FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2003
Business Overview: The Company is a real estate investment trust (REIT) owning 888 in-service industrial properties across 24 states, totaling approximately 60.4 million square feet of gross leasable area (GLA). Operations are conducted primarily through First Industrial, L.P., in which the Company holds an approximate 85.3% interest.

Key Financial Metrics (Six Months Ended June 30, 2003)

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by $18.5 million (11.4%) compared to the six months ended June 30, 2002. This was driven primarily by a $10.7 million lease termination fee and income from properties acquired or developed after December 31, 2001, partially offset by a decrease in average occupied GLA.
• Expense Increases: Property expenses rose by $7.3 million (14.2%) due to higher same-store expenses (repairs, utilities, insurance) and new acquisitions. General and administrative expenses increased by $4.0 million due to higher employee compensation.
• Interest Expense: Increased by $5.1 million to $47.8 million, attributed to a higher average debt balance ($1.447 billion vs. $1.393 billion) and reduced capitalized interest.
• Discontinued Operations: Income from discontinued operations was $34.4 million, reflecting the sale of 40 industrial properties and gains on those sales. This compares to $36.2 million in the prior year period.
• Portfolio Activity: The Company acquired 27 properties (3.8 million sq. ft.) and sold 45 properties (2.6 million sq. ft.) during the period.

Guidance, Outlook, and Risks

• Development Pipeline: The Company is committed to 29 development projects totaling 2.6 million square feet with an estimated investment of $151.5 million. Approximately $24.2 million remains to be funded, expected to be sourced from property sales, operating cash flows, and the unsecured line of credit.
• Liquidity: The Company maintains a $300 million unsecured line of credit with approximately $45.2 million available for additional borrowings as of August 1, 2003. Management believes operating cash flows will meet short-term liquidity needs.
• Market Risk: Approximately 89.5% of total debt is fixed-rate. A 10% increase in interest rates on variable-rate debt would decrease future net income by approximately $0.3 million annually.
• Accounting Changes: The Company expects to restate prior period EPS for the six months ended June 30, 2002, and years ended 2001 and 2002 due to SEC clarification on EITF 42 regarding preferred stock redemption costs. This will reduce reported net income available to common stockholders for those periods.
• Contingencies: The Company is assessing the impact of FASB Interpretation No. 46 (FIN 46) on its joint venture arrangements, which may require consolidation of certain entities.

Investor Verification Checklist

• Restatement Impact: Verify the specific reduction in historical EPS resulting from the EITF 42 restatement of preferred stock redemption costs.
• Discontinued Operations: Confirm the sustainability of earnings by analyzing continuing operations income ($24.7 million) versus discontinued operations ($34.4 million).
• Debt Maturities: Review the schedule of debt maturities, noting significant principal payments due in 2005 ($253.9 million) and 2006 ($155.5 million).
• Development Funding: Assess the ability to fund the remaining $24.2 million in development commitments given current cash balances and line of credit availability.
• Lease Termination Fee: Evaluate the one-time nature of the $10.7 million lease termination fee included in current period revenue.