e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2006
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from
to
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Commission file number 1-13102
First
Industrial Realty Trust, Inc.
(Exact Name of Registrant as
Specified in its Charter)
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Maryland
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36-3935116
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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311 S. Wacker Drive, Suite 4000, Chicago,
Illinois 60606
(Address of Principal Executive
Offices)
(312) 344-4300
(Registrants Telephone
Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Number of shares of Common Stock, $.01 par value,
outstanding as of July 28, 2006: 44,805,265.
FIRST
INDUSTRIAL REALTY TRUST, INC.
Form 10-Q
For the
Period Ended June 30, 2006
INDEX
2
PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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FIRST
INDUSTRIAL REALTY TRUST, INC.
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June 30,
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December 31,
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2006
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2005
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(Unaudited)
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(Dollars in thousands, except share and per share data)
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ASSETS
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Assets:
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Investment in Real Estate:
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Land
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$
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538,349
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$
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541,406
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Buildings and Improvements
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2,534,754
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2,653,281
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Construction in Progress
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108,882
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66,074
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Less: Accumulated Depreciation
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(436,264
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)
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|
(410,566
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)
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Net Investment in Real Estate
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2,745,721
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2,850,195
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Real Estate Held for Sale, Net of
Accumulated Depreciation and Amortization of $7,587 and $1,622
at June 30, 2006 and December 31, 2005, respectively
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73,260
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16,840
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Cash and Cash Equivalents
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86
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8,237
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Restricted Cash
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73,344
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29,581
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Tenant Accounts Receivable, Net
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7,527
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8,897
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Investments in Joint Ventures
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49,280
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|
44,241
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Deferred Rent Receivable, Net
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26,671
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24,910
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Deferred Financing Costs, Net
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11,605
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10,909
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Deferred Leasing Intangibles, Net
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80,272
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78,537
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Prepaid Expenses and Other Assets,
Net
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99,414
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153,896
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Total Assets
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$
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3,167,180
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$
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3,226,243
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LIABILITIES AND
STOCKHOLDERS EQUITY
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Liabilities:
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Mortgage Loans Payable, Net
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$
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52,488
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$
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57,309
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Senior Unsecured Debt, Net
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1,498,952
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1,298,893
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Unsecured Lines of Credit
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268,000
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457,500
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Accounts Payable, Accrued Expenses
and Other Liabilities, Net
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107,608
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110,560
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Deferred Leasing Intangibles, Net
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17,281
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24,307
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Rents Received in Advance and
Security Deposits
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29,639
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32,283
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Leasing Intangibles Held For Sale,
Net of Accumulated Amortization of $90 at June 30, 2006
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128
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Dividends Payable
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37,270
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39,509
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Total Liabilities
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2,011,366
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2,020,361
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Commitments and Contingencies
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Minority Interest
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159,443
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162,320
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Stockholders Equity:
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Preferred Stock ($.01 par
value, 10,000,000 shares authorized, 20,000, 500, 250 and
600 shares of Series C, F, G and J Cumulative
Preferred Stock, respectively, issued and outstanding at
June 30, 2006, having a liquidation preference of
$2,500 per share ($50,000), $100,000 per share
($50,000), $100,000 per share ($25,000) and
$250,000 per share ($150,000), respectively. At
December 31, 2005, 10,000,000 shares authorized,
20,000, 500, 250 and 750 shares of Series C, F, G and
I Cumulative Preferred Stock, respectively, issued and
outstanding at December 31, 2005, having a liquidation
preference of $2,500 per share ($50,000), $100,000 per
share ($50,000), $100,000 per share ($25,000) and
$250,000 per share ($187,500), respectively)
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Common Stock ($.01 par value,
100,000,000 shares authorized, 47,319,449 and
46,971,110 shares issued and 44,793,049 and
44,444,710 shares outstanding at June 30, 2006 and
December 31, 2005, respectively)
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465
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470
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Additional
Paid-in-Capital
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1,336,851
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1,384,712
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Distributions in Excess of
Accumulated Earnings
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(267,099
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)
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(248,686
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)
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Unearned Value of Restricted Stock
Grants
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(16,825
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)
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Accumulated Other Comprehensive Loss
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|
(3,258
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)
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(5,521
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)
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Treasury Shares at Cost
(2,526,400 shares at June 30, 2006 and
December 31, 2005)
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(70,588
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)
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|
(70,588
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)
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|
|
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|
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|
Total Stockholders Equity
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996,371
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|
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1,043,562
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|
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|
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Total Liabilities and
Stockholders Equity
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$
|
3,167,180
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|
|
$
|
3,226,243
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The accompanying notes are an integral part of the financial
statements.
3
FIRST
INDUSTRIAL REALTY TRUST, INC.
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Three Months
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Three Months
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Six Months
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Six Months
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Ended
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|
Ended
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|
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Ended
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Ended
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June 30,
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June 30,
|
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June 30,
|
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June 30,
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2006
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2005
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|
2006
|
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|
2005
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(Unaudited)
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|
(Dollars in thousands, except share and per share data)
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Revenues:
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|
|
|
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Rental Income
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$
|
71,283
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|
|
$
|
56,009
|
|
|
$
|
138,536
|
|
|
$
|
110,985
|
|
Tenant Recoveries and Other Income
|
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|
29,214
|
|
|
|
19,354
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|
|
|
55,605
|
|
|
|
40,682
|
|
Revenues from Build to Suit
Development for Sale
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|
|
|
|
|
|
|
|
|
|
733
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|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
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|
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Total Revenues
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|
|
100,497
|
|
|
|
75,363
|
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|
194,874
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151,667
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|
|
|
|
|
|
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|
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|
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|
|
|
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|
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Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Property Expenses
|
|
|
32,610
|
|
|
|
25,942
|
|
|
|
65,968
|
|
|
|
52,871
|
|
General and Administrative
|
|
|
18,236
|
|
|
|
11,571
|
|
|
|
35,872
|
|
|
|
23,493
|
|
Depreciation and Other Amortization
|
|
|
39,093
|
|
|
|
25,134
|
|
|
|
74,442
|
|
|
|
48,893
|
|
Expenses from Build to Suit
Development for Sale
|
|
|
|
|
|
|
|
|
|
|
666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
89,939
|
|
|
|
62,647
|
|
|
|
176,948
|
|
|
|
125,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other Income/Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
260
|
|
|
|
448
|
|
|
|
899
|
|
|
|
837
|
|
Interest Expense
|
|
|
(29,744
|
)
|
|
|
(25,890
|
)
|
|
|
(59,232
|
)
|
|
|
(51,693
|
)
|
Amortization of Deferred Financing
Costs
|
|
|
(603
|
)
|
|
|
(510
|
)
|
|
|
(1,223
|
)
|
|
|
(1,019
|
)
|
Mark-to-Market/Gain
on Settlement of Interest Rate Protection Agreement
|
|
|
|
|
|
|
(1,404
|
)
|
|
|
(170
|
)
|
|
|
(463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense
|
|
|
(30,087
|
)
|
|
|
(27,356
|
)
|
|
|
(59,726
|
)
|
|
|
(52,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Before Equity in Income (Loss) of Joint Ventures, Income Tax
Benefit and Income Allocated to Minority Interest
|
|
|
(19,529
|
)
|
|
|
(14,640
|
)
|
|
|
(41,800
|
)
|
|
|
(25,928
|
)
|
Equity in Income (Loss) of Joint
Ventures
|
|
|
7,307
|
|
|
|
(98
|
)
|
|
|
7,273
|
|
|
|
(220
|
)
|
Income Tax Benefit
|
|
|
483
|
|
|
|
2,694
|
|
|
|
6,476
|
|
|
|
4,720
|
|
Minority Interest Allocable to
Continuing Operations
|
|
|
2,085
|
|
|
|
1,857
|
|
|
|
4,965
|
|
|
|
3,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
|
(9,654
|
)
|
|
|
(10,187
|
)
|
|
|
(23,086
|
)
|
|
|
(18,048
|
)
|
Income from Discontinued Operations
(Including Gain on Sale of Real Estate of $51,953 and $33,690
for the Three Months Ended June 30, 2006 and 2005,
respectively and $105,532 and $47,186 for the Six Months Ended
June 30, 2006 and 2005, respectively)
|
|
|
54,521
|
|
|
|
38,116
|
|
|
|
110,291
|
|
|
|
55,994
|
|
Provision for Income Taxes
Allocable to Discontinued Operations (Including $7,484 and
$2,584 for the Three Months Ended June 30, 2006 and 2005,
respectively and $21,946 and $5,383 for the Six Months Ended
June 30, 2006 and 2005, respectively allocable to Gain on
Sale of Real Estate)
|
|
|
(7,845
|
)
|
|
|
(3,156
|
)
|
|
|
(23,133
|
)
|
|
|
(7,071
|
)
|
Minority Interest Allocable to
Discontinued Operations
|
|
|
(6,073
|
)
|
|
|
(4,572
|
)
|
|
|
(11,418
|
)
|
|
|
(6,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Income Before Gain on Sale of Real
Estate
|
|
|
30,949
|
|
|
|
20,201
|
|
|
|
52,654
|
|
|
|
24,466
|
|
Gain on Sale of Real Estate
|
|
|
2,493
|
|
|
|
3,232
|
|
|
|
4,011
|
|
|
|
24,716
|
|
Provision for Income Taxes
Allocable to Gain on Sale of Real Estate
|
|
|
(947
|
)
|
|
|
(1,446
|
)
|
|
|
(1,039
|
)
|
|
|
(8,977
|
)
|
Minority Interest Allocable to Gain
on Sale of Sale Estate
|
|
|
(201
|
)
|
|
|
(234
|
)
|
|
|
(389
|
)
|
|
|
(2,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
32,294
|
|
|
|
21,753
|
|
|
|
55,237
|
|
|
|
38,143
|
|
Less: Preferred Stock Dividends
|
|
|
(5,029
|
)
|
|
|
(2,310
|
)
|
|
|
(10,048
|
)
|
|
|
(4,620
|
)
|
Less: Redemption of Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
27,265
|
|
|
$
|
19,443
|
|
|
$
|
44,517
|
|
|
$
|
33,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(0.30
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Discontinued Operations
|
|
$
|
0.92
|
|
|
$
|
0.72
|
|
|
$
|
1.72
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.62
|
|
|
$
|
0.46
|
|
|
$
|
1.01
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
|
44,006
|
|
|
|
42,285
|
|
|
|
43,947
|
|
|
|
42,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(0.30
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Discontinued Operations
|
|
$
|
0.92
|
|
|
$
|
0.72
|
|
|
$
|
1.72
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.62
|
|
|
$
|
0.46
|
|
|
$
|
1.01
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
|
44,006
|
|
|
|
42,285
|
|
|
|
43,947
|
|
|
|
42,222
|
|
Net Income
|
|
$
|
32,294
|
|
|
$
|
21,753
|
|
|
$
|
55,237
|
|
|
$
|
38,143
|
|
Other Comprehensive (Loss) Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of Interest Rate
Protection Agreements
|
|
|
|
|
|
|
|
|
|
|
(1,729
|
)
|
|
|
|
|
Mark-to-Market
of Interest Rate Protection Agreements
|
|
|
3,374
|
|
|
|
|
|
|
|
4,789
|
|
|
|
|
|
Amortization of Interest Rate
Protection Agreements
|
|
|
(220
|
)
|
|
|
(273
|
)
|
|
|
(450
|
)
|
|
|
(547
|
)
|
Other Comprehensive Income
Allocable to Minority Interest
|
|
|
(410
|
)
|
|
|
|
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
$
|
35,038
|
|
|
$
|
21,480
|
|
|
$
|
57,505
|
|
|
$
|
37,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
4
FIRST
INDUSTRIAL REALTY TRUST, INC.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in thousands)
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
55,237
|
|
|
$
|
38,143
|
|
Income Allocated to Minority
Interest
|
|
|
6,842
|
|
|
|
5,091
|
|
|
|
|
|
|
|
|
|
|
Net Income Before Minority Interest
|
|
|
62,079
|
|
|
|
43,234
|
|
Adjustments to Reconcile Net
Income to Net Cash Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
60,832
|
|
|
|
45,569
|
|
Amortization of Deferred Financing
Costs
|
|
|
1,223
|
|
|
|
1,019
|
|
Other Amortization
|
|
|
19,851
|
|
|
|
15,309
|
|
Provision for Bad Debt
|
|
|
846
|
|
|
|
931
|
|
Mark-to-Market
of Interest Rate Protection Agreement
|
|
|
(16
|
)
|
|
|
463
|
|
Equity in (Income) Loss of Joint
Ventures
|
|
|
(7,273
|
)
|
|
|
220
|
|
Distributions from Joint Ventures
|
|
|
7,847
|
|
|
|
|
|
Gain on Sale of Real Estate
|
|
|
(109,543
|
)
|
|
|
(71,902
|
)
|
Decrease in Build to Suit
Development for Sale Costs Receivable
|
|
|
16,241
|
|
|
|
|
|
Decrease (Increase) in Tenant
Accounts Receivable and Prepaid Expenses and Other Assets, Net
|
|
|
3,615
|
|
|
|
(6,549
|
)
|
Increase in Deferred Rent
Receivable
|
|
|
(4,987
|
)
|
|
|
(4,063
|
)
|
Increase (Decrease) in Accounts
Payable and Accrued Expenses and Rents Received in Advance and
Security Deposits
|
|
|
2,669
|
|
|
|
(2,902
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities
|
|
|
53,384
|
|
|
|
21,329
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of and Additions to
Investment in Real Estate
|
|
|
(389,459
|
)
|
|
|
(304,857
|
)
|
Net Proceeds from Sales of
Investments in Real Estate
|
|
|
471,106
|
|
|
|
260,481
|
|
Contributions to and Investments
in Joint Ventures
|
|
|
(14,093
|
)
|
|
|
(11,191
|
)
|
Distributions from Joint Ventures
|
|
|
8,099
|
|
|
|
402
|
|
Repayment of Mortgage Loans
Receivable
|
|
|
34,987
|
|
|
|
37,627
|
|
(Increase) Decrease in Restricted
Cash
|
|
|
(43,763
|
)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in)
Investing Activities
|
|
|
66,877
|
|
|
|
(17,513
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Proceeds from the Issuance of
Common Stock
|
|
|
1,240
|
|
|
|
6,479
|
|
Proceeds from the Issuance of
Preferred Stock
|
|
|
144,672
|
|
|
|
|
|
Redemption of Preferred Stock
|
|
|
(182,156
|
)
|
|
|
|
|
Repurchase of Restricted Stock
|
|
|
(2,660
|
)
|
|
|
(3,262
|
)
|
Dividends/Distributions
|
|
|
(71,766
|
)
|
|
|
(68,594
|
)
|
Preferred Stock Dividends
|
|
|
(12,574
|
)
|
|
|
(4,620
|
)
|
Repayments on Mortgage Loans
Payable
|
|
|
(11,431
|
)
|
|
|
(922
|
)
|
Net Proceeds from Senior Unsecured
Debt
|
|
|
199,306
|
|
|
|
|
|
Other Costs of Senior Unsecured
Debt
|
|
|
(1,729
|
)
|
|
|
|
|
Proceeds on Mortgage Loans Payable
|
|
|
|
|
|
|
1,167
|
|
Proceeds from Unsecured Lines of
Credit
|
|
|
303,500
|
|
|
|
153,500
|
|
Repayments on Unsecured Lines of
Credit
|
|
|
(493,000
|
)
|
|
|
(91,500
|
)
|
Debt Issuance Costs
|
|
|
(1,814
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing
Activities
|
|
|
(128,412
|
)
|
|
|
(7,868
|
)
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash
Equivalents
|
|
|
(8,151
|
)
|
|
|
(4,052
|
)
|
Cash and Cash Equivalents,
Beginning of Period
|
|
|
8,237
|
|
|
|
4,924
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of
Period
|
|
$
|
86
|
|
|
$
|
872
|
|
|
|
|
|
|
|
|
|
|
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, except per share data)
(Unaudited)
|
|
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 Companys operations are
conducted primarily through First Industrial, L.P. (the
Operating Partnership) of which the Company is the
sole general partner with an approximate 87.0% ownership
interest at June 30, 2006 and June 30, 2005. Minority
interest at June 30, 2006 and June 30, 2005 of
approximately 13.0% represents the aggregate partnership
interest in the Operating Partnership held by the limited
partners thereof.
As of June 30, 2006, the Company owned 946 industrial
properties (inclusive of developments in process) located in
28 states in the United States and one province in Canada,
containing an aggregate of approximately 77.5 million
square feet of gross leasable area (GLA). Of the 946
industrial properties owned by the Company, 759 are held by the
Operating Partnership and limited liability companies of which
the Operating Partnership is the sole member, 94 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 and 93 are held directly or indirectly by
an entity wholly-owned by the Operating Partnership.
In March, 2006, the Company, through separate wholly-owned
limited liability companies of which the Operating Partnership
is the sole member, entered into a co-investment arrangement
with an institutional investor to invest in industrial
properties (the March 2006 Co-Investment Program).
The Company, through separate wholly-owned limited liability
companies of which the Operating Partnership is the sole member,
owns a 15 percent equity interest in and provides property
management, leasing, disposition and portfolio management
services to the March 2006 Co-Investment Program.
The Company, through separate wholly-owned limited liability
companies of which the Operating Partnership or First Industrial
Development Services, Inc. is the sole member, also owns
minority equity interests in, and provides various services to,
four other joint ventures which invest in industrial properties
(the September 1998 Joint Venture, the May
2003 Joint Venture, the March 2005 Joint
Venture and the September 2005 Joint Venture;
together with the March 2006 Co-Investment Program, the
Joint Ventures). The operating data of the Joint
Ventures is not consolidated with that of the Company as
presented herein.
|
|
2.
|
Summary
of Significant Accounting Policies
|
The accompanying unaudited interim financial statements have
been prepared in accordance with the accounting policies
described in the financial statements and related notes included
in the Companys 2005
Form 10-K
and should be read in conjunction with such financial statements
and related notes. The following notes to these interim
financial statements highlight significant changes to the notes
included in the December 31, 2005 audited financial
statements included in the Companys 2005
Form 10-K
and present interim disclosures as required by the Securities
and Exchange Commission.
In order to conform with generally accepted accounting
principles, management, in preparation of the Companys
financial statements, is required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
as of June 30, 2006 and December 31, 2005, and the
reported amounts of revenues and expenses for each of the three
and six months ended June 30, 2006 and June 30, 2005.
Actual results could differ from those estimates.
In the opinion of management, the accompanying unaudited interim
financial statements reflect all adjustments necessary for a
fair presentation of the financial position of the Company as of
June 30, 2006 and December 31, 2005 and the results of
its operations and comprehensive income for each of the three
and six months ended June 30, 2006 and June 30, 2005,
and its cash flows for each of the six months ended
June 30, 2006 and June 30, 2005, and all adjustments
are of a normal recurring nature.
6
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock
Incentive Plans:
Effective January 1, 2006 the Company has adopted Statement
of Financial Accounting Standards No. 123R, Share
Based Payment (FAS 123R), using the modified
prospective application method, which requires measurement of
compensation cost for all stock-based awards at fair value on
date of grant and recognition of compensation over the service
period for awards expected to vest. For the years ended
December 31, 2003, 2004 and 2005, the Company accounted for
its stock incentive plans under the recognition and measurement
principles of Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based
Compensation for all new issuances of stock based
compensation. At January 1, 2006 the Company did not have
any unvested option awards and the Company had accounted for
their previously issued restricted stock awards at fair value,
accordingly, the adoption of FAS 123R did not require the
Company to recognize a cumulative effect of a change in
accounting principle. The Company did reclassify $16,825 from
the Unearned Value of Restricted Stock Grants line item within
Stockholders Equity to Additional Paid in Capital during
the three months ended March 31, 2006.
For the six months ended June 30, 2006 and 2005, the
Company awarded 305,455 and 191,979 restricted stock awards to
its employees and directors of the Company having a fair value
of $11,614 and $8,055, respectively. The awards generally vest
over three years. For the six months ended June 30, 2006
and 2005, the Company recognized $4,625 and $4,820 in restricted
stock amortization related to restricted stock awards, of which
$614 and $646, respectively, was capitalized in connection with
development activities. At June 30, 2006, the Company has
$23,078 in unearned compensation related to unvested restricted
stock awards. The weighted average period that the unrecognized
compensation is expected to be incurred is 1.89 years. The
Company has not awarded options to employees or directors of the
Company during the six months ended June 30, 2006 and
June 30, 2005, and therefore no stock-based employee
compensation expense related to options is included in net
income available to common stockholders.
Prior to January 1, 2003, the Company accounted for its
stock incentive plans under the recognition and measurement
principles of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees
(APB 25). Under APB 25, compensation
expense is not recognized for options issued in which the strike
price is equal to the fair value of the Companys stock on
the date of grant. The following table illustrates the pro forma
effect on net income and earnings per share as if the fair value
recognition provisions of FAS 123R had been applied to all
outstanding and unvested option awards for the three and six
months ended June 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
Three and Six
|
|
|
|
Months Ended
|
|
|
|
June 30,
|
|
|
|
2005
|
|
|
Net Income Available to Common
Stockholders as reported
|
|
$
|
19,443
|
|
|
$
|
33,523
|
|
Less: Total Stock-Based Employee
Compensation Expense, Net of Minority Interest
Determined Under the Fair Value Method
|
|
|
(16
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders pro forma
|
|
$
|
19,427
|
|
|
$
|
33,467
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders per Share as reported Basic
|
|
$
|
0.46
|
|
|
$
|
0.79
|
|
Net Income Available to Common
Stockholders per Share pro forma Basic
|
|
$
|
0.46
|
|
|
$
|
0.79
|
|
Net Income Available to Common
Stockholders per Share as reported
Diluted
|
|
$
|
0.46
|
|
|
$
|
0.79
|
|
Net Income Available to Common
Stockholders per Share pro forma Diluted
|
|
$
|
0.46
|
|
|
$
|
0.79
|
|
7
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
Leasing Intangibles
Deferred Leasing Intangibles included in the Companys
total assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
In-Place Leases
|
|
$
|
77,684
|
|
|
$
|
78,674
|
|
Less: Accumulated Amortization
|
|
|
(10,609
|
)
|
|
|
(6,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
67,075
|
|
|
$
|
72,438
|
|
|
|
|
|
|
|
|
|
|
Above Market Leases
|
|
$
|
7,338
|
|
|
$
|
7,958
|
|
Less: Accumulated Amortization
|
|
|
(2,098
|
)
|
|
|
(1,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,240
|
|
|
$
|
6,099
|
|
|
|
|
|
|
|
|
|
|
Tenant Relationship
|
|
$
|
8,318
|
|
|
$
|
|
|
Less: Accumulated Amortization
|
|
|
(361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,957
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Leasing Intangibles included in the Companys
total liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Below Market Leases
|
|
$
|
22,327
|
|
|
$
|
27,710
|
|
Less: Accumulated Amortization
|
|
|
(5,046
|
)
|
|
|
(3,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,281
|
|
|
$
|
24,307
|
|
|
|
|
|
|
|
|
|
|
The fair value of in-place leases, above market leases, tenant
relationships and below market leases recorded due to real
estate acquisitions during the six months ended June 30,
2006 was $15,742 $1,541, $8,482 and $(4,295) respectively. The
fair value of in-place leases, above market leases and below
market leases recorded due to real estate acquisitions during
the six months ended June 30, 2005 was $20,054, $3,891 and
$(4,409), respectively.
Net amortization expense related to deferred leasing intangibles
was $5,360 and $1,732 for the six months ended June 30,
2006 and June 30, 2005, respectively. The Company will
recognize net amortization expense related to deferred leasing
intangibles over the next five years as follows:
|
|
|
|
|
Remainder of 2006
|
|
$
|
9,036
|
|
2007
|
|
|
15,657
|
|
2008
|
|
|
13,918
|
|
2009
|
|
|
12,467
|
|
2010
|
|
|
10,556
|
|
|
|
|
|
|
Total
|
|
$
|
61,634
|
|
|
|
|
|
|
Recent
Accounting Pronouncements
In February 2006, the FASB issued Statement of Financial
Standards (SFAS) No. 155, Accounting for
Certain Hybrid Financial Instruments which amends
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, and SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and
8
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Extinguishments of Liabilities. This Statement resolves issues
addressed in Statement 133 Implementation Issue
No. D1, Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets. This
Statement:
a. Permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation;
b. Clarifies which interest-only strips and principal-only
strips are not subject to the requirements of Statement 133;
c. Establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring
bifurcation;
d. Clarifies that concentrations of credit risk in the form
of subordination are not embedded derivatives; and
e. Amends Statement 140 to eliminate the prohibition
on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
This Statement is effective for all financial instruments
acquired or issued after the beginning of an entitys first
fiscal year that begins after September 15, 2006. The
Company does not expect that the implementation of this
Statement will have a material effect on the Companys
consolidated financial position or results of operations.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets which amends
FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities, (FAS 140) with respect to the
accounting for separately recognized servicing assets and
servicing liabilities. This statement was issued to simplify the
accounting for servicing rights and reduce the volatility that
results from the use of different measurements attributes for
servicing rights and the related financial instruments used to
economically hedge risks associated with those servicing rights.
The statement clarifies when to separately account for servicing
rights, requires separately recognized servicing rights to be
initially measured at fair value, and provides the option to
subsequently account for those servicing rights at either fair
value or under the amortization method previously required under
FAS 140. An entity should adopt this Statement as of the
beginning of its first fiscal year that begins after
September 15, 2006. The Company does not expect that the
implementation of this Statement will have a material effect on
the Companys consolidated financial position or results of
operations.
In June 2006, the FASB issued FIN 48, Accounting for
Uncertainty in Income Taxes (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes
recognized in accordance with SFAS 109, Accounting
for Income Taxes. The evaluation of a tax position in
accordance with FIN 48 is a two-step process. First, the
Company determines whether it is more likely than not that a tax
position will be sustained upon examination based on the
technical merits of the position. Second, a tax position that
meets the more-likely-than-not threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount
of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement. Tax positions that previously
failed to meet the more-likely-than-not recognition threshold
should be recognized in the first subsequent reporting period in
which the threshold is met. Previously recognized tax positions
that no longer meet the more-likely-than-not recognition
threshold should be derecognized in the first subsequent
reporting period in which the threshold is no longer met. The
Company is required to apply the guidance of FIN 48
beginning January 1, 2007. The Company is currently
evaluating what impact the application of FIN 48 will have
on the consolidated financial statements.
|
|
3.
|
Investments
in Joint Ventures
|
At June 30, 2006, the September 1998 Joint Venture owned 41
industrial properties comprising approximately 1.3 million
square feet of GLA, the May 2003 Joint Venture owned 12
industrial properties comprising approximately 5.4 million
square feet of GLA, the March 2005 Joint Venture owned 41
industrial properties comprising
9
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
approximately 3.6 million square feet of GLA and several
land parcels, the September 2005 Joint Venture owned 178
industrial properties comprising approximately 12.2 million
square feet of GLA and several land parcels and the March 2006
Joint Venture owned seven industrial properties comprising
approximately 3.1 million square feet of GLA (of which the
Company has an equity interest in six industrial properties
comprising approximately 2.2 million square feet of GLA).
At June 30, 2006 and December 31, 2005, the Company
has a receivable from the Joint Ventures of $4,810 and $3,354,
respectively, which mainly relates to development, leasing,
property management and asset management fees due to the Company
from the Joint Ventures, reimbursement for development
expenditures made by a wholly owned subsidiary of the Company
who is acting in the capacity of the developer for two
development projects for the March 2005 Joint Venture and from
borrowings made to the September 1998 Joint Venture.
During the six months ended June 30, 2006 and June 30,
2005, the Company invested the following amounts in its Joint
Ventures as well as received distributions and recognized fees
from acquisition, disposition, leasing, development, property
management and asset management services in the following
amounts:
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Contributions
|
|
$
|
12,198
|
|
|
$
|
10,385
|
|
Distributions
|
|
$
|
15,946
|
|
|
$
|
402
|
|
Fees
|
|
$
|
10,793
|
|
|
$
|
2,661
|
|
|
|
4.
|
Mortgage
Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured
Line of Credit
|
On September 24, 1996, the Consolidated Operating
Partnership assumed a mortgage loan in the amount of $2,600 (the
Acquisition Mortgage Loan IV). The Acquisition
Mortgage Loan IV was collateralized by one property in
Baltimore, MD. The loan had a maturity date of October 1,
2006, and a fixed interest rate of 8.95%. The Acquisition
Mortgage Loan IV was paid off and retired on June 30,
2006.
On January 10, 2006, the Company, through the Operating
Partnership, issued $200,000 of senior unsecured debt which
matures on January 15, 2016 and bears interest at a rate of
5.75% (the 2016 Notes). The issue price of the 2016
Notes was 99.653%. Interest is paid semi-annually in arrears on
January 15 and July 15. In December 2005, the Company also
entered into interest rate protection agreements which were used
to fix the interest rate on the 2016 Notes prior to issuance.
The Company settled the interest rate protection agreements on
January 9, 2006 for a payment of approximately $1,729,
which is included in other comprehensive income. The debt issue
discount and the settlement amount of the interest rate
protection agreements will be amortized over the life of the
2016 Notes as an adjustment to interest expense. Including the
impact of the offering discount and the settlement amount of the
interest rate protection agreements, the Companys
effective interest rate on the 2016 Notes is 5.91%. The 2016
Notes contain certain covenants, including limitations on
incurrence of debt and debt service coverage.
On January 11, 2006, the Company assumed a mortgage loan in
the amount of $1,954 (the Acquisition Mortgage Loan
XIX). The Acquisition Mortgage Loan XIX is collateralized
by one property in Richmond, IN, bears interest at a fixed rate
of 7.32% and provides for monthly principal and interest
payments based on a 10 year amortization schedule. The
Acquisition Mortgage Loan XIX matures on June 1, 2014. In
conjunction with the assumption of the Acquisition Mortgage Loan
XIX, the Company recorded a premium in the amount of $116 which
will be amortized as an adjustment to interest expense through
June 1, 2014. Including the impact of the premium recorded,
the Companys effective interest rate on the Acquisition
Mortgage Loan XIX is 5.82%.
On March 7, 2006, the Consolidated Operating Partnership
assumed a mortgage loan in the amount of $4,925 (the
Acquisition Mortgage Loan XX). The Acquisition
Mortgage Loan XX was collateralized by a land parcel in
10
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Compton, CA, did not require principal payments prior to
maturity on June 5, 2006 and had an 8.0% interest rate. The
Acquisition Mortgage Loan XX was paid off and retired on
June 5, 2006.
The following table discloses certain information regarding the
Companys mortgage loans payable, senior unsecured debt and
unsecured lines of credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Accrued Interest
|
|
|
Interest
|
|
|
|
|
|
|
Balance at
|
|
|
Payable at
|
|
|
Rate at
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
Maturity
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
Date
|
|
|
Mortgage Loans Payable,
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed Loan I
|
|
$
|
2,045
|
|
|
$
|
2,320
|
|
|
$
|
|
|
|
$
|
|
|
|
|
9.250
|
%
|
|
|
09/01/09
|
|
Assumed Loan II
|
|
|
1,711
|
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
9.250
|
%
|
|
|
01/01/13
|
|
Acquisition Mortgage Loan IV
|
|
|
|
(1)
|
|
|
1,936
|
|
|
|
|
|
|
|
14
|
|
|
|
N/A
|
(1)
|
|
|
N/A
|
(1)
|
Acquisition Mortgage Loan V
|
|
|
|
(2)
|
|
|
2,380
|
(3)
|
|
|
|
|
|
|
18
|
|
|
|
N/A
|
(2)
|
|
|
N/A
|
(2)
|
Acquisition Mortgage Loan VIII
|
|
|
5,226
|
|
|
|
5,308
|
|
|
|
36
|
|
|
|
37
|
|
|
|
8.260
|
%
|
|
|
12/01/19
|
|
Acquisition Mortgage Loan IX
|
|
|
5,420
|
|
|
|
5,505
|
|
|
|
37
|
|
|
|
38
|
|
|
|
8.260
|
%
|
|
|
12/01/19
|
|
Acquisition Mortgage Loan X
|
|
|
15,469
|
(3)
|
|
|
15,733
|
(3)
|
|
|
95
|
|
|
|
98
|
|
|
|
8.250
|
%
|
|
|
12/01/10
|
|
Acquisition Mortgage Loan XII
|
|
|
2,471
|
(3)
|
|
|
2,503
|
(3)
|
|
|
14
|
|
|
|
15
|
|
|
|
7.540
|
%
|
|
|
01/01/12
|
|
Acquisition Mortgage Loan XIV
|
|
|
6,212
|
(3)
|
|
|
6,392
|
(3)
|
|
|
34
|
|
|
|
34
|
|
|
|
6.940
|
%
|
|
|
07/01/09
|
|
Acquisition Mortgage Loan XV
|
|
|
|
(4)
|
|
|
1,167
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
(4)
|
|
|
N/A
|
(4)
|
Acquisition Mortgage Loan XVI
|
|
|
1,926
|
(3)
|
|
|
1,960
|
(3)
|
|
|
9
|
|
|
|
9
|
|
|
|
5.500
|
%
|
|
|
09/30/24
|
|
Acquisition Mortgage Loan XVII
|
|
|
3,101
|
(3)
|
|
|
3,209
|
(3)
|
|
|
18
|
|
|
|
18
|
|
|
|
7.375
|
%
|
|
|
05/01/16
|
|
Acquisition Mortgage Loan XVIII
|
|
|
6,914
|
(3)
|
|
|
7,091
|
(3)
|
|
|
40
|
|
|
|
42
|
|
|
|
7.580
|
%
|
|
|
03/01/11
|
|
Acquisition Mortgage Loan XIX
|
|
|
1,993
|
(3)
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
7.320
|
%
|
|
|
06/01/14
|
|
Acquisition Mortgage Loan XX
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
(5)
|
|
|
N/A
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
52,488
|
|
|
$
|
57,309
|
|
|
$
|
294
|
|
|
$
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt,
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
$
|
875
|
|
|
$
|
875
|
|
|
|
7.000
|
%
|
|
|
12/01/06
|
|
2007 Notes
|
|
|
149,995
|
(6)
|
|
|
149,992
|
(6)
|
|
|
1,456
|
|
|
|
1,456
|
|
|
|
7.600
|
%
|
|
|
05/15/07
|
|
2016 Notes
|
|
|
199,338
|
(6)
|
|
|
|
|
|
|
5,462
|
|
|
|
|
|
|
|
5.750
|
%
|
|
|
01/15/16
|
|
2017 Notes
|
|
|
99,890
|
(6)
|
|
|
99,886
|
(6)
|
|
|
625
|
|
|
|
625
|
|
|
|
7.500
|
%
|
|
|
12/01/17
|
|
2027 Notes
|
|
|
15,055
|
(6)
|
|
|
15,054
|
(6)
|
|
|
138
|
|
|
|
138
|
|
|
|
7.150
|
%
|
|
|
05/15/27
|
|
2028 Notes
|
|
|
199,827
|
(6)
|
|
|
199,823
|
(6)
|
|
|
7,009
|
|
|
|
7,009
|
|
|
|
7.600
|
%
|
|
|
07/15/28
|
|
2011 Notes
|
|
|
199,715
|
(6)
|
|
|
199,685
|
(6)
|
|
|
4,343
|
|
|
|
4,343
|
|
|
|
7.375
|
%
|
|
|
03/15/11
|
|
2012 Notes
|
|
|
199,201
|
(6)
|
|
|
199,132
|
(6)
|
|
|
2,903
|
|
|
|
2,903
|
|
|
|
6.875
|
%
|
|
|
04/15/12
|
|
2032 Notes
|
|
|
49,424
|
(6)
|
|
|
49,413
|
(6)
|
|
|
818
|
|
|
|
818
|
|
|
|
7.750
|
%
|
|
|
04/15/32
|
|
2009 Notes
|
|
|
124,871
|
(6)
|
|
|
124,849
|
(6)
|
|
|
292
|
|
|
|
292
|
|
|
|
5.250
|
%
|
|
|
06/15/09
|
|
2014 Notes
|
|
|
111,636
|
(6)
|
|
|
111,059
|
(6)
|
|
|
669
|
|
|
|
669
|
|
|
|
6.420
|
%
|
|
|
06/01/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,498,952
|
|
|
$
|
1,298,893
|
|
|
$
|
24,590
|
|
|
$
|
19,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Unsecured Line of Credit I
|
|
$
|
268,000
|
|
|
$
|
332,500
|
|
|
$
|
1,581
|
|
|
$
|
1,833
|
|
|
|
5.867
|
%
|
|
|
09/28/08
|
|
2005 Unsecured Line of
Credit II
|
|
|
|
(7)
|
|
|
125,000
|
|
|
|
|
(7)
|
|
|
232
|
|
|
|
N/A
|
(7)
|
|
|
N/A
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
268,000
|
|
|
$
|
457,500
|
|
|
$
|
1,581
|
|
|
$
|
2,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On June 30, 2006, the Company paid off and retired the
Acquisition Mortgage Loan IV. |
11
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(2) |
|
On March 1, 2006, the Company paid off and retired the
Acquisition Mortgage Loan V. |
|
(3) |
|
At June 30, 2006, the Acquisition Mortgage Loan X, the
Acquisition Mortgage Loan XII, the Acquisition Mortgage Loan
XIV, the Acquisition Mortgage Loan XVI, the Acquisition Mortgage
Loan XVII, the Acquisition Mortgage Loan XVIII, and the
Acquisition Mortgage Loan XIX includes unamortized premiums of
$1,718, $209, $372, $22, $234, $613, and $111, respectively. At
December 31, 2005, the Acquisition Mortgage Loan V,
the Acquisition Mortgage Loan X, the Acquisition Mortgage Loan
XII, the Acquisition Mortgage Loan XIV, the Acquisition Mortgage
Loan XVI, the Acquisition Mortgage Loan XVII, the Acquisition
Mortgage Loan XVIII, includes unamortized premiums of $24,
$1,909, $228, $432, $26, $246, and $681, respectively. |
|
(4) |
|
On January 12, 2006, the Company paid off and retired the
Acquisition Mortgage Loan XV. |
|
(5) |
|
On June 5, 2006, the Company paid off and retired the
Acquisition Mortgage Loan XX. |
|
(6) |
|
At June 30, 2006, the 2007 Notes, 2016 Notes, 2017 Notes,
2027 Notes, 2028 Notes, 2011 Notes, 2012 Notes, 2032 Notes, 2009
Notes and the 2014 Notes are net of unamortized discounts of $5,
$662, $110, $15, $173, $285, $799, $576, $129 and $13,365
respectively. At December 31, 2005, the 2007 Notes, 2017
Notes, 2027 Notes, 2028 Notes, 2011 Notes, 2012 Notes, 2032
Notes, 2009 Notes and the 2014 Notes are net of unamortized
discounts of $8, $114, $16, $177, $315, $868, $587, $151 and
$13,941, respectively. |
|
(7) |
|
On January 10, 2006, the Company, through the Operating
Partnership, paid off and retired the 2005 Unsecured Line of
Credit II. |
The following is a schedule of the stated maturities and
scheduled principal payments of the mortgage loans, senior
unsecured debt and unsecured line of credit, exclusive of
premiums and discounts, for the next five years ending
December 31, and thereafter:
|
|
|
|
|
|
|
Amount
|
|
|
Remainder of 2006
|
|
$
|
151,035
|
|
2007
|
|
|
152,339
|
|
2008
|
|
|
270,533
|
|
2009
|
|
|
132,411
|
|
2010
|
|
|
15,472
|
|
Thereafter
|
|
|
1,110,488
|
|
|
|
|
|
|
Total
|
|
$
|
1,832,278
|
|
|
|
|
|
|
Derivatives:
In April 2006, the Company, through the Operating Partnership,
entered into four interest rate protection agreements which
fixed the interest rate on forecasted offerings of unsecured
debt which it designated as cash flow hedges. Two of the
interest rate protection agreements each have a notional value
of $72,900 and are effective from November 28, 2006 through
November 28, 2016. The interest rate protection agreements
fixed the LIBOR rate at 5.537%. The third and fourth interest
rate protection agreements each have a notional value of
$74,750, are effective from May 10, 2007 through
May 10, 2012, and fixed the LIBOR rate at 5.420%.
In October 2005, the Company, through First Industrial
Development Services, Inc., entered into an interest rate
protection agreement which hedged the change in value of a build
to suit development project the Company was constructing. This
interest rate protection agreement had a notional value of
$50,000, was based on the three Month LIBOR rate, had a strike
rate of 4.8675%, had an effective date of December 30, 2005
and a termination date of December 30, 2010. Per Financial
Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities fair value
and cash flow hedge accounting for hedges of non-financial
assets and liabilities is limited to hedges of the risk of
changes in the market price of the entire hedged item because
changes in the price of an ingredient or component of a
non-financial item generally do not have a predictable,
separately measurable effect
12
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
on the price of the item. Since the interest rate protection
agreement is hedging a component of the change in value of the
build to suit development, the interest rate protection
agreement does not qualify for hedge accounting and the change
in value of the interest rate protection agreement will be
recognized immediately in net income as opposed to other
comprehensive income. On January 5, 2006, the Company,
through First Industrial Development Services, Inc., settled the
interest rate protection agreement for a payment of $186.
In December 2005, the Company, through the Operating
Partnership, entered into three interest rate protection
agreements which fixed the interest rate on a forecasted
offering of unsecured debt which it designated as cash flow
hedges. Two of the interest rate protection agreements each had
a notional value of $48,700 and were effective from
December 30, 2005 through December 30, 2015. The
interest rate protection agreements fixed the LIBOR rate at
5.066% and 5.067%. The third interest rate protection agreement
had a notional value of $48,700, was effective from
January 19, 2006 through January 19, 2016, and fixed
the LIBOR rate at 4.992%. The Company settled the three interest
rate protection agreements on January 9, 2006 for a payment
of approximately $1,729, which is included in other
comprehensive income. The settlement amount of the interest rate
protection agreements will be amortized over the life of the
2016 Notes as an adjustment to interest expense.
In conjunction with certain issuances of senior unsecured debt,
the Company entered into interest rate protection agreements to
fix the interest rate on anticipated offerings of senior
unsecured debt. In the next 12 months, the Company will
amortize approximately $1,053 into net income by decreasing
interest expense.
On January 13, 2006, the Company issued 6,000,000
Depositary Shares, each representing 1/10,000th of a share
of the Companys 7.25%, $.01 par value, Series J
Flexible Cumulative Redeemable Preferred Stock (the
Series J Preferred Stock), at an initial
offering price of $25.00 per Depositary Share. Dividends on
the Series J Preferred Stock, represented by the Depositary
Shares, are cumulative from the date of initial issuance and are
payable quarterly in arrears. However, during any period that
both (i) the depositary shares are not listed on the NYSE
or AMEX, or quoted on NASDAQ, and (ii) the Company is not
subject to the reporting requirements of the Exchange Act, but
the preferred shares are outstanding, the Company will increase
the dividend on the preferred shares to a rate of 8.25% of the
liquidation preference per year. However, if at any time both
(i) the depositary shares cease to be listed on the NYSE or
the AMEX, or quoted on NASDAQ, and (ii) the Company ceases
to be subject to the reporting requirements of the Exchange Act,
but the preferred shares are outstanding, then the preferred
shares will be redeemable, in whole but not in part at the
Companys option, within 90 days of the date upon
which the depositary shares cease to be listed and the Company
ceases to be subject to such reporting requirements, at a
redemption price equivalent to $25.00 per Depositary Share,
plus all accrued and unpaid dividends to the date of redemption.
With respect to the payment of dividends and amounts upon
liquidation, dissolution or winding up, the Series J
Preferred Stock ranks senior to payments on the Companys
Common Stock and pari passu with the Companys
Series C Preferred Stock, Series F Preferred Stock,
and Series G Preferred Stock. The Series J Preferred
Stock is not redeemable prior to January 15, 2011. On or
after January 15, 2011, the Series J Preferred Stock
is redeemable for cash at the option of the Company, in whole or
in part, at a redemption price equivalent to $25.00 per
Depositary Share, or $150,000 in the aggregate, plus dividends
accrued and unpaid to the redemption date. The Series J
Preferred Stock has no stated maturity and is not convertible
into any other securities of the Company.
On November 8, 2005 and November 18, 2005, the Company
issued 600 and 150 Shares, respectively, of $.01 par
value, Series I Flexible Cumulative Redeemable Preferred
Stock, (the Series I Preferred Stock), in a
private placement at an initial offering price of
$250,000 per share for an aggregate initial offering price
of $187,500. The Company redeemed the Series I Preferred
Stock on January 13, 2006 for $242,875.00 per share,
and paid a prorated first quarter dividend of $470.667 per
share, totaling approximately $353. In accordance with
EITF D-42, due to the redemption of the Series I
Preferred Stock, the difference between the redemption cost and
the carrying value of the Series I Preferred Stock of
approximately $672 is reflected as a deduction from net income
13
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to arrive at net income available to common stockholders in
determining earnings per share for the six months ended
June 30, 2006.
Dividend/Distributions:
The following table summarizes dividends/distributions accrued
during the six months ended June 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2006
|
|
|
|
Dividend/
|
|
|
Total
|
|
|
|
Distribution
|
|
|
Dividend/
|
|
|
|
per Share/Unit
|
|
|
Distribution
|
|
|
Common Stock/Operating Partnership
Units
|
|
$
|
1.40
|
|
|
$
|
72,053
|
|
Series C Preferred Stock
|
|
$
|
107.82
|
|
|
$
|
2,156
|
|
Series F Preferred Stock
|
|
$
|
3,118.00
|
|
|
$
|
1,559
|
|
Series G Preferred Stock
|
|
$
|
3,618.00
|
|
|
$
|
905
|
|
Series I Preferred Stock
|
|
$
|
470.67
|
|
|
$
|
353
|
|
Series J Preferred Stock
|
|
$
|
8,458.33
|
|
|
$
|
5,075
|
|
Non-Qualified
Employee Stock Options:
During the six months ended June 30, 2006, certain
employees of the Company exercised 52,667 non-qualified employee
stock options. Net proceeds to the Company were approximately
$1,520.
Restricted
Stock:
During the six months ended June 30, 2006, the Company
awarded 303,142 shares of restricted common stock to
certain employees and 2,313 shares of restricted common
stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $11,614 on the date of
grant. The restricted common stock generally vests over periods
from one to three years. Compensation expense will be charged to
earnings over the respective vesting period for the shares
expected to vest.
Units:
During the six months ended June 30, 2006, the Operating
Partnership issued 31,473 Units having an aggregate market value
of approximately $1,288 in exchange for property.
|
|
6.
|
Acquisition
of Real Estate
|
During the six months ended June 30, 2006, the Company
acquired 52 industrial properties comprising approximately
4.5 million square feet of GLA and several land parcels.
The purchase price of these acquisitions totaled approximately
$251,276, excluding costs incurred in conjunction with the
acquisition of the industrial properties and land parcels.
|
|
7.
|
Sale of
Real Estate, Real Estate Held for Sale and Discontinued
Operations
|
During the six months ended June 30, 2006, the Company sold
66 industrial properties comprising approximately
8.4 million square feet of GLA and several land parcels.
Gross proceeds from the sales of the 66 industrial properties
and several land parcels were approximately $498,754. The gain
on sale of real estate, net of income taxes was approximately
$86,558. The 66 sold industrial properties meet the criteria
established by FAS 144 to be included in discontinued
operations. Therefore, in accordance with FAS 144, the
results of operations and gain on sale of real estate, net of
income taxes for the 66 sold industrial properties are included
in discontinued operations.
14
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The results of operations and gain on sale of real estate, net
of income taxes for the several land parcels that do not meet
the criteria established by FAS 144 are included in
continuing operations.
At June 30, 2006, the Company had 16 industrial properties
comprising approximately 2.1 million square feet of GLA
held for sale. In accordance with FAS 144, the results of
operations of the 16 industrial properties held for sale at
June 30, 2006 are included in discontinued operations.
There can be no assurance that such industrial properties held
for sale will be sold.
Income from discontinued operations for the six months ended
June 30, 2006 reflects the results of operations and gain
on sale of real estate, net of income taxes of 66 industrial
properties that were sold during the six months ended
June 30, 2006 as well as the results of operations of 16
industrial properties held for sale at June 30, 2006.
Income from discontinued operations for the six months ended
June 30, 2005 reflects the results of operations of 66
industrial properties that were sold during the six months ended
June 30, 2006, 86 industrial properties that were sold
during the year ended December 31, 2005 and 16 industrial
properties identified as held for sale at June 30, 2006.
The following table discloses certain information regarding the
industrial properties included in discontinued operations by the
Company for the three and six months ended June 30, 2006
and June 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Total Revenues
|
|
$
|
4,776
|
|
|
$
|
13,947
|
|
|
$
|
12,250
|
|
|
$
|
27,940
|
|
Operating Expenses
|
|
|
(1,330
|
)
|
|
|
(5,114
|
)
|
|
|
(3,693
|
)
|
|
|
(10,015
|
)
|
Interest Expense
|
|
|
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
(344
|
)
|
Depreciation and Amortization
|
|
|
(878
|
)
|
|
|
(4,235
|
)
|
|
|
(3,798
|
)
|
|
|
(8,773
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(361
|
)
|
|
|
(572
|
)
|
|
|
(1,187
|
)
|
|
|
(1,688
|
)
|
Gain on Sale of Real Estate
|
|
|
51,953
|
|
|
|
33,690
|
|
|
|
105,532
|
|
|
|
47,186
|
|
Provision for Income Taxes
Allocable to Gain on Sale of Real Estate
|
|
|
(7,484
|
)
|
|
|
(2,584
|
)
|
|
|
(21,946
|
)
|
|
|
(5,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
46,676
|
|
|
$
|
34,960
|
|
|
$
|
87,158
|
|
|
$
|
48,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
Supplemental
Information to Statements of Cash Flows
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Interest paid, net of capitalized
interest
|
|
$
|
54,283
|
|
|
$
|
51,569
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized
|
|
$
|
3,165
|
|
|
$
|
1,482
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of noncash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Distribution payable on common
stock/Units
|
|
$
|
36,038
|
|
|
$
|
34,485
|
|
|
|
|
|
|
|
|
|
|
Distribution payable on preferred
stock
|
|
$
|
1,232
|
|
|
$
|
1,232
|
|
|
|
|
|
|
|
|
|
|
15
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Exchange of units for common
shares:
|
|
|
|
|
|
|
|
|
Minority interest
|
|
$
|
(1,959
|
)
|
|
$
|
(1,085
|
)
|
Common Stock
|
|
|
1
|
|
|
|
1
|
|
Additional
paid-in-capital
|
|
|
1,958
|
|
|
|
1,084
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
In conjunction with the property
and land acquisitions, the following assets and liabilities were
assumed and units issued:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
$
|
(1,505
|
)
|
|
$
|
(1,823
|
)
|
|
|
|
|
|
|
|
|
|
Issuance of Operating Partnership
Units
|
|
$
|
(1,288
|
)
|
|
$
|
(1,507
|
)
|
|
|
|
|
|
|
|
|
|
Mortgage Debt
|
|
$
|
(6,995
|
)
|
|
$
|
(11,545
|
)
|
|
|
|
|
|
|
|
|
|
Property acquisition and write-off
of a mortgage loan receivable
|
|
$
|
|
|
|
$
|
3,870
|
|
|
|
|
|
|
|
|
|
|
Write-off of retired assets
|
|
$
|
13,732
|
|
|
$
|
22,151
|
|
|
|
|
|
|
|
|
|
|
In conjunction with certain
property sales, the Company provided seller financing:
|
|
|
|
|
|
|
|
|
Notes receivable
|
|
$
|
11,200
|
|
|
$
|
21,443
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Earnings
Per Share (EPS)
|
The computation of basic and diluted EPS is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(9,654
|
)
|
|
$
|
(10,187
|
)
|
|
$
|
(23,086
|
)
|
|
$
|
(18,048
|
)
|
Gain on Sale of Real Estate, Net of
Minority Interest and Income Taxes
|
|
|
1,345
|
|
|
|
1,552
|
|
|
|
2,583
|
|
|
|
13,677
|
|
Less: Preferred Stock Dividends
|
|
|
(5,029
|
)
|
|
|
(2,310
|
)
|
|
|
(10,048
|
)
|
|
|
(4,620
|
)
|
Less: Redemption of Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority
Interest For Basic and Diluted EPS
|
|
|
(13,338
|
)
|
|
|
(10,945
|
)
|
|
|
(31,223
|
)
|
|
|
(8,991
|
)
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
|
40,603
|
|
|
|
30,388
|
|
|
|
75,740
|
|
|
|
42,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders For Basic and Diluted EPS
|
|
$
|
27,265
|
|
|
$
|
19,443
|
|
|
$
|
44,517
|
|
|
$
|
33,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Basic
|
|
|
44,006,081
|
|
|
|
42,285,046
|
|
|
|
43,946,946
|
|
|
|
42,221,819
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and Director Common Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and Director Shares of
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Diluted
|
|
|
44,006,081
|
|
|
|
42,285,046
|
|
|
|
43,946,946
|
|
|
|
42,221,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority Interest
|
|
$
|
(0.30
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
$
|
0.92
|
|
|
$
|
0.72
|
|
|
$
|
1.72
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.62
|
|
|
$
|
0.46
|
|
|
$
|
1.01
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority Interest
|
|
$
|
(0.30
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.71
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
$
|
0.92
|
|
|
$
|
0.72
|
|
|
$
|
1.72
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.62
|
|
|
$
|
0.46
|
|
|
$
|
1.01
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares diluted are the same as
weighted average shares basic for the three and
six months June 30, 2006 and June 30, 2005 as the
dilutive effect of stock options and restricted stock was
excluded because its inclusion would have been anti-dilutive to
the loss from continuing operations available to common
stockholders, net of minority interest. If the Company had
income from continuing operations available to common
stockholders, net of minority interest, the dilutive stock
options and restricted stock that would be added to the
denominator of weighted average shares-basic would have been
156,132 and 245,094, respectively for the three months ended
June 30, 2006 and 2005 and 177,803 and 269,598,
respectively for the six months ended June 30, 2006 and
2005. Additionally, unvested restricted stock shares aggregating
176,001 and 185,034, respectively for the three and six months
ended June 30, 2006 and 2005 are excluded from the
denominator because such shares are anti-dilutive for the
periods presented.
|
|
10.
|
Employee
Benefit Plans
|
The Company maintains three stock incentive plans (the
Stock Incentive Plans) which are administered by the
Compensation Committee of the Board of Directors. There are
approximately 10.0 million shares reserved under the Stock
Incentive Plans. Only officers, other employees of the Company,
its Independent Directors and its affiliates generally are
eligible to participate in the Stock Incentive Plans.
The Stock Incentive Plans authorize (i) the grant of stock
options that qualify as incentive stock options under
Section 422 of the Code, (ii) the grant of stock
options that do not so qualify, (iii) restricted stock
awards, (iv) performance share awards and (v) dividend
equivalent rights. The exercise price of the stock options is
determined by the Compensation Committee. Special provisions
apply to awards granted under the Stock Incentive
17
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Plans in the event of a change in control in the Company. As of
June 30, 2006, stock options and restricted stock covering
1.2 million shares were outstanding and 2.3 million
shares were available under the Stock Incentive Plans. At
June 30, 2006 all outstanding options are vested.
Stock option transactions for the six months ended June 30,
2006 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Exercise
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Price
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
per Share
|
|
|
Value
|
|
|
Outstanding at December 31,
2005
|
|
|
546,723
|
|
|
$
|
31.27
|
|
|
$
|
22.75-$33.15
|
|
|
|
|
|
Exercised
|
|
|
(52,667
|
)
|
|
$
|
29.79
|
|
|
$
|
22.75-$33.15
|
|
|
$
|
623
|
|
Expired or Terminated
|
|
|
(38,967
|
)
|
|
$
|
30.88
|
|
|
$
|
27.25-$33.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2006
|
|
|
455,089
|
|
|
$
|
31.47
|
|
|
$
|
25.13-$33.15
|
|
|
$
|
2,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes currently outstanding and
exercisable options as of June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Average
|
|
|
|
and
|
|
|
Remaining
|
|
|
Exercise
|
|
Range of Exercise Price
|
|
Exercisable
|
|
|
Contractual Years
|
|
|
Price
|
|
|
$25.13-$30.00
|
|
|
61,070
|
|
|
|
3.64
|
|
|
$
|
28.43
|
|
$30.38-$33.15
|
|
|
394,019
|
|
|
|
4.25
|
|
|
$
|
31.94
|
|
The Company has granted restricted stock awards to officers,
certain other employees, and non-employee members of the Board
of Directors of the Company, which allow the holders to each
receive a certain amount of shares of the Companys common
stock generally over a one to three-year vesting period and
generally based on time and service, of which
773,950 shares were outstanding at June 30, 2006.
Restricted stock transactions for the six months ended
June 30, 2006 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Grant Date Fair Value
|
|
|
Outstanding at December 31,
2005
|
|
|
700,023
|
|
|
$
|
34.23
|
|
Issued
|
|
|
305,455
|
|
|
$
|
38.02
|
|
Vested
|
|
|
(209,865
|
)
|
|
$
|
36.71
|
|
Forfeited
|
|
|
(21,663
|
)
|
|
$
|
34.11
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2006
|
|
|
773,950
|
|
|
$
|
35.41
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Commitments
and Contingencies
|
In the normal course of business, the Company is involved in
legal actions arising from the ownership of its properties. In
managements 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 certain
industrial properties totaling approximately 3.7 million
square feet of GLA. The estimated total construction costs are
approximately $131.5 million. Of this amount, approximately
$32.7 million remains to be funded. There can be no
assurance the actual completion cost will not exceed the
estimated completion cost stated above.
At June 30, 2006, the Company had 15 letters of credit
outstanding in the aggregate amount of $5,057. These letters of
credit expire between July, 2006 and June, 2007.
18
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
From July 1, 2006 to July 28, 2006, the Company
acquired 15 industrial properties and a land parcel for a
purchase price of approximately $158,460, excluding costs
incurred in conjunction with the acquisition of these industrial
properties. The Company also sold four industrial properties for
approximately $19,350 of gross proceeds.
On July 17, 2006, the Company and the Operating Partnership
paid a second quarter 2006 dividend/distribution of
$.70 per common share/Unit, totaling approximately $36,038.
On July 25, 2006, the Company, through a wholly-owned
limited liability company in which a wholly-owned company of the
Operating Partnership is the sole member, entered into a joint
venture arrangement with an institutional investor to invest in
land and vertical development (the July 2006 Joint
Venture). The Company, through a wholly-owned limited
liability company in which a wholly-owned company of the
Operating Partnership is the sole member, owns a ten percent
equity interest in the July 2006 Joint Venture.
19
|
|
Item 2.
|
Managements
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 Exchange Act). 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 Companys 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 financing, interest rates, competition,
supply and demand for industrial properties in the
Companys current and proposed market areas, potential
environmental liabilities, slippage in development or
lease-up
schedules, tenant credit risks,
higher-than-expected
costs and changes in 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 Companys financial results, is
included herein in Item 1A, Risk Factors, and
in the Companys other filings with the Securities and
Exchange Commission.
GENERAL
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 Code). The Companys operations are
conducted primarily through First Industrial, L.P. (the
Operating Partnership) of which the Company is the
sole general partner with an approximate 87.0% ownership
interest at June 30, 2006. Minority interest in the Company
at June 30, 2006 represents the approximate 13.0% aggregate
partnership interest in the Operating Partnership held by the
limited partners thereof.
As of June 30, 2006, the Company owned 946 industrial
properties (inclusive of developments in process) located in
28 states and one province in Canada, containing an
aggregate of approximately 77.5 million square feet of
gross leasable area (GLA). Of the 946 industrial
properties owned by the Company, 759 are held by the Operating
Partnership and limited liability companies of which the
Operating Partnership is the sole member, 94 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 and 93 are held by an entity wholly-owned by
the Operating Partnership.
In March, 2006, the Company, through separate wholly-owned
limited liability companies of which the Operating Partnership
is the sole member, entered into a co-investment arrangement
with an institutional investor to invest in industrial
properties (the March 2006 Co-Investment Program).
The Company, through separate wholly-owned limited liability
companies of which the Operating Partnership is the sole member,
owns a 15 percent equity interest in and provides property
management, leasing, disposition and portfolio management
services to the March 2006 Co-Investment Program.
The Company, through separate, wholly-owned limited liability
companies of which the Operating Partnership or First Industrial
Development Services, Inc. is the sole member, also owns
minority equity interests in, and provides various services to,
four other joint ventures which invest in industrial properties
(the September 1998 Joint Venture, the May
2003 Joint Venture, the March 2005 Joint
Venture and the September 2005 Joint
20
Venture; together with the March 2006 Co-Investment
Program, the Joint Ventures). The operating data of
the Joint Ventures is not consolidated with that of the Company
as presented herein.
MANAGEMENTS
OVERVIEW
Management believes the Companys financial condition and
results of operations are, primarily, a function of the
Companys and its Joint Ventures performance in four
key areas: leasing of industrial properties, acquisition and
development of additional industrial properties, redeployment of
internal capital and access to external capital.
The Company generates revenue primarily from rental income and
tenant recoveries from long-term (generally three to six years)
operating leases of its and its joint ventures industrial
properties. Such revenue is offset by certain property specific
operating expenses, such as real estate taxes, repairs and
maintenance, property management, utilities and insurance
expenses, along with certain other costs and expenses, such as
depreciation and amortization costs and general and
administrative and interest expenses. The Companys revenue
growth is dependent, in part, on its ability to
(i) increase rental income, through increasing either or
both occupancy rates and rental rates at the Companys and
its joint ventures properties, (ii) maximize tenant
recoveries and (iii) minimize operating and certain other
expenses. Revenues generated from rental income and tenant
recoveries are a significant source of funds, in addition to
income generated from gains/losses on the sale of the
Companys and its joint ventures properties (as
discussed below), for the Companys distributions. The
leasing of property, in general, and occupancy rates, rental
rates, operating expenses and certain non-operating expenses, in
particular, are impacted, variously, by property specific,
market specific, general economic and other conditions, many of
which are beyond the control of the Company. The leasing of
property also entails various risks, including the risk of
tenant default. If the Company were unable to maintain or
increase occupancy rates and rental rates at the Companys
and its joint ventures properties or to maintain tenant
recoveries and operating and certain other expenses consistent
with historical levels and proportions, the Companys
revenue growth would be limited. Further, if a significant
number of the Companys and its joint ventures
tenants were unable to pay rent (including tenant recoveries) or
if the Company or its joint ventures were unable to rent their
properties on favorable terms, the Companys financial
condition, results of operations, cash flow and ability to pay
dividends on, and the market price of, the Companys
securities would be adversely affected.
The Companys revenue growth is also dependent, in part, on
its and its joint ventures ability to acquire existing,
and acquire and develop new, additional industrial properties on
favorable terms. The Company itself and through its various
joint ventures, continually seeks to acquire existing industrial
properties on favorable terms, and, when conditions permit, also
seeks to acquire and develop new industrial properties on
favorable terms. Existing properties, as they are acquired, and
acquired and developed properties, as they lease-up, generate
revenue from rental income, tenant recoveries and fees, income
from which, as discussed above, is a source of funds for the
Companys distributions. The acquisition and development of
properties is impacted, variously, by property specific, market
specific, general economic and other conditions, many of which
are beyond the control of the Company. The acquisition and
development of properties also entails various risks, including
the risk that the Companys and its joint ventures
investments may not perform as expected. For example, acquired
existing and acquired and developed new properties may not
sustain
and/or
achieve anticipated occupancy and rental rate levels. With
respect to acquired and developed new properties, the Company
may not be able to complete construction on schedule or within
budget, resulting in increased debt service expense and
construction costs and delays in leasing the properties. Also,
the Company and its joint ventures face significant competition
for attractive acquisition and development opportunities from
other well-capitalized real estate investors, including both
publicly-traded real estate investment trusts and private
investors. Further, as discussed below, the Company and its
joint ventures may not be able to finance the acquisition and
development opportunities they identify. If the Company and its
joint ventures were unable to acquire and develop sufficient
additional properties on favorable terms, or if such investments
did not perform as expected, the Companys revenue growth
would be limited and its financial condition, results of
operations, cash flow and ability to pay dividends on, and the
market price of, the Companys securities would be
adversely affected.
The Company also generates income from the sale of its and its
joint ventures properties (including existing buildings,
buildings which the Company or its joint ventures have developed
or re-developed on a merchant basis,
21
and land). The Company itself and through its various joint
ventures is continually engaged in, and its income growth is
dependent in part on, systematically redeploying capital from
properties and other assets with lower yield potential into
properties and other assets with higher yield potential. As part
of that process, the Company and its joint ventures sell, on an
ongoing basis, select stabilized properties or land or
properties offering lower potential returns relative to their
market value. The gain/loss on and fees from, the sale of such
properties are included in the Companys income and are a
significant source of funds, in addition to revenues generated
from rental income and tenant recoveries, for the Companys
distributions. Also, a significant portion of the Companys
proceeds from such sales is used to fund the acquisition of
existing, and the acquisition and development of new, industrial
properties. The sale of properties is impacted, variously, by
property specific, market specific, general economic and other
conditions, many of which are beyond the control of the Company.
The sale of properties also entails various risks, including
competition from other sellers and the availability of
attractive financing for potential buyers of the Companys
and its joint ventures properties. Further, the
Companys ability to sell properties is limited by safe
harbor rules applying to REITs under the Code which relate to
the number of properties that may be disposed of in a year,
their tax bases and the cost of improvements made to the
properties, along with other tests which enable a REIT to avoid
punitive taxation on the sale of assets. If the Company and its
joint ventures were unable to sell a sufficient number of
properties on favorable terms, the Companys income growth
would be limited and its financial condition, results of
operations, cash flow and ability to pay dividends on, and the
market price of, the Companys securities would be
adversely affected.
Currently, the Company utilizes a portion of the net sales
proceeds from property sales, borrowings under its unsecured
line of credit and proceeds from the issuance, when and as
warranted, of additional debt and equity securities to finance
acquisitions and developments and to fund its equity commitments
to its joint ventures. Access to external capital on favorable
terms plays a key role in the Companys financial condition
and results of operations, as it impacts the Companys cost
of capital and its ability and cost to refinance existing
indebtedness as it matures and to fund acquisitions,
developments and contributions to its joint ventures or through
the issuance, when and as warranted, of additional equity
securities. The Companys ability to access external
capital on favorable terms is dependent on various factors,
including general market conditions, interest rates, credit
ratings on the Companys capital stock and debt, the
markets perception of the Companys growth potential,
the Companys current and potential future earnings and
cash distributions and the market price of the Companys
capital stock. If the Company were unable to access external
capital on favorable terms, the Companys financial
condition, results of operations, cash flow and ability to pay
dividends on, and the market price of, the Companys
securities would be adversely affected.
RESULTS
OF OPERATIONS
Comparison
of Six Months Ended June 30, 2006 to Six Months Ended
June 30, 2005
The Companys net income available to common stockholders
was $44.5 million and $33.5 million for the six months
ended June 30, 2006 and 2005, respectively. Basic and
diluted net income available to common stockholders were
$1.01 per share for the six months ended June 30,
2006, and $0.79 per share for the six months ended
June 30, 2005.
The tables below summarize the Companys revenues, property
expenses and depreciation and other amortization by various
categories for the six months ended June 30, 2006 and
June 30, 2005. Same store properties are in service
properties owned prior to January 1, 2005. Acquired
properties are properties that were acquired subsequent to
December 31, 2004. Sold properties are properties that were
sold subsequent to December 31, 2004. Properties that are
not in service are properties that are under construction that
have not reached stabilized occupancy or were placed in service
after December 31, 2004 or acquisitions acquired prior to
January 1, 2005 that were not placed in service as of
December 31, 2004. These properties are placed in service
as they reach stabilized occupancy (generally defined as 90%
occupied). Other revenues are derived from the operations of the
Companys maintenance company, fees earned from the
Companys joint ventures, fees earned for developing
properties for third parties and other miscellaneous revenues.
Other expenses are derived from the operations of the
Companys maintenance company and other miscellaneous
regional expenses.
22
The Companys future financial condition and results of
operations, including rental revenues, may be impacted by the
future acquisition and sale of properties. The Companys
future revenues and expenses may vary materially from historical
rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
REVENUES ($ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
134,108
|
|
|
$
|
136,203
|
|
|
$
|
(2,095
|
)
|
|
|
(1.5
|
)%
|
Acquired Properties
|
|
|
37,776
|
|
|
|
2,349
|
|
|
|
35,427
|
|
|
|
1,508.2
|
%
|
Sold Properties
|
|
|
9,605
|
|
|
|
25,821
|
|
|
|
(16,216
|
)
|
|
|
(62.8
|
)%
|
Properties Not In Service
|
|
|
10,501
|
|
|
|
8,010
|
|
|
|
2,491
|
|
|
|
31.1
|
%
|
Other
|
|
|
15,134
|
|
|
|
7,224
|
|
|
|
7,910
|
|
|
|
109.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
207,124
|
|
|
$
|
179,607
|
|
|
$
|
27,517
|
|
|
|
15.3
|
%
|
Discontinued Operations
|
|
|
(12,250
|
)
|
|
|
(27,940
|
)
|
|
|
15,690
|
|
|
|
(56.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
194,874
|
|
|
$
|
151,667
|
|
|
$
|
43,207
|
|
|
|
28.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006 and June 30, 2005, the occupancy
rates of the Companys same store properties were 90.5% and
91.1%, respectively. Revenues from same store properties
decreased by $2.1 million due to a decrease in same store
property occupancy rates. Revenues from acquired properties
increased $35.4 million due to the 213 industrial
properties acquired subsequent to December 31, 2004
totaling approximately 24.6 million square feet of GLA.
Revenues from sold properties decreased $16.2 million due
to the 162 industrial properties sold subsequent to
December 31, 2004 totaling approximately 21.1 million
square feet of GLA partially offset by the revenues from the
build to suit development for sale. Revenues from properties not
in service increased by $2.5 million due to an increase in
properties placed in service during 2006 and 2005. Other
revenues increased by approximately $7.9 million due
primarily to an increase in joint venture fees partially offset
by a decrease in assignment fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
PROPERTY EXPENSES ($ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
45,363
|
|
|
$
|
44,884
|
|
|
$
|
479
|
|
|
|
1.1
|
%
|
Acquired Properties
|
|
|
9,716
|
|
|
|
663
|
|
|
|
9,053
|
|
|
|
1,365.5
|
%
|
Sold Properties
|
|
|
2,872
|
|
|
|
8,882
|
|
|
|
(6,010
|
)
|
|
|
(67.7
|
)%
|
Properties Not In Service
|
|
|
4,807
|
|
|
|
4,471
|
|
|
|
336
|
|
|
|
7.5
|
%
|
Other
|
|
|
7,569
|
|
|
|
3,986
|
|
|
|
3,583
|
|
|
|
89.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
70,327
|
|
|
$
|
62,886
|
|
|
$
|
7,441
|
|
|
|
11.8
|
%
|
Discontinued Operations
|
|
|
(3,693
|
)
|
|
|
(10,015
|
)
|
|
|
6,322
|
|
|
|
(63.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
66,634
|
|
|
$
|
52,871
|
|
|
$
|
13,763
|
|
|
|
26.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance, other
property related expenses and expenses from build to suit
development for sale. Property expenses from same store
properties remained relatively unchanged. Property expenses from
acquired properties increased by $9.1 million due to
properties acquired subsequent to December 31, 2004.
Property expenses from sold properties decreased by
$6.0 million due to properties sold subsequent to
December 31, 2004 partially offset by the expenses from the
build to suit development for sale. Property expenses from
properties not in service increased by $0.3 million due to
an increase in properties placed in service during 2006 and
2005. Other expense increased $3.6 million due primarily to
increases in employee compensation.
23
General and administrative expense increased by approximately
$12.4 million, or 52.7%, due primarily to increases in
employee compensation related to compensation for additional
employees as well as an increase in incentive compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
DEPRECIATION and OTHER
AMORTIZATION ($ in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
43,898
|
|
|
$
|
42,802
|
|
|
$
|
1,096
|
|
|
|
2.6
|
%
|
Acquired Properties
|
|
|
22,199
|
|
|
|
1,438
|
|
|
|
20,761
|
|
|
|
1,443.7
|
%
|
Sold Properties
|
|
|
2,560
|
|
|
|
8,246
|
|
|
|
(5,686
|
)
|
|
|
(69.0
|
)%
|
Properties Not In Service and Other
|
|
|
8,719
|
|
|
|
4,521
|
|
|
|
4,198
|
|
|
|
92.9
|
%
|
Corporate Furniture, Fixtures and
Equipment
|
|
|
864
|
|
|
|
659
|
|
|
|
205
|
|
|
|
31.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
78,240
|
|
|
$
|
57,666
|
|
|
$
|
20,574
|
|
|
|
35.7
|
%
|
Discontinued Operations
|
|
|
(3,798
|
)
|
|
|
(8,773
|
)
|
|
|
4,975
|
|
|
|
(56.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other
Amortization
|
|
$
|
74,442
|
|
|
$
|
48,893
|
|
|
$
|
25,549
|
|
|
|
52.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
remained relatively unchanged. Depreciation and other
amortization from acquired properties increased by
$20.8 million due to properties acquired subsequent to
December 31, 2004. Depreciation and other amortization from
sold properties decreased by $5.7 million due to properties
sold subsequent to December 31, 2004. Depreciation and
other amortization for properties not in service and other
increased by $4.2 million due primarily to accelerated
depreciation on one property in Columbus, OH which was razed
during the six months ended June 30, 2006.
Interest income remained relatively unchanged.
Interest expense increased by approximately $7.5 million
primarily due to an increase in the weighted average debt
balance outstanding for the six months ended June 30, 2006
($1,854.1 million), as compared to the six months ended
June 30, 2005 ($1,606.1 million), as well as an
increase in the weighted average interest rate for the six
months ended June 30, 2006 (6.79%), as compared to the six
months ended June 30, 2005 (6.72%) partially offset by an
increase in capitalized interest for the six months ended
June 30, 2006 as compared to the six months ended
June 30, 2005, due to an increase in development activities.
Amortization of deferred financing costs increased by
$0.2 million, or 20.0% due primarily to financing fees
incurred associated with the amendment and restatement of the
Companys 2005 Unsecured Line of Credit I in
August 2005 and the issuance of $200 million of senior
unsecured debt (the 2016 Notes) in January 2006.
In October 2005, the Company, through First Industrial
Development Services, Inc., entered into an interest rate
protection agreement which hedged the change in value of a build
to suit development project the Company was constructing. On
January 5, 2006, the Company, through First Industrial
Development Services, Inc., settled the interest rate protection
agreement for a payment of $0.2 million.
The Company recognized a $0.5 million loss during the six
months ended June 30, 2005 on its
mark-to-market
of an interest rate protection agreement that was entered into
in January 2005 in order to hedge the change in value of a build
to suit development project the Company through First Industrial
Development Services, Inc., was constructing.
Equity in income of joint ventures increased by
$7.5 million primarily due to the Companys economic
share of the gains and earn outs on property sales from the
March 2005 Joint Venture and the September 2005 Joint Venture
during the six months ended June 30, 2006.
Income tax benefit increased by $1.8 million due primarily
to an increase in general and administrative expense and
depreciation expense incurred during the six months ended
June 30, 2006 compared to the six months ended
June 30, 2005 within the Companys taxable REIT
subsidiary associated with additional investment activity. The
increase in expense is partially offset by an increase in income
related to the Companys economic share of the
24
gains and earn outs on property sales from the March 2005 Joint
Venture and the September 2005 Joint Venture and fees earned
from the Joint Ventures, recognized during the six months ended
June 30, 2006 compared to the six months ended
June 30, 2005 associated with additional activity in the
Joint Ventures, in which the Companys taxable REIT
subsidiary has equity interests in.
The following table summarizes certain information regarding the
industrial properties included in discontinued operations by the
Company for the six months ended June 30, 2006 and
June 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
12,250
|
|
|
$
|
27,940
|
|
Operating Expenses
|
|
|
(3,693
|
)
|
|
|
(10,015
|
)
|
Interest Expense
|
|
|
|
|
|
|
(344
|
)
|
Depreciation and Amortization
|
|
|
(3,798
|
)
|
|
|
(8,773
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(1,187
|
)
|
|
|
(1,688
|
)
|
Gain on Sale of Real Estate
|
|
|
105,532
|
|
|
|
47,186
|
|
Provision for Income Taxes
Allocable to Gain on Sale
|
|
|
(21,946
|
)
|
|
|
(5,383
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
87,158
|
|
|
$
|
48,923
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations (net of income taxes) for
the six months ended June 30, 2006 reflects the results of
operations and gain on sale of real estate, net of income taxes,
relating to 66 industrial properties that were sold during the
six months ended June 30, 2006 and the results of
operations of 16 properties that were identified as held for
sale at June 30, 2006.
Income from discontinued operations (net of income taxes) for
the six months ended June 30, 2005 reflects the results of
operations and gain on sale of real estate, net of income taxes,
relating to 66 industrial properties that were sold during the
six months ended June 30, 2006, 86 industrial properties
that were sold during the year ended December 31, 2005 and
16 industrial properties identified as held for sale at
June 30, 2006.
The $3.0 million gain on sale of real estate, net of income
taxes for the six months ended June 30, 2006 resulted from
the sale of several land parcels that do not meet the criteria
established by FAS 144 for inclusion in discontinued
operations. The $15.7 million gain on sale of real estate,
net of income taxes for the six months ended June 30, 2005
resulted from the sale of nine industrial properties and several
land parcels that do not meet the criteria established by
FAS 144 for inclusion in discontinued operations.
Comparison
of Three Months Ended June 30, 2006 to Three Months Ended
June 30, 2005
The Companys net income available to common stockholders
was $27.3 million and $19.4 million for the three
months ended June 30, 2006 and 2005, respectively. Basic
and diluted net income available to common stockholders were
$0.62 per share for the three months ended June 30,
2006, and $0.46 per share for the three months ended
June 30, 2005.
The tables below summarize the Companys revenues, property
expenses and depreciation and other amortization by various
categories for the three months ended June 30, 2006 and
June 30, 2005. Same store properties are in service
properties owned prior to April 1, 2005. Acquired
properties are properties that were acquired subsequent to
March 31, 2005. Sold properties are properties that were
sold subsequent to March 31, 2005. Properties that are not
in service are properties that are under construction that have
not reached stabilized occupancy or were placed in service after
March 31, 2005 or acquisitions acquired prior to
April 1, 2005 that were not placed in service as of
March 31, 2005. These properties are placed in service as
they reach stabilized occupancy (generally defined as 90%
occupied). Other revenues are derived from the operations of the
Companys maintenance company, fees earned from the
Companys joint ventures, fees earned for developing
properties for third parties and other miscellaneous revenues.
Other expenses are derived from the operations of the
Companys maintenance company and other miscellaneous
regional expenses.
25
The Companys future financial condition and results of
operations, including rental revenues, may be impacted by the
future acquisition and sale of properties. The Companys
future revenues and expenses may vary materially from historical
rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
REVENUES ($ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
71,261
|
|
|
$
|
70,551
|
|
|
$
|
710
|
|
|
|
1.0
|
%
|
Acquired Properties
|
|
|
19,336
|
|
|
|
412
|
|
|
|
18,924
|
|
|
|
4,593.2
|
%
|
Sold Properties
|
|
|
3,099
|
|
|
|
12,486
|
|
|
|
(9,387
|
)
|
|
|
(75.2
|
)%
|
Properties Not In Service
|
|
|
2,580
|
|
|
|
2,378
|
|
|
|
202
|
|
|
|
8.5
|
%
|
Other
|
|
|
8,997
|
|
|
|
3,483
|
|
|
|
5,514
|
|
|
|
158.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,273
|
|
|
$
|
89,310
|
|
|
$
|
15,963
|
|
|
|
17.9
|
%
|
Discontinued Operations
|
|
|
(4,776
|
)
|
|
|
(13,947
|
)
|
|
|
9,171
|
|
|
|
(65.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
100,497
|
|
|
$
|
75,363
|
|
|
$
|
25,134
|
|
|
|
33.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2006 and June 30, 2005, the occupancy
rates of the Companys same store properties were 90.7% and
90.9%, respectively. Revenues from same store properties
remained relatively unchanged. Revenues from acquired properties
increased $18.9 million due to the 192 industrial
properties acquired subsequent to March 31, 2005 totaling
approximately 21.6 million square feet of GLA. Revenues
from sold properties decreased $9.4 million due to the 142
industrial properties sold subsequent to March 31, 2005
totaling approximately 17.9 million square feet of GLA.
Revenues from properties not in service increased by
$0.2 million due to an increase in properties placed in
service during 2006 and 2005. Other revenues increased by
approximately $5.5 million due primarily to an increase in
joint venture fees partially offset by a decrease in assignment
fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
PROPERTY EXPENSES ($ in
000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
22,635
|
|
|
$
|
22,407
|
|
|
$
|
228
|
|
|
|
1.0
|
%
|
Acquired Properties
|
|
|
5,008
|
|
|
|
113
|
|
|
|
4,895
|
|
|
|
4,331.9
|
%
|
Sold Properties
|
|
|
781
|
|
|
|
4,195
|
|
|
|
(3,414
|
)
|
|
|
(81.4
|
)%
|
Properties Not In Service
|
|
|
1,467
|
|
|
|
1,973
|
|
|
|
(506
|
)
|
|
|
(25.6
|
)%
|
Other
|
|
|
4,049
|
|
|
|
2,368
|
|
|
|
1,681
|
|
|
|
71.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,940
|
|
|
$
|
31,056
|
|
|
$
|
2,884
|
|
|
|
9.3
|
%
|
Discontinued Operations
|
|
|
(1,330
|
)
|
|
|
(5,114
|
)
|
|
|
3,784
|
|
|
|
(74.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
32,610
|
|
|
$
|
25,942
|
|
|
$
|
6,668
|
|
|
|
25.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance, and
other property related expenses. Property expenses from same
store properties remained relatively unchanged. Property
expenses from acquired properties increased by $4.9 million
due to properties acquired subsequent to March 31, 2005.
Property expenses from sold properties decreased by
$3.4 million due to properties sold subsequent to
March 31, 2005. Property expenses from properties not in
service decreased by $0.5 million due primarily to a
decrease in bad debt expense. Other expense increased
$1.7 million due primarily to increases in employee
compensation.
General and administrative expense increased by approximately
$6.7 million, or 57.6%, due primarily to increases in
employee compensation related to compensation for additional
employees as well as an increase in incentive compensation.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
DEPRECIATION and OTHER
AMORTIZATION ($ in 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
23,732
|
|
|
$
|
23,406
|
|
|
$
|
326
|
|
|
|
1.4
|
%
|
Acquired Properties
|
|
|
11,444
|
|
|
|
348
|
|
|
|
11,096
|
|
|
|
3,188.5
|
%
|
Sold Properties
|
|
|
243
|
|
|
|
3,852
|
|
|
|
(3,609
|
)
|
|
|
(93.7
|
)%
|
Properties Not In Service and Other
|
|
|
4,104
|
|
|
|
1,426
|
|
|
|
2,678
|
|
|
|
187.8
|
%
|
Corporate Furniture, Fixtures and
Equipment
|
|
|
448
|
|
|
|
337
|
|
|
|
111
|
|
|
|
32.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,971
|
|
|
$
|
29,369
|
|
|
$
|
10,602
|
|
|
|
36.1
|
%
|
Discontinued Operations
|
|
|
(878
|
)
|
|
|
(4,235
|
)
|
|
|
3,357
|
|
|
|
(79.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other
Amortization
|
|
$
|
39,093
|
|
|
$
|
25,134
|
|
|
$
|
13,959
|
|
|
|
55.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
remained relatively unchanged. Depreciation and other
amortization from acquired properties increased by
$11.1 million due to properties acquired subsequent to
March 31, 2005. Depreciation and other amortization from
sold properties decreased by $3.6 million due to properties
sold subsequent to March 31, 2005. Depreciation and other
amortization for properties not in service and other increased
by $2.7 million due primarily to accelerated depreciation
on one property in Columbus, OH which was razed during the three
months ended June 30, 2006.
Interest income decreased by approximately $.2 million due
primarily to a decrease in the average mortgage loans receivable
outstanding during the three months ended June 30, 2006, as
compared to the three months ended June 30, 2005.
Interest expense increased by approximately $3.9 million
primarily due to an increase in the weighted average debt
balance outstanding for the three months ended June 30,
2006 ($1,863.2 million), as compared to the three months
ended June 30, 2005 ($1,618.7 million), as well as an
increase in the weighted average interest rate for the three
months ended June 30, 2006 (6.79%), as compared to the
three months ended June 30, 2005 (6.69%) partially offset
by an increase in capitalized interest for the three months
ended June 30, 2006 as compared to three months ended
June 30, 2005, due to an increase in development activities.
Amortization of deferred financing costs increased by
$0.1 million due primarily to financing fees incurred
associated with the amendment and restatement of the
Companys 2005 Unsecured Line of Credit I in
August 2005 and the issuance of the 2016 Notes in January 2006.
During the three months ended June 30, 2005 the Company
recognized $1.4 million loss on its
mark-to-market
of an interest rate protection agreement that the Company
entered into in January 2005 in order to hedge the change in
value of a build to suit development project.
Equity in income of joint ventures increased by
$7.4 million primarily due to the Companys economic
share of the gains and earn outs on property sales from the
March 2005 Joint Venture and the September 2005 Joint Venture
during the three months ended June 30, 2006.
Income tax benefit decreased by $2.2 million due primarily
to an increase in income related to the Companys economic
share of the gains and earn outs on property sales from the
March 2005 Joint Venture and the September 2005 Joint Venture
and fees earned from the Joint Ventures recognized in the three
months ended June 30, 2006 compared to the three months
ended June 30, 2005 associated with additional activity in
the Joint Ventures, in which the Companys taxable REIT
subsidiary has equity interest in.
27
The following table summarizes certain information regarding the
industrial properties included in discontinued operations by the
Company for the three months ended June 30, 2006 and
June 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
4,776
|
|
|
$
|
13,947
|
|
Operating Expenses
|
|
|
(1,330
|
)
|
|
|
(5,114
|
)
|
Interest Expense
|
|
|
|
|
|
|
(172
|
)
|
Depreciation and Amortization
|
|
|
(878
|
)
|
|
|
(4,235
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(361
|
)
|
|
|
(572
|
)
|
Gain on Sale of Real Estate
|
|
|
51,953
|
|
|
|
33,690
|
|
Provision for Income Taxes
Allocable to Gain on Sale
|
|
|
(7,484
|
)
|
|
|
(2,584
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
46,676
|
|
|
$
|
34,960
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations (net of income taxes) for
the three months ended June 30, 2006 reflects the results
of operations and gain on sale of real estate, net of income
taxes, relating to 42 industrial properties that were sold
during the three months ended June 30, 2006 and the results
of operations of 16 properties that were identified as held for
sale at June 30, 2006.
Income from discontinued operations (net of income taxes) for
the three months ended June 30, 2005 reflects the results
of operations and gain on sale of real estate, net of income
taxes, relating to 42 industrial properties that were sold
during the three months ended June 30, 2006, 86 industrial
properties that were sold during the year ended
December 31, 2005 and 16 industrial properties identified
as held for sale at June 30, 2006.
The $1.5 million gain on sale of real estate, net of income
taxes for the three months ended June 30, 2006 resulted
from the sale of several land parcels that do not meet the
criteria established by FAS 144 for inclusion in
discontinued operations. The $1.8 million gain on sale of
real estate, net of income taxes for the three months ended
June 30, 2005 resulted from the sale of one industrial
properties and several land parcels that do not meet the
criteria established by FAS 144 for inclusion in
discontinued operations.
LIQUIDITY
AND CAPITAL RESOURCES
At June 30, 2006, the Companys cash and restricted
cash was approximately $0.1 million and $73.3 million,
respectively. Restricted cash is primarily comprised of gross
proceeds from the sales of certain industrial properties. These
sales proceeds will be disbursed as the Company exchanges
industrial properties under Section 1031 of the Internal
Revenue Code.
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 Companys 7.0% Notes, in the aggregate
principal amount of $150 million, are due on
December 1, 2006 (the 2006 Notes) and the
Companys 7.6% Notes, in the aggregate of
$150 million, are due on May 15, 2007 (the
2007 Notes). The Company expects to satisfy the
payment obligations on the 2006 Notes and the 2007 Notes with
the issuance of additional debt. With the exception of the 2006
Notes and the 2007 Notes, the Company believes that its
principal short-term liquidity needs are to fund normal
recurring expenses, debt service requirements and the minimum
distribution required to maintain the Companys REIT
qualification under the Internal Revenue Code. The Company
anticipates that these needs will be met with cash flows
provided by operating and investment 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 unsecured
indebtedness and the issuance of additional equity securities.
As of June 30, 2006 and July 28, 2006,
$265.4 million of common stock, preferred stock and
depositary shares and $300.0 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
28
2005 Unsecured Line of Credit I. At June 30, 2006,
borrowings under the 2005 Unsecured Line of Credit I bore
interest at a weighted average interest rate of 5.867%. The 2005
Unsecured Line of Credit I bears interest at a floating rate of
LIBOR plus .625%, or the Prime Rate, at the Companys
election. As of July 28, 2006 the Company had approximately
$52.9 million available for additional borrowings under the
2005 Unsecured Line of Credit I.
Six
Months Ended June 30, 2006
Net cash provided by operating activities of approximately
$53.4 million for the six months ended June 30, 2006
was comprised primarily of net income before minority interest
of approximately $62.1 million, the net change in operating
assets and liabilities of approximately $22.5 million and
net distributions from joint ventures of $.6 million,
offset by adjustments for non-cash items of approximately
$31.8 million. The adjustments for the non-cash items of
approximately $31.8 million are primarily comprised of the
gain on sale of real estate of approximately $109.5 million
and the effect of the straight-lining of rental income of
approximately $5.0 million, offset by depreciation and
amortization of approximately $81.9 million and the
provision for bad debt of $0.8 million.
Net cash provided by investing activities of approximately
$66.9 million for the six months ended June 30, 2006
was comprised primarily by the net proceeds from the sale of
real estate, the repayment of mortgage loans receivable, and
distributions from the Companys industrial real estate
joint ventures, partially offset by the acquisition of real
estate, development of real estate, capital expenditures related
to the expansion and improvement of existing real estate,
contributions to, and investments in, the Companys
industrial real estate joint ventures and an increase in
restricted cash that is held by an intermediary for
Section 1031 exchange purposes.
During the six months ended June 30, 2006, the Company
acquired 52 industrial properties comprising approximately
4.5 million square feet of GLA and several land parcels.
The purchase price for these acquisitions totaled approximately
$251.3 million, excluding costs incurred in conjunction
with the acquisition of the industrial properties and land
parcels.
The Company, through a wholly-owned limited liability company in
which the Operating Partnership or First Industrial Development
Services, Inc. is the sole member, invested approximately
$14.1 million and received distributions of approximately
$15.9 million from the Companys real estate joint
ventures. As of June 30, 2006, the Companys
industrial real estate joint ventures owned 279 industrial
properties comprising approximately 25.6 million square
feet of GLA.
During the six months ended June 30, 2006, the Company sold
66 industrial properties comprising approximately
8.4 million square feet of GLA and several land parcels.
Net proceeds from the sales of the 66 industrial properties and
several land parcels were approximately $471.1 million.
Net cash used in financing activities of approximately
$128.4 million for the six months ended June 30, 2006
was derived primarily by the redemption of preferred stock,
common and preferred stock dividends and unit distributions, net
repayments under the Companys Unsecured Lines of Credit,
the repurchase of restricted stock from employees of the Company
to pay for withholding taxes on the vesting of restricted stock
and repayments on mortgage loans payable, partially offset by
the net proceeds from the issuance of senior unsecured debt and
preferred stock and the net proceeds from the exercise of stock
options.
On November 8, 2005 and November 18, 2005, the Company
issued 600 and 150 Shares, respectively, of $.01 par
value, Series I Flexible Cumulative Redeemable Preferred
Stock, (the Series I Preferred Stock), in a
private placement at an initial offering price of
$250,000 per share for an aggregate initial offering price
of $187.5 million. Net of offering costs, the Company
received net proceeds of $181.5 million from the issuance
of Series I Preferred Stock. The Company redeemed the
Series I Preferred Stock on January 13, 2006 for
$242,875.00 per share, and paid a prorated first quarter
dividend of $470.667 per share, totaling approximately
$.4 million. In accordance with EITF D-42, due to the
redemption of the Series I Preferred Stock, the difference
between the redemption cost and the carrying value of the
Series I Preferred Stock of approximately $.7 million
is reflected as a deduction from net income to arrive at net
income available to common stockholders in determining earnings
per share for the three months ended March 31, 2006 and six
months ended June 30, 2006.
During the six months ended June 30, 2006, the Company
awarded 303,142 shares of restricted common stock to
certain employees and 2,313 shares of restricted common
stock to certain Directors. These shares of restricted
29
common stock had a fair value of approximately
$11,614 million on the date of grant. The restricted common
stock vests over periods from one to ten years. Compensation
expense will be charged to earnings over the respective vesting
periods for those shares that are expected to vest.
On January 10, 2006, the Company, through the Operating
Partnership, issued the 2016 Notes. Net of offering costs, the
Company received net proceeds of $197.5 million from the
issuance of 2016 Notes. In December 2005, the Company also
entered into interest rate protection agreements which were used
to fix the interest rate on the 2016 Notes prior to issuance.
The Company settled the interest rate protection agreements on
January 9, 2006 for a payment of approximately
$1.7 million which is included in other comprehensive
income.
On January 13, 2006, the Company issued 6,000,000
Depositary Shares, each representing 1/10,000th of a share
of the Companys 7.25%, $.01 par value, Series J
Flexible Cumulative Redeemable Preferred Stock (the
Series J Preferred Stock), at an initial
offering price of $25.00 per Depositary Share. Net of
offering costs, the Company received net proceeds of
$144.7 million from the issuance of Series J Preferred
Stock.
During the six months ended June 30, 2006, certain
employees of the Company exercised 52,667 non-qualified employee
stock options. Net proceeds to the Company were approximately
$1.5 million.
Market
Risk
The following discussion about the Companys
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
June 30, 2006 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 June 30, 2006, approximately $1,551.4 million
(approximately 85.3% of total debt at June 30,
2006) of the Companys debt was fixed rate debt and
approximately $268.0 million (approximately 14.7% of total
debt at June 30, 2006) was variable rate debt.
In April 2006, the Company entered into $295.3 million of
cash flow hedges through
forward-starting
interest rate swaps to hedge interest rates on
$300.0 million of forecasted debt offerings in 2006 and
2007. At June 30, 2006, the estimated fair value of the
$295.3 million swaps was approximately $3.4 million in
an asset position as the effective rates of the swaps were lower
than current interest rates at June 30, 2006. The Company
does not utilize derivative 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 Companys 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
Companys various fixed rate debt.
Recent
Accounting Pronouncements
In February 2006, the FASB issued Statement of Financial
Standards (SFAS) No. 155, Accounting for
Certain Hybrid Financial Instruments which amends
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, and SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. This Statement resolves issues
addressed in Statement 133 Implementation Issue
No. D1. Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets. This
Statement:
a. Permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation;
30
b. Clarifies which interest-only strips and principal-only
strips are not subject to the requirements of Statement 133;
c. Establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring
bifurcation;
d. Clarifies that concentrations of credit risk in the form
of subordination are not embedded derivatives; and
e. Amends Statement 140 to eliminate the prohibition
on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
This Statement is effective for all financial instruments
acquired or issued after the beginning of an entitys first
fiscal year that begins after September 15, 2006. The
Company does not expect that the implementation of this
Statement will have a material effect on the Companys
consolidated financial position or results of operations.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Asset which amends
FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities
(FAS 140), with respect to the accounting for separately
recognized servicing assets and servicing liabilities. This
statement was issued to simplify the accounting for servicing
rights and reduce the volatility that results from the use of
different measurements attributes for servicing rights and the
related financial instruments used to economically hedge risks
associated with those servicing rights. The statement clarifies
when to separately account for servicing rights, requires
separately recognized servicing rights to be initially measured
at fair value, and provides the option to subsequently account
for those servicing rights at either fair value or under the
amortization method previously required under FAS 140. An
entity should adopt this Statement as of the beginning of its
first fiscal year that begins after September 15, 2006. The
Company does not expect that the implementation of this
Statement will have a material effect on the Companys
consolidated financial position or results of operations.
In June 2006, the FASB issued FIN 48, Accounting for
Uncertainty in Income Taxes (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes
recognized in accordance with SFAS 109, Accounting
for Income Taxes. The evaluation of a tax position in
accordance with FIN 48 is a two-step process. First, the
Company determines whether it is more likely than not that a tax
position will be sustained upon examination based on the
technical merits of the position. Second, a tax position that
meets the more-likely-than-not threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount
of benefit that is greater than fifty percent likely of being
realized upon ultimate settlement. Tax positions that previously
failed to meet the more-likely-than-not recognition threshold
should be recognized in the first subsequent reporting period in
which the threshold is met. Previously recognized tax positions
that no longer meet the more-likely-than-not recognition
threshold should be derecognized in the first subsequent
reporting period in which the threshold is no longer met. The
Company is required to apply the guidance of FIN 48
beginning January 1, 2007. The Company is currently
evaluating what impact the application of FIN 48 will have
on the consolidated financial statements.
Subsequent
Events
From July 1, 2006 to July 28, 2006, the Company
acquired 15 industrial properties and a land parcel for a
purchase price of approximately $158.5 million, excluding
costs incurred in conjunction with the acquisition of these
industrial properties. The Company also sold four industrial
properties for approximately $19.4 million of gross
proceeds.
On July 17, 2006, the Company and the Operating Partnership
paid a second quarter 2006 dividend/distribution of
$.70 per common share/Unit, totaling approximately
$36.0 million.
On July 25, 2006, the Company, through a wholly-owned
limited liability company in which a wholly-owned company of the
Operating Partnership is the sole member, entered into a joint
venture arrangement with an institutional investor to invest in
land and vertical development (the July 2006 Joint
Venture). The Company, through a wholly-owned limited
liability company in which a wholly-owned company of the
Operating Partnership is the sole member, owns a ten percent
equity interest in the July 2006 Joint Venture.
31
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Response to this item is included in Item 2,
Managements Discussion and Analysis of Financial
Condition and Results of Operations above.
|
|
Item 4.
|
Controls
and Procedures
|
The Companys principal executive officer and principal
financial officer, after evaluating the effectiveness of the
Companys disclosure controls and procedures (as defined in
Exchange Act
Rules 13a-15(e)
and
15d-15(e))
as of the end of the period covered by this report, based on the
evaluation of these controls and procedures required by Exchange
Act
Rules 13a-15(b)
or
15d-15(b),
have concluded that as of the end of such period the
Companys disclosure controls and procedures were effective.
There has been no change in the Companys internal control
over financial reporting that occurred during the fiscal quarter
covered by this report that has materially affected or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
None.
Item 1A. Risk
Factors
The
Company may be unable to sell sufficient properties on
advantageous terms.
The Company and its joint ventures have sold properties to third
parties and, as part of its business, the Company currently
anticipates continuing to sell, for itself and its joint
ventures, a growing number of properties to third parties,
subject to operating considerations and market conditions. The
Companys ability to sell a growing number of properties on
advantageous terms depends on factors beyond the Companys
control, including competition from other sellers, the
availability of attractive financing for potential buyers of the
Companys properties and the overall demand for industrial
real estate. If the Company is unable to sell a growing number
of properties on favorable terms or adequately redeploy the
proceeds of property sales in accordance with the Companys
business strategy, which calls for, among other things, a
sufficient pipeline of saleable properties, then the
Companys financial condition, results of operations, cash
flow and ability to pay dividends on, and the market price of,
the Companys securities could be adversely affected.
The Company has also sold properties to its joint ventures and,
as part of its business, the Company currently anticipates
continuing to sell properties to its joint ventures, subject to
operating considerations and market conditions. If the Company
does not have sufficient properties available that meet the
investment criteria of current or future joint ventures, or if
the joint ventures have reduced or no access to capital on
favorable terms, then such sales could be delayed or prevented,
adversely affecting the Companys financial condition,
results of operations, cash flow and ability to pay dividends
on, and the market price of, the Companys securities.
The
Company may be unable to acquire sufficient properties on
advantageous terms or acquisitions may not perform as the
Company expects.
The Company and its joint ventures have acquired properties and,
as part of its business, the Company currently anticipates
continuing to acquire, for itself and its joint ventures, a
growing number of properties, subject to operating
considerations and market conditions. Properties that the
Company acquires for itself generate income/loss during the
holding period and gains/losses upon sale. Properties that the
Company acquires on behalf of its joint ventures generate fee
and other income, in addition to income/loss during the holding
period and gains/losses upon sale. The acquisition of properties
entails various risks, including the risks that the
Companys investments may not perform as expected and that
the Companys cost estimates for bringing an acquired
property up to market standards may prove inaccurate. Further,
the Company faces significant competition for attractive
investment opportunities from other well-capitalized real estate
investors, including both publicly-traded real estate investment
trusts and private investors. This competition increases as
investments in real estate become attractive relative to other
forms
32
of investment. As a result of competition, the Company may be
unable to acquire additional properties as it desires or the
purchase price may be elevated. In addition, the Company expects
to finance future acquisitions through a combination of
borrowings under the 2005 Unsecured Line of Credit I, proceeds
from equity or debt offerings by the Company, proceeds from
property sales and equity and debt provided by its joint venture
partners, which may not be available and which could adversely
affect the Companys cash flow. If the Company were unable
to acquire a growing number of properties on advantageous terms,
or if such investments did not perform as expected, the
Companys financial condition, results of operations, cash
flow and ability to pay dividends on, and the market value of,
the Companys securities could be adversely affected.
The
Company may be unable to complete sufficient development and
re-development projects on advantageous terms.
As part of its business, the Company, for itself and on behalf
of its joint ventures, develops new and re-develops existing
properties. In addition, the Company has sold development and
re-development properties to third parties and currently
anticipates continuing to sell, for itself and its joint
ventures, a growing number of development and re-development
properties to third parties, subject to operating considerations
and market conditions. The real estate development and
re-development business involves significant risks that could
adversely affect the Companys financial condition, results
of operations, cash flow and ability to pay dividends on, and
the market price of the Companys securities, which include:
|
|
|
|
|
the Company may not be able to obtain financing for development
projects on favorable terms and complete construction on
schedule or within budget, resulting in increased debt service
expense and construction costs and delays in leasing the
properties and generating cash flow;
|
|
|
|
the Company may not be able to obtain, or may experience delays
in obtaining, all necessary zoning, land-use, building,
occupancy and other governmental permits and authorizations;
|
|
|
|
the properties may perform below anticipated levels, producing
cash flow below budgeted amounts and limiting the Companys
ability to sell such properties to third parties.
|
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
On May 17, 2006, First Industrial Realty Trust, Inc. (the
Company) held its Annual Meeting of Stockholders. At
the meeting, three Class III directors of the Company were
elected to serve until the 2009 Annual Meeting of Stockholders
and one Class I director was elected to serve until the
2007 Annual Meeting of Stockholders until their respective
successors are duly elected and qualified. The votes cast for
each director were as follows:
For election of John Rau
Votes for: 38,191,703
Votes withheld: 2,790,892
For election of Robert J. Slater
Votes for: 40,414,970
Votes withheld: 567,625
For election of W. Ed Tyler
Votes for: 40,597,572
Votes withheld: 385,023
For election of James F. Millar
Votes for: 40,609,885
Votes withheld: 372,710
33
In addition, the appointment of PricewaterhouseCoopers LLP, as
independent auditors of the Company for the fiscal year ending
December 31, 2006, was ratified at the meeting with
38,209,748 shares voting in favor, 2,642,343 shares
voting against and 130,504 shares abstaining.
Amendment No. 1 to the Companys 2001 Stock Incentive
Plan was approved at the meeting with 20,787,551 shares
voting in favor, 8,593,058 shares voting against,
296,896 shares abstaining and 11,305,090 broker non-votes.
Michael W. Brennan, Michael G. Damone, and Kevin W. Lynch
continue to serve as Class II directors until their present
terms expire in 2008 and their successors are duly elected. Jay
H. Shidler and J. Steven Wilson continue to serve as
Class I directors until their present terms expire in 2007
and their successors are duly elected.
|
|
Item 5.
|
Other
Information
|
Not Applicable.
a) Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Form of Restricted Stock Agreement
(Directors Annual Retainer) (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed May 19, 2006, File
No. 1-13102)+
|
|
10
|
.2
|
|
Amendment No. 1 to the
Companys 2001 Stock Incentive Plan*+
|
|
31
|
.1*
|
|
Certification of the Principal
Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal
Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal
Executive Officer and the Principal Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
+ |
|
Indicates a compensatory plan or arrangement |
The Company maintains a website at www.firstindustrial.com.
Copies of the Companys annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to such reports are available without charge on
the Companys website as soon as reasonably practicable
after such reports are filed with or furnished to the SEC. In
addition, the Companys Corporate Governance Guidelines,
Code of Business Conduct and Ethics, Audit Committee Charter,
Compensation Committee Charter, Nominating/Corporate Governance
Committee Charter, along with supplemental financial and
operating information prepared by the Company, are all available
without charge on the Companys website or upon request to
the Company. Amendments to, or waivers from, the Companys
Code of Business Conduct and Ethics that apply to the
Companys executive officers or directors shall be posted
to the Companys website at www.firstindustrial.com. Please
direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 4000
Chicago, IL 60606
Attention: Investor Relations
34
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.
Scott A. Musil
Chief Accounting Officer
(Principal Accounting Officer)
Date: August 9, 2006
35
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Form of Restricted Stock Agreement
(Directors Annual Retainer) (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed May 19, 2006, File
No. 1-13102)+
|
|
10
|
.2
|
|
Amendment No. 1 to the
Companys 2001 Stock Incentive Plan*+
|
|
31
|
.1*
|
|
Certification of the Principal
Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal
Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal
Executive Officer and the Principal Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
+ |
|
Indicates a compensatory plan or arrangement |
36