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Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc. (First Industrial)

Filing Type: Form 10-Q (Quarterly Report)

Reporting Period: Three months ended March 31, 2011

Business Overview: First Industrial is a Maryland-domiciled Real Estate Investment Trust (REIT) owning and operating industrial properties. As of March 31, 2011, the portfolio consisted of 762 industrial properties across 27 U.S. states and one Canadian province, totaling approximately 67.9 million square feet of gross leasable area (GLA). The company is actively managing a portfolio of "Non-Strategic Assets" (182 properties) identified for sale.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Improvement: Net loss attributable to common stockholders improved significantly from $(21.9) million in Q1 2010 to $(8.7) million in Q1 2011. This improvement was driven by a reduction in impairment charges and restructuring costs, as well as gains from discontinued operations.
• Revenue Decline: Total revenues decreased 3.3% to $71.9 million. Same-store property revenues declined 1.4% due to lower rental rates, partially offset by an increase in occupancy rates (84.5% vs. 81.2%).
• Discontinued Operations: Q1 2011 included a $3.8 million gain on the sale of 13 industrial properties. In contrast, Q1 2010 included a $9.2 million impairment charge on a Grand Rapids property and lower gains on sales.
• Expense Reduction: General and administrative expenses dropped 40.9% to $5.3 million, primarily due to reduced lawsuit settlement expenses and lower compensation costs from headcount reductions. Restructuring costs increased to $1.2 million (vs. $0.3 million in 2010) due to office lease terminations.
• Debt Reduction: Total debt decreased by approximately $124.6 million year-over-year. The company retired $33.2 million in mortgage loans during the quarter and reduced its unsecured credit facility balance.

Guidance, Outlook, and Risks

• Liquidity Strategy: Management expects to meet short-term liquidity needs through operating cash flows, asset dispositions, and the issuance of equity or debt. The company plans to retain capital by paying minimum dividends required for REIT status.
• Debt Maturities: The company has $128.9 million in 2011 Exchangeable Notes due September 15, 2011. Management intends to satisfy this obligation using proceeds from property sales, new secured debt, and equity issuance.
• Capital Markets Activity: In March 2011, the company completed a public offering of 8.9 million common shares, raising approximately $100.4 million net of costs. An "at-the-market" (ATM) distribution agreement for up to $100 million was also established, though no shares were issued under it in Q1.
• Subsequent Events: Between April 1 and May 2, 2011, the company sold three properties for $11.6 million, paid off a $27.4 million mortgage, and secured $178.3 million in new mortgage loans at a 4.45% fixed rate.
• Risks: Key risks include the ability to sell non-strategic assets at favorable prices, compliance with financial covenants on the unsecured credit facility, and the impact of interest rate fluctuations on variable-rate debt (approx. 17.7% of total debt).

Investor Verification Checklist

• Debt Refinancing: Verify the company's ability to refinance or repay the $128.9 million Exchangeable Notes maturing in September 2011.
• Asset Dispositions: Monitor the pace and pricing of sales for the 182 "Non-Strategic Assets" held for sale to ensure they meet liquidity targets.
• Dividend Policy: Confirm if the company will pay common stock dividends in 2011, as it has not paid any to date in the year, which impacts REIT qualification and investor yield.
• Occupancy Trends: Track same-store occupancy and rental rate trends to assess the sustainability of revenue growth given the recent decline in rental rates.
• Covenant Compliance: Review future filings to ensure continued compliance with debt covenants, particularly regarding debt service coverage ratios.