FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc. (REIT)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2006
Portfolio Overview: As of June 30, 2006, the Company owned 946 industrial properties (including developments) across 28 U.S. states and one Canadian province, totaling approximately 77.5 million square feet of gross leasable area (GLA). The Company operates primarily through First Industrial, L.P., in which it holds an approximate 87.0% interest.

Key Financial Metrics (Six Months Ended June 30, 2006)

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 28.5% to $194.9 million from $151.7 million in the prior year period. This was driven by a $35.4 million increase in revenue from acquired properties and a $7.9 million increase in "Other" revenues (primarily joint venture fees), partially offset by a $16.2 million decrease in revenue from sold properties.
• Profitability: Net income available to common stockholders rose 32.8% to $44.5 million from $33.5 million. Basic and diluted EPS increased to $1.01 from $0.79.
• Discontinued Operations: Income from discontinued operations was significant, totaling $87.2 million (net of tax) for the six months, primarily due to a $105.5 million gain on the sale of 66 industrial properties. This compares to $48.9 million in the prior year period.
• Expense Increases: General and administrative expenses increased 52.7% ($12.4 million) due to higher employee compensation and incentive costs. Interest expense increased 14.6% ($7.5 million) due to a higher weighted average debt balance and interest rate.
• Debt Structure: Senior unsecured debt increased by approximately $200 million following the issuance of $200 million in 2016 Notes in January 2006. Unsecured lines of credit decreased by $189.5 million as the Company repaid borrowings.

Guidance, Outlook, and Risks

Management Commentary: Management attributes financial performance to leasing activity, acquisitions, and the redeployment of capital from lower-yield assets to higher-yield opportunities. The Company continues to sell stabilized properties to fund new acquisitions and developments.

Liquidity and Capital Resources:

• The Company expects to meet short-term liquidity needs through operating cash flows and the issuance of additional debt to refinance $150 million in notes due in December 2006 and $150 million due in May 2007.
• Long-term liquidity will be supported by asset dispositions, long-term unsecured debt, and equity issuances.
• As of July 28, 2006, approximately $52.9 million remained available under the 2005 Unsecured Line of Credit I.

Risks and Contingencies:

• Market Risk: Approximately 14.7% of total debt is variable rate. The Company has entered into interest rate swaps to hedge forecasted debt offerings.
• Development Risk: The Company has committed to construction totaling approximately $131.5 million, with $32.7 million remaining to be funded. Completion costs may exceed estimates.
• Disposal Risk: The Company's strategy relies on selling properties on advantageous terms; failure to do so could adversely affect cash flow and dividend payments.

Subsequent Events: Between July 1 and July 28, 2006, the Company acquired 15 properties for approximately $158.5 million and sold four properties for $19.4 million. A second-quarter dividend of $0.70 per share was paid on July 17, 2006.

Investor Verification Checklist

• Discontinued Operations Impact: Verify the sustainability of earnings by analyzing Net Income excluding the $86.6 million net gain from discontinued operations (property sales).
• Debt Maturities: Confirm refinancing plans for the $150 million 2006 Notes and $150 million 2007 Notes maturing within the next 12-18 months.
• Occupancy Trends: Review same-store property occupancy rates (90.5% at June 30, 2006 vs. 91.1% prior year) and rental rate trends to assess core operating performance.
• Development Pipeline: Assess the $32.7 million remaining funding requirement for committed construction projects and potential cost overruns.
• Preferred Stock Redemption: Note the $672,000 deduction from net income related to the redemption of Series I Preferred Stock, which impacts EPS calculations.