operations for these properties to be restated and presented in discontinued operations in prior consolidated statements of operations. In compliance with FAS 144, the Consolidated Operating Partnership has reported the results of operations and gains/(losses) on the sale of industrial properties sold and the results of operations from properties that are classified as held for sale at March 31, 2004 as income from discontinued operations for each period presented in its quarterly report filed on Form 10-Q for the first quarter ended March 31, 2004.

(d)		As of end of period and excludes properties under development.

(e)		In accordance with FASB’s Statement of Financial Accounting Standards No. 128, “Earnings Per Share”, the basic weighted average units outstanding for 2002, 2001, 2000 and 1999 have been adjusted to exclude restricted stock issued that has not vested. The diluted weighted average units outstanding for 2002, 2001 2000 and 1999 have been adjusted to exclude restricted stock issued that has not vested except for the impact of the dilution related to restricted stock outstanding. Due to these adjustments, basic and diluted earnings per unit available to unitholders for the years ended December 31, 2002, 2001, and 2000 exceeds the basic and diluted earnings per unit available to unitholders reported in 2002’s Form 10-K by $.01 per unit, $.02 per unit, and $.02 per unit, respectively and $.01 per unit, for basic earnings per unit available to unitholders for the year ended December 31, 1999.

•		The Consolidated Operating Partnership maintains an allowance for doubtful accounts which is based on estimates of potential losses which could result from the inability of the Consolidated Operating Partnership’s tenants to satisfy outstanding billings with the Consolidated Operating Partnership. The allowance for doubtful accounts is an estimate based on the consolidated operating partnership’s assessment of the creditworthiness of its tenants.

•		Properties are classified as held for sale when the Consolidated Operating Partnership has entered into a binding contract to sell such assets. When properties are classified as held for sale, the Consolidated Operating Partnership ceases depreciating the properties and values of such properties and measures them at the lower of depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and, as a result, the Consolidated Operating Partnership decides not to sell a property previously classified as held for sale, the Consolidated Operating Partnership will reclassify such property as held and used. The Consolidated Operating Partnership estimates the value of such property and measures it at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

•		The Consolidated Operating Partnership reviews its properties on a quarterly basis for impairment and provides a provision if impairments are determined. The Consolidated Operating Partnership utilizes the guidelines established under Financial Accounting Standards Board’s Statement of Financial Accounting Standards (“FAS”) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“FAS 144”) to determine if impairment conditions exist. The Consolidated Operating Partnership reviews the expected undiscounted cash flows of each property to determine if there are any indications of impairment. The review of anticipated cash flows involves assumptions of estimated occupancy and rental rates and ultimate residual value; accordingly, the anticipated cash flows may not ultimately be achieved.

•		The Consolidated Operating Partnership is engaged in the acquisition of individual properties as well as multi-property portfolios. In accordance with FAS No.141, “Business Combinations” (“FAS 141”), the Consolidated Operating Partnership is required to allocate purchase price between land, building, tenant improvements, leasing commissions, intangible assets and above and below market leases. Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rents for each corresponding in-place lease. Acquired above and below market leases are amortized over the remaining non-cancelable terms of the respective leases. The Consolidated Operating Partnership also must allocate purchase price on multi-property portfolios to individual properties. The allocation of purchase price is based on the Consolidated Operating Partnership’s assessment of various characteristics of the markets where the property is located and the expected cash flows of the property.

•		general economic climate;

•		local conditions such as oversupply or a reduction in demand in the area;

•		the attractiveness of the properties to tenants;

•		tenant defaults;

•		zoning or other regulatory restrictions;

•		competition from other available real estate;

•		our ability to provide adequate maintenance and insurance; and

•		increased operating costs, including insurance premiums and real estate taxes.

•		the Consolidated Operating Partnership may not be able to obtain financing for development projects on favorable terms and complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing the properties and generating cash flow;

•		the Consolidated Operating Partnership may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;

•		the properties may perform below anticipated levels, producing cash flow below budgeted amounts and limiting the Consolidated Operating Partnership’s ability to sell such properties to third parties or to sell or contribute such properties to the Consolidated Operating Partnership’s joint ventures;

•		$50 million aggregate principal amount of 7.75% Notes due 2032 (the “2032 Notes”)

•		$200 million aggregate principal amount of 7.60% Notes due 2028 (the “2028 Notes”)

•		approximately $15 million aggregate principal amount of 7.15% Notes due 2027 (the “2027 Notes”)

•		$100 million aggregate principal amount of 7.50% Notes due 2017 (the “2017 Notes”)

•		$200 million aggregate principal amount of 6.875% Notes due 2012 (the “2012 Notes”)

•		$100 million aggregate principal amount of 7.375% Notes due 2011 (the “Trust Notes”)

		The trust to which the Trust Notes were issued must exercise its right to require the Consolidated Operating Partnership, to redeem the Trust Notes on May 15, 2004 if the holder of a call option with respect to the Trust Notes fails to give written notice on or before May 1, 2004 that it intends to exercise such option.

•		$200 million aggregate principal amount of our 7.375% Notes due 2011(the “2011 Notes”)

•		$150 million aggregate principal amount of 7.60% Notes due 2007 (the “2007 Notes”)

•		$150 million aggregate principal amount of 7.00% Notes due 2006 (the “2006 Notes”)

•		$50 million aggregate principal amount of 6.90% Notes due 2005 (the “2005 Notes”) and

•		a $300 million unsecured revolving credit facility (the “Unsecured Line of Credit”) under which Consolidated Operating Partnership may borrow to finance the acquisition of additional properties and for other corporate purposes, including working capital.

(1)		The entire loan was paid off and retired on January 2003.

(2)		At December 31, 2003 and 2002, the Acquisition Mortgage Loan V is net of an unamortized premium of $102 and $143, respectively.