FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc. (REIT)
Reporting Period: Quarter ended March 31, 2002
Portfolio Overview: As of March 31, 2002, the Company owned 914 in-service industrial properties across 24 states, totaling approximately 63.1 million square feet of gross leasable area (GLA). The Company operates primarily through First Industrial, L.P., in which it holds an approximate 85% interest.

Key Financial Metrics

Note: Total Debt calculated as sum of Mortgage Loans Payable ($86,924), Senior Unsecured Debt ($1,048,525), and Acquisition Facility Payable ($219,500).

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased by approximately $9.6 million (9.7%) compared to Q1 2001. This was primarily driven by a reduction in average GLA and lower average occupancy rates.
• Expense Reduction: Property expenses decreased by approximately $3.3 million (10.7%), largely due to lower real estate taxes, repairs, maintenance, and utilities resulting from the smaller portfolio size.
• Discontinued Operations Impact: Q1 2002 results include significant income from discontinued operations ($16.274 million) due to the adoption of FAS 144. This includes a $15.0 million gain on the sale of 20 industrial properties. In contrast, Q1 2001 included a $13.9 million gain on sale of real estate within continuing operations.
• Interest Expense: Interest expense decreased by $1.4 million, attributed to a lower weighted average interest rate (6.69% in 2002 vs. 7.26% in 2001) and increased capitalization of interest due to development activities.
• Liquidity Position: Cash and cash equivalents dropped to $2.1 million from $13.4 million, while restricted cash increased to $60.6 million, largely due to proceeds from property sales held for Section 1031 tax-deferred exchanges.

Guidance, Outlook, and Risks

• Development Pipeline: The Company has committed to 42 development projects totaling 4.3 million square feet with an estimated investment of $209.2 million. Approximately $44.5 million remains to be funded, expected to be sourced from property sales, operating cash flows, and the Acquisition Facility.
• Debt Maturities and Refinancing: The Company received redemption notices for $84.9 million of its 2027 Notes, requiring repayment by May 15, 2002. Subsequent to the period end, the Company issued $200 million of 2012 Notes and $50 million of 2032 Notes to manage liquidity and refinancing needs.
• Market Risk: Approximately 89.3% of total debt is fixed-rate. A 10% increase in interest rates on the remaining variable-rate debt would decrease future net income by approximately $0.5 million annually.
• Accounting Changes: The Company adopted FAS 144, reclassifying results of operations for sold properties to discontinued operations. The Company is also assessing the impact of FAS 145 regarding the classification of gains/losses on debt extinguishment.

Investor Verification Checklist

• Refinancing of 2027 Notes: Verify the successful repayment of the $84.9 million in 2027 Notes due May 15, 2002, and the terms of the new debt issued in April 2002.
• Section 1031 Exchange Status: Confirm the deployment of the $58.0 million in restricted cash held for tax-deferred exchanges to ensure capital is reinvested as planned.
• Development Cost Overruns: Monitor the $44.5 million remaining funding requirement for development projects against actual completion costs and lease-up schedules.
• Preferred Stock Redemption: Verify the redemption of Series B Preferred Stock scheduled for May 14, 2002, and the associated cash outflow.
• Occupancy Trends: Track occupancy rates and rental income per square foot to assess if the revenue decline is a temporary portfolio transition or a structural market issue.