FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc. (REIT)
Reporting Period: Quarter and Six Months ended June 30, 1997
Portfolio Overview: As of June 30, 1997, the Company owned 453 in-service industrial properties across 16 states, totaling approximately 39.1 million square feet of gross leasable area. This represents a significant expansion from 320 properties (28.3 million sq. ft.) as of June 30, 1996, driven by the acquisition of 132 properties and the completion of seven new developments.

Key Financial Metrics

Debt Structure: Total debt obligations include $96.1 million in mortgage loans, $300.0 million in defeased mortgage loans, $349.2 million in senior unsecured debt, and $55.0 million under the acquisition facility.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 51.0% to $98.8 million from $65.4 million in the prior year period. Rental income rose 49.8% to $74.7 million, primarily due to properties acquired or developed after June 30, 1996.
• Expense Increases: Total expenses rose 41.4% to $70.5 million. Interest expense increased 52.3% to $21.3 million due to higher average debt balances used to fund acquisitions and defeasance activities.
• Extraordinary Loss: The Company recorded an extraordinary loss of $12.6 million (compared to $0.8 million in 1996). This loss resulted from prepayment fees and the write-off of unamortized deferred financing costs associated with the early retirement of the 1994 Defeased Mortgage Loan and the Defeasance Loan.
• EPS Impact: Net income available to common stockholders per share was $0.53 for the six months ended June 30, 1997, down from $0.68 in the prior year, largely due to the extraordinary loss and increased share count.

Guidance, Outlook, and Management Commentary

Capital Markets Activity:

• Debt Issuance: In May 1997, the Company issued $350 million in senior unsecured notes (2007, 2011, and 2027 maturities) to refinance the Defeasance Loan and fund operations. Effective interest rates range from 7.04% to 7.61%.
• Equity Issuance: Issued $100 million of Series B Preferred Stock (May 1997) and $50 million of Series C Preferred Stock (June 1997).

Acquisitions and Development:

• Acquired 74 properties for approximately $253.5 million during the six months ended June 30, 1997.
• Subsequent to period end (July-August 1997), acquired an additional 23 properties for $136.5 million.
• Committed to constructing nine properties (1.4 million sq. ft.) with estimated costs of $51.2 million.

Liquidity: The Company maintains $12.5 million in unrestricted cash and $33.2 million in restricted cash. Approximately $144.0 million remains available under the 1996 Unsecured Acquisition Facility. Management expects operating cash flows to meet short-term needs, while long-term needs will be met through debt and equity issuances.

Risks and Contingencies:

• Legal Proceedings: No material legal proceedings reported.
• Accounting Changes: The Company noted upcoming adoption of FAS 128 (Earnings Per Share) and FAS 131 (Segment Reporting), though the impact is currently deemed immaterial or undetermined.

Investor Verification Checklist

• Extraordinary Loss Details: Verify the specific components of the $12.6 million extraordinary loss related to the defeasance of the 1994 Mortgage Loan.
• Debt Maturities: Review the schedule of debt maturities, noting the $300 million defeased loan scheduled for retirement at the end of 1997.
• FFO Reconciliation: Confirm the calculation of Funds From Operations ($42.5 million) as a key performance metric for REITs, excluding depreciation and gains/losses on sales.
• Acquisition Financing: Assess the leverage ratio given the $253.5 million in acquisitions funded largely by the acquisition facility and new debt issuances.
• Preferred Stock Obligations: Review the dividend requirements for the newly issued Series B and Series C preferred stock.