FR

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, 2006

Business Overview: First Industrial is a real estate investment trust (REIT) owning 959 industrial properties (including developments in process) across 29 U.S. states and one Canadian province, totaling approximately 79.2 million square feet of gross leaseable area (GLA). Operations are conducted primarily through First Industrial, L.P., in which the Company holds an approximate 86.9% interest.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 22.7% to $96.8 million, driven primarily by a $17.6 million increase in revenue from acquired properties (185 properties acquired since Dec 31, 2004). This offset a $3.1 million decrease in same-store property revenue due to lower occupancy rates (88.4% in Q1 2006 vs. 91.2% in Q1 2005).
• Discontinued Operations: Net income was significantly boosted by income from discontinued operations ($55.4 million), which included a $53.6 million gain on the sale of 24 industrial properties. In Q1 2005, discontinued operations contributed $17.0 million.
• Expenses: Total expenses rose to $89.1 million from $64.3 million. General and administrative expenses increased 47.9% ($5.7 million) due to new employee compensation and incentives. Depreciation and amortization increased 48.2% ($11.8 million) largely due to new acquisitions.
• Debt Structure: The Company issued $200 million in senior unsecured debt (2016 Notes) and $150 million in Series J Preferred Stock. Conversely, it redeemed $187.5 million of Series I Preferred Stock and reduced its unsecured line of credit balance by $226.5 million.

Guidance, Outlook, and Risks

• Liquidity and Capital Resources: The Company expects to meet short-term liquidity needs through operating cash flows. A significant debt maturity of $150 million (2006 Notes) is due December 1, 2006, which management expects to refinance with additional debt issuance. As of May 1, 2006, approximately $173.4 million remained available under the unsecured line of credit.
• Development Commitments: The Company has committed to constructing approximately 3.6 million square feet of industrial properties with estimated total costs of $129.7 million; approximately $45.2 million remains to be funded.
• Market Risk: Approximately 87.1% of total debt is fixed-rate, while 12.9% is variable-rate. A 10% increase in interest rates on variable debt would decrease future net income by approximately $1.3 million annually.
• Unusual Items: The Company settled interest rate protection agreements in January 2006 for a payment of approximately $1.7 million, recorded in other comprehensive income. Additionally, a $0.7 million deduction was taken from net income available to common stockholders due to the redemption of Series I Preferred Stock.

Investor Verification Checklist

• Discontinued Operations Impact: Verify the sustainability of earnings by analyzing Net Income excluding the $53.6 million gain on sale of real estate included in discontinued operations.
• Occupancy Trends: Monitor the decline in same-store occupancy rates (from 91.2% to 88.4%) and its potential impact on future rental revenue.
• Debt Maturity Wall: Confirm the refinancing strategy for the $150 million 2006 Notes due in December 2006.
• Preferred Stock Redemption: Review the impact of the $0.7 million redemption cost on Series I Preferred Stock on future earnings per share calculations.
• Development Pipeline: Assess the $45.2 million remaining funding requirement for committed construction projects and associated completion risks.