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
September 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, $.01 par value,
outstanding as of October 27, 2006: 44,818,345.
FIRST
INDUSTRIAL REALTY TRUST, INC.
Form 10-Q
For the
Period Ended September 30, 2006
INDEX
2
PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
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September 30,
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December 31,
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2006
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2005
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(Unaudited)
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(Dollars in thousands, except share and per share data)
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ASSETS
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Assets:
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Investment in Real Estate:
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Land
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$
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560,839
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$
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541,406
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Buildings and Improvements
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2,676,080
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2,653,281
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Construction in Progress
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20,418
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66,074
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Less: Accumulated Depreciation
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(458,411
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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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2,798,926
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2,850,195
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Real Estate Held for Sale, Net of
Accumulated Depreciation and Amortization of $2,178 and $1,622
at September 30, 2006 and December 31, 2005,
respectively
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38,557
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16,840
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Cash and Cash Equivalents
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9,713
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8,237
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Restricted Cash
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21,916
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29,581
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Tenant Accounts Receivable, Net
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7,810
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8,897
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Investments in Joint Ventures
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56,356
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44,241
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Deferred Rent Receivable, Net
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28,245
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24,910
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Deferred Financing Costs, Net
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15,249
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10,909
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Deferred Leasing Intangibles, Net
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92,984
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78,537
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Prepaid Expenses and Other Assets,
Net
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119,252
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153,896
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Total Assets
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$
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3,189,008
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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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52,535
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$
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57,309
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Senior Unsecured Debt, Net
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1,674,340
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1,298,893
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Unsecured Lines of Credit
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64,000
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457,500
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Accounts Payable, Accrued Expenses
and Other Liabilities, Net
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120,071
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110,560
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Deferred Leasing Intangibles, Net
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21,341
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24,307
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Rents Received in Advance and
Security Deposits
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29,614
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32,283
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Leasing Intangibles Held For Sale,
Net of Accumulated Amortization of $19 at September 30, 2006
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133
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Dividends Payable
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42,727
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39,509
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Total Liabilities
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2,004,761
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2,020,361
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Commitments and Contingencies
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Minority Interest
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157,150
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162,320
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Stockholders Equity:
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Preferred Stock ($.01 par
value, 10,000,000 shares authorized, 20,000, 500, 250, 600
and 200 shares of Series C, F, G , J and K Cumulative
Preferred Stock, respectively, issued and outstanding at
September 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), $250,000 per
share ($150,000) and $250,000 per share ($50,000),
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, 47,344,413 and
46,971,110 shares issued and 44,818,013 and
44,444,710 shares outstanding at September 30, 2006
and December 31, 2005, respectively)
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455
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470
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Additional
Paid-in-Capital
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1,381,826
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1,384,712
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Distributions in Excess of
Accumulated Earnings
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(274,452
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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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(10,144
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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 September 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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Total Stockholders Equity
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|
1,027,097
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1,043,562
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Total Liabilities and
Stockholders Equity
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$
|
3,189,008
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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.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
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Three Months
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Three Months
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Nine Months
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Nine Months
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Ended
|
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|
Ended
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|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
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|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
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|
|
(Unaudited)
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|
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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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$
|
74,835
|
|
|
$
|
58,767
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|
|
$
|
211,789
|
|
|
$
|
168,958
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|
Tenant Recoveries and Other Income
|
|
|
28,265
|
|
|
|
21,866
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|
|
|
83,604
|
|
|
|
62,353
|
|
Revenues from Build to Suit
Development for Sale
|
|
|
|
|
|
|
10,694
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|
|
|
733
|
|
|
|
10,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
103,100
|
|
|
|
91,327
|
|
|
|
296,126
|
|
|
|
242,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Expenses
|
|
|
34,083
|
|
|
|
28,203
|
|
|
|
99,273
|
|
|
|
80,835
|
|
General and Administrative
|
|
|
20,047
|
|
|
|
15,382
|
|
|
|
55,918
|
|
|
|
38,875
|
|
Depreciation and Other Amortization
|
|
|
38,336
|
|
|
|
29,300
|
|
|
|
111,358
|
|
|
|
77,972
|
|
Expenses from Build to Suit
Development for Sale
|
|
|
|
|
|
|
10,455
|
|
|
|
666
|
|
|
|
10,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
92,466
|
|
|
|
83,340
|
|
|
|
267,215
|
|
|
|
208,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income/Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
446
|
|
|
|
219
|
|
|
|
1,345
|
|
|
|
1,056
|
|
Interest Expense
|
|
|
(31,622
|
)
|
|
|
(27,413
|
)
|
|
|
(90,853
|
)
|
|
|
(79,106
|
)
|
Amortization of Deferred Financing
Costs
|
|
|
(603
|
)
|
|
|
(541
|
)
|
|
|
(1,826
|
)
|
|
|
(1,560
|
)
|
Mark-to-Market/Gain
(Loss) on Settlement of Interest Rate Protection Agreements
|
|
|
(2,942
|
)
|
|
|
1,212
|
|
|
|
(3,112
|
)
|
|
|
749
|
|
Gain from Early Retirement of Debt,
Net
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income/Expense
|
|
|
(34,721
|
)
|
|
|
(26,441
|
)
|
|
|
(94,446
|
)
|
|
|
(78,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Before Equity in Income of Joint Ventures, Income Tax Benefit
and Income Allocated to Minority Interest
|
|
|
(24,087
|
)
|
|
|
(18,454
|
)
|
|
|
(65,535
|
)
|
|
|
(44,911
|
)
|
Equity in Income of Joint Ventures
|
|
|
4,747
|
|
|
|
3,978
|
|
|
|
12,019
|
|
|
|
3,758
|
|
Income Tax Benefit
|
|
|
3,465
|
|
|
|
3,245
|
|
|
|
9,779
|
|
|
|
8,014
|
|
Minority Interest Allocable to
Continuing Operations
|
|
|
2,751
|
|
|
|
1,785
|
|
|
|
7,779
|
|
|
|
5,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
|
(13,124
|
)
|
|
|
(9,446
|
)
|
|
|
(35,958
|
)
|
|
|
(27,912
|
)
|
Income from Discontinued Operations
(Including Gain on Sale of Real Estate of $65,368 and $38,552
for the Three Months Ended September 30, 2006 and 2005,
respectively and $171,390 and $85,734 for the Nine Months Ended
September 30, 2006 and 2005, respectively)
|
|
|
67,453
|
|
|
|
43,247
|
|
|
|
177,884
|
|
|
|
99,768
|
|
Provision for Income Taxes
Allocable to Discontinued Operations (Including $19,427 and
$5,943 for the Three Months Ended September 30, 2006 and
2005, respectively and $41,340 and $11,349 for the Nine Months
Ended September 30, 2006 and 2005, respectively allocable
to Gain on Sale of Real Estate)
|
|
|
(20,143
|
)
|
|
|
(6,957
|
)
|
|
|
(43,298
|
)
|
|
|
(14,070
|
)
|
Minority Interest Allocable to
Discontinued Operations
|
|
|
(6,145
|
)
|
|
|
(4,794
|
)
|
|
|
(17,577
|
)
|
|
|
(11,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Gain on Sale of Real
Estate
|
|
|
28,041
|
|
|
|
22,050
|
|
|
|
81,051
|
|
|
|
46,525
|
|
Gain on Sale of Real Estate
|
|
|
2,853
|
|
|
|
2,613
|
|
|
|
6,374
|
|
|
|
27,333
|
|
Provision for Income Taxes
Allocable to Gain on Sale of Real Estate
|
|
|
(1,324
|
)
|
|
|
(949
|
)
|
|
|
(2,180
|
)
|
|
|
(9,933
|
)
|
Minority Interest Allocable to Gain
on Sale of Sale Estate
|
|
|
(199
|
)
|
|
|
(220
|
)
|
|
|
(548
|
)
|
|
|
(2,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
29,371
|
|
|
|
23,494
|
|
|
|
84,697
|
|
|
|
61,639
|
|
Less: Preferred Stock Dividends
|
|
|
(5,442
|
)
|
|
|
(2,310
|
)
|
|
|
(15,490
|
)
|
|
|
(6,930
|
)
|
Less: Redemption of Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
23,929
|
|
|
$
|
21,184
|
|
|
$
|
68,535
|
|
|
$
|
54,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(0.39
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Discontinued Operations
|
|
$
|
0.93
|
|
|
$
|
0.74
|
|
|
$
|
2.66
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
|
$
|
1.56
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
44,032
|
|
|
|
42,468
|
|
|
|
43,976
|
|
|
|
42,305
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(0.39
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Discontinued Operations
|
|
$
|
0.93
|
|
|
$
|
0.74
|
|
|
$
|
2.66
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
|
$
|
1.56
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
|
44,032
|
|
|
|
42,468
|
|
|
|
43,976
|
|
|
|
42,305
|
|
Net Income
|
|
$
|
29,371
|
|
|
$
|
23,494
|
|
|
$
|
84,697
|
|
|
$
|
61,639
|
|
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of Settlement of
Interest Rate Protection Agreements from Other Comprehensive
Income
|
|
|
|
|
|
|
(159
|
)
|
|
|
|
|
|
|
(159
|
)
|
Settlement of Interest Rate
Protection Agreements
|
|
|
|
|
|
|
|
|
|
|
(1,729
|
)
|
|
|
|
|
Mark-to-Market
of Interest Rate Protection Agreements
|
|
|
(7,702
|
)
|
|
|
|
|
|
|
(2,913
|
)
|
|
|
|
|
Amortization of Interest Rate
Protection Agreements
|
|
|
(218
|
)
|
|
|
(270
|
)
|
|
|
(668
|
)
|
|
|
(817
|
)
|
Other Comprehensive Income
Allocable to Minority Interest
|
|
|
1,029
|
|
|
|
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
$
|
22,480
|
|
|
$
|
23,065
|
|
|
$
|
80,079
|
|
|
$
|
60,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
4
FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in thousands)
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
84,697
|
|
|
$
|
61,639
|
|
Income Allocated to Minority
Interest
|
|
|
10,346
|
|
|
|
8,320
|
|
|
|
|
|
|
|
|
|
|
Net Income Before Minority Interest
|
|
|
95,043
|
|
|
|
69,959
|
|
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
90,511
|
|
|
|
71,070
|
|
Amortization of Deferred Financing
Costs
|
|
|
1,826
|
|
|
|
1,560
|
|
Other Amortization
|
|
|
28,002
|
|
|
|
24,481
|
|
Provision for Bad Debt
|
|
|
1,912
|
|
|
|
1,398
|
|
Mark-to-Market
of Interest Rate Protection Agreement
|
|
|
(16
|
)
|
|
|
(749
|
)
|
Equity in Income of Joint Ventures
|
|
|
(12,019
|
)
|
|
|
(3,758
|
)
|
Distributions from Joint Ventures
|
|
|
12,803
|
|
|
|
590
|
|
Gain on Early Retirement
|
|
|
|
|
|
|
(82
|
)
|
Gain on Sale of Real Estate
|
|
|
(177,764
|
)
|
|
|
(113,067
|
)
|
Decrease (Increase) in
Build-to-Suit
For Sale Costs Receivable
|
|
|
16,241
|
|
|
|
(10,694
|
)
|
|
|
|
|
|
|
|
|
|
Increase in Tenant Accounts
Receivable and Prepaid Expenses and Other Assets, Net
|
|
|
(14,940
|
)
|
|
|
(20,243
|
)
|
Increase in Deferred Rent Receivable
|
|
|
(7,857
|
)
|
|
|
(6,495
|
)
|
Increase in Accounts Payable and
Accrued Expenses and Rents Received in Advance and Security
Deposits
|
|
|
16,070
|
|
|
|
23,057
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities
|
|
|
49,812
|
|
|
|
37,027
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of and Additions to
Investment in Real Estate
|
|
|
(651,333
|
)
|
|
|
(518,240
|
)
|
Net Proceeds from Sales of
Investments in Real Estate
|
|
|
725,038
|
|
|
|
392,498
|
|
Contributions to and Investments in
Joint Ventures
|
|
|
(24,425
|
)
|
|
|
(41,473
|
)
|
Distributions from Joint Ventures
|
|
|
10,877
|
|
|
|
597
|
|
Repayment of Mortgage Loans
Receivable
|
|
|
34,987
|
|
|
|
43,411
|
|
Decrease (Increase) in Restricted
Cash
|
|
|
7,665
|
|
|
|
(23,288
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in)
Investing Activities
|
|
|
102,809
|
|
|
|
(146,495
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Proceeds from the Issuance of
Common Stock
|
|
|
1,542
|
|
|
|
6,664
|
|
Proceeds from the Issuance of
Preferred Stock
|
|
|
192,897
|
|
|
|
|
|
Redemption of Preferred Stock
|
|
|
(182,156
|
)
|
|
|
|
|
Repurchase of Restricted Stock
|
|
|
(2,660
|
)
|
|
|
(3,269
|
)
|
Dividends/Distributions
|
|
|
(107,804
|
)
|
|
|
(103,079
|
)
|
Preferred Stock Dividends
|
|
|
(12,574
|
)
|
|
|
(8,162
|
)
|
Repayments on Mortgage Loans Payable
|
|
|
(11,973
|
)
|
|
|
(1,421
|
)
|
Net Proceeds from Senior Unsecured
Debt
|
|
|
374,306
|
|
|
|
|
|
Other Costs of Senior Unsecured Debt
|
|
|
(7,539
|
)
|
|
|
|
|
Proceeds on Mortgage Loans Payable
|
|
|
|
|
|
|
1,167
|
|
Proceeds from Unsecured Lines of
Credit
|
|
|
488,500
|
|
|
|
376,500
|
|
Repayments on Unsecured Lines of
Credit
|
|
|
(882,000
|
)
|
|
|
(163,500
|
)
|
Cash Book Overdraft
|
|
|
3,765
|
|
|
|
1,431
|
|
Debt Issuance Costs
|
|
|
(5,449
|
)
|
|
|
(1,787
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Provided by
Financing Activities
|
|
|
(151,145
|
)
|
|
|
104,544
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and
Cash Equivalents
|
|
|
1,476
|
|
|
|
(4,924
|
)
|
Cash and Cash Equivalents,
Beginning of Period
|
|
|
8,237
|
|
|
|
4,924
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of
Period
|
|
$
|
9,713
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
5
FIRST
INDUSTRIAL REALTY TRUST, INC.
(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% and 86.8%
ownership interest at September 30, 2006 and
December 31, 2005, respectively. Minority interest at
September 30, 2006 and December 31, 2005 of
approximately 13.0% and 13.2%, respectively, represents the
aggregate partnership interest in the Operating Partnership held
by the limited partners thereof.
As of September 30, 2006, the Company owned 946 industrial
properties (inclusive of developments in process) located in
27 states in the United States and one province in Canada,
containing an aggregate of approximately 76.5 million
square feet of gross leasable area (GLA). Of the 946
industrial properties owned by the Company, 754 are held by the
Operating Partnership and limited liability companies of which
the Operating Partnership is the sole member, 101 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 91 are held directly or indirectly by
an entity wholly-owned by the Operating Partnership.
On March 21, 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.
On July 21, 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 and provides property management, leasing,
development, disposition and portfolio management services to
the July 2006 Joint Venture.
The Company, through separate wholly-owned limited liability
companies of which the Operating Partnership or First Industrial
Investment, 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 and the July 2006 Joint
Venture, 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,
as amended by
Form 8-K
of the Company filed during September 2006, 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.
6
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 September 30, 2006 and December 31, 2005, and
the reported amounts of revenues and expenses for each of the
three and nine months ended September 30, 2006 and
September 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
September 30, 2006 and December 31, 2005 and the
results of its operations and comprehensive income for each of
the three and nine months ended September 30, 2006 and
September 30, 2005, and its cash flows for each of the nine
months ended September 30, 2006 and September 30,
2005, and all adjustments are of a normal recurring nature.
Stock
Incentive Plans:
Effective January 1, 2006 the Company 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 caption within Stockholders Equity
to Additional Paid in Capital during the three months ended
March 31, 2006.
For the nine months ended September 30, 2006 and 2005, the
Company awarded 317,671 and 199,013 restricted stock awards to
its employees and directors of the Company having a fair value
of $12,075 and $8,340, respectively. The awards generally vest
over three years. For the nine months ended September 30,
2006 and 2005, the Company recognized $7,111 and $6,932 in
restricted stock amortization related to restricted stock
awards, of which $987 and $1,047, respectively, was capitalized
in connection with development activities. At September 30,
2006, the Company has $21,036 in unearned compensation related
to unvested restricted stock awards. The weighted average period
that the unrecognized compensation is expected to be incurred is
1.85 years. The Company has not awarded options to
employees or directors of the Company during the nine months
ended September 30, 2006 and September 30, 2005, and
therefore no stock-based employee compensation expense related
to options is included in net income available to common
stockholders.
7
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 nine
months ended September 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
Three and Nine
|
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
|
2005
|
|
|
Net Income Available to Common
Stockholders as reported
|
|
$
|
21,184
|
|
|
$
|
54,709
|
|
Less: Total Stock-Based Employee
Compensation Expense, Net of Minority Interest
Determined Under the Fair Value Method
|
|
|
(16
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders pro forma
|
|
$
|
21,168
|
|
|
$
|
54,637
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders per Share as reported Basic
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Net Income Available to Common
Stockholders per Share pro forma Basic
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Net Income Available to Common
Stockholders per Share as reported
Diluted
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Net Income Available to Common
Stockholders per Share pro forma Diluted
|
|
$
|
0.50
|
|
|
$
|
1.29
|
|
Deferred
Leasing Intangibles
Deferred Leasing Intangibles included in the Companys
total assets, including assets held for sale, consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
In-Place Leases
|
|
$
|
85,577
|
|
|
$
|
78,674
|
|
Less: Accumulated Amortization
|
|
|
(13,368
|
)
|
|
|
(6,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
72,209
|
|
|
$
|
72,438
|
|
|
|
|
|
|
|
|
|
|
Above Market Leases
|
|
$
|
8,794
|
|
|
$
|
7,958
|
|
Less: Accumulated Amortization
|
|
|
(2,304
|
)
|
|
|
(1,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,490
|
|
|
$
|
6,099
|
|
|
|
|
|
|
|
|
|
|
Tenant Relationship
|
|
$
|
15,059
|
|
|
$
|
|
|
Less: Accumulated Amortization
|
|
|
(774
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,285
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
8
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred Leasing Intangibles included in the Companys
total liabilities, including liabilities held for sale, consist
of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Below Market Leases
|
|
$
|
27,348
|
|
|
$
|
27,710
|
|
Less: Accumulated Amortization
|
|
|
(5,874
|
)
|
|
|
(3,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,474
|
|
|
$
|
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 nine months ended
September 30, 2006 was $27,232, $3,477, $15,328, and
$(10,801), respectively. The fair value of in-place leases,
above market leases and below market leases recorded due to real
estate acquisitions during the nine months ended
September 30, 2005 was $30,257, $5,276 and $(8,585),
respectively.
Net amortization expense related to deferred leasing intangibles
was $8,788 and $4,390 for the nine months ended
September 30, 2006 and September 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
|
|
$
|
5,245
|
|
2007
|
|
|
18,766
|
|
2008
|
|
|
16,400
|
|
2009
|
|
|
14,456
|
|
2010
|
|
|
12,305
|
|
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;
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.
9
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements which establishes a
common definition of fair value to be applied to US GAAP
guidance requiring use of fair value, establishes a framework
for measuring fair value, and expands disclosure about such fair
value measurements. This statement is effective for fiscal years
beginning after November 15, 2007. 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 September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans which requires that
employers recognize on a prospective basis the funded status of
their defined benefit pension and other postretirement plans on
their consolidated balance sheet and recognize as a component of
other income, net of tax, the gains or losses and prior service
costs or credits that arise during the period but are not
recognized as components of net periodic benefit cost. This
statement also requires additional disclosures in the footnotes
to the financial statements. This statement is effective for
fiscal years beginning after December 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 September 2006, the SEC staff issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in the Current
Year Financial Statements in order to address the
observed diversity in quantification practices with respect to
annual financial statements. This bulletin should be applied for
the annual financial statements for the first fiscal year ending
after November 15, 2006. The Company does not expect the
application of this bulletin to have a material impact on the
Companys results of operations, cash flows and financial
position.
10
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
3.
|
Investments
in Joint Ventures
|
At September 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 48 industrial properties comprising approximately
4.1 million square feet of GLA and several land parcels,
the September 2005 Joint Venture owned 166 industrial properties
comprising approximately 11.2 million square feet of GLA
and several land parcels and the March 2006 Joint Venture owned
ten industrial properties comprising approximately
4.8 million square feet of GLA (of which the Operating
Partnership, through
wholly-owned
limited liability companies, has an equity interest in nine
industrial properties comprising approximately 3.9 million
square feet of GLA).
At September 30, 2006 and December 31, 2005, the
Company has a receivable from the Joint Ventures of $10,323 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 general
contractor 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 nine months ended September 30, 2006 and
September 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:
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Contributions
|
|
$
|
21,477
|
|
|
$
|
40,099
|
|
Distributions
|
|
$
|
23,680
|
|
|
$
|
1,187
|
|
Fees
|
|
$
|
16,242
|
|
|
$
|
5,054
|
|
|
|
4.
|
Mortgage
Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured
Line of Credit
|
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.
In December 2005, the Company, through the Operating
Partnership, entered into a non-revolving unsecured line of
credit (the 2005 Unsecured Line of Credit II).
The 2005 Unsecured Line of Credit II had a borrowing
capacity of $125,000 and matured on March 15, 2006. The
2005 Unsecured Line of Credit II provided for interest only
payments at LIBOR plus .625% or at Prime, at the Companys
election. On January 10, 2006, the Company, through the
Operating Partnership, paid off and retired the 2005 Unsecured
Line of Credit II.
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
11
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 January 12, 2005, in conjunction with the acquisition of
a parcel of land, the seller provided the Company a mortgage
loan in the amount of $1,167 (the Acquisition Mortgage
Loan XV). The Acquisition Mortgage Loan XV was
collateralized by a land parcel in Lebanon, Tennessee, did not
require principal payments prior to maturity, and had a 0%
interest rate. The Acquisition Mortgage Loan XV was paid off and
retired upon maturity on January 12, 2006.
On July 16, 1998, the Company, through TK-SV, LTD., assumed
a mortgage loan in the principal amount of $2,566 (the
Acquisition Mortgage Loan V). The Acquisition
Mortgage Loan V was collateralized by one property in Tampa,
Florida. The loan had a maturity date of September 1, 2006,
and a fixed interest rate of 9.01%. The Acquisition Mortgage
Loan V was paid off and retired on March 1, 2006.
On March 7, 2006, in conjunction with the acquisition of a
parcel of land, the seller provided the Company 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 Compton, CA, did not require
principal payments prior to maturity, and had an 8.0% interest
rate. The Acquisition Mortgage Loan XX was paid off and retired
upon maturity on June 5, 2006.
On April 16, 1998, the Consolidated Operating Partnership
assumed a mortgage loan in the amount of $2,525 (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 August 25, 2006, in conjunction with the acquisition of
a parcel of land, the seller provided the Company a mortgage
loan in the amount of $770 (the Acquisition Mortgage Loan
XXI). The Acquisition Mortgage Loan XXI is collateralized
by a land parcel in Owatanna, MN, has a maturity date of
February 1, 2017, does not require principal payments until
February 1, 2009, and has a 0% interest rate.
On September 25, 2006, the Company, through the Operating
Partnership, issued $175,000 of senior unsecured debt which
bears interest at a rate of 4.625% (the 2011 Exchangeable
Notes). The Company also granted the initial purchasers of
the 2011 Exchangeable Notes an option exercisable until
October 4, 2006 to purchase up to an additional $25,000
principal amount of the 2011 Exchangeable Notes to cover
over-allotments, if any (the Over-allotment Option).
Holders of the 2011 Exchangeable Notes may exchange their notes
for the Companys common stock prior to the close of
business on the second business day immediately preceding the
stated maturity date at any time beginning on July 15, 2011
and also under the following circumstances: 1) during any
calendar quarter beginning after December 31, 2006 (and
only during such calendar quarter), if, and only if, the closing
sale price per share of the Companys common stock for at
least 20 trading days ending on the last trading day of the
preceding calendar quarter is more than 130% of the exchange
price per share of the Companys common stock in effect on
the applicable trading day; 2) during the five consecutive
trading-day period following any five consecutive trading-day
period in which the trading price of the notes was less than 98%
of the product of the closing sale price per share of the
Companys common stock multiplied by the applicable
exchange rate; 3) if those notes have been called for
redemption, at any time prior to the close of business on the
second business day prior to the redemption date; 4) upon
the occurrence of distributions of certain rights to purchase
the Companys common stock or certain other assets; or
5) if the Companys common stock ceases to be listed
on a U.S. national or regional securities exchange and is
not quoted on the
over-the-counter
market as reported by Pink Sheets LLC or any similar
organization, in each case, for 30 consecutive trading days. The
2011 Exchangeable Notes have an initial exchange rate of
19.6356 shares of the Companys common stock per
$1,000 principal amount, representing an exchange price of
approximately $50.93 per common share and an exchange
premium of approximately 20% based on the last reported sale
price of $42.44 per share of the Companys common
stock on September 19, 2006. If a change of
12
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
control transaction described in the indenture relating to the
2011 Exchangeable Notes occurs and a holder elects to exchange
notes in connection with any such transaction, holders of the
2011 Exchangeable Notes will be entitled to a make-whole amount
in the form of an increase in the exchange rate. The exchange
rate may also be adjusted under certain other circumstances,
including the payment of cash dividends in excess of the
Companys current regular quarterly dividend on its common
stock of $0.70 per share. The 2011 Exchangeable Notes will
be exchangeable for cash up to their principal amount and shares
of the Companys common stock for the remainder of the
exchange value in excess of the principal amount. The 2011
Exchangeable notes mature on September 15, 2011, unless
previously redeemed or repurchased by the Company or exchanged
in accordance with their terms prior to such date. Interest is
paid semi-annually in arrears on March 15 and September 15 of
each year, beginning March 15, 2007. In connection with the
Operating Partnerships offering of the 2011 Exchangeable
Notes, the Operating Partnership entered into capped call
transactions (the capped call transactions) with
affiliates of two of the initial purchasers of the 2011
Exchangeable Notes (the option counterparties) in
order to increase the effective exchange price of the 2011
Exchangeable Notes to $59.42 per share of the
Companys common stock, which represents an exchange
premium of approximately 40% based on the last reported sale
price of $42.44 per share of the Companys common
stock on September 19, 2006. The aggregate cost of the
capped call transactions was approximately $5,810. The capped
call transactions are expected to reduce the potential dilution
with respect to the Companys common stock upon exchange of
the 2011 Exchangeable Notes to the extent the then market value
per share of the Companys common stock does not exceed the
cap price of the capped call transaction during the observation
period relating to an exchange. The 2011 Exchangeable Notes and
the
Over-Allotment
Option are fully and unconditionally guaranteed by the Company.
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
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
Maturity
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
Date
|
|
|
Mortgage Loans Payable,
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed Loan I
|
|
$
|
1,902
|
|
|
$
|
2,320
|
|
|
$
|
|
|
|
$
|
|
|
|
|
9.250
|
%
|
|
|
09/01/09
|
|
Assumed Loan II
|
|
|
1,663
|
|
|
|
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
|
|
|
5,184
|
|
|
|
5,308
|
|
|
|
36
|
|
|
|
37
|
|
|
|
8.260
|
%
|
|
|
12/01/19
|
|
Acquisition Mortgage Loan IX
|
|
|
5,377
|
|
|
|
5,505
|
|
|
|
37
|
|
|
|
38
|
|
|
|
8.260
|
%
|
|
|
12/01/19
|
|
Acquisition Mortgage Loan X
|
|
|
15,338
|
(3)
|
|
|
15,733
|
(3)
|
|
|
94
|
|
|
|
98
|
|
|
|
8.250
|
%
|
|
|
12/01/10
|
|
Acquisition Mortgage Loan XII
|
|
|
2,455
|
(3)
|
|
|
2,503
|
(3)
|
|
|
14
|
|
|
|
15
|
|
|
|
7.540
|
%
|
|
|
01/01/12
|
|
Acquisition Mortgage Loan XIV
|
|
|
6,120
|
(3)
|
|
|
6,392
|
(3)
|
|
|
33
|
|
|
|
34
|
|
|
|
6.940
|
%
|
|
|
07/01/09
|
|
Acquisition Mortgage Loan XV
|
|
|
|
(4)
|
|
|
1,167
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
(4)
|
|
|
N/A
|
(4)
|
Acquisition Mortgage Loan XVI
|
|
|
1,909
|
(3)
|
|
|
1,960
|
(3)
|
|
|
9
|
|
|
|
9
|
|
|
|
5.500
|
%
|
|
|
09/30/24
|
|
Acquisition Mortgage Loan XVII
|
|
|
3,046
|
(3)
|
|
|
3,209
|
(3)
|
|
|
17
|
|
|
|
18
|
|
|
|
7.375
|
%
|
|
|
05/01/16
|
|
Acquisition Mortgage Loan XVIII
|
|
|
6,825
|
(3)
|
|
|
7,091
|
(3)
|
|
|
40
|
|
|
|
42
|
|
|
|
7.580
|
%
|
|
|
03/01/11
|
|
Acquisition Mortgage Loan XIX
|
|
|
1,946
|
(3)
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
7.320
|
%
|
|
|
06/01/14
|
|
Acquisition Mortgage Loan XX
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
(5)
|
|
|
N/A
|
(5)
|
Acquisition Mortgage Loan XXI
|
|
|
770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.000
|
%
|
|
|
02/01/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
52,535
|
|
|
$
|
57,309
|
|
|
$
|
291
|
|
|
$
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Accrued Interest
|
|
|
Interest
|
|
|
|
|
|
|
Balance at
|
|
|
Payable at
|
|
|
Rate at
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
Maturity
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
Date
|
|
|
Senior Unsecured Debt,
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
$
|
3,500
|
|
|
$
|
875
|
|
|
|
7.000
|
%
|
|
|
12/01/06
|
|
2007 Notes
|
|
|
149,996
|
(6)
|
|
|
149,992
|
(6)
|
|
|
4,306
|
|
|
|
1,456
|
|
|
|
7.600
|
%
|
|
|
05/15/07
|
|
2016 Notes
|
|
|
199,355
|
(6)
|
|
|
|
|
|
|
2,428
|
|
|
|
|
|
|
|
5.750
|
%
|
|
|
01/15/16
|
|
2017 Notes
|
|
|
99,893
|
(6)
|
|
|
99,886
|
(6)
|
|
|
2,500
|
|
|
|
625
|
|
|
|
7.500
|
%
|
|
|
12/01/17
|
|
2027 Notes
|
|
|
15,055
|
(6)
|
|
|
15,054
|
(6)
|
|
|
407
|
|
|
|
138
|
|
|
|
7.150
|
%
|
|
|
05/15/27
|
|
2028 Notes
|
|
|
199,829
|
(6)
|
|
|
199,823
|
(6)
|
|
|
3,209
|
|
|
|
7,009
|
|
|
|
7.600
|
%
|
|
|
07/15/28
|
|
2011 Notes
|
|
|
199,731
|
(6)
|
|
|
199,685
|
(6)
|
|
|
656
|
|
|
|
4,343
|
|
|
|
7.375
|
%
|
|
|
03/15/11
|
|
2012 Notes
|
|
|
199,235
|
(6)
|
|
|
199,132
|
(6)
|
|
|
6,340
|
|
|
|
2,903
|
|
|
|
6.875
|
%
|
|
|
04/15/12
|
|
2032 Notes
|
|
|
49,430
|
(6)
|
|
|
49,413
|
(6)
|
|
|
1,787
|
|
|
|
818
|
|
|
|
7.750
|
%
|
|
|
04/15/32
|
|
2009 Notes
|
|
|
124,882
|
(6)
|
|
|
124,849
|
(6)
|
|
|
1,932
|
|
|
|
292
|
|
|
|
5.250
|
%
|
|
|
06/15/09
|
|
2014 Notes
|
|
|
111,934
|
(6)
|
|
|
111,059
|
(6)
|
|
|
2,675
|
|
|
|
669
|
|
|
|
6.420
|
%
|
|
|
06/01/14
|
|
2011 Exchangeable Notes
|
|
|
175,000
|
|
|
|
|
|
|
|
135
|
|
|
|
|
|
|
|
4.625
|
%
|
|
|
09/15/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,674,340
|
|
|
$
|
1,298,893
|
|
|
$
|
29,875
|
|
|
$
|
19,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Unsecured Line of Credit I
|
|
$
|
64,000
|
|
|
$
|
332,500
|
|
|
$
|
1,510
|
|
|
$
|
1,833
|
|
|
|
6.038
|
%
|
|
|
09/28/08
|
|
2005 Unsecured Line of
Credit II
|
|
|
|
(7)
|
|
|
125,000
|
|
|
|
|
(7)
|
|
|
232
|
|
|
|
N/A
|
(7)
|
|
|
N/A
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
64,000
|
|
|
$
|
457,500
|
|
|
$
|
1,510
|
|
|
$
|
2,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On June 30, 2006, the Company paid off and retired the
Acquisition Mortgage Loan IV. |
|
(2) |
|
On March 1, 2006, the Company paid off and retired the
Acquisition Mortgage Loan V. |
|
(3) |
|
At September 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
$1,623, $200, $342, $20, $229, $579, and $107, 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 September 30, 2006, the 2007 Notes, 2016 Notes, 2017
Notes, 2027 Notes, 2028 Notes, 2011 Notes, 2012 Notes, 2032
Notes, 2009 Notes, and 2014 Notes are net of unamortized
discounts of $4, $645, $107, $15, $171, $269, $765, $570, $118,
and $13,066, 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. |
14
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a schedule of the stated maturities and
scheduled principal payments of the mortgage loans, senior
unsecured debt and unsecured line of credit, exclusive of
premiums and discounts, for the next five years ending
December 31, and thereafter:
|
|
|
|
|
|
|
Amount
|
|
|
Remainder of 2006
|
|
$
|
150,493
|
|
2007
|
|
|
152,339
|
|
2008
|
|
|
66,533
|
|
2009
|
|
|
132,452
|
|
2010
|
|
|
15,563
|
|
Thereafter
|
|
|
1,286,125
|
|
|
|
|
|
|
Total
|
|
$
|
1,803,505
|
|
|
|
|
|
|
Derivatives:
In October 2005, the Company, through an entity
wholly-owned
by the Operating Partnership, 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 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, 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 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% (the
2006 Interest Rate Protection Agreements). In
September 2006, the 2006 Interest Rate Protection Agreements
failed to qualify for hedge accounting, since the actual debt
issuance date was not within the range of dates the Company
disclosed in its hedge designation. The Company settled the 2006
Interest Rate Protection Agreements and paid the counterparties
$2,942. This amount is recognized in the
mark-to-market/gain
(loss) on settlement of interest rate protection agreements
caption on the consolidated statements of operations.
15
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In conjunction with certain issuances of senior unsecured debt,
the Company, through the Operating Partnership, 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 $1,130
into net income, which will decrease interest expense.
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
to arrive at net income available to common stockholders in
determining earnings per share for the nine months ended
September 30, 2006.
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
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 August 21, 2006, the Company issued 2,000,000 Depositary
Shares, each representing 1/10,000th of a share of the
Companys 7.25%, $.01 par value, Series K
Flexible Cumulative Redeemable Preferred Stock (the
Series K Preferred Stock), at an initial
offering price of $25.00 per Depositary Share. Dividends on
the Series K Preferred Stock, represented by the Depositary
Shares, are cumulative from the date of initial issuance and are
payable quarterly in arrears. With respect to the payment of
dividends and amounts upon liquidation, dissolution or winding
up, the Series K 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, Series G Preferred Stock and Series J
Preferred Stock. The Series K Preferred Stock is not
redeemable prior to August 15, 2011. On or after
August 15, 2011, the Series K 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 $50,000 in the aggregate, plus dividends
accrued and unpaid to the redemption date. The Series K
Preferred Stock has no stated maturity and is not convertible
into any other securities of the Company.
16
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Dividend/Distributions:
The following table summarizes dividends/distributions accrued
during the nine months ended September 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
|
Dividend/
|
|
|
Total
|
|
|
|
Distribution
|
|
|
Dividend/
|
|
|
|
per Share/Unit
|
|
|
Distribution
|
|
|
Common Stock/Operating Partnership
Units
|
|
$
|
2.10
|
|
|
$
|
108,106
|
|
Series C Preferred Stock
|
|
$
|
161.73
|
|
|
$
|
3,234
|
|
Series F Preferred Stock
|
|
$
|
4,677.00
|
|
|
$
|
2,339
|
|
Series G Preferred Stock
|
|
$
|
5,427.00
|
|
|
$
|
1,357
|
|
Series I Preferred Stock
|
|
$
|
470.67
|
|
|
$
|
353
|
|
Series J Preferred Stock
|
|
$
|
12,989.58
|
|
|
$
|
7,794
|
|
Series K Preferred Stock
|
|
$
|
2,064.30
|
|
|
$
|
413
|
|
Non-Qualified
Employee Stock Options:
During the nine months ended September 30, 2006, certain
employees of the Company exercised 62,467 non-qualified employee
stock options. Net proceeds to the Company were approximately
$1,822.
Restricted
Stock:
During the nine months ended September 30, 2006, the
Company awarded 303,142 shares of restricted common stock
to certain employees and 14,529 shares of restricted common
stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $12,075 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 nine months ended September 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 nine months ended September 30, 2006, the
Company acquired 76 industrial properties comprising
approximately 7.7 million square feet of GLA and several
land parcels. The purchase price of these acquisitions totaled
approximately $463,029, 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 nine months ended September 30, 2006, the
Company sold 93 industrial properties comprising approximately
14.3 million square feet of GLA and several land parcels,
totaling gross proceeds of $759,941. The gain on sale of real
estate, net of income taxes was approximately $134,244. The 93
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 93 sold industrial properties are included in
discontinued operations. The results of operations and gain on
sale of real estate, net of
17
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
income taxes for the several land parcels that do not meet the
criteria established by FAS 144 are included in continuing
operations.
At September 30, 2006, the Company had six industrial
properties comprising approximately 1.1 million square feet
of GLA held for sale. In accordance with FAS 144, the
results of operations of the six industrial properties held for
sale at September 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 nine months ended
September 30, 2006 reflects the results of operations and
gain on sale of real estate, net of income taxes of 93
industrial properties that were sold during the nine months
ended September 30, 2006 as well as the results of
operations of six industrial properties held for sale at
September 30, 2006.
Income from discontinued operations for the nine months ended
September 30, 2005 reflects the results of operations of 93
industrial properties that were sold during the nine months
ended September 30, 2006, 86 industrial properties that
were sold during the year ended December 31, 2005 and six
industrial properties identified as held for sale at
September 30, 2006.
The following table discloses certain information regarding the
industrial properties included in discontinued operations by the
Company for the three and nine months ended September 30,
2006 and September 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Total Revenues
|
|
$
|
4,052
|
|
|
$
|
12,975
|
|
|
$
|
18,150
|
|
|
$
|
41,906
|
|
Operating Expenses
|
|
|
(897
|
)
|
|
|
(4,131
|
)
|
|
|
(5,367
|
)
|
|
|
(14,385
|
)
|
Interest Expense
|
|
|
|
|
|
|
(29
|
)
|
|
|
|
|
|
|
(373
|
)
|
Depreciation and Amortization
|
|
|
(1,070
|
)
|
|
|
(4,120
|
)
|
|
|
(6,289
|
)
|
|
|
(13,114
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(716
|
)
|
|
|
(1,014
|
)
|
|
|
(1,958
|
)
|
|
|
(2,721
|
)
|
Gain on Sale of Real Estate
|
|
|
65,368
|
|
|
|
38,552
|
|
|
|
171,390
|
|
|
|
85,734
|
|
Provision for Income Taxes
Allocable to Gain on Sale of Real Estate
|
|
|
(19,427
|
)
|
|
|
(5,943
|
)
|
|
|
(41,340
|
)
|
|
|
(11,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Discontinued
Operations Before Minority Interest
|
|
$
|
47,310
|
|
|
$
|
36,290
|
|
|
$
|
134,586
|
|
|
$
|
85,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
Supplemental
Information to Statements of Cash Flows
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
Interest paid, net of capitalized
interest
|
|
$
|
80,693
|
|
|
$
|
69,625
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized
|
|
$
|
4,225
|
|
|
$
|
2,363
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Distribution payable on common
stock/Units
|
|
$
|
36,053
|
|
|
$
|
34,592
|
|
|
|
|
|
|
|
|
|
|
Distribution payable on preferred
stock
|
|
$
|
6,674
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Exchange of units for common
shares:
|
|
|
|
|
|
|
|
|
Minority interest
|
|
$
|
(2,041
|
)
|
|
$
|
(1,951
|
)
|
Common Stock
|
|
|
1
|
|
|
|
1
|
|
Additional
paid-in-capital
|
|
|
2,040
|
|
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
In conjunction with the property
and land acquisitions, the following assets and liabilities were
assumed and units issued:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
$
|
(1,795
|
)
|
|
$
|
(4,218
|
)
|
|
|
|
|
|
|
|
|
|
Issuance of Operating Partnership
Units
|
|
$
|
(1,288
|
)
|
|
$
|
(8,875
|
)
|
|
|
|
|
|
|
|
|
|
Mortgage Debt
|
|
$
|
(7,765
|
)
|
|
$
|
(11,545
|
)
|
|
|
|
|
|
|
|
|
|
Property acquisition and write-off
of a mortgage loan receivable
|
|
$
|
|
|
|
$
|
3,870
|
|
|
|
|
|
|
|
|
|
|
Write-off of retired assets
|
|
$
|
20,977
|
|
|
$
|
25,840
|
|
|
|
|
|
|
|
|
|
|
In conjunction with certain
property sales, the Company provided seller financing and
assigned a mortgage note payable:
|
|
|
|
|
|
|
|
|
Notes Receivable
|
|
$
|
11,200
|
|
|
$
|
51,158
|
|
|
|
|
|
|
|
|
|
|
Mortgage Note Payable
|
|
$
|
|
|
|
$
|
13,242
|
|
|
|
|
|
|
|
|
|
|
19
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
9.
|
Earnings
Per Share (EPS)
|
The computation of basic and diluted EPS is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(13,124
|
)
|
|
$
|
(9,446
|
)
|
|
$
|
(35,958
|
)
|
|
$
|
(27,912
|
)
|
Gain on Sale of Real Estate, Net
of Minority Interest and Income Taxes
|
|
|
1,330
|
|
|
|
1,444
|
|
|
|
3,646
|
|
|
|
15,114
|
|
Less: Preferred Stock Dividends
|
|
|
(5,442
|
)
|
|
|
(2,310
|
)
|
|
|
(15,490
|
)
|
|
|
(6,930
|
)
|
Less: Redemption of Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority
Interest For Basic and Diluted EPS
|
|
|
(17,236
|
)
|
|
|
(10,312
|
)
|
|
|
(48,474
|
)
|
|
|
(19,728
|
)
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
|
41,165
|
|
|
|
31,496
|
|
|
|
117,009
|
|
|
|
74,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders For Basic and Diluted EPS
|
|
$
|
23,929
|
|
|
$
|
21,184
|
|
|
$
|
68,535
|
|
|
$
|
54,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Basic
|
|
|
44,031,936
|
|
|
|
42,468,264
|
|
|
|
43,975,588
|
|
|
|
42,304,870
|
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and Director Common Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee and Director Shares of
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Diluted
|
|
|
44,031,936
|
|
|
|
42,468,264
|
|
|
|
43,975,588
|
|
|
|
42,304,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority Interest
|
|
$
|
(0.39
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
$
|
0.93
|
|
|
$
|
0.74
|
|
|
$
|
2.66
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
|
$
|
1.56
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
Available to Common Stockholders, Net of Minority Interest
|
|
$
|
(0.39
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations, Net of
Minority Interest and Income Taxes
|
|
$
|
0.93
|
|
|
$
|
0.74
|
|
|
$
|
2.66
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common
Stockholders
|
|
$
|
0.54
|
|
|
$
|
0.50
|
|
|
$
|
1.56
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares diluted are the same as
weighted average shares basic for the three and nine
months ended September 30, 2006 and September 30, 2005
as the dilutive effect of stock options and restricted
20
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 dilution related to
stock options and restricted stock that would be added to the
denominator of weighted average shares-basic would have been
201,046 and 205,354 for the three months ended
September 30, 2006 and 2005, respectively, and 183,800 and
241,076, for the nine months ended September 30, 2006 and
2005, respectively. Additionally, unvested restricted stock
shares aggregating 109,788 and 117,991, for the three and nine
months ended September 30, 2006, respectively, and 109,282
for the three and nine months ended September 30, 2005 are
excluded from the denominator because such shares are
anti-dilutive for the periods presented.
|
|
10.
|
Stock
Based Compensation
|
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 Plans in the
event of a change in control in the Company. As of
September 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 September 30, 2006 all outstanding stock options
are vested.
Stock option transactions for the nine months ended
September 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
|
|
|
(62,467
|
)
|
|
$
|
29.94
|
|
|
$
|
22.75-$33.15
|
|
|
$
|
728
|
|
Expired or Terminated
|
|
|
(38,967
|
)
|
|
$
|
30.88
|
|
|
$
|
27.25-$33.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30,
2006
|
|
|
445,289
|
|
|
$
|
31.49
|
|
|
$
|
25.13-$33.15
|
|
|
$
|
5,571
|
|
The following table summarizes currently outstanding and
exercisable options as of September 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Average
|
|
|
|
and
|
|
|
Remaining
|
|
|
Exercise
|
|
Range of Exercise Price
|
|
Exercisable
|
|
|
Contractual Years
|
|
|
Price
|
|
|
$25.13-$30.00
|
|
|
59,370
|
|
|
|
3.37
|
|
|
$
|
28.46
|
|
$30.38-$33.15
|
|
|
385,919
|
|
|
|
3.98
|
|
|
$
|
31.95
|
|
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
779,721 shares were outstanding at September 30, 2006.
21
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted stock transactions for the nine months ended
September 30, 2006 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding at December 31,
2005
|
|
|
700,023
|
|
|
$
|
34.23
|
|
Issued
|
|
|
317,671
|
|
|
$
|
38.01
|
|
Vested
|
|
|
(215,865
|
)
|
|
$
|
36.55
|
|
Forfeited
|
|
|
(22,108
|
)
|
|
$
|
34.22
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30,
2006
|
|
|
779,721
|
|
|
$
|
35.48
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2.1 million
square feet of GLA. The estimated total construction costs are
approximately $99,881. Of this amount, approximately $68,855
remains to be funded. There can be no assurance the actual
completion cost will not exceed the estimated completion cost
stated above.
At September 30, 2006, the Company had 13 letters of credit
outstanding in the aggregate amount of $5,431. These letters of
credit expire between March 31, 2007 and September 30,
2008.
From October 1, 2006 to October 27, 2006, the Company
acquired ten industrial properties and several land parcels for
a purchase price of approximately $100,720, excluding costs
incurred in conjunction with the acquisition of these industrial
properties. The Company also sold three industrial properties
for approximately $42,150 of gross proceeds.
On October 2, 2006, the Company paid third quarter 2006
dividends of $53.91 per share ($0.5391 per Depositary Share) on
its Series C Preferred Stock totaling, in the aggregate,
approximately $1,078; a prorata dividend of $3,118.00 per share
($31.1800 per Depositary Share) on its Series F Preferred
Stock totaling, in the aggregate, approximately $1,559; a
prorata dividend of $3,618.00 per share ($36.1800 per Depositary
Share) on its Series G Preferred Stock totaling, in the
aggregate, approximately $905; a dividend of $4,531.30 per share
($0.4531 per Depositary Share) on its Series J Preferred
Stock totaling, in the aggregate, approximately $2,719; and a
prorata dividend of $2,064.30 per share ($0.2064 per Depositary
Share) on its Series K Preferred Stock totaling, in the
aggregate, approximately $413.
On October 3, 2006, the initial purchasers of the 2011
Exchangeable Notes exercised their Over-Allotment Option with
respect to $25,000 in principal amount of the 2011 Exchangeable
Notes. Together with the 2011 Exchangeable Notes, the aggregate
principal amount issued and outstanding is $200,000.
On October 10, 2006, the Company assumed mortgage loans in
the amounts of $14,217 and $12,000 (the Acquisition
Mortgage Loan XXII and the Acquisition Mortgage Loan
XXIII). The Acquisition Mortgage Loans XXII and XXIII are
collateralized by one property in Edwardsville, IL, bear
interest at a fixed rate of 5.92% and 5.96% respectively, and
provide for monthly principal and interest payments based on a
25 year amortization schedule. The Acquisition Mortgage Loans
XXII and XXIII mature on January 1, 2014.
On October 17, 2006, the Company and the Operating
Partnership paid a third quarter 2006 dividend/distribution of
$0.70 per common share/Unit, totaling approximately $36,053.
22
|
|
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 September 30, 2006. Minority interest in the
Company at September 30, 2006 represents the approximate
13.0% aggregate partnership interest in the Operating
Partnership held by the limited partners thereof.
As of September 30, 2006, the Company owned 946 industrial
properties (inclusive of developments in process) located in
27 states and one province in Canada, containing an
aggregate of approximately 76.5 million square feet of
gross leasable area (GLA). Of the 946 industrial
properties owned by the Company, 754 are held by the Operating
Partnership and limited liability companies of which the
Operating Partnership is the sole member, 101 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 91 are held by an entity wholly-owned
by the Operating Partnership.
On March 21, 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.
On July 21, 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
23
is the sole member, owns a ten percent equity interest in and
provides property management, leasing, development, disposition
and portfolio management services to the July 2006 Joint Venture.
The Company, through separate, wholly-owned limited liability
companies of which the Operating Partnership or First Industrial
Investment, 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 and the July 2006 Joint
Venture, 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
24
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, 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. Also, acquisitions and developments
undertaken by the Company through its joint ventures are funded
in substantial part by borrowings of the joint ventures and
equity commitments of the Companys joint venture partners.
Access to external capital on favorable terms, whether directly
or through joint ventures, plays a key role in the
Companys financial condition and results of operations, as
it impacts the Companys and its joint ventures cost
of capital and their ability and cost to refinance existing
indebtedness as it matures and the Companys ability and
cost to issue, when and as warranted, of additional equity
securities, which, in turn, impacts the Companys and its
joint ventures ability to acquire and develop properties. 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 and
its joint ventures 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.
25
RESULTS
OF OPERATIONS
Comparison
of Nine Months Ended September 30, 2006 to Nine Months
Ended September 30, 2005
The Companys net income available to common stockholders
was $68.5 million and $54.7 million for the nine
months ended September 30, 2006 and 2005, respectively.
Basic and diluted net income available to common stockholders
were $1.56 per share for the nine months ended
September 30, 2006, and $1.29 per share for the nine
months ended September 30, 2005.
The tables below summarize the Companys revenues, property
expenses and depreciation and other amortization by various
categories for the nine months ended September 30, 2006 and
September 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.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
196,641
|
|
|
$
|
197,609
|
|
|
$
|
(968
|
)
|
|
|
(0.5
|
)%
|
Acquired Properties
|
|
|
62,024
|
|
|
|
8,344
|
|
|
|
53,680
|
|
|
|
643.3
|
%
|
Sold Properties
|
|
|
16,845
|
|
|
|
52,544
|
|
|
|
(35,699
|
)
|
|
|
(67.9
|
)%
|
Properties Not In Service
|
|
|
16,591
|
|
|
|
13,711
|
|
|
|
2,880
|
|
|
|
21.0
|
%
|
Other
|
|
|
22,175
|
|
|
|
11,703
|
|
|
|
10,472
|
|
|
|
89.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
314,276
|
|
|
$
|
283,911
|
|
|
$
|
30,365
|
|
|
|
10.7
|
%
|
Discontinued Operations
|
|
|
(18,150
|
)
|
|
|
(41,906
|
)
|
|
|
23,756
|
|
|
|
(56.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
296,126
|
|
|
$
|
242,005
|
|
|
$
|
54,121
|
|
|
|
22.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2006 and September 30, 2005, the
occupancy rates of the Companys same store properties were
91.5% and 90.8%, respectively. Revenues from same store
properties remained relatively unchanged. Revenues from acquired
properties increased $53.7 million due to the 237
industrial properties acquired subsequent to December 31,
2004 totaling approximately 27.8 million square feet of
GLA. Revenues from sold properties decreased $35.7 million
due to the 189 industrial properties sold subsequent to
December 31, 2004 totaling approximately 27.0 million
square feet of GLA and the revenues from the build to suit
development for sale in 2005. Revenues from properties not in
service increased by $2.9 million due to an increase in
properties placed in service during 2006 and 2005. Other
revenues increased by approximately $10.5 million due
primarily to an increase in joint venture fees partially offset
by a decrease in assignment fees.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
PROPERTY EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
65,579
|
|
|
$
|
64,872
|
|
|
$
|
707
|
|
|
|
1.1
|
%
|
Acquired Properties
|
|
|
15,825
|
|
|
|
2,511
|
|
|
|
13,314
|
|
|
|
530.2
|
%
|
Sold Properties
|
|
|
5,062
|
|
|
|
24,031
|
|
|
|
(18,969
|
)
|
|
|
(78.9
|
)%
|
Properties Not In Service
|
|
|
7,179
|
|
|
|
6,683
|
|
|
|
496
|
|
|
|
7.4
|
%
|
Other
|
|
|
11,661
|
|
|
|
7,578
|
|
|
|
4,083
|
|
|
|
53.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
105,306
|
|
|
$
|
105,675
|
|
|
$
|
(369
|
)
|
|
|
(0.3
|
)%
|
Discontinued Operations
|
|
|
(5,367
|
)
|
|
|
(14,385
|
)
|
|
|
9,018
|
|
|
|
(62.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
99,939
|
|
|
$
|
91,290
|
|
|
$
|
8,649
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $13.3 million due to
properties acquired subsequent to December 31, 2004.
Property expenses from sold properties decreased by
$19.0 million due to properties sold subsequent to
December 31, 2004 and the expenses from the build to suit
development for sale in 2005. Property expenses from properties
not in service remained relatively unchanged. Other expense
increased $4.1 million due primarily to increases in
employee compensation and the bad debt reserve.
General and administrative expense increased by approximately
$17.0 million, or 43.8%, due primarily to increases in
employee compensation related to compensation for additional
employees as well as an increase in incentive compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
DEPRECIATION and OTHER
AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
63,848
|
|
|
$
|
64,135
|
|
|
$
|
(287
|
)
|
|
|
(0.4
|
)%
|
Acquired Properties
|
|
|
36,264
|
|
|
|
5,505
|
|
|
|
30,759
|
|
|
|
558.7
|
%
|
Sold Properties
|
|
|
4,661
|
|
|
|
12,928
|
|
|
|
(8,267
|
)
|
|
|
(63.9
|
)%
|
Properties Not In Service and Other
|
|
|
11,533
|
|
|
|
7,518
|
|
|
|
4,015
|
|
|
|
53.4
|
%
|
Corporate Furniture, Fixtures and
Equipment
|
|
|
1,341
|
|
|
|
1,000
|
|
|
|
341
|
|
|
|
34.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
117,647
|
|
|
$
|
91,086
|
|
|
$
|
26,561
|
|
|
|
29.2
|
%
|
Discontinued Operations
|
|
|
(6,289
|
)
|
|
|
(13,114
|
)
|
|
|
6,825
|
|
|
|
(52.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other
Amortization
|
|
$
|
111,358
|
|
|
$
|
77,972
|
|
|
$
|
33,386
|
|
|
|
42.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
remained relatively unchanged. Depreciation and other
amortization from acquired properties increased by
$30.8 million due to properties acquired subsequent to
December 31, 2004. Depreciation and other amortization from
sold properties decreased by $8.3 million due to properties
sold subsequent to December 31, 2004. Depreciation and
other amortization for properties not in service and other
increased by $4.0 million due primarily to accelerated
depreciation on one property in Columbus, OH which was
razed during the nine months ended September 30, 2006.
Interest income remained relatively unchanged.
27
Interest expense increased by approximately $11.7 million
primarily due to an increase in the weighted average debt
balance outstanding for the nine months ended September 30,
2006 ($1,880.3 million), as compared to the nine months
ended September 30, 2005 ($1,642.0 million), as well
as an increase in the weighted average interest rate for the
nine months ended September 30, 2006 (6.71%), as compared
to the nine months ended September 30, 2005 (6.62%)
partially offset by an increase in capitalized interest for the
nine months ended September 30, 2006 as compared to the
nine months ended September 30, 2005, due to an increase in
development activities.
Amortization of deferred financing costs increased by
$0.3 million, or 17.1% 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 April 2006, the Company, through the Operating Partnership,
entered into interest rate protection agreements which it
designated as cash flow hedges. Each of the interest rate
protection agreements had a notional value of
$74.8 million, were effective from May 10, 2007
through May 10, 2012, and fixed the LIBOR rate at 5.42%. In
September 2006, the interest rate protection agreements failed
to qualify for hedge accounting since the actual debt issuance
date was not within the range of dates the Company disclosed in
its hedge designation. The Company, through the Operating
Partnership, settled the interest rate protection agreements and
paid the counterparties $2.9 million. In October 2005, the
Company, through an entity
wholly-owned
by the Operating Partnership, 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 didnt qualify for hedge
accounting. The Company recognized a loss of $0.2 million
related to this interest rate protection agreement for the nine
months ended September 30, 2006. Both transactions are
recognized in the
mark-to-market/(loss)
gain on settlement of interest rate protection agreements
caption on the consolidated statement of operations.
The Company recognized $0.7 million gain for the nine
months ended September 30, 2005, relating to the
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 as well as a deferred gain that was
reclassed out of Other Comprehensive Income relating to a
settled interest rate protection agreement that did not qualify
for hedge accounting treatment.
Equity in income of joint ventures increased by
$8.3 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 nine months ended September 30, 2006.
Income tax benefit increased by $1.8 million due primarily
to an increase in general and administrative expense and
interest expense associated with additional investment activity,
partially offset by an increase in joint venture fees and net
income earned from its joint ventures during the nine months
ended September 30, 2006 compared to the nine months ended
September 30, 2005 within the Companys taxable REIT
subsidiary.
28
The following table summarizes certain information regarding the
industrial properties included in discontinued operations by the
Company for the nine months ended September 30, 2006 and
September 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
18,150
|
|
|
$
|
41,906
|
|
Operating Expenses
|
|
|
(5,367
|
)
|
|
|
(14,385
|
)
|
Interest Expense
|
|
|
|
|
|
|
(373
|
)
|
Depreciation and Amortization
|
|
|
(6,289
|
)
|
|
|
(13,114
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(1,958
|
)
|
|
|
(2,721
|
)
|
Gain on Sale of Real Estate
|
|
|
171,390
|
|
|
|
85,734
|
|
Provision for Income Taxes
Allocable to Gain on Sale
|
|
|
(41,340
|
)
|
|
|
(11,349
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued
Operations Before Minority Interest
|
|
$
|
134,586
|
|
|
$
|
85,698
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations (net of income taxes) for
the nine months ended September 30, 2006 reflects the
results of operations and gain on sale of real estate, net of
income taxes, relating to 93 industrial properties that were
sold during the nine months ended September 30, 2006 and
the results of operations from six properties that were
identified as held for sale at September 30, 2006.
Income from discontinued operations (net of income taxes) for
the nine months ended September 30, 2005 reflects the
results of operations and gain on sale of real estate, net of
income taxes, relating to 93 industrial properties that were
sold during the nine months ended September 30, 2006, 86
industrial properties that were sold during the year ended
December 31, 2005 and six industrial properties identified
as held for sale at September 30, 2006.
The $4.2 million gain on sale of real estate, net of income
taxes for the nine months ended September 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 $17.4 million gain on sale of
real estate, net of income taxes for the nine months ended
September 30, 2005 resulted from the sale of ten 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 September 30, 2006 to Three Months
Ended September 30, 2005
The Companys net income available to common stockholders
was $23.9 million and $21.2 million for the three
months ended September 30, 2006 and 2005, respectively.
Basic and diluted net income available to common stockholders
were $0.54 per share for the three months ended
September 30, 2006, and $0.50 per share for the three
months ended September 30, 2005.
The tables below summarize the Companys revenues, property
expenses and depreciation and other amortization by various
categories for the three months ended September 30, 2006
and September 30, 2005. Same store properties are in
service properties owned prior to July 1, 2005. Acquired
properties are properties that were acquired subsequent to
June 30, 2005. Sold properties are properties that were
sold subsequent to June 30, 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
June 30, 2005 or acquisitions acquired prior to
July 1, 2005 that were not placed in service as of
June 30, 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.
29
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
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
72,218
|
|
|
$
|
71,352
|
|
|
$
|
866
|
|
|
|
1.2
|
%
|
Acquired Properties
|
|
|
21,203
|
|
|
|
1,722
|
|
|
|
19,481
|
|
|
|
1,131.3
|
%
|
Sold Properties
|
|
|
2,824
|
|
|
|
23,405
|
|
|
|
(20,581
|
)
|
|
|
(87.9
|
)%
|
Properties Not In Service
|
|
|
3,871
|
|
|
|
3,345
|
|
|
|
526
|
|
|
|
15.7
|
%
|
Other
|
|
|
7,036
|
|
|
|
4,478
|
|
|
|
2,558
|
|
|
|
57.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
107,152
|
|
|
$
|
104,302
|
|
|
$
|
2,850
|
|
|
|
2.7
|
%
|
Discontinued Operations
|
|
|
(4,052
|
)
|
|
|
(12,975
|
)
|
|
|
8,923
|
|
|
|
(68.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
103,100
|
|
|
$
|
91,327
|
|
|
$
|
11,773
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2006 and September 30, 2005, the
occupancy rates of the Companys same store properties were
91.9% and 91.1%, respectively. Revenues from same store
properties remained relatively unchanged. Revenues from acquired
properties increased $19.5 million due to the 187
industrial properties acquired subsequent to June 30, 2005
totaling approximately 20.7 million square feet of GLA.
Revenues from sold properties decreased $20.6 million due
to the 149 industrial properties sold subsequent to
June 30, 2005 totaling approximately 21.7 million
square feet of GLA and the revenues from the build to suit
development for sale in 2005. Revenues from properties not in
service increased by $0.5 million due to an increase in
properties placed in service during 2006 and 2005. Other
revenues increased by approximately $2.6 million due
primarily to an increase in joint venture fees partially offset
by a decrease in assignment fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
PROPERTY EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
22,979
|
|
|
$
|
22,525
|
|
|
$
|
454
|
|
|
|
2.0
|
%
|
Acquired Properties
|
|
|
5,639
|
|
|
|
598
|
|
|
|
5,041
|
|
|
|
843.0
|
%
|
Sold Properties
|
|
|
670
|
|
|
|
14,283
|
|
|
|
(13,613
|
)
|
|
|
(95.3
|
)%
|
Properties Not In Service
|
|
|
1,599
|
|
|
|
1,793
|
|
|
|
(194
|
)
|
|
|
(10.8
|
)%
|
Other
|
|
|
4,093
|
|
|
|
3,590
|
|
|
|
503
|
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,980
|
|
|
$
|
42,789
|
|
|
$
|
(7,809
|
)
|
|
|
(18.3
|
)%
|
Discontinued Operations
|
|
|
(897
|
)
|
|
|
(4,131
|
)
|
|
|
3,234
|
|
|
|
(78.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
34,083
|
|
|
$
|
38,658
|
|
|
$
|
(4,575
|
)
|
|
|
(11.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $5.0 million
due to properties acquired subsequent to June 30, 2005.
Property expenses from sold properties decreased by
$13.6 million due to properties sold subsequent to
June 30, 2005 and the expenses from the build to suit
development for sale in 2005. Property expenses from properties
not in service remained relatively unchanged. Other expense
increased $0.5 million due primarily to increases in
employee compensation.
30
General and administrative expense increased by approximately
$4.7 million, or 30.3%, due primarily to increases in
employee compensation related to compensation for additional
employees as well as an increase in incentive compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
DEPRECIATION and OTHER
AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
23,656
|
|
|
$
|
25,361
|
|
|
$
|
(1,705
|
)
|
|
|
(6.7
|
)%
|
Acquired Properties
|
|
|
12,366
|
|
|
|
1,701
|
|
|
|
10,665
|
|
|
|
627.0
|
%
|
Sold Properties
|
|
|
559
|
|
|
|
3,774
|
|
|
|
(3,215
|
)
|
|
|
(85.2
|
)%
|
Properties Not In Service and Other
|
|
|
2,348
|
|
|
|
2,241
|
|
|
|
107
|
|
|
|
4.8
|
%
|
Corporate Furniture, Fixtures and
Equipment
|
|
|
477
|
|
|
|
343
|
|
|
|
134
|
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
39,406
|
|
|
$
|
33,420
|
|
|
$
|
5,986
|
|
|
|
17.9
|
%
|
Discontinued Operations
|
|
|
(1,070
|
)
|
|
|
(4,120
|
)
|
|
|
3,050
|
|
|
|
(74.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other
Amortization
|
|
$
|
38,336
|
|
|
$
|
29,300
|
|
|
$
|
9,036
|
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
decreased by $1.7 million due primarily to an acceleration
of amortization on intangible lease assets for tenants who did
not renew their lease for the three months ended
September 30, 2005. Depreciation and other amortization
from acquired properties increased by $10.7 million due to
properties acquired subsequent to June 30, 2005.
Depreciation and other amortization from sold properties
decreased by $3.2 million due to properties sold subsequent
to June 30, 2005. Depreciation and other amortization for
properties not in service and other remained relatively
unchanged.
Interest income remained relatively unchanged.
Interest expense increased by approximately $4.2 million
primarily due to an increase in the weighted average debt
balance outstanding for the three months ended
September 30, 2006 ($1,924.3 million), as compared to
the three months ended September 30, 2005
($1,712.7 million), as well as an increase in the weighted
average interest rate for the three months ended
September 30, 2006 (6.74%), as compared to the three months
ended September 30, 2005 (6.56%), partially offset by an
increase in capitalized interest for the three months ended
September 30, 2006, as compared to the three months ended
September 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.
In April 2006, the Company, through the Operating Partnership,
entered into interest rate protection agreements which it
designated as cash flow hedges. Each of the interest rate
protection agreements had a notional value of
$74.8 million, were effective from May 10, 2007
through May 10, 2012, and fixed the LIBOR rate at 5.42%. In
September 2006, the interest rate protection agreements failed
to qualify for hedge accounting. The Company, through the
Operating Partnership, settled the interest rate protection
agreements and paid the counterparties $2.9 million which
is recognized in the
mark-to-market/(loss)
gain on settlement of interest rate protection agreements
caption on the consolidated statement of operations.
The Company recognized $1.2 million of a gain for the three
months ended September 30, 2005, relating to the
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 as well as a deferred gain that was
reclassed out of Other Comprehensive Income relating to a
settled interest rate protection agreement that did not qualify
for hedge accounting treatment.
31
Equity in income of joint ventures increased by
$0.8 million primarily due to the Companys economic
share of the gains and earn outs on property sales from the
March 2005 Joint Venture and the September 2005 Joint Venture
during the three months ended September 30, 2006.
Income tax benefit remained relatively unchanged.
The following table summarizes certain information regarding the
industrial properties included in discontinued operations by the
Company for the three months ended September 30, 2006 and
September 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
4,052
|
|
|
$
|
12,975
|
|
Operating Expenses
|
|
|
(897
|
)
|
|
|
(4,131
|
)
|
Interest Expense
|
|
|
|
|
|
|
(29
|
)
|
Depreciation and Amortization
|
|
|
(1,070
|
)
|
|
|
(4,120
|
)
|
Provision for Income Taxes
Allocable to Operations
|
|
|
(716
|
)
|
|
|
(1,014
|
)
|
Gain on Sale of Real Estate
|
|
|
65,368
|
|
|
|
38,552
|
|
Provision for Income Taxes
Allocable to Gain on Sale
|
|
|
(19,427
|
)
|
|
|
(5,943
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued
Operations Before Minority Interest
|
|
$
|
47,310
|
|
|
$
|
36,290
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes, for
the three months ended September 30, 2006 reflects the
results of operations and gain on sale of real estate, net of
income taxes, relating to 28 industrial properties that were
sold during the three months ended September 30, 2006 and
the results of operations from six properties that were
identified as held for sale at September 30, 2006.
Income from discontinued operations, net of income taxes, for
the three months ended September 30, 2005 reflects the
results of operations and gain on sale of real estate, net of
income taxes, relating to 28 industrial properties that were
sold during the three months ended September 30, 2006, 86
industrial properties that were sold during the year ended
December 31, 2005 and six industrial properties identified
as held for sale at September 30, 2006.
The $1.5 million gain on sale of real estate, net of income
taxes for the three months ended September 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 $1.7 million gain on sale of
real estate, net of income taxes for the three months ended
September 30, 2005 resulted from the sale of one industrial
property and several land parcels that do not meet the criteria
established by FAS 144 for inclusion in discontinued
operations.
LIQUIDITY
AND CAPITAL RESOURCES
At September 30, 2006, the Companys cash and
restricted cash was approximately $9.7 million and
$21.9 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 with borrowings on its unsecured
line of credit 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
32
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 September 30, 2006 and October 27, 2006,
$215.4 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 2005 Unsecured Line of Credit I. At September 30, 2006,
borrowings under the 2005 Unsecured Line of Credit I bore
interest at a weighted average interest rate of 6.038%. 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 October 27, 2006 the Company had
approximately $399.6 million available for additional
borrowings under the 2005 Unsecured Line of Credit I.
Nine
Months Ended September 30, 2006
Net cash provided by operating activities of approximately
$49.8 million for the nine months ended September 30,
2006 was comprised primarily of net income before minority
interest of approximately $95.0 million, the net change in
operating assets and liabilities of approximately
$17.5 million and net distributions from joint ventures of
$0.8 million, offset by adjustments for non-cash items of
approximately $63.5 million. The adjustments for non-cash
items of approximately $63.5 million are primarily
comprised of the gain on sale of real estate of approximately
$177.8 million and the effect of the straight-lining of
rental income of approximately $7.9 million, offset by
depreciation and amortization of approximately
$120.3 million and the provision for bad debt of
$1.9 million.
Net cash provided by investing activities of approximately
$102.8 million for the nine months ended September 30,
2006 was comprised primarily by the net proceeds from the sale
of real estate, the repayment of mortgage loans receivable,
decrease in restricted cash that is held by an intermediary for
Section 1031 exchange purposes, 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.
During the nine months ended September 30, 2006, the
Company acquired 76 industrial properties comprising
approximately 7.7 million square feet of GLA and several
land parcels. The purchase price for these acquisitions totaled
approximately $463.0 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 an entity
wholly-owned
by the Operating Partnership is the sole member, invested
approximately $24.4 million and received distributions of
approximately $23.7 million from the Companys real
estate joint ventures. As of September 30, 2006, the
Companys industrial real estate joint ventures owned 277
industrial properties comprising approximately 26.8 million
square feet of GLA.
During the nine months ended September 30, 2006, the
Company sold 93 industrial properties comprising approximately
14.3 million square feet of GLA and several land parcels.
Gross proceeds from the sales of the 93 industrial
properties and several land parcels were approximately
$759.9 million.
Net cash used in financing activities of approximately
$151.1 million for the nine months ended September 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
33
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 nine months ended September 30, 2006.
During the nine months ended September 30, 2006, the
Company awarded 303,142 shares of restricted common stock
to certain employees and 14,529 shares of restricted common
stock to certain Directors. These shares of restricted common
stock had a fair value of approximately $12.1 million on
the date of grant. The restricted common stock vests over
periods from one to ten years. Compensation expense will be
charged to earnings over the respective vesting 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.
On August 21, 2006, the Company issued 2,000,000 Depositary
Shares, each representing 1/10,000th of a share of the
Companys 7.25%, $.01 par value, Series K
Flexible Cumulative Redeemable Preferred Stock (the
Series K Preferred Stock), at an initial
offering price of $25.00 per Depositary Share. Net of
offering costs, the Company received net proceeds of
$47.9 million from the issuance of Series K Preferred
Stock.
On September 25, 2006, the Company, through the Operating
Partnership issued $175 million of Senior unsecured debt
which bears interest at 4.625% (the Exchangeable
Notes). Under certain circumstances, the holders of the
Exchangeable Notes may exchange their notes for cash up to their
principal amount and shares of the Companys common stock
for the remainder of the exchange value in excess of the
principal amount. In connection with the offering of the
Exchangeable Notes, the Operating Partnership entered into
capped call transactions in order to increase the effective
exchange price. The aggregate cost of the capped call
transactions was approximately $5.8 million.
During the nine months ended September 30, 2006, certain
employees of the Company exercised 62,467 non-qualified employee
stock options. Net proceeds to the Company were approximately
$1.8 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 derivative instruments
which are held by the Company at September 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 September 30, 2006, approximately $1,726.9 million
(approximately 96.4% of total debt at September 30,
2006) of the Companys debt was fixed rate debt and
approximately $64.0 million (approximately 3.6% of total
debt at September 30, 2006) was variable rate debt.
34
In April 2006, the Company, through the Operating Partnership,
entered into $295.3 million of cash flow hedges through
forward-starting interest rate swaps to hedge interest rates on
forecasted debt offerings. In September 2006, the
$149.5 million of the original interest rate protection
failed to qualify for hedge accounting. In September 2006, the
Company settled these interest rate protection agreements and
paid the counterparties $2.9 million. This amount is
recognized in the
mark-to-market/gain
(loss) on settlement of interest rate protection agreements
caption in the consolidated statements of operations. At
September 30, 2006, the estimated fair value of the
remaining $145.8 million in swaps was approximately
$4.3 million in a liability position as the effective rates
of the swaps were higher than current interest rates at
September 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;
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.
35
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.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements which establishes a
common definition of fair value to be applied to US GAAP
guidance requiring use of fair value, establishes a framework
for measuring fair value, and expands disclosure about such fair
value measurements. This statement is effective for fiscal years
beginning after November 15, 2007. 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 September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans which requires that
employers recognize on a prospective basis the funded status of
their defined benefit pension and other postretirement plans on
their consolidated balance sheet and recognize as a component of
other income, net of tax, the gains or losses and prior service
costs or credits that arise during the period but are not
recognized as components of net periodic benefit cost. This
statement also requires additional disclosures in the footnotes
to the financial statements. This statement is effective for
fiscal years beginning after December 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 September 2006, the SEC staff issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in the Current
Year Financial Statements in order to address the
observed diversity in quantification practices with respect to
annual financial statements. This bulletin should be applied for
the annual financial statements for the first fiscal year ending
after November 15, 2006. the Company does not expect the
application of this bulletin to have a material impact on the
Companys results of operations, cash flows and financial
position.
Subsequent
Events
From October 1, 2006 to October 27, 2006, the Company
acquired ten industrial properties and several land parcels for
a purchase price of approximately $100.7 million, excluding
costs incurred in conjunction with the acquisition of these
industrial properties. The Company also sold three industrial
properties for approximately $42.2 million of gross
proceeds.
On October 2, 2006, the Company paid third quarter 2006
dividends of $53.91 per share ($0.5391 per Depositary Share) on
its Series C Preferred Stock totaling, in the aggregate,
approximately $1.1 million; a prorata dividend of $3,118.00
per share ($31.1800 per Depositary Share) on its Series F
Preferred Stock totaling, in the aggregate, approximately
$1.6 million; a prorata dividend of $3,618.00 per share
($36.1800 per Depositary Share) on its Series G Preferred
Stock totaling, in the aggregate, approximately
$0.9 million; a dividend of $4,531.30 per share ($0.4531
per Depositary Share) on its Series J Preferred Stock
totaling, in the aggregate, approximately $2.7 million; and
a prorata dividend of $2,064.30 per share ($0.2064 per
Depositary Share) on its Series K Preferred Stock totaling,
in the aggregate, approximately $0.4 million.
On October 3, 2006, the initial purchasers of the 2011
Exchangeable Notes exercised their Over-Allotment Option with
respect to $25 million principal amount of the 2011
Exchangeable Notes. Together with the 2011 Exchangeable Notes,
the aggregate principal amount issued and outstanding is
$200 million.
36
On October 10, 2006, the Company assumed mortgage loans in
the amounts of $14.2 million and $12.0 million (the
Acquisition Mortgage Loan XXII and the
Acquisition Mortgage Loan XXIII). The Acquisition
Mortgage Loans XXII and XXIII are collateralized by one property
in Edwardsville, IL, bear interest at a fixed rate of 5.92% and
5.96% respectively, and provide for monthly principal and
interest payments based on a 25 year amortization schedule. The
Acquisition Mortgage Loans XXII and XXIII mature on
January 1, 2014.
On October 17, 2006, the Company and the Operating
Partnership paid a third quarter 2006 dividend/distribution of
$0.70 per common share/Unit, totaling approximately
$36.1 million.
|
|
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.
The
Company might fail to qualify or remain qualified as a
REIT.
The Company intends to operate so as to qualify as a REIT under
the Internal Revenue Code of 1986 (the Code).
Although the Company believes that it is organized and will
operate in a manner so as to qualify as a REIT, qualification as
a REIT involves the satisfaction of numerous requirements, some
of which must be met on a recurring basis. These requirements
are established under highly technical and complex Code
provisions of which there are only limited judicial or
administrative interpretations and involve the determination of
various factual matters and circumstances not entirely within
the Companys control.
The Company (through one of its subsidiary partnerships) entered
into certain development agreements in 2000 through 2003, the
performance of which has been completed. Under these agreements,
the Company provided services to unrelated third parties and
certain payments were made by the unrelated third parties for
services provided by certain contractors hired by the Company.
The Company believes that these payments were properly
characterized by it as reimbursements for costs incurred by it
on behalf of the third parties and do not constitute gross
income and did not prevent the Company from satisfying the gross
income requirements of the REIT provisions (the gross
income tests). The Company has brought this matter to the
attention of the Internal Revenue Service, or the IRS. The IRS
has not challenged or expressed any interest in challenging the
Companys view on this matter.
Employees of the Operating Partnership, a subsidiary partnership
of the Company (the Service Employees), have been
providing certain acquisition and disposition services since
2004 and certain leasing and property management services since
1997 to one of the Companys taxable REIT subsidiaries (the
TRS), and have also been providing certain of these
services (or similar services) to joint ventures in which First
Industrial, L.P. owns a
37
minority interest or to unrelated parties. In determining
whether it satisfied the gross income tests for certain years,
the Company has taken and intends to take the position that the
costs of the Service Employees should be shared between First
Industrial, L.P. and the TRS and that no fee income should be
imputed to the Company as a result of such arrangement. However,
because certain of these services (or similar services) have
also been performed for the joint ventures or unrelated parties
described above, there can be no assurance that the IRS will not
successfully challenge this position. First Industrial, L.P.
intends to take appropriate steps to address this issue going
forward, but there can be no assurance that any such steps will
adequately resolve this issue.
If the IRS were to challenge either of the positions described
in the two preceding paragraphs and were successful, the Company
could be found not to have satisfied the gross income tests in
one or more of its taxable years. If the Company were found not
to have satisfied the gross income tests, it could be subject to
a penalty tax. However, such noncompliance should not adversely
affect the Companys status as a REIT as long as such
noncompliance was due to reasonable cause and not to willful
neglect, and certain other requirements are met. The Company
believes that, in both situations, any such noncompliance was
due to reasonable cause and not willful neglect and that such
other requirements were met.
If the Company were to fail to qualify as a REIT in any taxable
year, it would be subject to federal income tax, including any
applicable alternative minimum tax, on its taxable income at
corporate rates. This could result in a discontinuation or
substantial reduction in dividends to stockholders and in cash
to pay interest and principal on debt securities that the
Company issues. Unless entitled to relief under certain
statutory provisions, the Company also would be disqualified
from electing treatment as a REIT for the four taxable years
following the year during which it failed to qualify as a REIT.
|
|
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
|
None.
|
|
Item 5.
|
Other
Information
|
Not Applicable.
a) Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
1
|
.1
|
|
Underwriting Agreement dated
August 16, 2006 among the Company, the Operating
Partnership, Wachovia Capital Markets, LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as underwriters
and as representatives of several other underwriters listed
therein (incorporated by reference to Exhibit 1.1 of the
Form 8-K
of the Company filed August 22, 2006, File No. 1-13102)
|
|
4
|
.1
|
|
Articles Supplementary dated
August 17, 2006 relating to the Companys
Series K Cumulative Redeemable Preferred Stock
(incorporated by reference to Exhibit 1.6 of the
Form 8-A
of the Company, as filed on August 18, 2006, File
No. 1-13102)
|
|
4
|
.2
|
|
Indenture dated as of
September 25, 2006 among the Operating Partnership, as
issuer, the Company, as guarantor, and U.S. Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.1 of the current report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
|
4
|
.3
|
|
Form of 4.625% Exchangeable Senior
Note due 2011 (incorporated by reference to Exhibit 4.2 of
the current report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
38
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1+
|
|
Summary of Managing Director 2006
Incentive Compensation Plan (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed August 7, 2006, File No. 1-13102)
|
|
10
|
.2
|
|
Deposit Agreement dated as of
August 21, 2006 by and among the Company, Computershare
Shareholder Services, Inc. and Computershare Trust Company, N.A.
and holders from time to time of Series K Depositary
Receipts (incorporated by reference to Exhibit 1.7 of the
Form 8-A
of the Company, as filed on August 18, 2006, File No.
1-13102)
|
|
10
|
.3
|
|
Eleventh Amended and Restated
Partnership Agreement of First Industrial, L.P. dated
August 21, 2006 (incorporated by reference to
Exhibit 10.2 of the
Form 8-K
of the Company filed August 22, 2006, File No. 1-13102)
|
|
10
|
.4
|
|
Registration Rights Agreement
dated September 25, 2006 among the Company, the Operating
Partnership and the Initial Purchasers named therein
(incorporated by reference to Exhibit 10.1 of the current
report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
|
31
|
.1*
|
|
Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of Principal
Executive Officer and 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
39
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: November 9, 2006
40
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
1
|
.1
|
|
Underwriting Agreement dated
August 16, 2006 among the Company, the Operating
Partnership, Wachovia Capital Markets, LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as underwriters
and as representatives of several other underwriters listed
therein (incorporated by reference to Exhibit 1.1 of the
Form 8-K
of the Company filed August 22, 2006, File No. 1-13102)
|
|
4
|
.1
|
|
Articles Supplementary dated
August 17, 2006 relating to the Companys
Series K Cumulative Redeemable Preferred Stock
(incorporated by reference to Exhibit 1.6 of the
Form 8-A
of the Company, as filed on August 18, 2006, File
No. 1-13102)
|
|
4
|
.2
|
|
Indenture dated as of
September 25, 2006 among the Operating Partnership, as
issuer, the Company, as guarantor, and U.S. Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.1 of the current report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
|
4
|
.3
|
|
Form of 4.625% Exchangeable Senior
Note due 2011 (incorporated by reference to Exhibit 4.2 of
the current report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
|
10
|
.1+
|
|
Summary of Managing Director 2006
Incentive Compensation Plan (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed August 7, 2006, File No. 1-13102)
|
|
10
|
.2
|
|
Deposit Agreement dated as of
August 21, 2006 by and among the Company, Computershare
Shareholder Services, Inc. and Computershare Trust Company, N.A.
and holders from time to time of Series K Depositary
Receipts (incorporated by reference to Exhibit 1.7 of the
Form 8-A
of the Company, as filed on August 18, 2006, File No.
1-13102)
|
|
10
|
.3
|
|
Eleventh Amended and Restated
Partnership Agreement of First Industrial, L.P. dated
August 21, 2006 (incorporated by reference to
Exhibit 10.2 of the
Form 8-K
of the Company filed August 22, 2006, File No. 1-13102)
|
|
10
|
.4
|
|
Registration Rights Agreement
dated September 25, 2006 among the Company, the Operating
Partnership and the Initial Purchasers named therein
(incorporated by reference to Exhibit 10.1 of the current
report on
Form 8-K
of the Operating Partnership dated September 25, 2006, File
No.
333-21873)
|
|
31
|
.1*
|
|
Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of Principal
Executive Officer and 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 |
41