FR

Business Context and Reporting Period

Company: First Industrial Realty Trust, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2003
Business Overview: A Maryland-domiciled Real Estate Investment Trust (REIT) owning 890 in-service industrial properties across 24 states, totaling approximately 59.1 million square feet of gross leasable area (GLA). Operations are conducted primarily through First Industrial, L.P.

Key Financial Metrics

Note: Debt figures are net of unamortized costs/discounts as presented in the balance sheet. Total debt includes Mortgage Loans Payable ($22,268), Senior Unsecured Debt ($1,211,933), and Unsecured Line of Credit ($173,600).

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 19.1% to $96.4 million, driven primarily by a $10.7 million lease termination fee and income from properties acquired or developed after December 31, 2001. This offset a decrease in average occupied GLA.
• Expense Increases: Property expenses rose 23.0% due to higher same-store expenses (repairs, utilities, insurance) and new acquisitions. Interest expense increased 20.4% to $23.8 million due to a higher average debt balance ($1.438 billion vs. $1.348 billion), despite a slight decrease in the weighted average interest rate.
• Discontinued Operations: Income from discontinued operations was $17.2 million, reflecting the sale of 20 industrial properties (gain of $16.5 million) and operations of two properties held for sale. This compares to $15.6 million in Q1 2002.
• Debt Reduction: The Company retired the $40.2 million "1995 Mortgage Loan" in January 2003, resulting in a $1.5 million loss on early retirement due to the write-off of unamortized deferred financing costs.

Outlook, Risks, and Management Commentary

• Development Pipeline: The Company is committed to 30 development projects totaling 2.8 million square feet with an estimated investment of $157.9 million. Approximately $32.8 million remains to be funded, expected to be sourced from property sales, operating cash flows, and the unsecured line of credit.
• Liquidity: Cash and cash equivalents were $3.2 million, with an additional $63.9 million in restricted cash held for Section 1031 tax-deferred exchanges. The Company has approximately $61.8 million available under its $300 million unsecured line of credit.
• Market Risk: Approximately 91.2% 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.
• Subsequent Events: Between April 1 and May 2, 2003, the Company acquired 12 properties for $60.2 million and sold five properties for $17.2 million.
• Accounting Changes: The Company adopted FAS 123 (stock-based compensation) prospectively on January 1, 2003. No stock-based compensation expense was recognized in Q1 2003 as no options were granted in the period.

Investor Verification Checklist

• Lease Termination Fee: Verify the sustainability of revenue growth given the $10.7 million one-time lease termination fee included in Q1 2003 results.
• Discontinued Operations: Assess the impact of the $16.5 million gain on sale of real estate included in discontinued operations on the reported net income.
• Development Funding: Confirm the ability to fund the remaining $32.8 million in development commitments without diluting equity or over-leveraging the balance sheet.
• Restricted Cash: Monitor the release of the $63.9 million in restricted cash pending the completion of Section 1031 exchanges.
• Debt Maturities: Review the schedule of debt maturities, noting significant principal payments due in 2005 ($224.7 million) and 2006 ($155.4 million).