Business Context and Reporting Period
Company: First Industrial Realty Trust, Inc. (First Industrial)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2002
Business Overview: First Industrial is a self-administered, fully integrated Real Estate Investment Trust (REIT) that owns, manages, acquires, sells, and develops industrial real estate. As of December 31, 2002, the portfolio consisted of 908 in-service properties totaling approximately 60.0 million square feet of Gross Leasable Area (GLA) across 24 states. The portfolio is diversified across light industrial, R&D/flex, bulk warehouse, regional warehouse, and manufacturing categories.
Key Financial Metrics
| Metric | 2002 | 2001 |
|---|---|---|
| Total Revenues | $346.6 million | $351.2 million |
| Net Income | $119.6 million | $122.4 million |
| Net Income Available to Common Stockholders | $96.2 million | $92.4 million |
| Diluted EPS (Common) | $2.44 | $2.34 |
| Cash Flow from Operating Activities | $131.6 million | $147.1 million |
| Total Assets | $2,630.0 million | $2,621.4 million |
| Total Debt (Mortgage, Senior Unsecured, Line of Credit) | $1,442.1 million | $1,318.5 million |
| Occupancy Rate | 90% | 91% |
| Weighted Average Interest Rate | 6.82% | 7.06% |
Material Changes vs. Prior Period
- Revenue: Total revenues decreased by approximately $4.7 million (1.3%) compared to 2001. This was primarily due to a decrease in same-store rental income and tenant recoveries, partially offset by income from properties acquired after December 31, 2000.
- Expenses: Property expenses increased by $2.6 million (2.5%) due to higher same-store expenses (repairs, maintenance, insurance) and expenses from newly acquired properties. Interest expense increased by $7.8 million due to a higher weighted average debt balance, despite a lower weighted average interest rate.
- Portfolio Activity: The Company acquired 90 in-service properties (5.7 million sq. ft.) and completed 17 developments (3.2 million sq. ft.) in 2002. Conversely, it sold 110 in-service properties and 4 out-of-service properties totaling approximately 11.9 million sq. ft. for gross proceeds of $473.5 million.
- Discontinued Operations: Due to the adoption of FAS 144, results from 86 properties sold in 2002 (not held for sale at year-end 2001) were reclassified to discontinued operations, resulting in income from discontinued operations of $67.1 million.
- Extraordinary Loss: The Company recorded an extraordinary loss of $0.9 million in 2002 related to the early retirement of senior unsecured debt, compared to a $10.3 million loss in 2001.
Guidance, Outlook, and Risks
- Outlook: Management expects to place 31 development projects (2.8 million sq. ft.) into service during fiscal year 2003. The Company plans to fund these developments through property sales, operating cash flow, and its $300 million unsecured line of credit (with $91.7 million available as of March 7, 2003).
- Distributions: The Company declared a first quarter 2003 distribution of $0.685 per common share/unit. The dividend policy aims to meet the minimum distribution required to maintain REIT qualification (90% of taxable income).
- Risks: Key risks include changes in economic conditions and real estate markets, legislative/regulatory changes affecting REIT taxation, availability of financing, interest rate fluctuations, and tenant credit risks. The Company noted that approximately 90% of its debt was fixed-rate as of year-end, mitigating some interest rate risk.
- Unusual Items: The filing highlights the impact of FAS 144 on the classification of property sales as discontinued operations. Additionally, the Company redeemed its Series B Preferred Stock ($100 million aggregate) in May 2002.
Investor Verification Checklist
- Occupancy Trends: Verify the 90% occupancy rate and the specific impact of lease expirations (23.7% of GLA expiring in 2003) on future rental income.
- Debt Maturities: Review the debt maturity schedule, noting significant maturities in 2005 ($221.4 million) and 2006 ($155.4 million), and the Company's refinancing strategy.
- Discontinued Operations: Confirm the sustainability of earnings by analyzing income from continuing operations ($63.4 million) versus discontinued operations ($67.1 million) to understand the core business performance.
- Development Pipeline: Assess the $155.9 million estimated cost for 31 development projects and the risk of cost overruns or delays in placing them in service.
- Preferred Stock Obligations: Verify the quarterly dividend obligations for Series C, D, and E preferred stock, which totaled approximately $5.0 million per quarter in 2002.