Business Context and Reporting Period
Company: First Industrial Realty Trust, Inc. (REIT)
Reporting Period: Six and three months ended June 30, 1998
Portfolio: 953 in-service properties totaling approximately 67.7 million square feet of gross leasable area (GLA) across 24 states. The portfolio grew by 511 properties (acquisitions and developments) compared to the prior year.
Key Financial Metrics (Six Months Ended June 30, 1998)
| Metric | Value (in thousands) |
|---|---|
| Total Revenues | $163,519 |
| Net Income | $42,836 |
| Net Income Available to Common Stockholders | $28,648 |
| Funds From Operations (FFO) | $63,049 |
| Net Cash Provided by Operating Activities | $62,645 |
| Total Assets | $2,423,859 |
| Total Liabilities | $1,166,683 |
| Stockholders' Equity | $1,077,552 |
| Cash and Cash Equivalents | $13,139 |
| Restricted Cash | $2,895 |
Debt Profile: Total debt obligations include Mortgage Loans Payable ($102,785), Senior Unsecured Debt ($748,785), and Acquisition Facility Payable ($230,100). A $300 million Defeased Mortgage Loan was retired in January 1998.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 65.5% to $163.5 million from $98.8 million in the prior year period, driven primarily by the acquisition of 502 properties and development of nine properties.
- Expense Increases: Property expenses rose 72.2% and interest expense increased 50.1% ($10.7 million) due to higher debt balances supporting expansion. General and administrative expenses increased $3.6 million, partly due to new accounting standards (EITF 97-11).
- Profitability: Net income available to common stockholders increased 80.9% to $28.6 million. Diluted EPS rose to $0.77 from $0.52.
- Accounting Changes: A $1.976 million cumulative effect of a change in accounting principle (SOP 98-5) reduced net income, reflecting the write-off of unamortized organizational costs.
- Asset Sales: The Company sold seven industrial properties and three land parcels for gross proceeds of $29.3 million, realizing a net gain of $2.4 million.
Guidance, Outlook, and Risks
- Capital Strategy: The Company continues to fund growth through a mix of operating cash flow, unsecured debt, and equity issuances. In the period, it issued $100 million in Dealer remarketable securities, $200 million in preferred stock, and $36.3 million in common stock.
- Development Pipeline: Committed to 17 development projects totaling 2.1 million square feet with estimated costs of $75.5 million, funded by operations and a $300 million unsecured revolving credit facility.
- Liquidity: Management believes cash flows from operations are sufficient for short-term needs. Long-term needs will be met via debt and equity markets. As of August 5, 1998, approximately $231.9 million remained available under the acquisition facility.
- Risks and Contingencies:
- Joint Venture: Entered a non-binding letter of intent for a joint venture; no assurance of success.
- Legal: No material legal proceedings expected to adversely affect financial position.
- Accounting Standards: Assessing the impact of FASB Statement No. 133 regarding derivative instruments, effective 1999.
Investor Verification Checklist
- Debt Maturities: Verify the $232.5 million debt maturity scheduled for 2001 (primarily the Acquisition Facility) and refinancing plans.
- Preferred Stock Obligations: Confirm the impact of new Series D and Series E preferred stock dividends on future cash distributions to common shareholders.
- Acquisition Costs: Review the impact of EITF 97-11 on future General and Administrative expenses, as internal acquisition costs are now expensed rather than capitalized.
- Development Funding: Assess the sufficiency of the $300 million credit facility to cover the $75.5 million in committed development costs alongside ongoing acquisitions.
- Related Party Transactions: Note the $7.9 million acquisition from Western Suburban Industrial Investments, involving Company directors/officers.