FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2003
Business Overview: The Company is a Maryland-domiciled Real Estate Investment Trust (REIT) owning and operating industrial properties. As of September 30, 2003, the portfolio consisted of 847 in-service properties across 24 states, totaling approximately 58.8 million square feet of gross leasable area (GLA). Operations are conducted primarily through First Industrial, L.P., in which the Company holds an approximate 85.4% interest.

Key Financial Metrics

All figures in thousands, except per share data.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by 9.8% ($23.5 million) compared to the prior year. This was driven primarily by a $10.7 million lease termination fee and income from properties acquired or developed after December 31, 2001, partially offset by a decrease in average occupied GLA.
• Expense Increases: Property expenses rose 13.5% ($10.1 million) due to higher same-store expenses (repairs, utilities, insurance) and new acquisitions. General and administrative expenses increased by $6.7 million due to higher employee compensation.
• Discontinued Operations: Income from discontinued operations was $60.2 million, reflecting the sale of 89 industrial properties with a gain of $54.7 million. In the prior year, this figure was $51.3 million.
• Debt Activity: The Company retired the $40.2 million "1995 Mortgage Loan" in January 2003, incurring a $1.5 million loss on early retirement. Conversely, the Company assumed three new acquisition mortgages totaling approximately $20.7 million during the quarter.
• Portfolio Turnover: The Company acquired 38 properties (4.7 million sq. ft.) and sold 97 properties (5.1 million sq. ft.) during the nine-month period.

Guidance, Outlook, and Risks

• Development Pipeline: The Company has committed to 30 development projects totaling 2.9 million square feet with an estimated investment of $173.5 million. Approximately $48.8 million remains to be funded, expected to be sourced from property sales, operating cash flows, and the unsecured line of credit.
• Liquidity: The Company maintains a $300 million unsecured line of credit. As of September 30, 2003, $188.6 million was drawn, leaving approximately $66 million available. Restricted cash of $66.6 million is held for Section 1031 tax-deferred exchanges.
• Market Risk: Approximately 87% of total debt is fixed-rate, while 13% is variable-rate. A 10% increase in interest rates on variable debt would decrease future net income by approximately $0.4 million annually.
• Accounting Changes: The Company adopted FAS 144, requiring results of sold properties to be reported as discontinued operations. Additionally, EITF 42 required a restatement of prior period EPS related to preferred stock redemption costs.

Investor Verification Checklist

• Discontinued Operations Impact: Verify the sustainability of earnings by analyzing "Income from Continuing Operations" ($22.2 million) separately from the significant gains on property sales included in discontinued operations.
• Occupancy Trends: Confirm the impact of the reported decrease in average occupied GLA on future rental income stability.
• Debt Maturities: Review the schedule of debt maturities, noting significant principal payments due in 2005 ($239.9 million) and 2006 ($155.6 million).
• Development Funding: Assess the reliance on property dispositions and the line of credit to fund the remaining $48.8 million in committed development costs.
• Restricted Cash Utilization: Monitor the deployment of the $66.6 million in restricted cash held for 1031 exchanges to ensure timely reinvestment.