0000950137-01-504175.txt : 20011101
0000950137-01-504175.hdr.sgml : 20011101
ACCESSION NUMBER: 0000950137-01-504175
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011030
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST INDUSTRIAL REALTY TRUST INC
CENTRAL INDEX KEY: 0000921825
STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798]
IRS NUMBER: 363935116
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-13102
FILM NUMBER: 1770939
BUSINESS ADDRESS:
STREET 1: 311 S WACKER DRIVE
STREET 2: SUITE 4000
CITY: CHICAGO
STATE: IL
ZIP: 60606
BUSINESS PHONE: 3123444300
MAIL ADDRESS:
STREET 1: 150 N WACHER DR
STREET 2: SUITE 150
CITY: CHICAGO
STATE: IL
ZIP: 60606
10-Q
1
c65673e10-q.txt
FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 2001
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
---------------------
Commission File Number 1-13102
---------------------
FIRST INDUSTRIAL REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 36-3935116
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of Principal Executive Offices)
(312) 344-4300
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /
Number of shares of Common Stock, $.01 par value, outstanding as of October 23,
2001: 39,196,104
FIRST INDUSTRIAL REALTY TRUST, INC.
FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2001
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000................. 2
Consolidated Statements of Operations for the Nine Months Ended September 30, 2001 and
September 30, 2000......................................................................... 3
Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and
September 30, 2000......................................................................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and
September 30, 2000......................................................................... 5
Notes to Consolidated Financial Statements ................................................ 6-16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................................ 17-26
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................ 26
PART II: OTHER INFORMATION
Item 1. Legal Proceedings ................................................................... 27
Item 2. Changes in Securities ............................................................... 27
Item 3. Defaults Upon Senior Securities...................................................... 27
Item 4. Submission of Matters to a Vote of Security Holders ................................. 27
Item 5. Other Information ................................................................... 27
Item 6. Exhibits and Report on Form 8-K...................................................... 27
SIGNATURE ...................................................................................... 29
EXHIBIT INDEX .................................................................................. 30
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
September 30, December 31,
2001 2000
------------- ------------
ASSETS
Assets:
Investment in Real Estate:
Land ......................................................... $ 406,485 $ 397,624
Buildings and Improvements ................................... 1,991,623 1,989,034
Furniture, Fixtures and Equipment ............................ 1,333 1,437
Construction in Progress ..................................... 127,776 52,715
Less: Accumulated Depreciation ............................... (242,792) (219,701)
----------- -----------
Net Investment in Real Estate ........................ 2,284,425 2,221,109
Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $24,745 at September 30, 2001 and $26,318 at
December 31, 2000 ............................................ 169,494 236,422
Cash and Cash Equivalents ....................................... 13,244 7,731
Restricted Cash ................................................. 47,397 24,215
Tenant Accounts Receivable, Net ................................. 10,632 9,793
Investments in Joint Ventures ................................... 5,818 6,158
Deferred Rent Receivable ........................................ 15,469 14,790
Deferred Financing Costs, Net ................................... 12,145 12,154
Prepaid Expenses and Other Assets, Net .......................... 76,763 86,121
----------- -----------
Total Assets ......................................... $ 2,635,387 $ 2,618,493
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage Loans Payable, Net ..................................... $ 89,273 $ 102,575
Senior Unsecured Debt, Net ...................................... 1,048,457 948,781
Acquisition Facility Payable .................................... 152,000 170,000
Accounts Payable and Accrued Expenses ........................... 74,809 93,336
Rents Received in Advance and Security Deposits ................. 21,700 20,104
Dividends/Distributions Payable ................................. 37,891 38,492
----------- -----------
Total Liabilities .................................... 1,424,130 1,373,288
----------- -----------
Minority Interest .................................................. 181,609 186,833
Commitments and Contingencies ...................................... --- ---
Stockholders' Equity:
Preferred Stock ($.01 par value, 10,000,000 shares authorized,
40,000, 20,000, 50,000 and 30,000 shares of Series B, C, D
and E Cumulative Preferred Stock, respectively, issued and
outstanding at September 30, 2001 and December 31, 2000,
having a liquidation preference of $2,500 per share
($100,000), $2,500 per share ($50,000), $2,500 per share
($125,000) and $2,500 per share ($75,000), respectively, and
1,650,000 shares of Series A Cumulative Preferred Stock
issued and outstanding at December 31, 2000, having
a liquidation preference of $25 per share ($41,250))............ 1 18
Common Stock ($.01 par value, 100,000,000 shares authorized,
40,210,729 and 39,238,386 shares issued and 39,638,829 and
38,844,086 shares outstanding at September 30, 2001 and
December 31, 2000, respectively) ............................... 402 392
Additional Paid-in-Capital ......................................... 1,194,226 1,205,052
Distributions in Excess of Accumulated Earnings .................... (129,631) (126,962)
Unearned Value of Restricted Stock Grants .......................... (7,429) (8,812)
Amortization of Stock Based Compensation ........................... 1,121 383
Accumulated Other Comprehensive Loss ............................... (12,202) ---
Treasury Shares at Cost (571,900 shares at September 30, 2001 and
394,300 shares at December 31, 2000) ........................... (16,840) (11,699)
----------- -----------
Total Stockholders' Equity ........................... 1,029,648 1,058,372
----------- -----------
Total Liabilities and Stockholders' Equity ........... $ 2,635,387 $ 2,618,493
=========== ===========
The accompanying notes are an integral part of the financial statements.
2
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Nine Months Nine Months
Ended Ended
September 30, 2001 September 30, 2000
------------------- -------------------
Revenues:
Rental Income ........................................................ $ 221,268 $ 224,499
Tenant Recoveries and Other Income ................................... 69,261 61,466
--------- ---------
Total Revenues ............................................. 290,529 285,965
--------- ---------
Expenses:
Real Estate Taxes .................................................... 44,224 44,512
Repairs and Maintenance .............................................. 14,906 12,942
Property Management .................................................. 9,870 10,462
Utilities ............................................................ 7,715 7,409
Insurance ............................................................ 1,611 1,113
Other ................................................................ 3,685 4,542
General and Administrative ........................................... 13,695 12,586
Interest Expense ..................................................... 62,722 61,425
Amortization of Deferred Financing Costs ............................. 1,357 1,323
Depreciation and Other Amortization .................................. 52,098 50,035
--------- ---------
Total Expenses ............................................ 211,883 206,349
--------- ---------
Income from Operations Before Equity in Income of Joint Ventures and
Income Allocated to Minority Interest ................................ 78,646 79,616
Equity in Income of Joint Ventures ...................................... 751 189
Income Allocated to Minority Interest ................................... (14,602) (12,150)
--------- ---------
Income from Operations .................................................. 64,795 67,655
Gain on Sale of Real Estate ............................................. 48,506 22,211
--------- ---------
Income Before Extraordinary Loss ........................................ 113,301 89,866
Extraordinary Loss ...................................................... (10,309) ---
--------- ---------
Net Income .............................................................. 102,992 89,866
Less: Preferred Stock Dividends ......................................... (22,770) (24,633)
--------- ---------
Net Income Available to Common Stockholders ............................. $ 80,222 $ 65,233
========= =========
Net Income Available to Common Stockholders Before Extraordinary Loss
Per Weighted Average Common Share Outstanding:
Basic ............................................................ $ 2.26 $ 1.69
========= =========
Diluted .......................................................... $ 2.25 $ 1.68
========= =========
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ............................................................ $ 2.04 $ 1.69
========= =========
Diluted .......................................................... $ 2.03 $ 1.68
========= =========
Net Income .............................................................. $ 102,992 $ 89,866
Other Comprehensive Income (Loss):
Cumulative Transition Adjustment ..................................... (14,920) ---
Settlement of Interest Rate Protection Agreements .................... (191) ---
Write-off of Unamortized Interest Rate Protection Agreement Due to the
Early Retirement of Debt ......................................... 2,156 ---
Amortization of Interest Rate Protection Agreements .................. 753 ---
--------- ---------
Comprehensive Income .................................................... $ 90,790 $ 89,866
========= =========
The accompanying notes are an integral part of the financial statements.
3
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Three Months
Ended Ended
September 30, 2001 September 30, 2000
------------------ -------------------
Revenues:
Rental Income ................................................... $ 71,429 $ 75,863
Tenant Recoveries and Other Income .............................. 22,222 20,688
-------- --------
Total Revenues ............................................ 93,651 96,551
-------- --------
Expenses:
Real Estate Taxes ............................................... 14,250 15,076
Repairs and Maintenance ......................................... 4,454 4,113
Property Management ............................................. 2,899 3,329
Utilities ....................................................... 1,964 2,480
Insurance ....................................................... 402 492
Other ........................................................... 1,329 1,464
General and Administrative ...................................... 4,042 4,357
Interest Expense ................................................ 20,089 21,349
Amortization of Deferred Financing Costs ........................ 459 424
Depreciation and Other Amortization ............................. 17,624 14,873
-------- --------
Total Expenses ............................................ 67,512 67,957
-------- --------
Income from Operations Before Equity in Income of Joint Ventures and
Income Allocated to Minority Interest ........................... 26,139 28,594
Equity in Income of Joint Ventures ................................. 315 70
Income Allocated to Minority Interest .............................. (5,778) (4,041)
-------- --------
Income from Operations ............................................. 20,676 24,623
Gain on Sale of Real Estate ........................................ 18,808 6,280
-------- --------
Net Income ......................................................... 39,484 30,903
Less: Preferred Stock Dividends .................................... (7,231) (8,211)
-------- --------
Net Income Available to Common Stockholders ........................ $ 32,253 $ 22,692
======== ========
Net Income Available to Common Stockholders Per Weighted Average
Common Share Outstanding:
Basic ..................................................... $ .81 $ .58
======== ========
Diluted ................................................... $ .81 $ .58
======== ========
Net Income ......................................................... $ 39,484 $ 30,903
Other Comprehensive Income:
Amortization of Interest Rate Protection Agreements ....... 51 ---
-------- --------
Comprehensive Income ............................................... $ 39,535 $ 30,903
======== ========
The accompanying notes are an integral part of the financial statements.
4
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Nine Months Ended Nine Months Ended
September 30, 2001 September 30, 2000
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ......................................................... $ 102,992 $ 89,866
Income Allocated to Minority Interest .............................. 14,602 12,150
--------- ---------
Income Before Minority Interest .................................... 117,594 102,016
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation ................................................... 45,048 45,104
Amortization of Deferred Financing Costs ....................... 1,357 1,323
Other Amortization ............................................. 11,098 6,468
Equity in Income of Joint Ventures ............................. (751) (189)
Distributions from Joint Ventures .............................. 751 189
Gain on Sale of Real Estate .................................... (48,506) (22,211)
Extraordinary Loss ............................................. 10,309 ---
Increase in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net ............................... (11,998) (21,147)
Increase in Deferred Rent Receivable ........................... (2,696) (882)
(Decrease) Increase in Accounts Payable and Accrued Expenses and
Rents Received in Advance and Security Deposits .............. (5,145) 25,628
Decrease in Restricted Cash .................................... 91 170
--------- ---------
Net Cash Provided by Operating Activities ................. 117,152 136,469
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and Additions to Investment in Real Estate ............ (298,218) (330,050)
Net Proceeds from Sales of Investment in Real Estate ............... 288,562 180,526
Contributions to and Investments in Joint Ventures ................. --- (37)
Distributions from Joint Ventures .................................. 340 481
Repayment of Mortgage Loans Receivable ............................. 9,819 14,887
Increase in Restricted Cash ........................................ (23,273) (20,432)
--------- ---------
Net Cash Used in Investing Activities ..................... (22,770) (154,625)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from Exercise of Employee Stock Options ............... 16,646 8,007
Repurchase of Restricted Stock ..................................... (1,866) ---
Purchase of Treasury Shares ........................................ (5,141) (11,699)
Purchase of U.S. Government Securities ............................. (1,123) (1,244)
Proceeds from Senior Unsecured Debt ................................ 199,390 ---
Repayments of Senior Unsecured Debt ................................ (100,000) ---
Redemption of Preferred Stock ...................................... (41,295) ---
Dividends/Distributions ............................................ (91,543) (85,229)
Preferred Stock Dividends .......................................... (23,750) (16,422)
Repayments on Mortgage Loans Payable ............................... (13,245) (1,710)
Proceeds from Acquisition Facility Payable ......................... 322,300 195,500
Repayments on Acquisition Facility Payable ......................... (340,300) (67,300)
Cost of Debt Issuance and Prepayment Fees .......................... (8,942) (2,322)
--------- ---------
Net Cash (Used in) Provided by Financing Activities ....... (88,869) 17,581
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents .................. 5,513 (575)
Cash and Cash Equivalents, Beginning of Period ........................ 7,731 2,609
--------- ---------
Cash and Cash Equivalents, End of Period .............................. $ 13,244 $ 2,034
========= =========
The accompanying notes are an integral part of the financial statements.
5
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND FORMATION OF COMPANY
First Industrial Realty Trust, Inc. (the "Company") was organized in the
state of Maryland on August 10, 1993. The Company is a real estate investment
trust as defined in the Internal Revenue Code. The Company's operations are
conducted primarily through First Industrial, L.P. (the "Operating Partnership")
of which the Company is the sole general partner with an approximate 85%
ownership interest at September 30, 2001. As of September 30, 2001, the Company
owned 930 in-service properties located in 24 states, containing an aggregate of
approximately 64.3 million square feet of gross leasable area ("GLA"). Of the
930 in-service properties owned by the Company, 765 are held by the Operating
Partnership, 106 are held by limited partnerships in which the Operating
Partnership is the limited partner and wholly-owned subsidiaries of the Company
are the general partners, 45 are held by limited liability companies of which
the Operating Partnership is the sole member and 14 are held by an entity
wholly-owned by the Operating Partnership. The Company, through wholly-owned
limited liability companies of which the Operating Partnership is the sole
member, also owns 10% equity interests in, and provides asset and property
management services to, two joint ventures which invest in industrial properties
(the "September 1998 Joint Venture" and the "September 1999 Joint Venture").
Minority interest in the Company at September 30, 2001 represents the
approximate 15% aggregate partnership interest in the Operating Partnership held
by the limited partners thereof.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared
in accordance with the accounting policies described in the financial statements
and related notes included in the Company's 2000 Form 10-K/A No. 1 and should be
read in conjunction with such financial statements and related notes. The
following notes to these interim financial statements highlight significant
changes to the notes included in the December 31, 2000 audited financial
statements included in the Company's 2000 Form 10-K/A No.1 and present interim
disclosures as required by the Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the Company'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 September
30, 2001 and December 31, 2000, and the reported amounts of revenues and
expenses for each of the nine and three months ended September 30, 2001 and
2000. Actual results could differ from those estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary for a fair statement of the financial position of the
Company as of September 30, 2001 and the results of its operations for each of
the nine months and three months ended September 30, 2001 and 2000 and its cash
flows for the nine months ended September 30, 2001 and 2000.
Tenant Accounts Receivable, Net:
The Company provides an allowance for doubtful accounts against the portion
of tenants accounts receivable which is estimated to be uncollectible. Tenant
accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of approximately $2,050 as of September 30, 2001
and December 31, 2000.
6
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Recent Accounting Pronouncements:
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), as
amended by Statement of Financial Accounting Standards No. 138, "Accounting for
Derivative Instruments and Hedging Activities- An Amendment of FAS Statement
133". FAS 133, as amended, establishes accounting and reporting standards for
derivative instruments. Specifically, FAS 133, as amended, requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and to measure those instruments at fair value. Additionally,
the fair value adjustment will affect either other comprehensive income
(shareholders' equity) or net income, depending on whether the derivative
instrument qualifies as a hedge for accounting purposes and, if so, the nature
of the hedging activity. FAS 133, as amended, also requires that any gains or
losses on derivative instruments that are reported independently as deferred
gains or losses (assets or liabilities) in the statement of financial position
at the date of initial application shall be derecognized and reported as a
cumulative transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of approximately $14,920. The Company
will amortize approximately $257 into net income as an adjustment to interest
expense in the next twelve months relating to these interest rate protection
agreements.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes (as defined in footnote 4), the Company settled this interest
rate protection agreement and received approximately $371, which is shown in
other comprehensive income. The Company is amortizing this settlement amount
into net income as an adjustment to interest expense over the life of the 2011
Notes (as defined in footnote 4). The Company will amortize approximately $37
into net income as an adjustment to interest expense in the next twelve months
relating to this interest rate protection agreement.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. (as defined in footnote 4) in April 2001, the
Company settled this interest rate protection agreement for a payment of
approximately $562 which is a component of the extraordinary loss the Company
has recognized relating to the retirement of the 2011 Drs. (as defined in
footnote 4).
In September 2001, the Company entered into two interest rate protection
agreements which fixed the interest rate on a portion of the Company's
outstanding borrowings on its $300,000 unsecured line of credit. The Company
designated both of these transactions as cash flow hedges. The first interest
rate protection agreement has a notional value of $25,000, is effective from
October 5, 2001 through October 5, 2002 and fixed the LIBOR rate at 2.5775%. The
second interest rate protection agreement has a notional value of $25,000, is
effective from October 5, 2001 through July 5, 2003 and fixed the LIBOR rate at
3.0775%. Any payments or receipts from these interest rate protection agreements
will be treated as a component of interest expense. The Company anticipates that
both interest rate protection agreements will be 100% effective and, as a
result, the change in value of both interest rate protection agreements will be
shown in other comprehensive income.
7
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
The following is a roll-forward of the accumulated other comprehensive loss
balance relating to these derivative transactions:
Balance at December 31, 2000 .......................................... $ ---
Cumulative Transition Adjustment ................................. (14,920)
Settlement of Interest Rate Protection Agreements ................ (191)
Write-off of Unamortized Interest Rate Protection Agreement Due to
The Early Retirement of Debt ............................... 2,156
Amortization of Interest Rate Protection Agreements .............. 753
--------
Balance at September 30, 2001 ......................................... $(12,202)
========
On October 3, 2001, the FASB issued the 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 becomes effective for financial
statements issued for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The Company does not expect the pronouncement
to have a material impact on its consolidated financial position, consolidated
results of operations or consolidated cash flows.
Reclassification:
Certain 2000 items have been reclassified to conform to the 2001
presentation.
3. INVESTMENTS IN JOINT VENTURES
During the nine months ended September 30, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $1,771 in asset
management and property management fees from the September 1998 Joint Venture
and the September 1999 Joint Venture, collectively. The Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received distributions of approximately $985 and $106 from the
September 1998 Joint Venture and the September 1999 Joint Venture, respectively.
As of September 30, 2001, the September 1998 Joint Venture owned 119 industrial
properties comprising approximately 6.0 million square feet of GLA and the
September 1999 Joint Venture owned 39 industrial properties comprising
approximately 1.2 million square feet of GLA.
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE
Mortgage Loans Payable, Net:
On December 29, 1995, the Company, through an entity in which the Operating
Partnership is the sole limited partner and a wholly-owned subsidiary of the
Company is the general partner (the "Mortgage Partnership"), entered into a
$40,200 mortgage loan (the "1995 Mortgage Loan"). In March 2001, the Company
purchased approximately $1.1 million of U.S. Government securities as substitute
collateral to execute a legal defeasance of approximately $1.1 million of the
1995 Mortgage Loan. The terms of the legal defeasance require the Mortgage
Partnership to use the gross proceeds from the maturities of the U.S. Government
securities to paydown and subsequently retire the defeased portion of the 1995
Mortgage Loan in January 2003. The Company is carrying the defeased portion of
the 1995 Mortgage Loan on its balance sheet until it pays down and retires the
defeased portion of the 1995 Mortgage Loan in January 2003. Upon the execution
of the legal defeasance, one of the 22 properties collateralizing the 1995
Mortgage Loan was released and subsequently sold.
8
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
On October 23, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $4,153 (the "Acquisition Mortgage Loan
I") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan I was collateralized by a property in Bensenville,
Illinois, bore interest at a fixed rate of 8.5% and provided for monthly
principal and interest payments based upon a 15-year amortization schedule. On
May 31, 2001, the Company, through the Operating Partnership, paid off and
retired the Acquisition Mortgage Loan I. Due to the retirement of the
Acquisition Mortgage Loan I, the Company has recorded an extraordinary loss of
approximately $128 due to a prepayment fee.
On December 9, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $7,997 (the "Acquisition Mortgage Loan
II") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan II was collateralized by ten properties in St.
Charles, Louisiana, bore interest at a fixed rate of 7.75% and provided for
monthly principal and interest payments based upon a 22-year amortization
schedule. On June 27, 2001, the Company, through the Operating Partnership, paid
off and retired the Acquisition Mortgage Loan II. Due to the retirement of the
Acquisition Mortgage Loan II, the Company has recorded an extraordinary loss of
approximately $936 due to a prepayment fee.
Senior Unsecured Debt, Net:
On March 19, 2001, the Company, 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 Company also entered into an interest rate protection agreement
which was used to fix the interest rate on the 2011 Notes prior to issuance. The
Company 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 March 31, 1998, the Company, 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%. On April 5, 2001 the Company paid off and
retired the 2011 Drs. for a payment of approximately $105,569. In conjunction
with the forecasted retirement of the 2011 Drs., the Company entered into an
interest rate protection agreement which fixed the retirement price of the 2011
Drs. 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
Company has recorded an extraordinary loss of approximately $9,245 comprised of
the amount paid above the 2011 Drs. carrying value, the write-off of unamortized
deferred financing fees, 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.
9
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS PAYABLE, NET, SENIOR UNSECURED DEBT, NET AND ACQUISITION
FACILITY PAYABLE, CONTINUED
The following table discloses certain information regarding the Company's
mortgage loans payable, senior unsecured debt and acquisition facility payable:
INTEREST
OUTSTANDING BALANCE AT ACCRUED INTEREST PAYABLE AT RATE AT
------------------------------ --------------------------- -------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, MATURITY
2001 2000 2001 2000 2001 DATE
------------- ------------ ------------- ------------ ------------- --------
MORTGAGE LOANS PAYABLE, NET
1995 Mortgage Loan ................ $ 38,204 (1) $ 38,604 $ 153 $ 163 7.220% 1/11/26 (1)
CIGNA Loan ........................ 33,403 33,952 209 212 7.500% 4/01/03
Assumed Loans ..................... 6,661 7,995 --- --- 9.250% 1/01/13
LB Mortgage Loan II .............. 705 705 5 5 8.000% (2)
Acquisition Mortgage Loan I ....... --- 3,294 --- --- 8.500% 8/01/08 (7)
Acquisition Mortgage Loan II ...... --- 7,432 --- --- 7.750% 4/01/06 (7)
Acquisition Mortgage Loan III ..... 3,104 3,214 --- --- 8.875% 6/01/03
Acquisition Mortgage Loan IV ...... 2,305 2,364 --- 17 8.950% 10/01/06
Acquisition Mortgage Loan V ....... 2,681 (3) 2,729 (3) --- --- 9.010% 9/01/06
Acquisition Mortgage Loan VI ...... 930 (3) 957 (3) --- --- 8.875% 11/01/06
Acquisition Mortgage Loan VII ..... 1,280 (3) 1,329 (3) --- --- 9.750% 3/15/02
---------- ---------- -------- ----------
Total ............................. $ 89,273 $ 102,575 $ 367 $ 397
========== ========== ======== ==========
SENIOR UNSECURED DEBT, NET
2005 Notes ........................ $ 50,000 $ 50,000 $ 1,246 $ 383 6.900% 11/21/05
2006 Notes ........................ 150,000 150,000 3,500 875 7.000% 12/01/06
2007 Notes ........................ 149,970 (4) 149,966 (4) 4,307 1,457 7.600% 5/15/07
2011 PATS ......................... 99,552 (4) 99,517 (4) 2,786 942 7.375% 5/15/11 (5)
2017 Notes ........................ 99,845 (4) 99,838 (4) 2,500 625 7.500% 12/01/17
2027 Notes ........................ 99,875 (4) 99,872 (4) 2,701 914 7.150% 5/15/27 (6)
2028 Notes ........................ 199,789 (4) 199,783 (4) 3,209 7,009 7.600% 7/15/28
2011 Drs .......................... --- 99,805 (4) --- 1,553 6.500% 4/05/11 (7)
2011 Notes ........................ 199,426 (4) --- 656 --- 7.375% 3/15/11
---------- ---------- -------- ----------
Total ............................. $1,048,457 $ 948,781 $ 20,905 $ 13,758
========== ========== ======== ==========
ACQUISITION FACILITY PAYABLE
2000 Unsecured Acquisition
Facility ....................... $ 152,000 $ 170,000 $ 530 $ 1,359 4.538% 6/30/03
========== ========== ======== ==========
(1) Approximately $2.4 million of this loan has been defeased and will be paid
in full in January 2003.
(2) The maturity date of the LB Mortgage Loan II is based on a contingent event
relating to the environmental status of the property collateralizing the
loan.
(3) At September 30, 2001, the Acquisition Mortgage Loan V, the Acquisition
Mortgage Loan VI and the Acquisition Mortgage Loan VII are net of
unamortized premiums of $190, $43 and $13, respectively. At December 31,
2000, the Acquisition Mortgage Loan V, the Acquisition Mortgage Loan VI and
the Acquisition Mortgage Loan VII are net of unamortized premiums of $219,
$49 and $35, respectively.
(4) At September 30, 2001, the 2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes,
2028 Notes and the 2011 Notes are net of unamortized discounts of $30,
$448, $155, $125, $211 and $574, respectively. At December 31, 2000, the
2007 Notes, 2011 PATS, 2017 Notes, 2027 Notes, 2028 Notes and the 2011 Drs.
are net of unamortized discounts of $34, $483, $162, $128, $217 and $195,
respectively.
(5) The 2011 PATS are redeemable at the option of the holder thereof, on May
15, 2004.
(6) The 2027 Notes are redeemable at the option of the holders thereof, on May
15, 2002.
(7) The Company paid off and retired the 2011 Drs. on April 5, 2001, the
Acquisition Mortgage Loan I on May 31, 2001, and the Acquisition Mortgage
Loan II on June 27, 2001.
The following is a schedule of the stated maturities and scheduled
principal payments of the mortgage loans payable, senior unsecured debt and
acquisition facility payable for the next five years ending December 31, and
thereafter:
Amount
----------
Remainder of 2001 $ 535
2002 3,456
2003 190,848
2004 1,418
2005 51,548
Thereafter 1,042,517
----------
Total $1,290,322
==========
The maturity date of the LB Mortgage Loan II is based on a contingent
event. As a result, this loan is not included in the preceding table.
10
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. STOCKHOLDERS' EQUITY
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. 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
Company redeemed the Series A Preferred Stock on April 9, 2001 and paid a
prorated second quarter dividend of $.05872 per share, totaling approximately
$97.
Restricted Stock:
During the nine months ended September 30, 2001, the Company awarded 94,450
shares of restricted common stock to certain employees and 2,698 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3,104 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 period.
Non-Qualified Employee Stock Options:
During the nine months ended September 30, 2001, the Company issued
1,030,900 non-qualified employee stock options to certain officers, Directors
and employees of the Company. These non-qualified employee stock options vest
over periods from one to three years, have a strike price of $31.05 - $33.125
per share and expire ten years from the date of grant.
During the nine months ended September 30, 2001, certain employees of the
Company exercised 635,030 non-qualified employee stock options. Gross proceeds
to the Company were approximately $16,646.
Treasury Stock:
During the nine months ended September 30, 2001, the Company repurchased
177,600 shares of its common stock at a weighted average price per share of
approximately $28.94.
11
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. STOCKHOLDERS' EQUITY, CONTINUED
Dividends/Distributions:
The following table summarizes dividends/distributions for the nine months
ended September 30, 2001.
COMMON STOCK/OPERATING PARTNERSHIP UNITS
Dividend/Distribution Total
Record Date Payable Date Per Share/Unit Dividend/Distribution
------------------ ------------------ --------------------- ---------------------
Fourth Quarter 2000 December 31, 2000 January 22, 2001 $ .6575 $ 30,275
First Quarter 2001 March 31, 2001 April 23, 2001 $ .6575 $ 30,537
Second Quarter 2001 June 29, 2001 July 23, 2001 $ .6575 $ 30,731
Third Quarter 2001 September 28, 2001 October 22, 2001 $ .6575 $ 30,660
PREFERRED STOCK
First Quarter: Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------ --------------------- ---------------------
Series A Preferred Stock March 15, 2001 March 31, 2001 $ .59375 $ 980
Series B Preferred Stock March 15, 2001 March 31, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock March 15, 2001 March 31, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock March 15, 2001 March 31, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock March 15, 2001 March 31, 2001 $ 49.37500 $ 1,480
Second Quarter: Redemption/ Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------ --------------------- ---------------------
Series A Preferred Stock April 9, 2001 April 9, 2001 $ .05872 $ 97
Series B Preferred Stock June 15, 2001 June 30, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock June 15, 2001 June 30, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock June 15, 2001 June 30, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock June 15, 2001 June 30, 2001 $ 49.37500 $ 1,480
Third Quarter: Dividend Total Quarterly
Record Date Payable Date per Share Dividend
------------------ ------------------ --------------------- ---------------------
Series B Preferred Stock September 14, 2001 September 30, 2001 $ 54.68750 $ 2,188
Series C Preferred Stock September 14, 2001 September 30, 2001 $ 53.90600 $ 1,078
Series D Preferred Stock September 14, 2001 September 30, 2001 $ 49.68700 $ 2,485
Series E Preferred Stock September 14, 2001 September 30, 2001 $ 49.37500 $ 1,480
12
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
6. ACQUISITION AND DEVELOPMENT OF REAL ESTATE
During the nine months ended September 30, 2001, the Company acquired 69
industrial properties comprising, in the aggregate, approximately 3.2 million
square feet of GLA and several land parcels. The aggregate purchase price for
these acquisitions totaled approximately $175,484, excluding costs incurred in
conjunction with the acquisition of the properties. Two of the 69 industrial
properties acquired, comprising approximately .1 million square feet of GLA,
were acquired from the 1998 Joint Venture for an aggregate purchase price of
approximately $5,845, excluding costs incurred in conjunction with the
acquisition of the properties. The Company also completed the development of six
industrial properties comprising approximately 1.0 million square feet of GLA at
a cost of approximately $40.5 million.
7. SALES OF REAL ESTATE AND REAL ESTATE HELD FOR SALE
During the nine months ended September 30, 2001, the Company sold 107
industrial properties comprising approximately 7.7 million square feet of GLA
and several land parcels. Gross proceeds from these sales were approximately
$318,759. The Company also recognized gains on sales that were deferred. The
gain on sale of real estate was approximately $48,506.
The Company has an active sales program through which it is continually
engaged in evaluating its current portfolio for potential sales candidates in
order to redeploy capital. At September 30, 2001, the Company had 61 industrial
properties comprising approximately 6.6 million square feet of GLA held for
sale. There can be no assurance that such properties held for sale will be sold.
The following table discloses certain information regarding the 61
industrial properties held for sale by the Company.
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
Total Revenues $ 19,399 $ 20,589 $ 5,877 $ 6,744
Operating Expenses (5,415) (5,479) (1,745) (1,754)
Depreciation and Amortization (365) (2,938) (127) (335)
-------- -------- -------- --------
Income from Operations $ 13,619 $ 12,172 $ 4,005 $ 4,655
======== ======== ======== ========
13
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
Nine Months Ended
-----------------------------
September 30, September 30,
2001 2000
------------- --------------
Interest paid, net of capitalized interest .............................. $ 56,434 $ 51,213
========= =========
Interest capitalized .................................................... $ 6,978 $ 4,075
========= =========
Supplemental schedule of noncash investing and financing activities:
Distribution payable on common stock/units .............................. $ 30,660 $ 28,409
========= =========
Distribution payable on preferred stock ................................. $ 7,231 $ 8,211
========= =========
Issuance of units in exchange for property ................................. $ 1,491 $ 869
========= =========
Exchange of units for common shares:
Minority interest ...................................................... $ (7,258) $ (3,793)
Common stock ........................................................... 3 1
Additional paid-in capital ............................................. 7,255 3,792
--------- ---------
$ -- $ --
========= =========
In conjunction with the property and land acquisitions, the following
liabilities were assumed:
Purchase of real estate ................................................. $ 175,484 $ 207,514
Accrued real estate taxes and security deposits ......................... (1,597) (2,317)
--------- ---------
$ 173,887 $ 205,197
========= =========
In conjunction with certain property sales, the Company provided seller
financing:
Notes receivable ........................................................ $ 12,460 $ 5,149
========= =========
14
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
9. Earnings Per Share
The computation of basic and diluted EPS is presented below:
Nine Months Ended Three Months Ended
---------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
------------- ------------- ------------- ------------
Numerator:
Net Income Before Extraordinary Loss ........................ $ 113,301 $ 89,866 $ 39,484 $ 30,903
Less: Preferred Stock Dividends .............................. (22,770) (24,633) (7,231) (8,211)
Less: Minority Interest Allocable to Extraordinary Loss ...... (1,597) -- -- --
------------- ------------ ------------ ------------
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest-For Basic
and Diluted EPS ......................................... 88,934 65,233 32,253 22,692
Extraordinary Loss, net of Minority Interest ................. (8,712) -- -- --
------------- ------------ ------------ ------------
Net Income Available to Common Stockholders
For Basic and Diluted EPS ................................... $ 80,222 $ 65,233 $ 32,253 $ 22,692
============= ============ ============ ============
Denominator:
Weighted Average Shares - Basic ............................. 39,353,513 38,645,312 39,661,725 38,816,664
Effect of Dilutive Securities:
Employee and Director Common Stock Options .................. 251,838 225,149 232,427 291,341
------------- ------------ ------------ ------------
Weighted Average Shares- Diluted ............................ 39,605,351 38,870,461 39,894,152 39,108,005
============= ============ ============ ============
Basic EPS:
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest ............. $ 2.26 $ 1.69 $ .81 $ .58
Extraordinary Loss, net of Minority Interest .......... (.22) -- -- --
------------- ------------ ------------ ------------
Net Income Available to Common Stockholders ................. $ 2.04 $ 1.69 $ .81 $ .58
============= ============ ============ ============
Diluted EPS:
Net Income Available to Common Stockholders Before
Extraordinary Loss, net of Minority Interest ............. $ 2.25 $ 1.68 $ .81 $ .58
Extraordinary Loss, net of Minority Interest ......... (.22) -- -- --
------------- ------------ ------------ ------------
Net Income Available to Common Stockholders ................. $ 2.03 $ 1.68 $ .81 $ .58
============= ============ ============ ============
10. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal
actions arising from the operation 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 Company.
The Company has committed to the construction of 31 development
projects totaling approximately 5.2 million square feet of GLA for an estimated
investment of approximately $236.5 million. Of this amount, approximately $79.5
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 24 of the 31
development projects, comprising approximately 3.8 million square feet of GLA at
an estimated investment of approximately $179.5 million, during the next twelve
months. There can be no assurance that the Company will place these projects in
service during the next twelve months or that the actual completion cost will
not exceed the amount stated above.
15
FIRST INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
11. SUBSEQUENT EVENTS
From October 1, 2001 to October 23, 2001, the Company acquired seven
industrial properties for an aggregate purchase price of approximately $33,150,
excluding costs incurred in conjunction with the acquisition of these industrial
properties. The Company also sold two industrial properties and a land parcel
for approximately $4,878 of gross proceeds.
On October 1, 2001, the Company paid third quarter preferred stock
dividends of $54.688 per share (equivalent to $.54688 per Depositary Share) on
its Series B Preferred Stock, $53.906 per share (equivalent to $.53906 per
Depositary Share) on its Series C Preferred Stock, $49.687 per share (equivalent
to $.49687 per Depositary Share) on its Series D Preferred Stock and $49.375 per
share (equivalent to $.49375 per Depositary Share) on its Series E Preferred
Stock. The preferred stock dividends paid on October 1, 2001 totaled, in the
aggregate, approximately $7,231.
On October 22, 2001, the Company and the Operating Partnership paid a third
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30,660.
From October 1, 2001 through October 23, 2001, the Company repurchased
461,900 shares of its common stock at a weighted average price per share of
approximately $28.52.
16
FIRST INDUSTRIAL REALTY TRUST, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of First Industrial Realty Trust,
Inc.'s (the "Company") financial condition and results of operations should be
read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-Q.
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or similar expressions. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse
affect on the operations and future prospects of the Company on a consolidated
basis include, but are not limited to, changes in: economic conditions generally
and the real estate market specifically, legislative/regulatory changes
(including changes to laws governing the taxation of real estate investment
trusts), availability of capital, interest rates, competition, supply and demand
for industrial properties in the Company's current and proposed market areas and
general accounting principles, policies and guidelines applicable to real estate
investment trusts. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning the Company and its business,
including additional factors that could materially affect the Company's
financial results, is included herein and in the Company's other filings with
the Securities and Exchange Commission.
The Company was organized in the state of Maryland on August 10, 1993. The
Company is a real estate investment trust ("REIT") as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through First
Industrial, L.P. (the "Operating Partnership") of which the Company is the sole
general partner with an approximate 85% ownership interest at September 30,
2001. As of September 30, 2001, the Company owned 930 in-service properties
located in 24 states, containing an aggregate of approximately 64.3 million
square feet of gross leasable area ("GLA") and eight properties held for
redevelopment. Of the in-service properties owned by the Company, 765 are held
by the Operating Partnership, 106 are held by limited partnerships in which the
Operating Partnership is the limited partner and wholly-owned subsidiaries of
the Company are the general partners, 45 are held by limited liability companies
of which the Operating Partnership is the sole member and 14 are held by an
entity wholly-owned by the Operating Partnership. The Company, through
wholly-owned limited liability companies of which the Operating Partnership is
the sole member, also owns 10% equity interests in, and provides asset and
property management services to, two joint ventures which invest in industrial
properties (the "September 1998 Joint Venture" and the "September 1999 Joint
Venture"). Minority interest in the Company at September 30, 2001 represents the
approximate 15% aggregate partnership interest in the Operating Partnership held
by the limited partners thereof.
RESULTS OF OPERATIONS
At September 30, 2001, the Company owned 930 in-service properties with
approximately 64.3 million square feet of GLA, compared to 976 in-service
properties with approximately 69.6 million square feet of GLA at September 30,
2000. During the period between October 1, 2000 and September 30, 2001, the
Company acquired 105 in-service properties containing approximately 5.1 million
square feet of GLA, completed development of 16 properties and redevelopment of
two properties totaling approximately 2.3 million square feet of GLA and sold
162 in-service properties totaling approximately 12.4 million square feet of
GLA, one out of service property and several land parcels. The Company also took
11 properties out of service that are under redevelopment, comprising
approximately .7 million square feet of GLA and placed in service four
properties comprising approximately .4 million square feet of GLA.
17
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
Rental income and tenant recoveries and other income increased by
approximately $4.6 million or 1.6% due primarily to an increase in tenant
recoveries related to an increase in property expenses (as discussed below),
offset by a decrease in rental income due to a decrease in average GLA and a
decrease in average occupancy for the nine months ended September 30, 2001 as
compared to the nine months ended September 30, 2000. Rental income and tenant
recoveries and other income from properties owned prior to January 1, 2000
increased by approximately $3.7 million or 1.8% due primarily to general rent
increases and an increase in tenant recoveries due to an increase in property
expenses (as discussed below) for the nine months ended September 30, 2001 as
compared to the nine months ended September 30, 2000.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
increased by approximately $1.0 million or 1.3%. This increase is due primarily
to increases in repairs and maintenance, utilities and insurance. The increase
in repairs and maintenance is due to an increase in snow removal and related
expenses as well as an increase in maintenance fees. The increase in utilities
is due to increases in gas and electricity expenses. The increase in insurance
is due to an increase in insurance premiums. These increases were slightly
offset by decreases in property management and other expense. The decrease in
property management is due primarily to the closing of the Long Island, New York
and the New Orleans, Louisiana regional offices. The decrease in other expense
is due primarily to a decrease in master lease payments associated with certain
properties during the nine months ended September 30, 2001 as compared to the
nine months ended September 30, 2000. Property expenses from properties owned
prior to January 1, 2000 increased by approximately $2.2 million or 4.0% due
primarily to the explanations discussed above.
General and administrative expense increased by approximately $1.1 million
due primarily to the write-off of the Company's technology initiative
investment.
Interest expense increased by approximately $1.3 million for the nine
months ended September 30, 2001 compared to the nine months ended September 30,
2000 due primarily to a higher average debt balance outstanding. This was
slightly offset by a decrease in the weighted average interest rate for the nine
months ended September 30, 2001 (7.15%) as compared to the nine months ended
September 30, 2000 (7.31%) and an increase in capitalized interest for the nine
months ended September 30, 2001 due to an increase in development activities.
The average debt balance outstanding for the nine months ended September 30,
2001 and 2000 was approximately $1,301.3 million and $1,201.2 million,
respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization increased by approximately $2.1 million
due primarily to a decrease in the number of properties the Company considered
held for sale during the nine months ended September 30, 2001 as compared to the
nine months ended September 30, 2000.
Equity in income of joint ventures increased by approximately $.6 million
due primarily to an increase in gain on sale of real estate in the September
1998 Joint Venture.
The $48.5 million gain on sale of real estate for the nine months ended
September 30, 2001 resulted from the sale of 107 industrial properties and
several land parcels. Gross proceeds from these sales were approximately $318.8
million.
The $22.2 million gain on sale of real estate for the nine months ended
September 30, 2000 resulted from the sale of 53 industrial properties and
several land parcels. Gross proceeds from these sales were approximately $193.1
million.
The $10.3 million extraordinary loss for the nine months ended September
30, 2001 is due to the early retirement of senior unsecured debt and various
mortgage loans. The extraordinary loss is comprised of the amount paid above the
carrying amount of the senior unsecured debt, the write-off of unamortized
18
deferred financing fees, 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, 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.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2001 TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
Rental income and tenant recoveries and other income decreased by
approximately $2.9 million or 3.0% due primarily to a decrease in average GLA
and a decrease in average occupancy for the three months ended September 30,
2001 as compared to the three months ended September 30, 2000, slightly offset
by an increase in tenant recoveries for the three months ended September 30,
2001 as compared to the three months ended September 30, 2000. Rental income and
tenant recoveries and other income from properties owned prior to January 1,
2000 increased by approximately $.6 million or .9% due primarily to an increase
in tenant recoveries due to an increase in property expenses (as discussed
below) for the three months ended September 30, 2001 as compared to the three
months ended September 30, 2000.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses
decreased by approximately $1.7 million or 6.1%. This decrease is due primarily
to decreases in real estate taxes, property management and utilities. The
decrease in real estate taxes and utilities is due to a decrease in average GLA
for the three months ended September 30, 2001 as compared to the three months
ended September 30, 2000. The decrease in property management expense is due to
the closing of the Long Island, New York and the New Orleans, Louisiana regional
offices. Property expenses from properties owned prior to January 1, 2000
remained relatively unchanged.
General and administrative expense remained relatively unchanged.
Interest expense decreased by approximately $1.3 million for the three
months ended September 30, 2001 compared to the three months ended September 30,
2000 due primarily to a decrease in the weighted average interest rate on the
Company's outstanding debt for the three months ended September 30, 2001 (7.08%)
as compared to the three months ended September 30, 2000 (7.35%), as well as an
increase in capitalized interest due to an increase in development activities.
This was slightly offset by a higher average debt balance outstanding for the
three months ended September 30, 2001 as compared to the three months ended
September 30, 2000. The average debt balance outstanding for the three months
ended September 30, 2001 and 2000 was approximately $1,283.0 million and
$1,237.1 million, respectively.
Amortization of deferred financing costs remained relatively unchanged.
Depreciation and other amortization increased by approximately $2.8 million
due primarily to a decrease in the number of properties the Company considered
held for sale during the three months ended September 30, 2001 as compared to
the three months ended September 30, 2000.
Equity in income of joint ventures increased by approximately $.2 million
due primarily to an increase in gain on sale of real estate in the September
1998 Joint Venture.
The $18.8 million gain on sale of real estate for the three months ended
September 30, 2001 resulted from the sale of 38 industrial properties and
several land parcels. Gross proceeds from these sales were approximately
$92.4 million.
The $6.3 million gain on sale of real estate for the three months ended
September 30, 2000 resulted from the sale of 18 industrial properties and
several land parcels. Gross proceeds from these sales were approximately $56.9
million.
19
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company's cash and cash equivalents was
approximately $13.2 million and restricted cash was approximately $47.4 million.
Included in restricted cash are approximately $1.1 million of cash reserves
required to be set aside under the Company's $40.0 million mortgage loan (the
"1995 Mortgage Loan") for payments of security deposit refunds, tenant
improvements, capital expenditures, interest, real estate taxes and insurance.
The portion of the cash reserve relating to payments for capital expenditures,
interest, real estate taxes and insurance for properties collateralizing the
1995 Mortgage Loan is established monthly, distributed to the Company as such
expenditures are made and is replenished to a level adequate to make the next
periodic payment of such expenditures. The portion of the cash reserve relating
to security deposit refunds for the tenants occupying the properties
collateralizing the 1995 Mortgage Loan is adjusted as tenants turn over. Also
included in restricted cash is approximately $46.3 million of gross proceeds
from the sales of certain properties. These sales proceeds will be disbursed as
the Company exchanges properties under Section 1031 of the Internal Revenue
Code.
NINE MONTHS ENDED SEPTEMBER 30, 2001
Net cash provided by operating activities of approximately $117.2 million
for the nine months ended September 30, 2001 was comprised primarily of net
income before minority interest of approximately $117.6 million and adjustments
for non-cash items of approximately $16.6 million, offset by the net change in
operating assets and liabilities of approximately $17.0 million. The adjustments
for the non-cash items of approximately $16.6 million are primarily comprised of
depreciation and amortization of approximately $57.5 million and an
extraordinary loss of approximately $10.3 million from the early retirement of
debt, offset by the gain on sale of real estate of approximately $48.5 million
and the effect of the straight-lining of rental income of approximately $2.7
million.
Net cash used in investing activities of approximately $22.8 million for
the nine months ended September 30, 2001 was comprised primarily of the
acquisition of real estate, development of real estate, capital expenditures
related to the expansion and improvement of existing real estate and an increase
in restricted cash from sales proceeds deposited with an intermediary for
Section 1031 exchange purposes, offset by the net proceeds from the sale of real
estate, distributions from the September 1998 Joint Venture and the September
1999 Joint Venture and the repayment of mortgage loans receivable.
Net cash used in financing activities of approximately $88.9 million for
the nine months ended September 30, 2001 was comprised primarily of repayments
on mortgage loans payable, the repurchase of restricted stock, the purchase of
treasury shares, the purchase of U.S. Government securities used as substitute
collateral to execute a legal defeasance of a portion of the 1995 Mortgage Loan,
common and preferred stock dividends and unit distributions, debt issuance costs
incurred in conjunction with the 2011 Notes (defined below), repayment of the
2011 Drs. (defined below), prepayment fees incurred in the early retirement
of the Acquisition Mortgage Loan I (defined below) and the Acquisition Mortgage
Loan II (defined below), redemption of the Company's Series A Preferred Stock
(defined below) and the net repayments under the Company's $300 million
unsecured line of credit (the "2000 Unsecured Acquisition Facility"), offset by
the proceeds from the issuance of 2011 Notes (defined below) and net proceeds
from the exercise of employee stock options.
NINE MONTHS ENDED SEPTEMBER 30, 2000
Net cash provided by operating activities of approximately $136.5 million
for the nine months ended September 30, 2000 was comprised primarily of net
income before minority interest of approximately $102.0 million, adjustments for
non-cash items of approximately $29.8 million and the net change in operating
assets and liabilities of approximately $4.7 million. The adjustments for the
non-cash items of approximately $29.8 million are primarily comprised of
depreciation and amortization of approximately $52.9 million, offset by the gain
on sale of real estate of approximately $22.2 million and the effect of the
straight-lining of rental income of approximately $.9 million.
20
Net cash used in investing activities of approximately $154.6 million for
the nine months ended September 30, 2000 was comprised primarily of the
acquisition of real estate, development of real estate, capital expenditures
related to the expansion and improvement of existing real estate and an increase
in restricted cash from sales proceeds deposited with an intermediary for
Section 1031 exchange purposes, offset by the net proceeds from the sale of real
estate, distributions from the September 1998 Joint Venture and the September
1999 Joint Venture and the repayment of mortgage loans receivable.
Net cash provided by financing activities of approximately $17.6 million
for the nine months ended September 30, 2000 was comprised primarily of net
borrowings under the Company's lines of credit and net proceeds from the
exercise of employee stock options, offset by repayments on mortgage loans
payable, the purchase of treasury shares, the purchase of U.S. Government
securities used as substitute collateral to execute a legal defeasance of a
portion of the 1995 Mortgage Loan, common and preferred stock dividends and unit
distributions and debt issuance costs incurred in conjunction with the 2000
Unsecured Acquisition Facility.
INVESTMENT IN REAL ESTATE, DEVELOPMENT OF REAL ESTATE AND SALES OF REAL ESTATE
During the nine months ended September 30, 2001, the Company purchased 69
industrial properties comprising, in the aggregate, approximately 3.2 million
square feet of GLA and several land parcels, for an aggregate purchase price of
approximately $175.5 million, excluding costs incurred in conjunction with the
acquisition of the properties. Two of the 69 industrial properties acquired,
comprising approximately .1 million square feet of GLA, were acquired from the
September 1998 Joint Venture for an aggregate purchase price of approximately
$5.8 million, excluding costs incurred in conjunction with the acquisition of
the properties. The Company also completed the development of six industrial
properties comprising approximately 1.0 million square feet of GLA at a cost of
approximately $40.5 million.
During the nine months ended September 30, 2001, the Company sold 107
industrial properties comprising approximately 7.7 million square feet of GLA
and several land parcels. Gross proceeds from these sales were approximately
$318.8 million.
The Company has committed to the construction of 31 development projects
totaling approximately 5.2 million square feet of GLA for an estimated
investment of approximately $236.5 million. Of this amount, approximately $79.5
million remains to be funded. These developments are expected to be funded with
cash flows from operations, borrowings under the Company's 2000 Unsecured
Acquisition Facility and proceeds from the sale of select properties of the
Company. The Company expects to place in service approximately 24 of the 31
development projects, comprising approximately 3.8 million square feet of GLA at
an estimated investment of approximately $179.5 million, during the next twelve
months. There can be no assurance that the Company will place these projects in
service during the next twelve months or that the actual completion cost will
not exceed the amount stated above.
REAL ESTATE HELD FOR SALE
The Company plans on exiting the markets of Cleveland, Columbus, Dayton,
Des Moines, Grand Rapids and Long Island and continually engages in evaluating
its other real estate markets for potential sales candidates. At September 30,
2001, the Company had 61 industrial properties comprising approximately 6.6
million square feet of GLA held for sale. Income from operations of the 61
industrial properties held for sale for the nine months ended September 30, 2001
and 2000 is approximately $13.6 million and $12.2 million, respectively. Income
from operations of the 61 industrial properties held for sale for the three
months ended September 30, 2001 and 2000 is approximately $4.0 million and $4.7
million, respectively. Net carrying value of the 61 industrial properties held
for sale at September 30, 2001 is approximately $169.5 million. There can be no
assurance that such properties held for sale will be sold.
INVESTMENTS IN JOINT VENTURES
During the nine months ended September 30, 2001, the Company, through
wholly-owned limited liability companies in which the Operating Partnership is
the sole member, received, in the aggregate, approximately $1.8 million in asset
management and property management fees from the September 1998
21
Joint Venture and the September 1999 Joint Venture, collectively. The Company,
through wholly-owned limited liability companies in which the Operating
Partnership is the sole member, received, in the aggregate, distributions of
approximately $1.1 million from the September 1998 Joint Venture and the
September 1999 Joint Venture. As of September 30, 2001, the September 1998 Joint
Venture owned 119 industrial properties comprising approximately 6.0 million
square feet of GLA and the September 1999 Joint Venture owned 39 industrial
properties comprising approximately 1.2 million square feet of GLA.
MORTGAGE LOANS PAYABLE
In March 2001, the Company purchased approximately $1.1 million of U.S.
Government securities as substitute collateral to execute a legal defeasance of
approximately $1.1 million of the 1995 Mortgage Loan. The terms of the legal
defeasance require the Mortgage Partnership to use the gross proceeds from the
maturities of the U.S. Government securities to paydown and subsequently retire
the defeased portion of the 1995 Mortgage Loan in January 2003. The Company is
carrying the defeased portion of the 1995 Mortgage Loan on its balance sheet
until it pays down and retires the defeased portion of the 1995 Mortgage Loan in
January 2003. Upon the execution of the legal defeasance, one of the 22
properties collateralizing the 1995 Mortgage Loan was released and subsequently
sold.
On October 23, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $4.2 million (the "Acquisition Mortgage
Loan I") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan I was collateralized by a property in Bensenville,
Illinois, bore interest at a fixed rate of 8.5% and provided for monthly
principal and interest payments based upon a 15-year amortization schedule. On
May 31, 2001, the Company, through the Operating Partnership, paid off and
retired the Acquisition Mortgage Loan I. Due to the retirement of the
Acquisition Mortgage Loan I, the Company has recorded an extraordinary loss of
approximately $.1 million due to a prepayment fee.
On December 9, 1997, the Company, through the Operating Partnership,
assumed a mortgage loan in the amount of $8.0 million (the "Acquisition Mortgage
Loan II") in conjunction with the acquisition of a portfolio of properties. The
Acquisition Mortgage Loan II was collateralized by ten properties in St.
Charles, Louisiana, bore interest at a fixed rate of 7.75% and provided for
monthly principal and interest payments based upon a 22-year amortization
schedule. On June 27, 2001, the Company, through the Operating Partnership, paid
off and retired the Acquisition Mortgage Loan II. Due to the retirement of the
Acquisition Mortgage Loan II, the Company has recorded an extraordinary loss of
approximately $.9 million due to a prepayment fee.
SENIOR UNSECURED DEBT
On March 19, 2001, the Company, through the Operating Partnership, issued
$200 million 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 Company also entered into an interest rate protection agreement
which was used to fix the interest rate on the 2011 Notes prior to issuance. The
Company settled the interest rate protection agreement for approximately $.4
million 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 March 31, 1998, the Company, through the Operating Partnership, issued
$100 million 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%. On April 5, 2001 the Company paid off and retired
the 2011 Drs. for a payment of approximately $105.6 million. In conjunction with
the forecasted retirement of the 2011 Drs., the Company entered into an interest
rate protection agreement which fixed the retirement price of the 2011 Drs. On
April 2, 2001, this interest rate protection agreement was settled for a payment
of approximately $.6 million. Due to the retirement of the 2011 Drs., the
Company has
22
recorded an extraordinary loss of approximately $9.2 million comprised of the
amount paid above the 2011 Drs. carrying value, the write-off of unamortized
deferred financing fees, 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.
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. 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 $41.3 million 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 Company redeemed the Series A Preferred Stock on April 9, 2001
and paid a prorated second quarter dividend of $.05872 per share, totaling
approximately $.1 million.
MARKET RISK
The following discussion about the Company'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 Company at September 30, 2001 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 Company 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 September 30, 2001, $152.0 million (approximately 11.8% of total debt at
September 30, 2001) of the Company's debt was variable rate debt (all of the
variable rate debt relates to the Company's 2000 Unsecured Acquisition Facility)
and $1,137.7 million (approximately 82.2% of total debt at September 30, 2001)
was fixed rate debt. The Company also has 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 Company 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 Company. Conversely,
for variable rate debt, changes in the interest rate generally do not impact the
fair value of the debt, but would affect the Company'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 Company until the Company
is required to refinance such debt. See Note 4 to the consolidated financial
statements for a discussion of the maturity dates of the Company's various fixed
rate debt.
Based upon the amount of variable rate debt outstanding at September 30,
2001, a 10% increase or decrease in the interest rate on the Company's variable
rate debt would decrease or increase, respectively, future net income and cash
flows by approximately $.7 million per year. A 10% increase in interest rates
would decrease the fair value of the fixed rate debt at September 30, 2001 by
approximately $51.6 million to $1,096.9 million. A 10% decrease in interest
rates would increase the fair value of the fixed rate debt at September 30, 2001
by approximately $56.8 million to $1,205.3 million. A 10% increase in interest
rates would decrease the fair value of the Written Option at September 30, 2001
by approximately $2.3 million
23
to $6.4 million. A 10% decrease in interest rates would increase the fair value
of the Written Option at September 30, 2001 by approximately $2.8 million to
$11.5 million.
ISSUANCE OF RESTRICTED STOCK AND EMPLOYEE STOCK OPTIONS
During the nine months ended September 30, 2001, the Company awarded 94,450
shares of restricted common stock to certain employees and 2,698 shares of
restricted common stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $3.1 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 period.
During the nine months ended September 30, 2001, the Company issued
1,030,900 non-qualified employee stock options to certain officers, Directors
and employees of the Company. These non-qualified employee stock options vest
over periods from one to three years, have a strike price of $31.05 - $33.125
per share and expire ten years from the date of grant.
COMMON STOCK
During the nine months ended September 30, 2001, certain employees of the
Company exercised 635,030 non-qualified employee stock options. Gross proceeds
to the Company were approximately $16.6 million.
TREASURY STOCK
During the nine months ended September 30, 2001, the Company repurchased
177,600 shares of its common stock at a weighted average price per share of
approximately $28.94.
DIVIDENDS/DISTRIBUTIONS
On January 2, 2001 and April 2, 2001, the Company paid quarterly preferred
stock dividends of $.59375 per share on its Series A Preferred Stock, $54.688
per share (equivalent to $.54688 per Depositary Share) on its Series B Preferred
Stock, $53.906 per share (equivalent to $.53906 per Depositary Share) on its
Series C Preferred Stock, $49.687 per share (equivalent to $.49687 per
Depositary Share) on its Series D Preferred Stock and $49.375 per share
(equivalent to $.49375 per Depositary Share) on its Series E Preferred Stock.
The preferred stock dividends paid on January 2, 2001 and April 2, 2001 totaled,
in the aggregate, approximately $8.2 million per quarter. On April 9, 2001, the
Company paid a prorated second quarter dividend of $.05872 per share, totaling
approximately $.1 million, on its Series A Preferred Stock. On July 2, 2001, the
Company paid quarterly preferred stock dividends of $54.688 per share
(equivalent to $.54688 per Depositary Share) on its Series B Preferred Stock,
$53.906 per share (equivalent to $.53906 per Depositary Share) on its Series C
Preferred Stock, $49.687 per share (equivalent to $.49687 per Depositary Share)
on its Series D Preferred Stock and $49.375 per share (equivalent to $.49375 per
Depositary Share) on its Series E Preferred Stock. The preferred stock dividends
paid on July 2, 2001 totaled, in the aggregate, approximately $7.2 million per
quarter.
On January 22, 2001, the Company and the Operating Partnership paid a
fourth quarter 2000 distribution of $.6575 per common share/Unit, totaling
approximately $30.3 million.
On April 23, 2001, the Company and the Operating Partnership paid a first
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.5 million.
On July 23, 2001, the Company and the Operating Partnership paid a second
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.7 million.
24
SUBSEQUENT EVENTS
From October 1, 2001 to October 23, 2001, the Company acquired seven
industrial properties for an aggregate purchase price of approximately $33.2
million, excluding costs incurred in conjunction with the acquisition of these
industrial properties. The Company also sold two industrial properties and a
land parcel for approximately $4.9 million of gross proceeds.
On October 1, 2001, the Company paid third quarter preferred stock
dividends of $54.688 per share (equivalent to $.54688 per Depositary Share) on
its Series B Preferred Stock, $53.906 per share (equivalent to $.53906 per
Depositary Share) on its Series C Preferred Stock, $49.687 per share (equivalent
to $.49687 per Depositary Share) on its Series D Preferred Stock and $49.375 per
share (equivalent to $.49375 per Depositary Share) on its Series E Preferred
Stock. The preferred stock dividends paid on October 1, 2001 totaled, in the
aggregate, approximately $7.2 million.
On October 22, 2001, the Company and the Operating Partnership paid a third
quarter 2001 dividend/distribution of $.6575 per common share/Unit, totaling
approximately $30.7 million.
From October 1, 2001 through October 23, 2001, the Company repurchased
461,900 shares of its common stock at a weighted average price per share of
approximately $28.52.
SHORT-TERM AND LONG-TERM LIQUIDITY NEEDS
The Company 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 believes that its
principle short-term liquidity needs are to fund normal recurring expenses, debt
service requirements and the minimum distribution required to maintain the
Company's REIT qualification under the Internal Revenue Code. The Company
anticipates that these needs will be met with cash flows provided by operating
activities.
The Company expects to meet long-term (greater than one year) liquidity
requirements such as property acquisitions, developments, scheduled debt
maturities, major renovations, expansions and other nonrecurring capital
improvements through the disposition of select assets, long-term secured and
unsecured indebtedness and the issuance of additional equity securities. As of
September 30, 2001 and October 23, 2001, $589.2 million of common stock,
preferred stock and depositary shares and $500.0 million of debt securities were
registered and unissued under the Securities Act of 1933, as amended. The
Company also may finance the development or acquisition of additional properties
through borrowings under the 2000 Unsecured Acquisition Facility. At September
30, 2001, borrowings under the 2000 Unsecured Acquisition Facility bore interest
at a weighted average interest rate of 4.5%. The 2000 Unsecured Acquisition
Facility bears interest at a floating rate of LIBOR plus .80%, or the Prime
Rate, at the Company's election. As of October 23, 2001, the Company had
approximately $101.9 million available for additional borrowings under the 2000
Unsecured Acquisition Facility.
OTHER
On January 1, 2001, the Company adopted the Financial Accounting Standards
Board's ("FASB") Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"), as
amended by Statement of Financial Accounting Standards No. 138, "Accounting for
Derivative Instruments and Hedging Activities- An Amendment of FAS Statement
133". FAS 133, as amended, establishes accounting and reporting standards for
derivative instruments. Specifically, FAS 133, as amended, requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and to measure those instruments at fair value. Additionally,
the fair value adjustment will affect either other comprehensive income
(shareholders' equity) or net income, depending on whether the derivative
instrument qualifies as a hedge for accounting purposes and, if so, the nature
of the hedging activity. FAS 133, as amended, also requires that any gains or
losses on derivative instruments that are reported independently as deferred
gains or
25
losses (assets or liabilities) in the statement of financial position
at the date of initial application shall be derecognized and reported as a
cumulative transition adjustment in other comprehensive income.
In conjunction with prior issuances of senior unsecured debt, the Company
entered into interest rate protection agreements to fix the interest rate on
anticipated offerings of unsecured debt. On January 1, 2001, the Company
derecognized the deferred settlement amounts relating to these settled interest
rate protection agreements and recorded in other comprehensive income a
cumulative transition adjustment expense of approximately $14.9 million.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the interest rate on a forecasted offering of unsecured
debt which it designated as a cash flow hedge. In conjunction with the offering
of the 2011 Notes, the Company settled this interest rate protection agreement
and received approximately $.4 million, which is shown in other comprehensive
income. The Company is amortizing this settlement amount into net income as an
adjustment to interest expense over the life of the 2011 Notes.
In March 2001, the Company entered into an interest rate protection
agreement which fixed the retirement price on a forecasted retirement of
unsecured debt which it designated as a cash flow hedge. In conjunction with the
retirement of the 2011 Drs. in April 2001, the Company settled this interest
rate protection agreement for a payment of approximately $.6 million which is a
component of the extraordinary loss the Company has recognized relating to the
retirement of the 2011 Drs.
In September 2001, the Company entered into two interest rate protection
agreements which fixed the interest rate on a portion of the Company's
outstanding borrowings on the 2000 Unsecured Acquisition Facility. The Company
designated both of these transactions as cash flow hedges. The first interest
rate protection agreement has a notional value of $25.0 million, is effective
from October 5, 2001 through October 5, 2002 and fixed the LIBOR rate at
2.5775%. The second interest rate protection agreement has a notional value of
$25.0 million, is effective from October 5, 2001 through July 5, 2003 and fixed
the LIBOR rate at 3.0775%. Any payments or receipts from these interest rate
protection agreements will be treated as a component of interest expense. The
Company anticipates that both interest rate protection agreements will be 100%
effective and, as a result, the change in value of both interest rate protection
agreements will be shown in other comprehensive income.
On October 3, 2001, the FASB issued the 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 becomes effective for financial
statements issued for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The Company does not expect the pronouncement
to have a material impact on its consolidated financial position, consolidated
results of operations or consolidated cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is included in Item 2. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" above.
26
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
a) Exhibits:
None.
b) Report on Form 8-K:
None.
27
--------------------------------------------------------------------------------
The Company has prepared supplemental financial and operating
information which is available without charge upon request to the Company.
Please direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 4000
Chicago, IL 60606
Attention: Investor Relations
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Date: October 30, 2001 By: /s/ Michael J. Havala
---------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and
Accounting Officer)
29
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
None.
30