FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2007
Business Overview: The Company is a real estate investment trust (REIT) owning 915 industrial properties (including developments) across 28 U.S. states and one Canadian province, totaling approximately 78.0 million square feet of gross leaseable area (GLA). Operations are conducted primarily through First Industrial, L.P., in which the Company holds an approximate 87.3% interest.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 27.7% year-over-year for the nine months ended September 30, 2007, compared to the same period in 2006. This was driven by a 315.7% increase in revenues from acquired properties and a 5.4% increase from same-store properties due to higher occupancy rates (94.0% in 2007 vs. 90.9% in 2006).
• Discontinued Operations: The Company sold 129 industrial properties during the nine months ended September 30, 2007, generating gross proceeds of approximately $647.7 million and a gain on sale of $178.9 million. Most of these sales are classified as discontinued operations.
• Acquisitions: The Company acquired 101 industrial properties totaling approximately 7.0 million square feet of GLA for a purchase price of approximately $404.9 million.
• Interest Expense: Interest expense decreased by approximately $1.1 million for the nine-month period, primarily due to a lower weighted average interest rate (6.50% in 2007 vs. 6.77% in 2006) and increased capitalized interest.
• Stock Repurchases: The Company completed a previous $100 million stock repurchase program, buying 743,514 shares at an average price of $39.55 per share during the quarter. A new $100 million repurchase program was authorized in September 2007.

Guidance, Outlook, and Risks

• Liquidity: The Company maintains a $500 million unsecured revolving credit facility, amended on September 28, 2007, with $106.4 million available for additional borrowings as of October 26, 2007. Management expects to meet long-term liquidity needs through asset dispositions, long-term debt, and equity issuances.
• Development Commitments: The Company is committed to construction projects totaling approximately 2.7 million square feet of GLA, with estimated total costs of $127.4 million. Approximately $83.9 million remains to be funded.
• Market Risk: Approximately 84.4% of the Company's debt is fixed-rate, while 15.6% is variable-rate. A 10% change in interest rates on variable-rate debt would impact future net income and cash flows by approximately $2.4 million per year.
• REIT Compliance: The Company addressed 2006 tax year gross income requirements by assigning service contracts to its taxable REIT subsidiary (TRS). Management determined IRS confirmation was not warranted.
• Subsequent Events: Between October 1 and October 26, 2007, the Company acquired several land parcels for approximately $6.3 million and paid a third-quarter dividend of $0.71 per share.

Investor Verification Checklist

• Discontinued Operations Impact: Verify the extent to which net income is driven by gains on the sale of 129 properties classified as discontinued operations versus recurring rental income.
• Debt Maturities: Review the schedule of debt maturities, noting significant principal payments due in 2009 ($132.9 million) and 2011 ($407.3 million).
• Development Funding: Assess the $83.9 million remaining funding requirement for committed development projects and the Company's ability to finance these without diluting equity or increasing leverage significantly.
• Occupancy Trends: Monitor the 94.0% same-store occupancy rate to ensure it is sustainable given the competitive industrial real estate market.
• Stock Repurchase Program: Track the execution of the newly authorized $100 million stock repurchase program and its impact on share count and earnings per share.