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Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc. (REIT)
Reporting Period: Nine months ended September 30, 2000 (Quarterly Report Form 10-Q)
Portfolio Overview: As of September 30, 2000, the Company owned 976 in-service industrial properties across 25 states, totaling approximately 69.6 million square feet of gross leasable area (GLA). The Company operates primarily through First Industrial, L.P., in which it holds an approximate 84.3% interest.

Key Financial Metrics

Note: Total Debt calculated as sum of Mortgage Loans Payable ($103,186), Senior Unsecured Debt ($948,758), and Acquisition Facility Payable ($222,200).

Material Changes vs. Prior Period

• Revenue: Total revenues increased slightly to $285.97 million from $283.55 million in the prior year period. Rental income remained relatively unchanged, while tenant recoveries increased due to higher property expenses.
• Net Income: Net income decreased to $89.87 million from $96.57 million. Net income available to common stockholders declined to $65.23 million from $71.93 million, primarily due to a lower gain on sales of real estate ($22.2 million vs. $25.3 million) and increased interest and operating expenses.
• Expenses: Property expenses increased by approximately $5.0 million (6.6%) driven by higher real estate taxes and property management costs. Interest expense rose by $0.9 million due to a higher weighted average interest rate (7.31% vs. 7.14%).
• Portfolio Activity: The Company acquired 47 properties (3.9 million sq. ft.) for $207.5 million and completed development of 16 properties (2.7 million sq. ft.) for $101.4 million. Conversely, 53 properties were sold for gross proceeds of $193.1 million.
• Debt Structure: The Company amended its acquisition facility in June 2000, increasing the commitment to $300 million. Outstanding borrowings under the facility were $222.2 million at period end.

Outlook, Risks, and Management Commentary

• Liquidity: The Company maintains $2.0 million in cash and $22.6 million in restricted cash. Approximately $21.4 million of restricted cash consists of proceeds from property sales held for Section 1031 tax-deferred exchanges.
• Development Pipeline: The Company is committed to 26 development projects totaling 6.0 million square feet with an estimated investment of $232.3 million. Approximately $151.2 million remains to be funded, expected to be sourced from operating cash flows, property sales, and the acquisition facility.
• Market Risk: Approximately 17.4% of total debt is variable rate. A 10% increase in interest rates on variable debt would decrease future net income by approximately $1.7 million annually. Fixed-rate debt fair value is sensitive to rate changes; a 10% rate increase would decrease fair value by approximately $47.2 million.
• Regulatory Changes: The REIT Modernization Act (effective Jan 1, 2001) may allow the Company to convert its preferred stock subsidiary to a taxable REIT subsidiary and reduces the required distribution level to 90% of ordinary taxable income.
• Properties Held for Sale: The Company holds 118 properties (10.8 million sq. ft.) with a net carrying value of $373.5 million for potential sale, though no assurance of sale is provided.

Investor Verification Checklist

• Debt Maturities: Verify the $260.5 million in debt maturities scheduled for 2003, including the $222.2 million Acquisition Facility maturing June 30, 2003.
• Section 1031 Exchanges: Confirm the status of the $21.4 million in restricted cash held for tax-deferred exchanges and the timeline for reinvestment.
• Development Funding: Assess the ability to fund the remaining $151.2 million in development commitments given current cash flow and credit facility availability.
• Preferred Stock Obligations: Review the quarterly dividend obligations for Series A through E preferred stock, which totaled approximately $8.2 million per quarter in 2000.
• Variable Rate Exposure: Monitor interest rate fluctuations impacting the $222.2 million variable-rate acquisition facility.