e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30, 2008
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-13102
First Industrial Realty Trust,
Inc.
(Exact Name of Registrant as
Specified in its Charter)
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Maryland
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36-3935116
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.
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311 S. Wacker Drive, Suite 4000, Chicago,
Illinois 60606
(Address of Principal Executive
Offices)
(312) 344-4300
(Registrants Telephone
Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ
No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Number of shares of Common Stock, $.01 par value,
outstanding as of July 25, 2008: 44,312,211.
FIRST
INDUSTRIAL REALTY TRUST, INC.
Form 10-Q
For the
Period Ended June 30, 2008
INDEX
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Page
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PART I: FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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2
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Consolidated Balance Sheets as of June 30, 2008 and
December 31, 2007
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2
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Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2008 and June 30, 2007
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3
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Consolidated Statements of Comprehensive Income for the Three
and Six Months Ended June 30, 2008 and June 30, 2007
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4
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Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2008 and June 30, 2007
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5
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Notes to Consolidated Financial Statements
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6
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Item 2.
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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18
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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29
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Item 4.
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Controls and Procedures
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29
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PART II: OTHER INFORMATION
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Item 1.
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Legal Proceedings
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30
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Item 1A.
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Risk Factors
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30
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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30
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Item 3.
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Defaults Upon Senior Securities
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30
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Item 4.
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Submission of Matters to a Vote of Security Holders
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30
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Item 5.
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Other Information
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30
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Item 6.
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Exhibits
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31
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SIGNATURE
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32
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EXHIBIT INDEX
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33
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PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED
BALANCE SHEETS
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June 30,
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December 31,
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2008
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2007
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(Unaudited)
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(Dollars in thousands
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except share data)
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ASSETS
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Assets:
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Investment in Real Estate:
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Land
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$
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672,443
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$
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655,523
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Buildings and Improvements
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2,454,065
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2,599,784
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Construction in Progress
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94,225
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70,961
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Less: Accumulated Depreciation
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(493,708
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(509,981
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)
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Net Investment in Real Estate
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2,727,025
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2,816,287
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Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $1,874 and $3,038 at June 30, 2008 and
December 31, 2007, respectively
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21,910
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37,875
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Cash and Cash Equivalents
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14,413
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5,757
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Restricted Cash
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103,028
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24,903
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Tenant Accounts Receivable, Net
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10,530
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9,665
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Investments in Joint Ventures
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63,376
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57,543
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Deferred Rent Receivable, Net
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30,451
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32,665
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Deferred Financing Costs, Net
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13,729
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15,373
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Deferred Leasing Intangibles, Net
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81,723
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87,019
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Prepaid Expenses and Other Assets, Net
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224,422
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170,946
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Total Assets
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$
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3,290,607
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$
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3,258,033
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LIABILITIES AND STOCKHOLDERS EQUITY
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Liabilities:
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Mortgage Loans Payable, Net
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$
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76,017
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$
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73,550
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Senior Unsecured Debt, Net
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1,530,355
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1,550,991
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Unsecured Line of Credit
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355,800
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322,129
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Accounts Payable, Accrued Expenses and Other Liabilities, Net
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130,343
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146,308
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Deferred Leasing Intangibles, Net
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21,066
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22,041
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Rents Received in Advance and Security Deposits
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26,784
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31,425
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Dividends Payable
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37,652
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37,311
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Total Liabilities
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2,178,017
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2,183,755
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Commitments and Contingencies
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Minority Interest
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150,935
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150,359
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Stockholders Equity:
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Preferred Stock ($0.01 par value, 10,000,000 shares
authorized, 500, 250, 600, and 200 shares of Series F,
G, J, and K Cumulative Preferred Stock, respectively, issued and
outstanding at June 30, 2008 and December 31, 2007,
having a liquidation preference of $100,000 per share ($50,000),
$100,000 per share ($25,000), $250,000 per share ($150,000), and
$250,000 per share ($50,000), respectively)
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Common Stock ($0.01 par value, 100,000,000 shares
authorized, 48,622,614 and 47,996,263 shares issued and
44,298,500 and 43,672,149 shares outstanding at
June 30, 2008 and December 31, 2007, respectively)
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486
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480
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Additional
Paid-in-Capital
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1,363,388
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1,354,674
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Distributions in Excess of Accumulated Earnings
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(255,383
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(281,587
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Accumulated Other Comprehensive Loss
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(6,818
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(9,630
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Treasury Shares at Cost (4,324,114 shares at June 30,
2008 and December 31, 2007)
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(140,018
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(140,018
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Total Stockholders Equity
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961,655
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923,919
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Total Liabilities and Stockholders Equity
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$
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3,290,607
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$
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3,258,033
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The accompanying notes are an integral part of the financial
statements.
2
FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
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Three Months
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Three Months
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Six Months
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Six Months
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Ended
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Ended
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Ended
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Ended
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June 30,
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June 30,
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June 30,
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June 30,
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2008
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2007
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2008
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2007
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(Unaudited)
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(Dollars in thousands except per share data)
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Revenues:
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Rental Income
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$
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68,662
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$
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61,836
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$
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135,265
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$
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121,675
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Tenant Recoveries and Other Income
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28,718
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26,264
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54,915
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54,556
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Contractor Revenues
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33,444
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7,601
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56,398
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15,848
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Total Revenues
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130,824
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95,701
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246,578
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192,079
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Expenses:
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Property Expenses
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33,038
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28,550
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66,127
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55,801
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General and Administrative
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22,836
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22,380
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46,125
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45,171
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Depreciation and Other Amortization
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45,385
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34,635
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82,985
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67,842
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Contractor Expenses
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32,432
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7,053
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54,733
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15,090
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Total Expenses
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133,691
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92,618
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249,970
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183,904
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Other Income/Expense:
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Interest Income
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1,118
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225
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1,762
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485
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Interest Expense
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(27,616
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)
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(29,667
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)
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(56,472
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)
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(59,568
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)
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Amortization of Deferred Financing Costs
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(722
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)
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(824
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)
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(1,445
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)
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(1,644
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)
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Gain (Loss) From Early Retirement of Debt
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1,489
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(108
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)
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1,489
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(254
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)
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Total Other Income/Expense
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(25,731
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(30,374
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)
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(54,666
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)
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(60,981
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)
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Loss from Continuing Operations Before Equity in Income of Joint
Ventures, Income Tax Benefit and Income Allocated to Minority
Interest
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(28,598
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)
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(27,291
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)
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(58,058
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)
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(52,806
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)
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Equity in Income of Joint Ventures
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3,268
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11,626
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6,570
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17,257
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Income Tax Benefit
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3,366
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107
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5,919
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2,030
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Minority Interest Allocable to Continuing Operations
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3,374
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2,915
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6,995
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5,965
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Loss from Continuing Operations
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(18,590
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)
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(12,643
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)
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(38,574
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)
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(27,554
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)
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Income from Discontinued Operations (Including Gain on Sale of
Real Estate of $70,484 and $59,429 for the Three Months Ended
June 30, 2008 and 2007, respectively and $143,844 and
$114,799 for the Six Months Ended June 30, 2008 and 2007,
respectively)
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74,518
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68,532
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153,244
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134,320
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Provision for Income Taxes Allocable to Discontinued Operations
(Including $3,362 and $11,070 for the Three Months Ended
June 30, 2008 and 2007, respectively and $3,608 and $21,203
for the Six Months Ended June 30, 2008 and 2007,
respectively allocable to Gain on Sale of Real Estate)
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(3,783
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)
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(11,802
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)
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(4,234
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)
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(23,036
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)
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Minority Interest Allocable to Discontinued Operations
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(8,792
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)
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(7,114
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)
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(18,775
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)
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(14,022
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)
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Income Before Gain on Sale of Real Estate
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43,353
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36,973
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91,661
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69,708
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Gain on Sale of Real Estate
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4,337
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|
830
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12,009
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|
4,404
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Provision for Income Taxes Allocable to Gain on Sale of Real
Estate
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(1,104
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)
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(327
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)
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(2,696
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)
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(1,095
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)
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Minority Interest Allocable to Gain on Sale of Sale Estate
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(402
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)
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(63
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)
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|
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(1,173
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)
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|
|
(417
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)
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|
|
|
|
|
|
|
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|
|
|
|
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Net Income
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|
46,184
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|
|
|
37,413
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|
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99,801
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72,600
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Less: Preferred Stock Dividends
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|
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(4,857
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)
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|
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(5,671
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)
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(9,714
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)
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(11,606
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)
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Less: Redemption of Preferred Stock
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|
|
|
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(2,017
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)
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|
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(2,017
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)
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Net Income Available to Common Stockholders
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$
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41,327
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$
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29,725
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$
|
90,087
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|
|
$
|
58,977
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|
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|
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|
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|
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|
|
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Basic and Diluted Earnings Per Share:
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Loss from Continuing Operations
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|
$
|
(0.48
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)
|
|
$
|
(0.45
|
)
|
|
$
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(0.93
|
)
|
|
$
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(0.86
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)
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Income From Discontinued Operations
|
|
$
|
1.44
|
|
|
$
|
1.12
|
|
|
$
|
3.02
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common Stockholders
|
|
$
|
0.96
|
|
|
$
|
0.67
|
|
|
$
|
2.09
|
|
|
$
|
1.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
43,128
|
|
|
|
44,471
|
|
|
|
43,056
|
|
|
|
44,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends/Distribution Declared per Common Share Outstanding
|
|
$
|
0.72
|
|
|
$
|
0.71
|
|
|
$
|
1.44
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
3
FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in thousands)
|
|
|
Net Income
|
|
$
|
46,184
|
|
|
$
|
37,413
|
|
|
$
|
99,801
|
|
|
$
|
72,600
|
|
Mark to Market of Interest Rate Protection Agreements, Net of
Income Tax Provision
|
|
|
5,375
|
|
|
|
4,357
|
|
|
|
3,533
|
|
|
|
4,215
|
|
Amortization of Interest Rate Protection Agreements
|
|
|
(191
|
)
|
|
|
(243
|
)
|
|
|
(378
|
)
|
|
|
(539
|
)
|
Write-off of Unamortized Settlement of Interest Rate Protection
Agreements
|
|
|
455
|
|
|
|
|
|
|
|
455
|
|
|
|
|
|
Mark to Market of Mortgage Notes Receivable
|
|
|
(328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of Interest Rate Protection Agreements
|
|
|
|
|
|
|
(4,261
|
)
|
|
|
|
|
|
|
(4,261
|
)
|
Foreign Currency Translation Adjustment, Offset by Income Tax
Benefit
|
|
|
273
|
|
|
|
|
|
|
|
(388
|
)
|
|
|
|
|
Other Comprehensive Income (Loss) Allocable to Minority Interest
|
|
|
(727
|
)
|
|
|
11
|
|
|
|
(410
|
)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
$
|
51,041
|
|
|
$
|
37,277
|
|
|
$
|
102,613
|
|
|
$
|
72,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
4
FIRST
INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
|
(Dollars in thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
99,801
|
|
|
$
|
72,600
|
|
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
|
|
|
|
|
|
|
|
|
Allocation of Income to Minority Interest
|
|
|
12,953
|
|
|
|
8,474
|
|
Depreciation
|
|
|
58,410
|
|
|
|
60,882
|
|
Amortization of Deferred Financing Costs
|
|
|
1,445
|
|
|
|
1,644
|
|
Other Amortization
|
|
|
31,838
|
|
|
|
26,338
|
|
Provision for Bad Debt
|
|
|
1,660
|
|
|
|
32
|
|
Equity in Income of Joint Ventures
|
|
|
(6,570
|
)
|
|
|
(17,257
|
)
|
Distributions from Joint Ventures
|
|
|
8,182
|
|
|
|
17,327
|
|
Gain on Sale of Real Estate
|
|
|
(155,853
|
)
|
|
|
(119,203
|
)
|
(Gain) Loss on Early Retirement of Debt
|
|
|
(1,489
|
)
|
|
|
254
|
|
Decrease in Developments for Sale Costs
|
|
|
1,860
|
|
|
|
7,528
|
|
(Increase) Decrease in Tenant Accounts Receivable and Prepaid
Expenses and Other Assets, Net
|
|
|
(19,413
|
)
|
|
|
5,952
|
|
Increase in Deferred Rent Receivable
|
|
|
(3,925
|
)
|
|
|
(5,505
|
)
|
Increase in Accounts Payable and Accrued Expenses and Rents
Received in Advance and Security Deposits
|
|
|
4,699
|
|
|
|
2,905
|
|
Decrease (Increase) in Restricted Cash
|
|
|
89
|
|
|
|
(246
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
33,687
|
|
|
|
61,725
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of and Additions to Investment in Real Estate
|
|
|
(300,729
|
)
|
|
|
(385,791
|
)
|
Net Proceeds from Sales of Investments in Real Estate
|
|
|
422,264
|
|
|
|
386,910
|
|
Contributions to and Investments in Joint Ventures
|
|
|
(10,916
|
)
|
|
|
(15,767
|
)
|
Distributions from Joint Ventures
|
|
|
3,050
|
|
|
|
7,436
|
|
Funding of Notes Receivable
|
|
|
(10,325
|
)
|
|
|
(8,385
|
)
|
Repayment of Mortgage Loans Receivable
|
|
|
21,151
|
|
|
|
8,385
|
|
Increase in Restricted Cash
|
|
|
(78,214
|
)
|
|
|
(28,532
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Investing Activities
|
|
|
46,281
|
|
|
|
(35,744
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Proceeds from the Issuance of Common Stock
|
|
|
161
|
|
|
|
393
|
|
Redemption of Preferred Stock
|
|
|
|
|
|
|
(50,014
|
)
|
Repurchase of Restricted Stock
|
|
|
(3,508
|
)
|
|
|
(3,707
|
)
|
Dividends/Distributions
|
|
|
(72,502
|
)
|
|
|
(73,483
|
)
|
Preferred Stock Dividends
|
|
|
(9,714
|
)
|
|
|
(12,684
|
)
|
Repayments on Mortgage Loans Payable
|
|
|
(1,525
|
)
|
|
|
(32,795
|
)
|
Debt Issuance Costs
|
|
|
(15
|
)
|
|
|
(2,190
|
)
|
Net Proceeds from Senior Unsecured Debt
|
|
|
|
|
|
|
149,595
|
|
Repayments of Senior Unsecured Debt
|
|
|
(19,359
|
)
|
|
|
(150,000
|
)
|
Other Costs of Senior Unsecured Debt
|
|
|
|
|
|
|
(4,261
|
)
|
Proceeds from Unsecured Line of Credit
|
|
|
356,000
|
|
|
|
570,000
|
|
Repayments on Unsecured Line of Credit
|
|
|
(322,000
|
)
|
|
|
(430,000
|
)
|
Cash Book Overdraft.
|
|
|
1,166
|
|
|
|
1,179
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing Activities
|
|
|
(71,296
|
)
|
|
|
(37,967
|
)
|
|
|
|
|
|
|
|
|
|
Net Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
(16
|
)
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
8,672
|
|
|
|
(11,986
|
)
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
5,757
|
|
|
|
16,135
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
14,413
|
|
|
$
|
4,149
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
5
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except share and per share data)
(Unaudited)
|
|
1.
|
Organization
and Formation of Company
|
First Industrial Realty Trust, Inc. (the Company)
was organized in the state of Maryland on August 10, 1993.
The Company is a real estate investment trust (REIT)
as defined in the Internal Revenue Code of 1986 (the
Code). Unless the context otherwise requires, the
terms the Company, we, us,
and our refer to First Industrial Realty Trust,
Inc., First Industrial, L.P. and their other controlled
subsidiaries. We refer to our operating partnership, First
Industrial, L.P., as the Operating Partnership, and
our taxable REIT subsidiary, First Industrial Investment, Inc.,
as the TRS.
We began operations on July 1, 1994. Our operations are
conducted primarily through the Operating Partnership, of which
we are the sole general partner with an approximate 87.6% and
87.5% ownership interest at June 30, 2008 and June 30,
2007, respectively, and through the TRS, of which the Operating
Partnership is the sole stockholder. We also conduct operations
through other partnerships, corporations, and limited liability
companies, the operating data of which, together with that of
the Operating Partnership and the TRS, is consolidated with that
of the Company as presented herein. Minority interest at
June 30, 2008 and June 30, 2007 of approximately 12.4%
and 12.5%, respectively, represents the aggregate partnership
interest in the Operating Partnership held by the limited
partners thereof.
We also own minority equity interests in, and provide various
services to, seven joint ventures which invest in industrial
properties (the 2003 Net Lease Joint Venture, the
2005 Development/Repositioning Joint Venture, the
2005 Core Joint Venture, the 2006 Net Lease
Co-Investment Program, the 2006 Land/Development
Joint Venture, the 2007 Canada Joint Venture,
and the 2007 Europe Joint Venture; together the
Joint Ventures). The Joint Ventures are accounted
for under the equity method of accounting. The operating data of
the Joint Ventures is not consolidated with that of the Company
as presented herein.
As of June 30, 2008, we owned 813 industrial properties
(inclusive of developments in process) located in 28 states
in the United States and one province in Canada, containing an
aggregate of approximately 71.4 million square feet of
gross leaseable area (GLA).
|
|
2.
|
Summary
of Significant Accounting Policies
|
The accompanying unaudited interim financial statements have
been prepared in accordance with the accounting policies
described in the financial statements and related notes included
in our Annual Report on
Form 10-K
for the year ended December 31, 2007, as amended
(2007
Form 10-K)
and should be read in conjunction with such financial statements
and related notes. The following notes to these interim
financial statements highlight significant changes to the notes
included in the December 31, 2007 audited financial
statements included in our 2007
Form 10-K
and present interim disclosures as required by the Securities
and Exchange Commission.
In order to conform with generally accepted accounting
principles, we, in preparation of our financial statements, are
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of June 30, 2008 and
December 31, 2007, and the reported amounts of revenues and
expenses for each of the three and six months ended
June 30, 2008 and June 30, 2007. Actual results could
differ from those estimates.
In our opinion, the accompanying unaudited interim financial
statements reflect all adjustments necessary for a fair
statement of our financial position as of June 30, 2008 and
December 31, 2007 and the results of our operations and
comprehensive income for each of the three and six months ended
June 30, 2008 and June 30, 2007, and our cash flows
for each of the six months ended June 30, 2008 and
June 30, 2007, and all adjustments are of a normal
recurring nature.
6
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Construction
Revenues and Expenses
Construction revenues and expenses include revenues and expenses
associated with us acting in the capacity of general contractor
and development manager for certain third party development
projects. For such projects we recognize the gross costs and
revenues on a percentage of completion basis. Additionally, for
the six months ended June 30, 2008, construction revenues
and expenses include amounts relating to the sale of industrial
units that we developed to sell.
Deferred
Leasing Intangibles
Deferred Leasing Intangibles, exclusive of Deferred Leasing
Intangibles held for sale, included in our total assets consist
of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
In-Place Leases
|
|
$
|
83,070
|
|
|
$
|
86,398
|
|
Less: Accumulated Amortization
|
|
|
(27,754
|
)
|
|
|
(24,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,316
|
|
|
$
|
61,538
|
|
|
|
|
|
|
|
|
|
|
Above Market Leases
|
|
$
|
6,008
|
|
|
$
|
6,440
|
|
Less: Accumulated Amortization
|
|
|
(2,583
|
)
|
|
|
(2,519
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,425
|
|
|
$
|
3,921
|
|
|
|
|
|
|
|
|
|
|
Tenant Relationships
|
|
$
|
27,425
|
|
|
$
|
24,970
|
|
Less: Accumulated Amortization
|
|
|
(4,443
|
)
|
|
|
(3,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,982
|
|
|
$
|
21,560
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Leasing Intangibles, Net
|
|
$
|
81,723
|
|
|
$
|
87,019
|
|
|
|
|
|
|
|
|
|
|
Deferred Leasing Intangibles, exclusive of Deferred Leasing
Intangibles held for sale, included in our total liabilities
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Below Market Leases
|
|
$
|
32,771
|
|
|
$
|
31,668
|
|
Less: Accumulated Amortization
|
|
|
(11,705
|
)
|
|
|
(9,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
21,066
|
|
|
$
|
22,041
|
|
|
|
|
|
|
|
|
|
|
The fair value of in-place leases, above market leases, tenant
relationships and below market leases recorded due to real
estate properties acquired during the six months ended
June 30, 2008 and June 30, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
In-Place Leases
|
|
$
|
8,906
|
|
|
$
|
16,541
|
|
Above Market Leases
|
|
$
|
61
|
|
|
$
|
855
|
|
Tenant Relationships
|
|
$
|
5,242
|
|
|
$
|
8,473
|
|
Below Market Leases
|
|
$
|
(2,052
|
)
|
|
$
|
(6,832
|
)
|
7
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average life in months of in-place leases, above
market leases, tenant relationships and below market leases
recorded as a result of the real estate properties acquired for
the six months ended June 30, 2008 and June 30, 2007
is as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
In-Place Leases
|
|
|
41
|
|
|
|
79
|
|
Above Market Leases
|
|
|
43
|
|
|
|
107
|
|
Tenant Relationships
|
|
|
92
|
|
|
|
116
|
|
Below Market Leases
|
|
|
31
|
|
|
|
148
|
|
Amortization expense related to in-place leases and tenant
relationships was $10,472 and $5,512 for the three months ended
June 30, 2008 and June 30, 2007, respectively, and $16,888 and
$11,268 for the six months ended June 30, 2008 and
June 30, 2007, respectively. Rental revenues related to
amortization of above/(below) market leases increased by $3,546
and $978 for the three months ended June 30, 2008 and June 30,
2007, respectively, and $4,823 and $2,033 for the six months
ended June 30, 2008 and June 30, 2007, respectively.
Income
Taxes
We file tax returns in the U.S. and various states and
foreign jurisdictions. At December 31, 2007 the TRS was under
examination by the Internal Revenue Service for tax years 2004
and 2005. During the three months ended June 30, 2008 we
received notification from the Internal Revenue Service that
they have completed their examinations of the TRS for the 2004
and 2005 tax years. There were no changes to taxable income of
the TRS as a result of the examination.
Recent
Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (the
FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 157, Fair Value
Measurements (SFAS 157), which
establishes a framework for reporting fair value and expands
disclosures about fair value measurements. We adopted the
required provisions of SFAS 157 that became effective in
our first quarter of 2008 (See Note 11). In February 2008,
the FASB issued FASB Staff Position
No. FAS 157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2).
FSP 157-2
delays the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities, except for certain items
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). We are
currently evaluating the potential impact of SFAS 157 on
our consolidated financial statements for items within the scope
of
FSP 157-2,
which will become effective beginning with our first quarter of
2009.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS 141R). SFAS 141R establishes
principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest
in the acquiree and the goodwill acquired. SFAS 141R also
establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination. We
are currently evaluating the potential impact of adoption of
SFAS 141R on our consolidated financial statements, which
will become effective beginning with our first quarter 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements-an amendment of ARB No. 51
(SFAS 160). SFAS 160 establishes
accounting and reporting standards pertaining to ownership
interests in subsidiaries held by parties other than the parent,
the amount of net income attributable to the parent and to the
noncontrolling interest, changes in a parents ownership
interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. This
statement also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and
the
8
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
interests of the noncontrolling owners. We are currently
evaluating the potential impact of adoption of SFAS 160 on
our consolidated financial statements, which will become
effective beginning with our first quarter 2009.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS 161).
SFAS 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their
objectives and strategies for using such instruments, as well as
any details of credit-risk-related contingent features contained
within derivatives. SFAS 161 also requires entities to
disclose additional information about the amounts and location
of derivatives located within the financial statements, how the
provisions of SFAS 133 Accounting for Derivative
Instruments and Hedging Activities, have been applied,
and the impact that hedges have on an entitys financial
position, financial performance, and cash flows. SFAS 161
is effective for fiscal years and interim periods beginning
after November 15, 2008. We will comply with the expanded
disclosure requirements, as applicable.
In May 2008, the FASB issued Staff Position No. APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB
14-1),
that requires the liability and equity components of convertible
debt instruments that may be settled in cash upon conversion
(including partial cash settlement) to be separately accounted
for in a manner that reflects the issuers nonconvertible
debt borrowing rate. FSP APB
14-1
dictates the debt component to be recorded be based upon the
estimated fair value of a similar nonconvertible debt. The
resulting debt discount would be amortized over the period
during which the debt is expected to be outstanding (i.e.
through the first optional redemption date) as additional
non-cash interest expense. FSP APB
14-1 will
become effective beginning in our first quarter of 2009 and is
required to be applied retrospectively to all presented periods,
as applicable. The adoption of FSP APB
14-1 is
expected to result in us recognizing additional non-cash
interest expense of approximately $1.5 million per annum.
|
|
3.
|
Investments
in Joint Ventures and Property Management Services
|
At June 30, 2008, the 2003 Net Lease Joint Venture owned 11
industrial properties comprising approximately 5.1 million
square feet of GLA, the 2005 Development/Repositioning Joint
Venture owned 29 industrial properties comprising approximately
5.2 million square feet of GLA and several land parcels,
the 2005 Core Joint Venture owned 60 industrial properties
comprising approximately 4.4 million square feet of GLA and
several land parcels, the 2006 Net Lease Co-Investment Program
owned 12 industrial properties comprising approximately
5.0 million square feet of GLA, the 2006 Land/Development
Joint Venture owned several land parcels, and the 2007 Canada
Joint Venture owned three industrial properties comprising
approximately 0.2 million square feet of GLA and several
land parcels. As of June 30, 2008, the 2007 Europe Joint
Venture does not own any properties.
During July 2007, we entered into a management arrangement with
an institutional investor to provide property management,
leasing, acquisition, disposition and portfolio management
services for industrial properties (the July 2007
Fund). We do not own an equity interest in the July 2007
Fund, however we are entitled to receive incentive payments if
certain economic thresholds related to the industrial properties
are achieved.
At June 30, 2008 and December 31, 2007, we have a
receivable from the Joint Ventures and the July 2007 Fund of
$5,627 and $6,068, respectively, which mainly relate to
development, leasing, property management and asset management
fees due to us from the Joint Ventures and the July 2007 Fund
and reimbursement for development expenditures made by the TRS,
who is acting in the capacity of the general contractor for
development projects for the 2005 Development/Repositioning
Joint Venture. These receivable amounts are included in prepaid
expenses and other assets, net.
During the six months ended June 30, 2008 and June 30,
2007, we invested the following amounts in, as well as received
distributions from, our Joint Ventures and recognized fees from
acquisition, disposition, leasing,
9
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
development, incentive, property management and asset management
services from our Joint Ventures and the July 2007 Fund in the
following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Contributions
|
|
$
|
5,332
|
|
|
$
|
10,569
|
|
|
$
|
10,414
|
|
|
$
|
14,734
|
|
Distributions
|
|
$
|
6,652
|
|
|
$
|
13,757
|
|
|
$
|
11,232
|
|
|
$
|
24,763
|
|
Fees
|
|
$
|
4,702
|
|
|
$
|
7,549
|
|
|
$
|
9,288
|
|
|
$
|
13,251
|
|
|
|
4.
|
Mortgage
Loans Payable, Net, Senior Unsecured Debt, Net and Unsecured
Line of Credit
|
The following table discloses certain information regarding our
mortgage loans payable, senior unsecured debt and unsecured line
of credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
Outstanding
|
|
|
Interest
|
|
Interest
|
|
|
|
|
Balance at
|
|
|
Rate at
|
|
Rate at
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
June 30,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
2008
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/09-
|
Mortgage Loans Payable, Net
|
|
$
|
76,017
|
|
|
$
|
73,550
|
|
|
5.50% - 9.25%
|
|
4.58% - 9.25%
|
|
09/24
|
Unamortized Premiums
|
|
|
(2,091
|
)
|
|
|
(2,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loans Payable, Gross
|
|
$
|
73,926
|
|
|
$
|
71,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Notes
|
|
|
194,490
|
|
|
|
199,442
|
|
|
5.750%
|
|
5.91%
|
|
01/15/16
|
2017 Notes
|
|
|
99,910
|
|
|
|
99,905
|
|
|
7.500%
|
|
7.52%
|
|
12/01/17
|
2027 Notes
|
|
|
15,056
|
|
|
|
15,056
|
|
|
7.150%
|
|
7.11%
|
|
05/15/27
|
2028 Notes
|
|
|
199,842
|
|
|
|
199,838
|
|
|
7.600%
|
|
8.13%
|
|
07/15/28
|
2011 Notes
|
|
|
199,837
|
|
|
|
199,807
|
|
|
7.375%
|
|
7.39%
|
|
03/15/11
|
2012 Notes
|
|
|
199,477
|
|
|
|
199,408
|
|
|
6.875%
|
|
6.85%
|
|
04/15/12
|
2032 Notes
|
|
|
49,469
|
|
|
|
49,457
|
|
|
7.750%
|
|
7.87%
|
|
04/15/32
|
2009 Notes
|
|
|
124,958
|
|
|
|
124,937
|
|
|
5.250%
|
|
4.10%
|
|
06/15/09
|
2014 Notes
|
|
|
114,206
|
|
|
|
113,521
|
|
|
6.420%
|
|
6.54%
|
|
06/01/14
|
2011 Exchangeable Notes
|
|
|
200,000
|
|
|
|
200,000
|
|
|
4.625%
|
|
4.63%
|
|
09/15/11
|
2017 II Notes
|
|
|
133,110
|
|
|
|
149,620
|
|
|
5.950%
|
|
6.37%
|
|
05/15/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
1,530,355
|
|
|
$
|
1,550,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized Discounts
|
|
|
13,145
|
|
|
|
14,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt, Gross
|
|
$
|
1,543,500
|
|
|
$
|
1,565,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Line of Credit
|
|
$
|
355,800
|
|
|
$
|
322,129
|
|
|
3.088%
|
|
3.088%
|
|
09/28/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 6, 2008, we assumed a mortgage loan payable of
$4,097 bearing interest at a rate of 6.83%. In conjunction with
the assumption of the mortgage loan, we recorded a premium in
the amount $256 which will be amortized as an adjustment to
interest expense through maturity on June 1, 2018.
On January 10, 2006, we issued $200,000 of senior unsecured
debt which matures on January 15, 2016 and bears interest
at a rate of 5.75% (the 2016 Notes). The issue price
of the 2016 Notes was 99.653%. In December 2005, we also entered
into interest rate protection agreements which were used to fix
the interest rate on the 2016
10
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Notes prior to issuance. We settled the interest rate protection
agreements on January 9, 2006 for a payment of
approximately $1,729, which is included in other comprehensive
income. On June 6, 2008, we repurchased and retired $5,000
of the 2016 Notes at a redemption price of 89.75% of par. In
connection with the partial retirement, we recognized $430 as
gain on early retirement of debt, which is the difference
between the repurchase amount of $4,488 and the principal amount
retired of $5,000, net of the pro rata write off of the
unamortized debt issue discount, the unamortized loan fees and
the unamortized settlement amount of the interest rate
protection agreements related to the 2016 Notes of $13, $36, and
$33, respectively.
On May 7, 2007, we issued $150,000 of senior unsecured debt
which matures on May 15, 2017 and bears interest at a rate
of 5.95% (the 2017 II Notes). The issue price of the
2017 II Notes was 99.730%. In April 2006, we also entered into
interest rate protection agreements to fix the interest rate on
the 2017 II Notes prior to issuance. We settled the effective
portion of the interest rate protection agreements on
May 1, 2007 for $4,261 which is included in other
comprehensive income. On June 6, 2008, we repurchased and
retired $16,570 of the 2017 II Notes at a redemption price of
89.75% of par. In connection with the partial retirement, we
recognized $1,059 as gain on early retirement of debt, which is
the difference between the repurchase amount of $14,872 and the
principal amount retired of $16,570, net of the pro rata write
off of the unamortized debt issue discount, the unamortized loan
fees and the unamortized settlement amount of the interest rate
protection agreements related to the 2017 II Notes of $40, $177,
and $422, respectively.
The following is a schedule of the stated maturities and
scheduled principal payments of the mortgage loans, senior
unsecured debt and unsecured line of credit, exclusive of
premiums and discounts, for the next five years ending
December 31, and thereafter:
|
|
|
|
|
|
|
Amount
|
|
|
Remainder of 2008
|
|
$
|
1,623
|
|
2009
|
|
|
133,038
|
|
2010
|
|
|
15,537
|
|
2011
|
|
|
407,359
|
|
2012
|
|
|
560,255
|
|
Thereafter
|
|
|
855,414
|
|
|
|
|
|
|
Total
|
|
$
|
1,973,226
|
|
|
|
|
|
|
Shares
of Common Stock
During the six months ended June 30, 2008, 152,544 limited
partnership interests in the Operating Partnership
(Units) were converted into an equivalent number of
shares of common stock, resulting in a reclassification of
$3,733 of minority interest to equity.
Non-Qualified
Employee Stock Options:
During the six months ended June 30, 2008, certain of our
employees exercised 6,300 non-qualified employee stock options.
Net proceeds to us were approximately $174.
Restricted
Stock:
During the six months ended June 30, 2008, we awarded
588,628 of restricted common stock shares and restricted stock
units to certain employees and 4,598 shares of restricted
common stock to certain directors. These restricted common stock
shares and restricted stock units had a fair value of
approximately $19,003 on the dates of approval by the
Compensation Committee of the Board of Directors. The restricted
common stock and restricted
11
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stock units awarded to employees generally vest over a three
year period and the restricted common stock awarded to directors
generally vest over a three to ten year period. Compensation
expense will be charged to earnings over the respective vesting
period for the shares/units expected to vest.
Dividend/Distributions:
The following table summarizes dividends/distributions accrued
during the six months ended June 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30, 2008
|
|
|
|
Dividend/
|
|
|
Total
|
|
|
|
Distribution
|
|
|
Dividend/
|
|
|
|
per Share/Unit
|
|
|
Distribution
|
|
|
Common Stock/Operating Partnership Units
|
|
$
|
1.44
|
|
|
$
|
72,843
|
|
Series F Preferred Stock
|
|
$
|
3,118.00
|
|
|
$
|
1,559
|
|
Series G Preferred Stock
|
|
$
|
3,618.00
|
|
|
$
|
905
|
|
Series J Preferred Stock
|
|
$
|
9,062.60
|
|
|
$
|
5,438
|
|
Series K Preferred Stock
|
|
$
|
9,062.60
|
|
|
$
|
1,812
|
|
|
|
6.
|
Acquisition
of Real Estate
|
During the six months ended June 30, 2008, we acquired 18
industrial properties comprising approximately 2.2 million
square feet of GLA and several land parcels. The purchase price
of these acquisitions totaled approximately $179,597, excluding
costs incurred in conjunction with the acquisition of the
industrial properties and land parcels.
|
|
7.
|
Sale of
Real Estate, Real Estate Held for Sale and Discontinued
Operations
|
During the six months ended June 30, 2008, we sold 90
industrial properties comprising approximately 7.6 million
square feet of GLA and several land parcels. Gross proceeds from
the sales of the 90 industrial properties and several land
parcels were approximately $494,993. The gain on sale of real
estate was approximately $155,853. We deferred $2,506 on the
gain on sale of real estate on the sale of one of the 90
properties. Since we leased back a portion of the property for
one of our regional offices and we provided seller financing,
SFAS No. 98 Accounting for Leases
required us to defer the gain. The gain on sale of real
estate will be recognized when the mortgage note receivable is
paid off and retired. The mortgage note receivable matures in
August 2008. All but one of the 90 sold industrial properties
meet the criteria established by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-
Lived Assets (SFAS 144) to be
included in discontinued operations. Therefore, in accordance
with SFAS 144, the results of operations and gain on sale
of real estate for 89 of the 90 sold industrial properties are
included in discontinued operations. The results of operations
and gain on sale of real estate for the one industrial property
and several land parcels that do not meet the criteria
established by SFAS 144 are included in continuing
operations.
At June 30, 2008, we had five industrial properties
comprising approximately 0.6 million square feet of GLA
held for sale. In accordance with SFAS 144, the results of
operations of the five industrial properties held for sale at
June 30, 2008 are included in discontinued operations.
There can be no assurance that such industrial properties held
for sale will be sold.
Income from discontinued operations for the three and six months
ended June 30, 2007 reflects the results of operations of
the 89 industrial properties that were sold during the six
months ended June 30, 2008, the results of operations of
161 industrial properties that were sold during the year ended
December 31, 2007, the results of operations of the five
industrial properties identified as held for sale at
June 30, 2008 and the gain on sale of real estate relating
to 84 industrial properties that were sold during the six months
ended June 30, 2007.
12
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table discloses certain information regarding the
industrial properties included in our discontinued operations
for the three and six months ended June 30, 2008 and
June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Total Revenues
|
|
$
|
7,636
|
|
|
$
|
24,331
|
|
|
$
|
21,269
|
|
|
$
|
52,017
|
|
Property Expenses
|
|
|
(2,462
|
)
|
|
|
(8,033
|
)
|
|
|
(7,733
|
)
|
|
|
(17,261
|
)
|
Depreciation and Amortization
|
|
|
(1,140
|
)
|
|
|
(7,195
|
)
|
|
|
(4,136
|
)
|
|
|
(15,235
|
)
|
Gain on Sale of Real Estate
|
|
|
70,484
|
|
|
|
59,429
|
|
|
|
143,844
|
|
|
|
114,799
|
|
Provision for Income Taxes
|
|
|
(3,783
|
)
|
|
|
(11,802
|
)
|
|
|
(4,234
|
)
|
|
|
(23,036
|
)
|
Minority Interest
|
|
|
(8,792
|
)
|
|
|
(7,114
|
)
|
|
|
(18,775
|
)
|
|
|
(14,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
61,943
|
|
|
$
|
49,616
|
|
|
$
|
130,235
|
|
|
$
|
97,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In conjunction with certain property sales, we provided seller
financing. At June 30, 2008 and
December 31, 2007, we had mortgage notes receivable
and accrued interest outstanding of approximately $75,944 and
$30,456, respectively, which is included as a component of
prepaid expenses and other assets.
|
|
8.
|
Supplemental
Information to Statements of Cash Flows
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
Interest paid, net of capitalized interest
|
|
$
|
57,602
|
|
|
$
|
58,945
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized
|
|
$
|
4,232
|
|
|
$
|
3,387
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Distribution payable on common stock/Units
|
|
$
|
36,420
|
|
|
$
|
36,854
|
|
|
|
|
|
|
|
|
|
|
Distribution payable on preferred stock
|
|
$
|
1,232
|
|
|
$
|
4,856
|
|
|
|
|
|
|
|
|
|
|
Exchange of units for common stock:
|
|
|
|
|
|
|
|
|
Minority interest
|
|
$
|
(3,733
|
)
|
|
$
|
(1,480
|
)
|
Common stock
|
|
|
2
|
|
|
|
1
|
|
Additional
paid-in-capital
|
|
|
3,731
|
|
|
|
1,479
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
In conjunction with the property and land acquisitions, the
following liabilities were assumed:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
(291
|
)
|
|
$
|
(5,148
|
)
|
|
|
|
|
|
|
|
|
|
Mortgage debt
|
|
$
|
(4,353
|
)
|
|
$
|
(38,590
|
)
|
|
|
|
|
|
|
|
|
|
Write-off of fully depreciated assets
|
|
$
|
(34,285
|
)
|
|
$
|
(18,634
|
)
|
|
|
|
|
|
|
|
|
|
In conjunction with certain property sales, the Company provided
seller financing and assigned a mortgage note payable:
|
|
|
|
|
|
|
|
|
Mortgage notes receivable
|
|
$
|
56,161
|
|
|
$
|
42,172
|
|
|
|
|
|
|
|
|
|
|
Mortgage note payable
|
|
$
|
|
|
|
$
|
769
|
|
|
|
|
|
|
|
|
|
|
13
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
9.
|
Earnings
Per Share (EPS)
|
The computation of basic and diluted EPS is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations
|
|
$
|
(18,590
|
)
|
|
$
|
(12,643
|
)
|
|
$
|
(38,574
|
)
|
|
$
|
(27,554
|
)
|
Gain on Sale of Real Estate, Net of Minority Interest and Income
Taxes
|
|
|
2,831
|
|
|
|
440
|
|
|
|
8,140
|
|
|
|
2,892
|
|
Less: Preferred Stock Dividends
|
|
|
(4,857
|
)
|
|
|
(5,671
|
)
|
|
|
(9,714
|
)
|
|
|
(11,606
|
)
|
Less: Redemption of Preferred Stock
|
|
|
|
|
|
|
(2,017
|
)
|
|
|
|
|
|
|
(2,017
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to Common
Stockholders, Net of Minority Interest and Income
Taxes For Basic and Diluted EPS
|
|
|
(20,616
|
)
|
|
|
(19,891
|
)
|
|
|
(40,148
|
)
|
|
|
(38,285
|
)
|
Discontinued Operations, Net of Minority Interest and Income
Taxes
|
|
|
61,943
|
|
|
|
49,616
|
|
|
|
130,235
|
|
|
|
97,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common Stockholders For
Basic and Diluted EPS
|
|
$
|
41,327
|
|
|
$
|
29,725
|
|
|
$
|
90,087
|
|
|
$
|
58,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Basic and Diluted
|
|
|
43,128,316
|
|
|
|
44,470,793
|
|
|
|
43,056,114
|
|
|
|
44,440,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to Common
Stockholders, Net of Minority Interest and Income Taxes
|
|
$
|
(0.48
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(0.86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations, Net of Minority Interest and Income
Taxes
|
|
$
|
1.44
|
|
|
$
|
1.12
|
|
|
$
|
3.02
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common Stockholders
|
|
$
|
0.96
|
|
|
$
|
0.67
|
|
|
$
|
2.09
|
|
|
$
|
1.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of weighted average shares diluted is the
same as the number of weighted average shares basic
for the three and six months ended June 30, 2008 and
June 30, 2007 as the dilutive effect of stock options and
restricted stock was excluded as its inclusion would have been
antidilutive to the loss from continuing operations available to
common stockholders, net of minority interest and income taxes.
The dilutive effect of stock options and restricted stock
excluded from the computation are 11,577 and 192,600 for the
three months ended June 30, 2008 and 2007,
respectively, and 17,033 and 219,349 for the six months ended
June 30, 2008 and 2007, respectively.
Unvested restricted stock shares aggregating 989,671 and 432,129
for the three months ended June 30, 2008 and 2007,
respectively, and 986,183 and 430,693 for the six months ended
June 30, 2008 and 2007, respectively, were antidilutive as
the issue price of these shares was higher than the
Companys average stock price during the respective periods
and accordingly were excluded from dilution computations.
Options to purchase common stock of 183,000 for the three months
ended June 30, 2008 and 163,000 for the six months ended
June 30, 2008 were antidilutive as the strike price of
these stock options was higher than the
14
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys average stock price during the respective periods
and accordingly were excluded in dilution computations. In 2007,
all of the stock options were dilutive.
The $200,000 of senior unsecured debt (the 2011
Exchangeable Notes) issued during 2006, which are
convertible into common shares of the Company at the price of
$50.93, were not included in the computation of diluted EPS as
our average stock price did not exceed the strike price of the
conversion feature.
|
|
10.
|
Stock
Based Compensation
|
We recognized $4,724 and $3,648 for the three months ended
June 30, 2008 and 2007, respectively, and $8,184 and $7,254
for the six months ended June 30, 2008 and 2007,
respectively, in compensation expense related to restricted
stock awards, of which $396 and $318 was capitalized for the
three months ended June 30, 2008 and 2007, respectively,
and $771 and $720 was capitalized for the six months ended
June 30, 2008 and 2007, respectively, in connection with
development activities. At June 30, 2008, we have $33,971
in unrecognized compensation related to unvested restricted
stock awards. The weighted average period that the unrecognized
compensation is expected to be recognized is 1.27 years. We
have not awarded stock options to our employees or our directors
during the six months ended June 30, 2008 and June 30,
2007 and all outstanding options are fully vested, therefore no
stock-based employee compensation expense related to stock
options is included in net income available to common
stockholders.
|
|
11.
|
Other
Comprehensive Income and Fair Value Measurements
|
In July 2007 and January 2008, the 2006 Land/Development Joint
Venture entered into an aggregate of four interest rate
protection agreements to effectively convert floating rate debt
to fixed rate debt on a portion of its variable rate debt. The
hedge relationship is considered highly effective and for the
three and six months ended June 30, 2008, $7,512 and
$1,974, respectively of mark to market gain due to a change in
values of the interest rate protection agreements was recognized
in other comprehensive income by the 2006 Land/Development Joint
Venture. For the three and six months ended June 30, 2008,
we recorded $752 and $198 in mark to market gain, respectively,
representing our 10% share, net of $296 and $81, respectively,
of income tax provision, which is included in mark to market of
interest rate protection agreements in other comprehensive
income.
In January 2008, the 2005 Core Joint Venture entered into two
interest rate protection agreements to effectively convert
floating rate debt to fixed rate debt on a portion of its
variable rate debt. The hedge relationship is considered highly
effective and for the three and six months ended June 30 2008,
$1,206 and $89, respectively, of mark to market gain due to a
change in values of the interest rate protection agreements was
recognized in other comprehensive income by the 2005 Core Joint
Venture. For the three and six months ended
June 30, 2008, we recorded $121 and $9 in mark to
market gain, respectively, representing our 10% share, net of
$47 and $3 of income tax provision, respectively, which is
included in mark to market of interest rate protection
agreements in other comprehensive income.
In January 2008, we entered into two interest rate protection
agreements which fixed the interest rate on forecasted offerings
of unsecured debt which we designated as cash flow hedges (the
January 2008 Agreements). The January 2008
Agreements each have a notional value of $59,750 and are
effective from May 15, 2009 through May 15, 2014. The
January 2008 Agreements fix the LIBOR rate at 4.0725% and
4.0770%, respectively. We anticipate that the January 2008
Agreements will be highly effective, and, as a result, the
change in value is shown in other comprehensive income. We
recorded $4,053 and $2,706 in mark to market gain, which is
included in mark to market of interest rate protection
agreements in other comprehensive income for the three and six
months ended June 30, 2008, respectively.
In March 2008, we entered into an interest rate swap agreement
(the March 2008 Agreement) which fixed the interest
rate on a portion of our outstanding borrowings on our unsecured
line of credit. We designated this transaction as a cash flow
hedge. The March 2008 Agreement has a notional value of $50,000
and is effective from
15
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
March 6, 2008 through April 1, 2010. The March 2008
Agreement fixes the LIBOR rate at 2.4150%. Any payments or
receipts from the March 2008 Agreement will be treated as a
component of interest expense. We anticipate that the March 2008
Agreement will be highly effective, and, as a result, the change
in value is shown in other comprehensive income. We recorded
$792 and $704 in mark to market gain, which is included in mark
to market of interest rate protection agreements in other
comprehensive income for the three and six months ended
June 30, 2008, respectively.
In conjunction with certain issuances of senior unsecured debt,
we entered into interest rate protection agreements to fix the
interest rate on anticipated offerings of senior unsecured debt.
In the next 12 months, we will amortize approximately $729
into net income by decreasing interest expense.
During 2008, we owned one industrial property and one land
parcel located in Toronto, Canada for which the functional
currency was determined to be the Canadian dollar. The assets
and liabilities of this industrial property and one land parcel
are translated to U.S. dollars from the Canadian dollar
based on the current exchange rate prevailing at each balance
sheet date. The income statement accounts of the industrial
property and one land parcel are translated using the average
exchange rate for the period. The resulting translation
adjustments are included in accumulated other comprehensive
income. For the three and six months ended June 30, 2008,
we recorded $264 and $(778) in foreign currency translation gain
(loss), respectively, offset by $9 and $390 of income tax
benefit, respectively.
We adopted the provisions of SFAS 157 as of January 1,
2008, for financial instruments recorded at fair value. Although
the adoption of SFAS 157 did not materially impact our
financial condition, results of operations, or cash flow, we are
now required to provide additional disclosures as part of our
financial statements.
SFAS 157 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such
as quoted prices in active markets; Level 2, defined as
inputs other than quoted prices in active markets that are
either directly or indirectly observable; and Level 3,
defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
The following table sets forth our financial assets and
liabilities that are accounted for, at fair value on a recurring
basis as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting
|
|
|
|
|
Date Using:
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
|
|
June 30,
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description
|
|
2008
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Protection Agreements(1)
|
|
$
|
3,410
|
|
|
|
|
|
|
$
|
3,410
|
|
|
|
|
|
|
|
|
(1) |
|
Mark to market gains on the interest rate protection agreements
are recorded in accumulated other comprehensive income and the
value of the interest rate protection agreements is included in
prepaid expenses and other assets, net. |
The valuation of the above interest rate protection agreements
are determined using widely accepted valuation techniques
including discounted cash flow analysis on the expected cash
flows of each instrument. This analysis reflects the contractual
terms of the interest rate protection agreements, including the
period to maturity, and uses observable market-based inputs,
including interest rate curves and implied volatilities. To
comply with the provisions of SFAS 157, we incorporated
credit valuation adjustments to appropriately reflect both our
own nonperformance risk and the respective counterpartys
nonperformance risk in the fair value measurements. In adjusting
the fair value of the interest rate protection agreements for
the effect of nonperformance risk, we have considered the impact
of netting and any applicable credit enhancements.
16
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Although we have determined that the majority of the inputs used
to value the instruments fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated
with our instruments utilize Level 3 inputs, such as
estimates of current credit spreads to evaluate the likelihood
of default by ourselves and our counterparties. However, as of
June 30, 2008, we have assessed the significance of the
impact of the credit valuation adjustments on the overall
valuation of the positions of the interest rate protection
agreements and have determined that the credit valuation
adjustments are not significant to the overall valuation of our
interest rate protection agreements. As a result, we have
determined that the valuations in their entirety are classified
in Level 2 of the fair value hierarchy.
|
|
12.
|
Commitments
and Contingencies
|
In the normal course of business, we are involved in legal
actions arising from the ownership of our properties. In our
opinion, the liabilities, if any, that may ultimately result
from such legal actions are not expected to have a materially
adverse effect on our consolidated financial position,
operations or liquidity.
We have committed to the construction of several industrial
properties totaling approximately 2.5 million square feet
of GLA. The estimated total construction costs are approximately
$128,611. Of this amount, approximately $51,602 remains to be
funded. There can be no assurance that the actual completion
cost will not exceed the estimated completion cost stated above.
At June 30, 2008, we had 20 letters of credit outstanding
in the aggregate amount of $7,791. These letters of credit
expire between July 2008 and January 2010.
From July 1, 2008 to July 25, 2008, we acquired three
industrial properties and one land parcel for a purchase price
of approximately $19,800, excluding costs incurred in
conjunction with the acquisition of these industrial properties
and one land parcel. In conjunction with the acquisition of two
of these industrial properties, we assumed $3,499 in mortgage
loans payable. There were no industrial properties sold during
this period.
On July 1, 2008, we repurchased and retired $5,000 of the
2017 II Notes at a redemption price of 88.915% of par. In
connection with the partial retirement, we recognized $361 as
gain on early retirement of debt, which is the difference
between the repurchase amount of $4,446 and the principal amount
retired of $5,000, net of the pro rata write off of the
unamortized debt issue discount, the unamortized loan fees, and
the unamortized settlement amount of the interest rate
protection agreements related to the 2017 II Notes of $12, $54,
and $127, respectively.
On July 3, 2008, the mortgage note receivable that we
originated related to a property sale in the first quarter 2008
in which we deferred $2,506 in gain (see Note 7) was
paid off and retired.
On July 21, 2008, we paid a second quarter 2008
dividend/distribution of $0.72 per common share/Unit, totaling
approximately $36,420.
17
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in
this
Form 10-Q.
This report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
and Section 21E of the Securities Exchange Act of 1934. We
intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995, and are
including this statement for purposes of complying with those
safe harbor provisions. Forward-looking statements, which are
based on certain assumptions and describe future plans,
strategies and expectations of the Company, are generally
identifiable by use of the words believe,
expect, intend, anticipate,
estimate, project or similar
expressions. Our ability to predict results or the actual effect
of future plans or strategies is inherently uncertain. Factors
which could have an adverse effect on our operations and future
prospects include, but are not limited to, changes in: national,
international (including trade volume growth), regional and
local economic conditions generally and real estate markets
specifically, legislation/regulation (including changes to laws
governing the taxation of real estate investment trusts), our
ability to qualify and maintain our status as a real estate
investment trust, availability and attractiveness of financing
(including both public and private capital) to us and to our
potential counterparties, interest rate levels, our ability to
maintain our current credit agency ratings, competition, supply
and demand for industrial properties (including land, the supply
and demand for which is inherently more volatile than other
types of industrial property) in the Companys current and
proposed market areas, difficulties in consummating acquisitions
and dispositions, risks related to our investments in properties
through joint ventures, potential environmental liabilities,
slippage in development or
lease-up
schedules, tenant credit risks, higher-than-expected costs,
changes in general accounting principles, policies and
guidelines applicable to real estate investment trusts risks
related to doing business internationally (including foreign
currency exchange risks and risks related to integrating
international properties and operations) and those additional
factors described under the heading Risk Factors and
elsewhere in the Companys annual report on
Form 10-K
for the year ended December 31, 2007, in the Companys
subsequent quarterly reports on
Form 10-Q,
and in Item 1A, Risk Factors, in this quarterly
report. We caution you not to place undue reliance on forward
looking statements, which reflect our analysis only and speak
only as of the date of this report or the dates indicated in the
statements. Unless the context otherwise requires, the terms
Company, we, us, and
our refer to First Industrial Realty Trust, Inc.,
First Industrial, L.P. and their controlled subsidiaries. We
refer to our operating partnership, First industrial, L.P., as
the Operating Partnership, and our taxable REIT
subsidiary, First Industrial Investment, Inc., as the
TRS.
GENERAL
The Company was organized in the state of Maryland on
August 10, 1993. We are a real estate investment trust
(REIT) as defined in the Internal Revenue Code of
1986 (the Code).
We began operations on July 1, 1994. Our operations are
conducted primarily through the Operating Partnership, of which
we are the sole general partner with an approximate 87.6% and
87.5% ownership interest at June 30, 2008 and 2007,
respectively, and through the TRS, of which the Operating
Partnership is the sole stockholder. We also conduct operations
through other partnerships, corporations, and limited liability
companies, the operating data of which, together with that of
the Operating Partnership and the TRS, is consolidated with that
of the Company, as presented herein. Minority interest at
June 30, 2008 and 2007 of approximately 12.4% and 12.5%,
respectively, represents the aggregate partnership interest in
the Operating Partnership held by the limited partners thereof.
We also own minority equity interests in, and provide various
services to, seven joint ventures which invest in industrial
properties (the 2003 Net Lease Joint Venture, the
2005 Development/Repositioning Joint Venture, the
2005 Core Joint Venture, the 2006 Net Lease
Co-Investment Program the 2006 Land/Development
Joint Venture., the 2007 Canada Joint Venture,
and the 2007 Europe Joint Venture; together the
Joint Ventures). The Joint Ventures are accounted
for under the equity method of accounting. The operating data of
the Joint Ventures is not consolidated with that of the Company
as presented herein.
As of June 30, 2008, we owned 813 industrial properties
(inclusive of developments in process) located in 28 states
in the United States and one province in Canada, containing an
aggregate of approximately 71.4 million square feet of
gross leaseable area (GLA).
18
MANAGEMENTS
OVERVIEW
We believe our financial condition and results of operations
are, primarily, a function of our performance and our Joint
Ventures performance in four key areas: leasing of
industrial properties, acquisition and development of additional
industrial properties, redeployment of internal capital and
access to external capital.
We generate revenue primarily from rental income and tenant
recoveries from long-term (generally three to six years)
operating leases of our industrial properties and our Joint
Ventures industrial properties. Such revenue is offset by
certain property specific operating expenses, such as real
estate taxes, repairs and maintenance, property management,
utilities and insurance expenses, along with certain other costs
and expenses, such as depreciation and amortization costs and
general and administrative and interest expenses. Our revenue
growth is dependent, in part, on our ability to
(i) increase rental income, through increasing either or
both occupancy rates and rental rates at our properties and our
Joint Ventures properties, (ii) maximize tenant
recoveries and (iii) minimize operating and certain other
expenses. Revenues generated from rental income and tenant
recoveries are a significant source of funds, in addition to
income generated from gains/losses on the sale of our properties
and our Joint Ventures properties (as discussed below),
for our distributions. The leasing of property, in general, and
occupancy rates, rental rates, operating expenses and certain
non-operating expenses, in particular, are impacted, variously,
by property specific, market specific, general economic and
other conditions, many of which are beyond our control. The
leasing of property also entails various risks, including the
risk of tenant default. If we were unable to maintain or
increase occupancy rates and rental rates at our properties and
our Joint Ventures properties or to maintain tenant
recoveries and operating and certain other expenses consistent
with historical levels and proportions, our revenue growth would
be limited. Further, if a significant number of our tenants and
our Joint Ventures tenants were unable to pay rent
(including tenant recoveries) or if we or our Joint Ventures
were unable to rent our properties on favorable terms, our
financial condition, results of operations, cash flow and
ability to pay dividends on, and the market price of, our common
stock would be adversely affected.
Our revenue growth is also dependent, in part, on our and our
Joint Ventures ability to acquire, develop and redevelop
additional industrial properties on favorable terms. These
properties, to the extent leased, generate revenue from rental
income, tenant recoveries and fees, income from which, as
discussed above, is a source of funds for our distributions.
These properties also replenish our and our Joint Ventures
portfolio of properties as we systematically redeploy capital,
as discussed below. In this regard, we seek to maintain an
investment pipeline (comprised of acquisitions under contract or
letter of intent and developments in, or in the process of being
placed into, their construction phase) from which to source the
acquisition, development and redevelopment transactions on which
our revenue growth is, in part, dependent. Our investment
pipeline, however, is subject to change and is not necessarily a
reliable indicator of our or our Joint Ventures ability to
acquire, develop or redevelop additional industrial properties
on favorable terms. The acquisition, development and
redevelopment of properties is impacted, variously, by property
specific, market specific, general economic and other
conditions, including significant competition for opportunities
from other well-capitalized real estate investors, including
both publicly-traded REITs and private investors, many of which
conditions are beyond our control. The acquisition, development
and redevelopment of properties also entails various other
risks, including the risk that our investments and our Joint
Ventures investments may not perform as expected. For
example, acquired, developed or redeveloped properties may not
sustain
and/or
achieve anticipated occupancy and rental rate levels. With
respect to developed and redeveloped properties, we may not be
able to complete construction on schedule or within budget,
resulting in increased debt service expense and construction
costs and delays in leasing the properties. Further, as
discussed below, we and our Joint Ventures may not be able to
finance the acquisition, development and redevelopment
opportunities we identify. If we and our Joint Ventures were
unable to acquire, develop and redevelop sufficient additional
properties on favorable terms, or if such investments did not
perform as expected, our revenue growth would be limited and our
financial condition, results of operations, cash flow and
ability to pay dividends on, and the market price of, our common
stock would be adversely affected.
We also generate income from the sale of our and our Joint
Ventures properties (including existing buildings,
buildings which we or our Joint Ventures have developed or
re-developed on a merchant basis, and land). The Company itself
and through our various Joint Ventures is continually engaged
in, and our income growth is dependent in part on,
systematically redeploying capital from properties and other
assets with lower yield potential into properties and other
assets with higher yield potential. As part of that process, we
and our Joint Ventures sell, on
19
an ongoing basis, select stabilized properties or land or
properties offering lower potential returns relative to their
market value. The gain/loss on, and fees from, the sale of such
properties are included in our income and are a significant
source of funds, in addition to revenues generated from rental
income and tenant recoveries, for our distributions. Also, a
significant portion of our proceeds from such sales is used to
fund the acquisition, development and redevelopment of
additional industrial properties. The sale of properties is
impacted, variously, by property specific, market specific,
general economic and other conditions, many of which are beyond
our control. The sale of properties also entails various risks,
including competition from other sellers and the availability of
attractive financing for potential buyers of our properties and
our Joint Ventures properties. Further, our ability to
sell properties is limited by safe harbor rules applying to
REITs under the Code which relate to the number of properties
that may be disposed of in a year, their tax bases and the cost
of improvements made to the properties, along with other tests
which enable a REIT to avoid punitive taxation on the sale of
assets. If we and our Joint Ventures were unable to sell
properties on favorable terms, our income growth would be
limited and our financial condition, results of operations, cash
flow and ability to pay dividends on, and the market price of,
our common stock would be adversely affected.
Currently, we utilize a portion of the net sales proceeds from
property sales, borrowings under our unsecured line of credit
(the Unsecured Line of Credit) and proceeds from the
issuance when and as warranted, of additional debt and equity
securities to finance future acquisitions, developments and
redevelopments and to fund our equity commitments to our Joint
Ventures. Access to external capital on favorable terms plays a
key role in our financial condition and results of operations,
as it impacts our cost of capital and our ability and cost to
refinance existing indebtedness as it matures and to fund
acquisitions, developments, redevelopments and contributions to
our Joint Ventures or through the issuance, when and as
warranted, of additional equity securities. Our ability to
access external capital on favorable terms is dependent on
various factors, including general market conditions, interest
rates, credit ratings on our capital stock and debt, the
markets perception of our growth potential, our current
and potential future earnings and cash distributions and the
market price of our capital stock. If we were unable to access
external capital on favorable terms, our financial condition,
results of operations, cash flow and ability to pay dividends
on, and the market price of, our common stock would be adversely
affected.
RESULTS
OF OPERATIONS
Comparison
of Six Months Ended June 30, 2008 to Six Months Ended
June 30, 2007
Our net income available to common stockholders was
$90.1 million and $59.0 million for the six months
ended June 30, 2008 and 2007, respectively. Basic and
diluted net income available to common stockholders were $2.09
per share and $1.33 per share for the six months ended
June 30, 2008 and June 30, 2007, respectively.
The tables below summarize our revenues, property expenses and
depreciation and other amortization by various categories for
the six months ended June 30, 2008 and June 30, 2007.
Same store properties are properties owned prior to
January 1, 2007 and held as operating properties through
June 30, 2008 and developments and redevelopments that were
placed in service prior to January 1, 2007 or were
substantially completed for 12 months prior to
January 1, 2007. Properties are placed in service as they
reach stabilized occupancy (generally defined as 90% occupied).
Acquired properties are properties that were acquired subsequent
to December 31, 2006 and held as operating properties
through June 30, 2008. Sold properties are properties that
were sold subsequent to December 31, 2006. (Re)Developments
and land are land parcels and developments and redevelopments
that were not a) substantially complete 12 months
prior to January 1, 2007 or b) placed in service prior
to January 1, 2007. Other revenues are derived from
the operations of our maintenance company, fees earned from our
Joint Ventures, and other miscellaneous revenues. Construction
revenues and expenses represent revenues earned and expenses
incurred in connection with the TRS acting as general contractor
or development manager to construct industrial properties,
including industrial properties for the 2005
Development/Repositioning Joint Venture, and also include
revenues and expenses related to the development and sale of
properties built for third parties. Other expenses are derived
from the operations of our maintenance company and other
miscellaneous regional expenses.
20
Our future financial condition and results of operations,
including rental revenues, may be impacted by the future
acquisition and sale of properties. Our future revenues and
expenses may vary materially from historical rates.
For the six months ended June 30, 2008 and 2007, the
occupancy rates of our same store properties were 90.7% and
91.4%, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
150,254
|
|
|
$
|
145,493
|
|
|
$
|
4,761
|
|
|
|
3.3
|
%
|
Acquired Properties
|
|
|
20,381
|
|
|
|
7,065
|
|
|
|
13,316
|
|
|
|
188.5
|
%
|
Sold Properties
|
|
|
19,956
|
|
|
|
51,175
|
|
|
|
(31,219
|
)
|
|
|
(61.0
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
6,135
|
|
|
|
3,514
|
|
|
|
2,621
|
|
|
|
74.6
|
%
|
Other
|
|
|
14,723
|
|
|
|
21,001
|
|
|
|
(6,278
|
)
|
|
|
(29.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,449
|
|
|
|
228,248
|
|
|
|
(16,799
|
)
|
|
|
(7.4
|
)%
|
Discontinued Operations
|
|
|
(21,269
|
)
|
|
|
(52,017
|
)
|
|
|
30,748
|
|
|
|
(59.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Revenues
|
|
|
190,180
|
|
|
|
176,231
|
|
|
|
13,949
|
|
|
|
7.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Revenues
|
|
|
56,398
|
|
|
|
15,848
|
|
|
|
40,550
|
|
|
|
255.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
246,578
|
|
|
$
|
192,079
|
|
|
$
|
54,499
|
|
|
|
28.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from same store properties increased by
$4.8 million due primarily to an increase in tenant
recoveries and an increase in lease termination fees of
$0.5 million partially offset by a decrease in occupancy.
Revenues from acquired properties increased $13.3 million
due to the 123 industrial properties acquired subsequent to
December 31, 2006 totaling approximately 10.8 million
square feet of GLA. Revenues from sold properties decreased
$31.2 million due to the 254 industrial properties sold
subsequent to December 31, 2006 totaling approximately
21.3 million square feet of GLA. Revenues from
(re)developments and land increased $2.6 million primarily
due to an increase in occupancy. Other revenues decreased by
approximately $6.3 million due primarily to a decrease in
fees earned from our Joint Ventures and a decrease in fees
earned related to us assigning our interest in certain purchase
contracts to third parties for consideration. Construction
revenues increased $40.6 million primarily due to two
development projects that commenced in September 2007 and April
2008 for which we are acting in the capacity of development
manager.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
PROPERTY AND CONSTRUCTION EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
49,473
|
|
|
$
|
44,484
|
|
|
$
|
4,989
|
|
|
|
11.2
|
%
|
Acquired Properties
|
|
|
6,228
|
|
|
|
1,575
|
|
|
|
4,653
|
|
|
|
295.4
|
%
|
Sold Properties
|
|
|
6,943
|
|
|
|
15,665
|
|
|
|
(8,722
|
)
|
|
|
(55.7
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
3,137
|
|
|
|
2,409
|
|
|
|
728
|
|
|
|
30.2
|
%
|
Other
|
|
|
8,079
|
|
|
|
8,929
|
|
|
|
(850
|
)
|
|
|
(9.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,860
|
|
|
|
73,062
|
|
|
|
798
|
|
|
|
1.1
|
%
|
Discontinued Operations
|
|
|
(7,733
|
)
|
|
|
(17,261
|
)
|
|
|
9,528
|
|
|
|
(55.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
|
66,127
|
|
|
|
55,801
|
|
|
|
10,326
|
|
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Expenses
|
|
|
54,733
|
|
|
|
15,090
|
|
|
|
39,643
|
|
|
|
262.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Construction Expenses
|
|
$
|
120,860
|
|
|
$
|
70,891
|
|
|
$
|
49,969
|
|
|
|
70.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance, and
other property related expenses. Property expenses from same
store properties increased $5.0 million due primarily to an
increase in real estate tax expense an increase in repairs and
maintenance expense attributable to increases in snow removal
expense and an increase in bad debt expense. Property expenses
from acquired properties increased $4.7 million due to
properties acquired subsequent to December 31, 2006.
Property expenses from sold properties decreased
$8.7 million due to properties sold subsequent to
December 31, 2006. Property expenses from (re)developments
and land remained relatively unchanged. The $0.9 million
decrease in other expense is primarily attributable to a
decrease in the bad debt reserve and a loss recorded in
connection with roof damage at a property that occurred during
the six months ended June 30, 2007. The damage was
accounted for as an involuntary conversion which requires the
recognition of a loss in the period in which the damage
occurred. Insurance reimbursements were deferred until
realizable. Construction expenses increased $39.7 million
primarily due to two development projects that commenced in
September 2007 and April 2008 for which we are acting in the
capacity of development manager.
General and administrative expense remained relatively unchanged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
DEPRECIATION and OTHER AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
59,637
|
|
|
$
|
60,456
|
|
|
$
|
(819
|
)
|
|
|
(1.4
|
)%
|
Acquired Properties
|
|
|
19,168
|
|
|
|
4,935
|
|
|
|
14,233
|
|
|
|
288.4
|
%
|
Sold Properties
|
|
|
3,811
|
|
|
|
15,047
|
|
|
|
(11,236
|
)
|
|
|
(74.7
|
)%
|
(Re)Developments and Land, Not Included Above and Other
|
|
|
3,531
|
|
|
|
1,677
|
|
|
|
1,854
|
|
|
|
110.6
|
%
|
Corporate Furniture, Fixtures and Equipment
|
|
|
974
|
|
|
|
962
|
|
|
|
12
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,121
|
|
|
|
83,077
|
|
|
|
4,044
|
|
|
|
4.9
|
%
|
Discontinued Operations
|
|
|
(4,136
|
)
|
|
|
(15,235
|
)
|
|
|
11,099
|
|
|
|
(72.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other Amortization
|
|
$
|
82,985
|
|
|
$
|
67,842
|
|
|
$
|
15,143
|
|
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
remained relatively unchanged. Depreciation and other
amortization from acquired properties increased by
$14.2 million due to properties acquired subsequent to
December 31, 2006 as well as $7.0 million of accelerated
depreciation and amortization taken during the six months ended
June 30, 2008 attributable to a tenant in two buildings that we
acquired in May 2007 who terminated their lease early.
Depreciation and other amortization from sold properties
decreased $11.2 million due to properties sold subsequent
to December 31, 2006. Depreciation and other amortization
for (re)developments and land and other increased
$1.9 million due primarily to an increase in the
substantial completion of developments.
Interest income increased approximately $1.3 million, or
263.3%, due primarily to an increase in the average mortgage
loans receivable outstanding during the six months ended
June 30, 2008, as compared to the six months ended
June 30, 2007.
Interest expense decreased approximately $3.1 million, or
5.2%, primarily due to a decrease in the weighted average
interest rate for the six months ended June 30, 2008
(5.97%), as compared to the six months ended
June 30, 2007 (6.55%), and due to an increase in
capitalized interest for the six months ended June 30, 2008
due to an increase in development activities, partially offset
by an increase in the weighted average debt balance outstanding
for the six months ended June 30, 2008
($2,045.4 million), as compared to the six months ended
June 30, 2007 ($1,936.9 million).
Amortization of deferred financing costs remained relatively
unchanged.
For the six months ended June 30, 2008, we recognized a
$1.5 million gain from early retirement of debt due to the
partial repurchase of two series of our senior unsecured notes.
For the six months ended June 30, 2007, we incurred a
$0.3 million loss from early retirement of debt due to
early payoffs of mortgage loans.
22
Equity in income of joint ventures decreased by approximately
$10.7 million, or 61.9%, due primarily to a decrease in our
prorata share of gain on sale of real estate and earn outs on
property sales from the 2005 Core Joint Venture and a decrease
in our earn outs on property sales from the 2005
Development/Repositioning Joint Venture during the six months
ended June 30, 2008 as compared to the six months ended
June 30, 2007.
The income tax benefit (provision) (included in continuing
operations, discontinued operations and gain on sale) decreased
by $21.1 million, or 95.4%, due primarily to a decrease in
equity in income of joint ventures and gain on the sale of real
estate within the TRS.
The following table summarizes certain information regarding the
industrial properties included in our discontinued operations
for the six months ended June 30, 2008 and June 30,
2007.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
21,269
|
|
|
$
|
52,017
|
|
Property Expenses
|
|
|
(7,733
|
)
|
|
|
(17,261
|
)
|
Depreciation and Amortization
|
|
|
(4,136
|
)
|
|
|
(15,235
|
)
|
Gain on Sale of Real Estate
|
|
|
143,844
|
|
|
|
114,799
|
|
Provision for Income Taxes
|
|
|
(4,234
|
)
|
|
|
(23,036
|
)
|
Minority Interest
|
|
|
(18,775
|
)
|
|
|
(14,022
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
130,235
|
|
|
$
|
97,262
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes and
minority interest, for the six months ended June 30, 2008
reflects the results of operations and gain on sale of real
estate relating to 89 industrial properties that were sold
during the six months ended June 30, 2008 and the results
of operations of five properties that were identified as held
for sale at June 30, 2008.
Income from discontinued operations, net of income taxes and
minority interest, for the six months ended June 30, 2007
reflects the gain on sale of real estate relating to 84
industrial properties that were sold during the six months ended
June 30, 2007 and reflects the results of operations of the
161 industrial properties that were sold during the year ended
December 31, 2007, 89 industrial properties that were sold
during the six months ended June 30, 2008, and five
industrial properties identified as held for sale at
June 30, 2008.
The $12.0 million gain on sale of real estate for the six
months ended June 30, 2008, resulted from the sale of one
industrial property and several land parcels that do not meet
the criteria established by SFAS 144 for inclusion in
discontinued operations. The $4.4 million gain on sale of
real estate for the six months ended June 30, 2007,
resulted from the sale of one industrial property and several
land parcels that do not meet the criteria established by
SFAS 144 for inclusion in discontinued operations.
Comparison
of Three Months Ended June 30, 2008 to Three Months Ended
June 30, 2007
Our net income available to common stockholders was
$41.3 million and $29.7 million for the three months
ended June 30, 2008 and 2007, respectively. Basic and
diluted net income available to common stockholders were $0.96
per share and $0.67 per share for the three months ended
June 30, 2008 and June 30, 2007, respectively.
The tables below summarize our revenues, property expenses and
depreciation and other amortization by various categories for
the three months ended June 30, 2008 and June 30,
2007. Same store properties are properties owned prior to
January 1, 2007 and held as operating properties through
June 30, 2008 and developments and redevelopments that were
placed in service prior to January 1, 2007 or were
substantially completed for 12 months prior to
January 1, 2007. Properties are placed in service as they
reach stabilized occupancy (generally defined as 90% occupied).
Acquired properties are properties that were acquired subsequent
to December 31, 2006 and held as operating properties
through June 30, 2008. Sold properties are properties that
were sold subsequent to December 31, 2006. (Re)Developments
and land are land parcels and developments and redevelopments
that were not a) substantially complete 12 months
prior to January 1, 2007 or b) placed in service prior
to January 1, 2007. Other revenues are derived from the
operations of our
23
maintenance company, fees earned from our Joint Ventures, and
other miscellaneous revenues. Construction revenues and expenses
represent revenues earned and expenses incurred in connection
with the TRS acting as general contractor or development manager
to construct industrial properties, including industrial
properties for the 2005 Development/Repositioning Joint Venture,
and also include revenues and expenses related to the
development and sale of properties built for third parties.
Other expenses are derived from the operations of our
maintenance company and other miscellaneous regional expenses.
Our future financial condition and results of operations,
including rental revenues, may be impacted by the future
acquisition and sale of properties. Our future revenues and
expenses may vary materially from historical rates.
For the three months ended June 30, 2008 and 2007, the
occupancy rates of our same store properties were 90.6% and
91.6%, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
74,177
|
|
|
$
|
72,912
|
|
|
$
|
1,265
|
|
|
|
1.7
|
%
|
Acquired Properties
|
|
|
12,356
|
|
|
|
3,808
|
|
|
|
8,548
|
|
|
|
224.5
|
%
|
Sold Properties
|
|
|
6,929
|
|
|
|
23,908
|
|
|
|
(16,979
|
)
|
|
|
(71.0
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
2,979
|
|
|
|
2,164
|
|
|
|
815
|
|
|
|
37.7
|
%
|
Other
|
|
|
8,575
|
|
|
|
9,639
|
|
|
|
(1,064
|
)
|
|
|
(11.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,016
|
|
|
|
112,431
|
|
|
|
(7,415
|
)
|
|
|
(6.6
|
)%
|
Discontinued Operations
|
|
|
(7,636
|
)
|
|
|
(24,331
|
)
|
|
|
16,695
|
|
|
|
(68.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Revenues
|
|
|
97,380
|
|
|
|
88,100
|
|
|
|
9,280
|
|
|
|
10.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Revenues
|
|
|
33,444
|
|
|
|
7,601
|
|
|
|
25,843
|
|
|
|
340.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
130,824
|
|
|
$
|
95,701
|
|
|
$
|
35,123
|
|
|
|
36.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from same store properties remained relatively
unchanged. Revenues from acquired properties increased
$8.5 million due to the 123 industrial properties acquired
subsequent to December 31, 2006 totaling approximately
10.8 million square feet of GLA. Revenues from sold
properties decreased $17.0 million due to the 254
industrial properties sold subsequent to December 31, 2006
totaling approximately 21.3 million square feet of GLA.
Revenues from (re)developments and land remained relatively
unchanged. Other revenues decreased by approximately
$1.1 million due primarily to a decrease in fees earned
from our Joint Ventures partially offset by an increase in fees
earned related to us assigning our interest in certain purchase
contracts to third parties for consideration. Construction
revenues increased $25.8 million primarily due to two
development projects that commenced in September 2007 and April
2008 for which we are acting in the capacity of development
manager.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
PROPERTY AND CONSTRUCTION EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
24,465
|
|
|
$
|
21,525
|
|
|
$
|
2,940
|
|
|
|
13.7
|
%
|
Acquired Properties
|
|
|
3,341
|
|
|
|
1,197
|
|
|
|
2,144
|
|
|
|
179.1
|
%
|
Sold Properties
|
|
|
2,145
|
|
|
|
7,354
|
|
|
|
(5,209
|
)
|
|
|
(70.8
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
1,753
|
|
|
|
1,198
|
|
|
|
555
|
|
|
|
46.3
|
%
|
Other
|
|
|
3,796
|
|
|
|
5,309
|
|
|
|
(1,513
|
)
|
|
|
(28.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,500
|
|
|
|
36,583
|
|
|
|
(1,083
|
)
|
|
|
(3.0
|
)%
|
Discontinued Operations
|
|
|
(2,462
|
)
|
|
|
(8,033
|
)
|
|
|
5,571
|
|
|
|
(69.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
|
33,038
|
|
|
|
28,550
|
|
|
|
4,488
|
|
|
|
15.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Expenses
|
|
|
32,432
|
|
|
|
7,053
|
|
|
|
25,379
|
|
|
|
359.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Construction Expenses
|
|
$
|
65,470
|
|
|
$
|
35,603
|
|
|
$
|
29,867
|
|
|
|
83.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance, and
other property related expenses. Property expenses from same
store properties increased $2.9 million due primarily to an
increase in real estate tax expense, an increase in repairs and
maintenance expense, and an increase in bad debt expense.
Property expenses from acquired properties increased
$2.1 million due to properties acquired subsequent to
December 31, 2006. Property expenses from sold properties
decreased $5.2 million due to properties sold subsequent to
December 31, 2006. Property expenses from (re)developments
and land remained relatively unchanged. The $1.5 million
decrease in other expense is primarily attributable to a
decrease in the bad debt reserve and a loss recorded in
connection with roof damage at a property that occurred during
the three months ended June 30, 2007. The damage was
accounted for as an involuntary conversion which requires the
recognition of a loss in the period in which the damage
occurred. Insurance reimbursements were deferred until
realizable. Construction expenses increased $25.4 million
primarily due to two development projects that commenced in
September 2007 and April 2008 for which we are acting in the
capacity of development manager.
General and administrative expense remained relatively unchanged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
June 30, 2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in 000s)
|
|
|
DEPRECIATION and OTHER AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
29,672
|
|
|
$
|
30,328
|
|
|
$
|
(656
|
)
|
|
|
(2.2
|
)%
|
Acquired Properties
|
|
|
13,622
|
|
|
|
2,980
|
|
|
|
10,642
|
|
|
|
357.1
|
%
|
Sold Properties
|
|
|
1,020
|
|
|
|
7,102
|
|
|
|
(6,082
|
)
|
|
|
(85.6
|
)%
|
(Re)Developments and Land, Not Included Above and Other
|
|
|
1,698
|
|
|
|
929
|
|
|
|
769
|
|
|
|
82.8
|
%
|
Corporate Furniture, Fixtures and Equipment
|
|
|
513
|
|
|
|
491
|
|
|
|
22
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,525
|
|
|
|
41,830
|
|
|
|
4,695
|
|
|
|
11.2
|
%
|
Discontinued Operations
|
|
|
(1,140
|
)
|
|
|
(7,195
|
)
|
|
|
6,055
|
|
|
|
(84.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other Amortization
|
|
$
|
45,385
|
|
|
$
|
34,635
|
|
|
$
|
10,750
|
|
|
|
31.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
remained relatively unchanged. Depreciation and other
amortization from acquired properties increased
$10.6 million due to properties acquired subsequent to
December 31, 2006 as well as $7.0 million in
accelerated depreciation and amortization taken during the six
months ended June 30, 2008 attributable to one tenant in
two buildings that we acquired in May 2007 who terminated
their lease early. Depreciation and other amortization from sold
properties decreased $6.1 million due to properties sold
subsequent to December 31, 2006. Depreciation and other
amortization for (re)developments and land and other remained
relatively unchanged.
Interest income increased approximately $0.9 million, or
396.9%, due primarily to an increase in the average mortgage
loans receivable outstanding during the three months ended
June 30, 2008, as compared to the three months ended
June 30, 2007.
Interest expense decreased approximately $2.1 million, or
6.9%, primarily due to a decrease in the weighted average
interest rate for the three months ended June 30, 2008
(5.85%), as compared to the three months ended June 30,
2007 (6.49%), and due to an increase in capitalized interest for
the three months ended June 30, 2008 due to an increase in
development activities partially offset by an increase in the
weighted average debt balance outstanding for the three months
ended June 30, 2008 ($2,038.1 million), as compared to
the three months ended June 30, 2007
($1,958.5 million).
Amortization of deferred financing costs remained relatively
unchanged.
For the three months ended June 30, 2008, we recognized a
$1.5 million gain from early retirement of debt due to the
partial repurchase of two series of our senior unsecured notes.
For the three months ended June 30, 2007, we incurred a
$0.1 million loss from early retirement of debt due to
early payoffs of mortgage loans.
25
Equity in income of joint ventures decreased by approximately
$8.4 million, or 71.9%, due primarily to a decrease in our
prorata share of gain on sale of real estate and earn outs on
property sales from the 2005 Core Joint Venture and a decrease
in our earn outs on property sales from the 2005
Development/Repositioning Joint Venture during the three months
ended June 30, 2008 as compared to the three months ended
June 30, 2007.
The income tax benefit (provision) (included in continuing
operations, discontinued operations and gain on sale) decreased
by $10.5 million, or 87.3%, due primarily to a decrease in
equity in income of joint ventures and gain from the sale of
real estate within the TRS.
The following table summarizes certain information regarding the
industrial properties included in our discontinued operations
for the three months ended June 30, 2008 and June 30,
2007.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
7,636
|
|
|
$
|
24,331
|
|
Property Expenses
|
|
|
(2,462
|
)
|
|
|
(8,033
|
)
|
Depreciation and Amortization
|
|
|
(1,140
|
)
|
|
|
(7,195
|
)
|
Gain on Sale of Real Estate
|
|
|
70,484
|
|
|
|
59,429
|
|
Provision for Income Taxes
|
|
|
(3,783
|
)
|
|
|
(11,802
|
)
|
Minority Interest
|
|
|
(8,792
|
)
|
|
|
(7,114
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
61,943
|
|
|
$
|
49,616
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes and
minority interest, for the three months ended June 30, 2008
reflects the results of operations and gain on sale of real
estate relating to 51 industrial properties that were sold
during the three months ended June 30, 2008 and the results
of operations of five properties that were identified as held
for sale at June 30, 2008.
Income from discontinued operations, net of income taxes and
minority interest, for the three months ended June 30, 2007
reflects the gain on sale of real estate relating to 49
industrial properties that were sold during the three months
ended June 30, 2007 and reflects the results of operations
of the 161 industrial properties that were sold during the year
ended December 31, 2007, 89 industrial properties that were
sold during the six months ended June 30, 2008 and five
industrial properties identified as held for sale at
June 30, 2008.
The $4.3 million gain on sale of real estate for the three
months ended June 30, 2008, resulted from the sale of one
industrial property and several land parcels that do not meet
the criteria established by SFAS 144 for inclusion in
discontinued operations. The $0.8 million gain on sale of
real estate for the three months ended June 30, 2007,
resulted from the sale of one industrial property and several
land parcels that do not meet the criteria established by
SFAS 144 for inclusion in discontinued operations.
26
LIQUIDITY
AND CAPITAL RESOURCES
At June 30, 2008, our cash and restricted cash was
approximately $14.4 and $103.0 million, respectively.
Restricted cash is primarily comprised of cash held in escrow in
connection with mortgage debt requirements and gross proceeds
from the sales of certain industrial properties. These sales
proceeds will be disbursed as we exchange industrial properties
under Section 1031 of the Code.
We have considered our short-term (one year or less) liquidity
needs and the adequacy of our estimated cash flow from
operations and other expected liquidity sources to meet these
needs. Our 5.25% Notes due in 2009, in the aggregate
principal amount of $125 million are due on June 15,
2009 (the 2009 Notes). We expect to satisfy the
payment obligations on the 2009 Notes with the issuance of
additional debt, subject to market conditions, and have filed a
registration statement with the Securities and Exchange
Commission covering an indefinite number or amount of debt or
equity securities to be issued up to April 30, 2010. With
the exception of the 2009 Notes, we believe that our principal
short-term liquidity needs are to fund normal recurring
expenses, property acquisitions, developments, renovations,
expansions and other nonrecurring capital improvements, debt
service requirements and the minimum distribution required to
maintain our REIT qualification under the Code. We anticipate
that these needs will be met with cash flows provided by
operating and investing activities, including the disposition of
select assets.
We expect to meet long-term (greater than one year) liquidity
requirements such as property acquisitions, developments,
scheduled debt maturities, major renovations, expansions and
other nonrecurring capital improvements through the disposition
of select assets, long-term unsecured indebtedness and the
issuance of additional equity securities.
We also may finance the development or acquisition of additional
properties through borrowings under the Unsecured Line of
Credit. At June 30, 2008, borrowings under the Unsecured
Line of Credit bore interest at a weighted average interest rate
of 3.09%. The Unsecured Line of Credit currently bears interest
at a floating rate of LIBOR plus .475%, or the prime rate, at
our election. As of July 25, 2008 we had approximately
$113.8 million available for additional borrowings under
the Unsecured Line of Credit.
Six
Months Ended June 30, 2008
Net cash provided by operating activities of approximately
$33.7 million for the six months ended June 30, 2008
was comprised primarily of net income before minority interest
of approximately $112.8 million and net distributions from
Joint Ventures of $1.6, offset by adjustments for non-cash items
of approximately $67.9 million and the net change in
operating assets and liabilities of approximately
$12.8 million. The adjustments for the non-cash items of
approximately $67.9 million are primarily comprised of the
gain on sale of real estate of approximately
$155.9 million, the effect of the straight-lining of rental
income of approximately $3.9 million, and gain on early
retirement of debt of approximately $1.5 million, offset by
depreciation and amortization of approximately
$91.7 million and the provision for bad debt of
approximately $1.7 million.
Net cash provided by investing activities of approximately
$46.3 million for the six months ended June 30, 2008
was comprised primarily of the net proceeds from the sale of
real estate, the repayment of notes receivable, and
distributions from our Joint Ventures, partially offset by the
acquisition of real estate, development of real estate, capital
expenditures related to the expansion and improvement of
existing real estate, an increase in restricted cash that is
held by an intermediary for Section 1031 exchange purposes,
contributions to, and investments in, our Joint Ventures and
funding of notes receivable.
During the six months ended June 30, 2008, we acquired 18
industrial properties comprising approximately 2.2 million
square feet of GLA and several land parcels. The purchase price
of these acquisitions totaled approximately $179.6 million,
excluding costs incurred in conjunction with the acquisition of
the industrial properties and land parcels.
We invested approximately $10.9 million and received
distributions of approximately $11.2 million from our Joint
Ventures. As of June 30, 2008, our industrial real estate
Joint Ventures owned 115 industrial properties comprising
approximately 19.9 million square feet of GLA.
27
During the six months ended June 30, 2008, we sold 90
industrial properties comprising approximately 7.6 million
square feet of GLA and several land parcels. Net proceeds from
the sales of the 90 industrial properties and several land
parcels were approximately $422.3 million.
Net cash used in financing activities of approximately
$71.3 million for the six months ended June 30, 2008
was derived primarily of common and preferred stock dividends
and unit distributions, repayments of senior unsecured debt, the
repurchase of restricted stock from our employees to pay for
withholding taxes on the vesting of restricted stock, repayments
on mortgage loans payable, and debt issuance costs, partially
offset by net proceeds from our Unsecured Line of Credit, a book
overdraft, and proceeds from the issuance of common stock.
During the six months ended June 30, 2008, certain of our
employees exercised 6,300 non-qualified employee stock options.
Net proceeds to us were approximately $0.2 million.
Market
Risk
The following discussion about our risk-management activities
includes forward-looking statements that involve
risk and uncertainties. Actual results could differ materially
from those projected in the forward-looking statements. Our
business subjects us to market risk from interest rates, and to
a much lesser extent, foreign currency fluctuations.
Interest
Rate Risk
In the normal course of business, we also face risks that are
either non-financial or non-quantifiable. Such risks principally
include credit risk and legal risk and are not represented in
the following analysis.
At June 30, 2008, approximately $1,656.4 million
(approximately 84.4% of total debt at June 30,
2008) of our debt was fixed rate debt (including
$50.0 million of borrowings under the Unsecured Line of
Credit in which the interest rate was fixed via an interest rate
protection agreement) and approximately $305.8 million
(approximately 15.6% of total debt at June 30,
2008) was variable rate debt.
For fixed rate debt, changes in interest rates generally affect
the fair value of the debt, but not our earnings or cash flows.
Conversely, for variable rate debt, changes in the interest rate
generally do not impact the fair value of the debt, but would
affect our future earnings and cash flows. The interest rate
risk and changes in fair market value of fixed rate debt
generally do not have a significant impact on us until we are
required to refinance such debt. See Note 4 to the
consolidated financial statements for a discussion of the
maturity dates of our various fixed rate debt.
Based upon the amount of variable rate debt outstanding at
June 30, 2008, a 10% increase or decrease in the interest
rate on our variable rate debt would decrease or increase,
respectively, future net income and cash flows by approximately
$1.0 million per year.
The use of derivative financial instruments allows us to manage
risks of increases in interest rates with respect to the effect
these fluctuations would have on our earnings and cash flows. As
of June 30, 2008, we had two outstanding interest rate
protection agreements with an aggregate notional amount of
$119.5 million which fix the interest rate on a forecasted
offering of debt, and one outstanding interest rate protection
agreement with a notional amount of $50.0 million which
fixes the interest rate on borrowings on our Unsecured Line of
Credit. See Note 11 to the June 30, 2008 Consolidated
Financial Statements.
Foreign
Currency Exchange Rate Risk
Owning, operating, and developing industrial property outside of
the United States exposes us to the possibility of volatile
movements in foreign exchange rates. Changes in foreign
currencies can affect the operating results of international
operations reported in U.S. dollars and the value of the
foreign assets reported in U.S. dollars. The economic
impact of foreign exchange rate movements is complex because
such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other
factors. At June 30, 2008, we had only one property and one
land parcel for which the U.S. dollar was not the
functional currency. The property and land parcel are located in
Ontario, Canada and use the Canadian dollar as their functional
currency.
28
Recent
Accounting Pronouncements
Refer to Note 2 to the June 30, 2008 Consolidated
Financial Statements.
Subsequent
Events
From July 1, 2008 to July 25, 2008, we acquired three
industrial properties and one land parcel for a purchase price
of approximately $19.8 million, excluding costs incurred in
conjunction with the acquisition of these industrial properties
and one land parcel. In conjunction with the acquisition of two
of these industrial properties, we assumed $3.5 million in
mortgage loans payable. There were no industrial properties sold
during this period.
On July 1, 2008, we repurchased and retired
$5.0 million of the 2017 II Notes at a redemption price of
88.915% of par. In connection with the partial retirement, we
recognized $0.4 million as gain on early retirement of
debt, which is the difference between the repurchase amount of
$4.4 million and the principal amount retired of
$5.0 million, net of the pro rata write off of the
unamortized debt issue discount, the unamortized loan fees, and
the unamortized settlement amount of the interest rate
protection agreements related to the 2017 II Notes of
$0.01 million, $0.05 million, and $0.1 million,
respectively.
On July 3, 2008 the mortgage note receivable that we
originated related to a property sale in the first quarter 2008
in which we deferred $2.5 million in gain (see
Note 7) was paid off and retired.
On July 21, 2008, we paid a second quarter 2008
dividend/distribution of $0.72 per common share/Unit, totaling
approximately $36.4 million.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Response to this item is included in Item 2,
Managements Discussion and Analysis of Financial
Condition and Results of Operations above.
|
|
Item 4.
|
Controls
and Procedures
|
Our principal executive officer and principal financial officer,
after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
as of the end of the period covered by this report, based on the
evaluation of these controls and procedures required by Exchange
Act
Rules 13a-15(b)
or
15d-15(b),
have concluded that as of the end of such period our disclosure
controls and procedures were effective.
There has been no change in our internal control over financial
reporting that occurred during the fiscal quarter covered by
this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
29
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
None.
None.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
On May 20, 2008, First Industrial Realty Trust, Inc. (the
Company) held its Annual Meeting of Stockholders. At
the meeting, three Class II directors of the Company were
elected to serve until the 2011 Annual Meeting of Stockholders
and one Class III director was elected to serve until the
2009 Annual Meeting of Stockholders, and, in each case, until
his respective successor is duly elected and qualified.
Tabulated with the name of each of the nominees elected is the
number of shares of common stock cast for each nominee and the
number of shares of common stock withholding authority to vote
for each nominee. There were no broker non-votes with respect to
the election of directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Withheld
|
|
|
Michael W. Brennan
|
|
|
37,467,027
|
|
|
|
1,159,452
|
|
Michael G. Damone
|
|
|
37,703,204
|
|
|
|
923,275
|
|
Kevin W. Lynch
|
|
|
37,736,949
|
|
|
|
889,530
|
|
John W.M. Brenninkweijer*
|
|
|
36,958,950
|
|
|
|
1,667,529
|
|
In addition, the appointment of PricewaterhouseCoopers LLP, as
the Independent Registered Public Accounting Firm of the Company
for the fiscal year ending December 31, 2008, was ratified
at the meeting with 37,579,452 shares voting in favor,
950,618 shares voting against, 96,409 shares
abstaining and zero broker non-votes.
Jay H. Shidler, Robert D. Newman and J. Steven Wilson continue
to serve as Class I directors until their present terms
expire in 2010 and their successors are duly elected. John Rau,
Robert J. Slater and W. Ed Tyler continue to serve as
Class III directors until their present terms expire in
2009 and their successors are duly elected.
|
|
Item 5.
|
Other
Information
|
Not Applicable.
30
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes -Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Scott A. Musil
Chief Accounting Officer
(Principal Accounting Officer)
Date: August 7, 2008
32
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes -Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
33