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Business Context and Reporting Period

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

Filing Type: Form 10-Q (Quarterly Report)

Period Ended: March 31, 2004

Business Overview: First Industrial is a Maryland-domiciled Real Estate Investment Trust (REIT) focused on industrial properties. As of March 31, 2004, the Company owned 825 in-service industrial properties across 22 states, comprising approximately 58.5 million square feet of gross leasable area (GLA). Operations are conducted primarily through First Industrial, L.P., in which the Company holds an approximate 86.1% interest.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 2.6% to $84.5 million. This was driven by a 15.6% decrease in same-store property revenues, primarily due to the absence of a $10.7 million lease termination fee received in Q1 2003 and lower rental rates on new leases. Revenues from sold properties dropped 76.2%.
• Discontinued Operations: Income from discontinued operations was $25.8 million, including a $24.7 million gain on the sale of 20 industrial properties. This compares to $23.1 million in Q1 2003.
• Continuing Operations: Income from continuing operations available to common stockholders was minimal ($0.85 million or $0.02 EPS) compared to $5.9 million ($0.15 EPS) in the prior year, largely due to the one-time fee in 2003 and higher depreciation/amortization.
• Portfolio Activity: The Company acquired nine properties (1.9 million sq. ft.) for approximately $57.0 million and sold 22 properties (2.2 million sq. ft.) for gross proceeds of $111.9 million. Development of three properties was completed at a cost of $15.4 million.
• Debt and Liquidity: The Company reduced its unsecured line of credit balance by $34.0 million to $161.9 million. Cash and cash equivalents increased to $7.7 million, while restricted cash (held for 1031 exchanges) decreased to $54.1 million.

Guidance, Outlook, and Risks

• Market Conditions: Management noted a "soft leasing market" attributable to a weak economy, resulting in a negative cash-on-cash rental rate change of 3.7% for new leases and renewals in Q1 2004.
• Development Pipeline: The Company has committed to 24 development projects totaling 2.4 million sq. ft. with an estimated investment of $155.2 million. Approximately $34.9 million remains to be funded, expected to be sourced from property sales, operating cash flows, and the unsecured line of credit.
• Preferred Stock Redemption: On May 10, 2004, the Company called for the redemption of all Series D and Series E Preferred Stock at $25.00 per share, subject to the closing of new equity offerings.
• Risks: Key risks include the ability to access external capital on favorable terms, tenant credit risks, competition for acquisitions, and the potential for development costs to exceed estimates. The Company faces refinancing needs for significant portions of its debt maturing between 2005 and 2007.

Investor Verification Checklist

• Continuing Operations Viability: Verify the sustainability of core rental income given the 15.6% drop in same-store revenues and the reliance on property sales for significant portions of net income.
• Preferred Stock Redemption Funding: Confirm the successful closing of the equity offerings required to fund the redemption of Series D and E preferred stock scheduled for June 7, 2004.
• Development Cost Overruns: Monitor the $34.9 million remaining funding requirement for the development pipeline against actual completion costs and lease-up schedules.
• Debt Maturity Wall: Review the schedule of debt maturities, noting over $500 million in principal payments due between 2005 and 2007, and assess refinancing capacity in the current interest rate environment.
• 1031 Exchange Proceeds: Track the deployment of the $54.1 million in restricted cash held for tax-deferred exchanges to ensure timely reinvestment into new assets.