Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________
Form 10-Q
_______________________________
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 1-13102 (First Industrial Realty Trust, Inc.)
333-21873 (First Industrial, L.P.)
  _______________________________
FIRST INDUSTRIAL REALTY TRUST, INC.
FIRST INDUSTRIAL, L.P.
(Exact name of Registrant as specified in its Charter)
 
Maryland (First Industrial Realty Trust, Inc.)
 
36-3935116 (First Industrial Realty Trust, Inc.)
Delaware ( First Industrial, L.P.)
 
36-3924586 (First Industrial, L.P.)
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1 N. Wacker Drive,
Suite 4200, Chicago, Illinois
 
60606
(Address of principal executive offices)
 
(Zip Code)
(312) 344-4300
(Registrant's telephone number, including area code)

311 S. Wacker Drive, Suite 3900
Chicago, Illinois
(Former Address)
 _______________________________ 
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
First Industrial Realty Trust, Inc.
Yes þ No o
First Industrial, L.P.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
First Industrial Realty Trust, Inc.
Yes þ No o
First Industrial, L.P.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
First Industrial Realty Trust, Inc.:
 
 
 
 
 
 
 
Large accelerated filer
 
þ
 
 
Accelerated filer
 
o
Non-accelerated filer
 
o
 
(Do not check if a smaller reporting company)
Smaller reporting company
 
o
Emerging growth company
 
o
 
 
 
 
 
First Industrial, L.P.:
 
 
 
 
 
 
 
Large accelerated filer
 
o
 
 
Accelerated filer
 
þ
Non-accelerated filer
 
o
 
(Do not check if a smaller reporting company)
Smaller reporting company
 
o
Emerging growth company
 
o
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
First Industrial Realty Trust, Inc.
Yes o No o
First Industrial, L.P.
Yes o No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
First Industrial Realty Trust, Inc.
Yes o No þ
First Industrial, L.P.
Yes o No þ
At July 26, 2018, 125,984,144 shares of First Industrial Realty Trust, Inc.'s Common Stock, $0.01 par value, were outstanding. 
 






EXPLANATORY NOTE
This report combines the Quarterly Reports on Form 10-Q for the period ended June 30, 2018 of First Industrial Realty Trust, Inc., a Maryland corporation (the "Company"), and First Industrial, L.P., a Delaware limited partnership (the "Operating Partnership"). Unless stated otherwise or the context otherwise requires, the terms "we," "our" and "us" refer to the Company and its subsidiaries, including the Operating Partnership and its consolidated subsidiaries.
The Company is a real estate investment trust and the general partner of the Operating Partnership. At June 30, 2018, the Company owned an approximate 97.7% common general partnership interest in the Operating Partnership. The remaining approximate 2.3% common limited partnership interests in the Operating Partnership are owned by certain limited partners. As the sole general partner of the Operating Partnership, the Company exercises exclusive and complete discretion over the Operating Partnership's day-to-day management and control and can cause it to enter into certain major transactions, including acquisitions, dispositions and refinancings. The management of the Company consists of the same members as the management of the Operating Partnership.
The Company and the Operating Partnership are managed and operated as one enterprise. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of the Company's assets are held by, and its operations are conducted through, the Operating Partnership and its subsidiaries. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.
We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. The main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership are:
Stockholders' Equity, Noncontrolling Interest and Partners' Capital. The 2.3% equity interest in the Operating Partnership held by entities other than the Company is classified within partners' capital in the Operating Partnership's financial statements and as a noncontrolling interest in the Company's financial statements.
Relationship to Other Real Estate Partnerships. The Company's operations are conducted primarily through the Operating Partnership and its subsidiaries, although operations are also conducted through eight other limited partnerships, which are referred to as the "Other Real Estate Partnerships." The Operating Partnership is a limited partner, holding at least a 99% interest, and the Company is a general partner, holding at least a .01% general partnership interest through eight separate wholly-owned corporations, in each of the Other Real Estate Partnerships. The Other Real Estate Partnerships are variable interest entities that both the Company and the Operating Partnership consolidate. The Company's direct general partnership interest in the Other Real Estate Partnerships is reflected as noncontrolling interest within the Operating Partnership's financial statements.
Relationship to Service Subsidiary. The Company has a direct wholly-owned subsidiary that does not own any real estate but provides services to various other entities owned by the Company. Since the Operating Partnership does not have an ownership interest in this entity, its operations are reflected in the consolidated results of the Company but not the Operating Partnership. Also, this entity owes certain amounts to the Operating Partnership, for which a receivable is included on the Operating Partnership's balance sheet but is eliminated on the Company's consolidated balance sheet, since both this entity and the Operating Partnership are fully consolidated by the Company.
We believe combining the Company's and Operating Partnership's quarterly reports into this single report results in the following benefits:
enhances investors' understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management views and operates the business;
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports; and
eliminates duplicative disclosures and provides a more streamlined and readable presentation for our investors to review since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership.
To help investors understand the differences between the Company and the Operating Partnership, this report provides the following separate disclosures for each of the Company and the Operating Partnership:
consolidated financial statements;
a single set of consolidated notes to such financial statements that includes separate discussions of each entity's stockholders' equity or partners' capital, as applicable; and
a combined Management's Discussion and Analysis of Financial Condition and Results of Operations section that includes distinct information related to each entity.
This report also includes separate Part I, Item 4, Controls and Procedures sections and separate Exhibit 31 and 32 certifications for the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are both compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.




FIRST INDUSTRIAL REALTY TRUST, INC. AND FIRST INDUSTRIAL, L.P.
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2018
INDEX
 
 
 
Page
 
First Industrial Realty Trust, Inc.
 
 
 
 
 
 
 
First Industrial, L.P.
 
 
 
 
 
 
 
First Industrial Realty Trust, Inc. and First Industrial, L.P.
 
 



2



PART I: FINANCIAL INFORMATION 
Item 1.
Financial Statements
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

 
June 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
ASSETS
 
 
 
Assets:
 
 
 
Investment in Real Estate:
 
 
 
Land
$
888,466

 
$
864,813

Buildings and Improvements
2,579,886

 
2,521,457

Construction in Progress
118,793

 
109,475

Less: Accumulated Depreciation
(794,477
)
 
(789,919
)
Net Investment in Real Estate
2,792,668

 
2,705,826

Real Estate and Other Assets Held for Sale, Net of Accumulated Depreciation and Amortization of $6,056 and $0
16,304

 

Cash and Cash Equivalents
61,834

 
21,146

Restricted Cash
15,679

 
25,336

Tenant Accounts Receivable, Net
5,714

 
4,873

Investment in Joint Venture
23,599

 

Deferred Rent Receivable, Net
70,490

 
70,254

Deferred Leasing Intangibles, Net
29,581

 
30,481

Prepaid Expenses and Other Assets, Net
94,485

 
83,146

Total Assets
$
3,110,354

 
$
2,941,062

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Indebtedness:
 
 
 
Mortgage Loans Payable, Net
$
299,978

 
$
450,056

Senior Unsecured Notes, Net
544,293

 
246,673

Unsecured Term Loans, Net
456,281

 
455,768

Unsecured Credit Facility

 
144,500

Accounts Payable, Accrued Expenses and Other Liabilities
71,600

 
86,532

Deferred Leasing Intangibles, Net
10,330

 
10,355

Rents Received in Advance and Security Deposits
43,289

 
44,285

Dividends and Distributions Payable
28,771

 
27,016

Total Liabilities
1,454,542

 
1,465,185

Commitments and Contingencies

 

Equity:
 
 
 
First Industrial Realty Trust Inc.'s Stockholders' Equity:
 
 
 
Common Stock ($0.01 par value, 225,000,000 shares authorized and 125,984,144 and 119,883,180 shares issued and outstanding)
1,260

 
1,199

Additional Paid-in-Capital
2,123,460

 
1,967,110

Distributions in Excess of Accumulated Earnings
(517,526
)
 
(541,847
)
Accumulated Other Comprehensive Income
10,435

 
1,338

Total First Industrial Realty Trust, Inc.'s Stockholders' Equity
1,617,629

 
1,427,800

Noncontrolling Interest
38,183

 
48,077

Total Equity
1,655,812

 
1,475,877

Total Liabilities and Equity
$
3,110,354

 
$
2,941,062

The accompanying notes are an integral part of the consolidated financial statements.

3



FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share data)

 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
Revenues:
 
 
 
 
 
 
 
Rental Income
$
75,680

 
$
75,802

 
$
150,860

 
$
150,720

Tenant Recoveries and Other Income
23,165

 
21,777

 
47,756

 
44,242

Total Revenues
98,845

 
97,579

 
198,616

 
194,962

Expenses:
 
 
 
 
 
 
 
Property Expenses
28,553

 
26,897

 
57,964

 
55,383

General and Administrative
6,746

 
6,785

 
14,889

 
14,818

Impairment of Real Estate

 

 
2,756

 

Depreciation and Other Amortization
28,636

 
29,040

 
56,951

 
57,534

Total Expenses
63,935

 
62,722

 
132,560

 
127,735

Other Income (Expense):
 
 
 
 
 
 
 
Gain on Sale of Real Estate
25,067

 
20,860

 
45,156

 
28,869

Interest Expense
(12,603
)
 
(14,915
)
 
(25,394
)
 
(29,284
)
Amortization of Debt Issuance Costs
(845
)
 
(780
)
 
(1,700
)
 
(1,558
)
Loss from Retirement of Debt

 

 
(39
)
 
(1,653
)
Total Other Income (Expense)
11,619

 
5,165

 
18,023

 
(3,626
)
Income from Operations Before Equity in Loss of Joint Venture and Income Tax Provision
46,529

 
40,022

 
84,079

 
63,601

Equity in Loss of Joint Venture
(2
)
 

 
(2
)
 

Income Tax Provision
(123
)
 
(1,169
)
 
(209
)
 
(1,257
)
Net Income
46,404

 
38,853

 
83,868

 
62,344

Less: Net Income Attributable to the Noncontrolling Interest
(1,195
)
 
(1,291
)
 
(2,367
)
 
(2,073
)
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities
$
45,209

 
$
37,562

 
$
81,501

 
$
60,271

Basic and Diluted Earnings Per Share:
 
 
 
 
 
 
 
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders
$
0.36

 
$
0.32

 
$
0.67

 
$
0.51

Dividends/Distributions Per Share
$
0.2175

 
$
0.2100

 
$
0.4350

 
$
0.4200

Weighted Average Shares Outstanding - Basic
123,616

 
117,299

 
121,741

 
117,070

Weighted Average Shares Outstanding - Diluted
124,085

 
117,779

 
122,158

 
117,522

The accompanying notes are an integral part of the consolidated financial statements.


4



FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands)

 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
Net Income
$
46,404

 
$
38,853

 
$
83,868

 
$
62,344

Mark-to-Market Gain (Loss) on Interest Rate Protection Agreements
2,725

 
(1,435
)
 
9,250

 
743

Amortization of Interest Rate Protection Agreements
23

 
60

 
47

 
156

Comprehensive Income
49,152

 
37,478

 
93,165

 
63,243

Comprehensive Income Attributable to Noncontrolling Interest
(1,252
)
 
(1,245
)
 
(2,630
)
 
(2,103
)
Comprehensive Income Attributable to First Industrial Realty Trust, Inc.
$
47,900

 
$
36,233

 
$
90,535

 
$
61,140

The accompanying notes are an integral part of the consolidated financial statements.


5



FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited; in thousands)

 
Common
Stock
 
Additional
Paid-in-
Capital
 
Distributions
in Excess of
Accumulated
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling
Interest
 
Total
Balance as of December 31, 2017
$
1,199

 
$
1,967,110

 
$
(541,847
)
 
$
1,338

 
$
48,077

 
$
1,475,877

Net Income

 

 
81,501

 

 
2,367

 
83,868

Other Comprehensive Income

 

 

 
9,097

 
200

 
9,297

Issuance of Common Stock, Net of Issuance Costs
48

 
145,360

 

 

 

 
145,408

Stock Based Compensation Activity
3

 
891

 
(3,282
)
 

 

 
(2,388
)
Common Stock Dividends and Unit Distributions

 

 
(53,898
)
 

 
(1,418
)
 
(55,316
)
Conversion of Limited Partner Units to Common Stock
10

 
12,317

 

 

 
(12,327
)
 

Retirement of Limited Partner Units

 

 

 

 
(934
)
 
(934
)
Reallocation - Additional Paid-in-Capital

 
(2,218
)
 

 

 
2,218

 

Balance as of June 30, 2018
$
1,260

 
$
2,123,460

 
$
(517,526
)
 
$
10,435

 
$
38,183

 
$
1,655,812

The accompanying notes are an integral part of the consolidated financial statements.

6



FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
83,868

 
$
62,344

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
 
Depreciation
46,160

 
46,751

Amortization of Debt Issuance Costs
1,700

 
1,558

Other Amortization, including Stock Based Compensation
13,638

 
14,939

Impairment of Real Estate
2,756

 

Provision for Bad Debt
165

 
127

Equity in Loss of Joint Venture
2

 

Gain on Sale of Real Estate
(45,156
)
 
(28,869
)
Loss from Retirement of Debt
39

 
1,653

Increase in Tenant Accounts Receivable, Prepaid Expenses and Other Assets, Net
(3,169
)
 
(938
)
Increase in Deferred Rent Receivable, Net
(1,016
)
 
(2,936
)
Decrease in Accounts Payable, Accrued Expenses, Other Liabilities, Rents Received in Advance and Security Deposits
(5,170
)
 
(729
)
Net Cash Provided by Operating Activities
93,817

 
93,900

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Acquisitions of Real Estate
(87,733
)
 
(96,492
)
Additions to Investment in Real Estate and Non-Acquisition Tenant Improvements and Lease Costs
(121,169
)
 
(72,125
)
Net Proceeds from Sales of Investments in Real Estate
95,603

 
56,773

Contributions to and Investments in Joint Venture
(25,190
)
 

Distributions from Joint Venture
1,829

 

Other Investing Activity
(2,823
)
 
(1,117
)
Net Cash Used in Investing Activities
(139,483
)
 
(112,961
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Financing and Equity Issuance Costs
(2,842
)
 
(1,829
)
Proceeds from the Issuance of Common Stock, Net of Underwriter's Discount
145,584

 
74,880

Repurchase and Retirement of Restricted Stock
(6,020
)
 
(2,401
)
Common Stock Dividends and Unit Distributions Paid
(53,561
)
 
(48,493
)
Repayments on Mortgage Loans Payable
(161,964
)
 
(41,507
)
Prepayments of Penalties Associated with Retirement of Debt

 
(1,453
)
Proceeds from Senior Unsecured Notes
300,000

 
200,000

Repayments of Senior Unsecured Notes

 
(101,871
)
Proceeds from Unsecured Credit Facility
217,000

 
262,000

Repayments on Unsecured Credit Facility
(361,500
)
 
(324,500
)
Net Cash Provided by Financing Activities
76,697

 
14,826

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
31,031

 
(4,235
)
Cash, Cash Equivalents and Restricted Cash, Beginning of Year
46,482

 
21,461

Cash, Cash Equivalents and Restricted Cash, End of Period
$
77,513

 
$
17,226

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FIRST INDUSTRIAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited; in thousands)
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS:
 
 
 
Interest Expense Capitalized in Connection with Development Activity
$
3,317

 
$
1,907

Supplemental Schedule of Non-Cash Investing and Financing Activities:
 
 
 
Common Stock Dividends and Unit Distributions Payable
$
28,771

 
$
26,715

Exchange of Limited Partnership Units for Common Stock:
 
 
 
Noncontrolling Interest
$
(12,327
)
 
$

Common Stock
10

 

Additional Paid-in-Capital
12,317

 

Total
$

 
$

Assumption of Indebtedness and Other Liabilities in Connection with the Acquisition of Real Estate
$
11,705

 
$
305

Accounts Payable Related to Construction in Progress and Additions to Investment in Real Estate
$
27,797

 
$
19,786

Write-off of Fully Depreciated Assets
$
(22,936
)
 
$
(15,295
)
The accompanying notes are an integral part of the consolidated financial statements.

7



FIRST INDUSTRIAL, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except Unit data)

 
June 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
ASSETS
 
 
 
Assets:
 
 
 
Investment in Real Estate:
 
 
 
Land
$
888,466

 
$
864,813

Buildings and Improvements
2,579,886

 
2,521,457

Construction in Progress
118,793

 
109,475

Less: Accumulated Depreciation
(794,477
)
 
(789,919
)
Net Investment in Real Estate (including $266,260 and $270,708 related to consolidated variable interest entities, see Note 5)
2,792,668

 
2,705,826

Real Estate and Other Assets Held for Sale, Net of Accumulated Depreciation and Amortization of $6,056 and $0
16,304

 

Cash and Cash Equivalents
61,834

 
21,146

Restricted Cash
15,679

 
25,336

Tenant Accounts Receivable, Net
5,714

 
4,873

Investment in Joint Venture
23,599

 

Deferred Rent Receivable, Net
70,490

 
70,254

Deferred Leasing Intangibles, Net
29,581

 
30,481

Prepaid Expenses and Other Assets, Net
104,660

 
93,264

Total Assets
$
3,120,529

 
$
2,951,180

LIABILITIES AND PARTNERS' CAPITAL
 
 
 
Liabilities:
 
 
 
Indebtedness:
 
 
 
Mortgage Loans Payable, Net (including $20,723 and $61,256 related to consolidated variable interest entities, see Note 5)
$
299,978

 
$
450,056

Senior Unsecured Notes, Net
544,293

 
246,673

Unsecured Term Loans, Net
456,281

 
455,768

Unsecured Credit Facility

 
144,500

Accounts Payable, Accrued Expenses and Other Liabilities
71,600

 
86,532

Deferred Leasing Intangibles, Net
10,330

 
10,355

Rents Received in Advance and Security Deposits
43,289

 
44,285

Distributions Payable
28,771

 
27,016

Total Liabilities
1,454,542

 
1,465,185

Commitments and Contingencies

 

Partners' Capital:
 
 
 
First Industrial, L.P.'s Partners' Capital:
 
 
 
General Partner Units (125,984,144 and 119,883,180 units outstanding)
1,584,490

 
1,401,583

Limited Partners Units (2,955,211 and 4,008,221 units outstanding)
69,939

 
82,251

Accumulated Other Comprehensive Income
10,679

 
1,382

Total First Industrial L.P.'s Partners' Capital
1,665,108

 
1,485,216

Noncontrolling Interest
879

 
779

Total Partners' Capital
1,665,987

 
1,485,995

Total Liabilities and Partners' Capital
$
3,120,529

 
$
2,951,180

The accompanying notes are an integral part of the consolidated financial statements.

8



FIRST INDUSTRIAL L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per Unit data)

 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
Revenues:
 
 
 
 
 
 
 
Rental Income
$
75,680

 
$
75,802

 
150,860

 
$
150,720

Tenant Recoveries and Other Income
23,165

 
21,777

 
47,756

 
44,242

Total Revenues
98,845

 
97,579

 
198,616

 
194,962

Expenses:
 
 
 
 
 
 
 
Property Expenses
28,553

 
26,897

 
57,964

 
55,383

General and Administrative
6,746

 
6,785

 
14,889

 
14,818

Impairment of Real Estate

 

 
2,756

 

Depreciation and Other Amortization
28,636

 
29,040

 
56,951

 
57,534

Total Expenses
63,935

 
62,722

 
132,560

 
127,735

Other Income (Expense):
 
 
 
 
 
 
 
Gain on Sale of Real Estate
25,067

 
20,860

 
45,156

 
28,869

Interest Expense
(12,603
)
 
(14,915
)
 
(25,394
)
 
(29,284
)
Amortization of Debt Issuance Costs
(845
)
 
(780
)
 
(1,700
)
 
(1,558
)
Loss from Retirement of Debt

 

 
(39
)
 
(1,653
)
Total Other Income (Expense)
11,619

 
5,165

 
18,023

 
(3,626
)
Income from Operations Before Equity in Loss of Joint Venture and Income Tax Provision
46,529

 
40,022

 
84,079

 
63,601

Equity in Loss of Joint Venture
(2
)
 

 
(2
)
 

Income Tax Provision
(123
)
 
(1,169
)
 
(209
)
 
(1,257
)
Net Income
46,404

 
38,853

 
83,868

 
62,344

Less: Net Income Attributable to the Noncontrolling Interest
(22
)
 
(26
)
 
(43
)
 
(53
)
Net Income Available to Unitholders and Participating Securities
$
46,382

 
$
38,827

 
$
83,825

 
$
62,291

Basic and Diluted Earnings Per Unit:
 
 
 
 
 
 

Net Income Available to Unitholders
$
0.36

 
$
0.32

 
$
0.67

 
$
0.51

Distributions Per Unit
$
0.2175

 
$
0.2100

 
$
0.4350

 
$
0.4200

Weighted Average Units Outstanding - Basic
126,832

 
121,339

 
125,289

 
121,109

Weighted Average Units Outstanding - Diluted
127,301

 
121,819

 
125,706

 
121,561

The accompanying notes are an integral part of the consolidated financial statements.



9



FIRST INDUSTRIAL L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands)

 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
Net Income
$
46,404

 
$
38,853

 
$
83,868

 
$
62,344

Mark-to-Market Gain (Loss) on Interest Rate Protection Agreements
2,725

 
(1,435
)
 
9,250

 
743

Amortization of Interest Rate Protection Agreements
23

 
60

 
47

 
156

Comprehensive Income
$
49,152

 
$
37,478

 
$
93,165

 
$
63,243

Comprehensive Income Attributable to Noncontrolling Interest
(22
)
 
(26
)
 
(43
)
 
(53
)
Comprehensive Income Attributable to Unitholders
$
49,130

 
$
37,452

 
$
93,122

 
$
63,190

The accompanying notes are an integral part of the consolidated financial statements.


10



FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited; in thousands)

 
General
Partner
Units
 
Limited
Partner
Units
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling Interest
 
Total
Balance as of December 31, 2017
$
1,401,583

 
$
82,251

 
$
1,382

 
$
779

 
$
1,485,995

Net Income
81,458

 
2,367

 

 
43

 
83,868

Other Comprehensive Income

 

 
9,297

 

 
9,297

Contribution of General Partner Units, Net of Issuance Costs
145,408

 

 

 

 
145,408

Stock Based Compensation Activity
(2,388
)
 

 

 

 
(2,388
)
Unit Distributions
(53,898
)
 
(1,418
)
 

 

 
(55,316
)
Conversion of Limited Partner Units to General Partner Units
12,327

 
(12,327
)
 

 

 

Retirement of Limited Partner Units

 
(934
)
 

 

 
(934
)
Contributions from Noncontrolling Interest

 

 

 
121

 
121

Distributions to Noncontrolling Interest

 

 

 
(64
)
 
(64
)
Balance as of June 30, 2018
$
1,584,490

 
$
69,939

 
$
10,679

 
$
879

 
$
1,665,987

The accompanying notes are an integral part of the consolidated financial statements.


11



FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net Income
$
83,868

 
$
62,344

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
 
Depreciation
46,160

 
46,751

Amortization of Debt Issuance Costs
1,700

 
1,558

Other Amortization, including Stock Based Compensation
13,638

 
14,939

Impairment of Real Estate
2,756

 

Provision for Bad Debt
165

 
127

Equity in Loss of Joint Venture
2

 

Gain on Sale of Real Estate
(45,156
)
 
(28,869
)
Loss from Retirement of Debt
39

 
1,653

Increase in Tenant Accounts Receivable, Prepaid Expenses and Other Assets, Net
(3,226
)
 
(876
)
Increase in Deferred Rent Receivable, Net
(1,016
)
 
(2,936
)
Decrease in Accounts Payable, Accrued Expenses, Other Liabilities, Rents Received in Advance and Security Deposits
(5,170
)
 
(729
)
Net Cash Provided by Operating Activities
93,760

 
93,962

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Acquisitions of Real Estate
(87,733
)
 
(96,492
)
Additions to Investment in Real Estate and Non-Acquisition Tenant Improvements and Lease Costs
(121,169
)
 
(72,125
)
Net Proceeds from Sales of Investments in Real Estate
95,603

 
56,773

Contributions to and Investments in Joint Venture
(25,190
)
 

Distributions from Joint Venture
1,829

 

Other Investing Activity
(2,823
)
 
(1,117
)
Net Cash Used in Investing Activities
(139,483
)
 
(112,961
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Financing and Equity Issuance Costs
(2,842
)
 
(1,829
)
Contribution of General Partner Units
145,584

 
74,880

Repurchase and Retirement of Restricted Units
(6,020
)
 
(2,401
)
Unit Distributions Paid
(53,561
)
 
(48,493
)
Contributions from Noncontrolling Interests
121

 
20

Distributions to Noncontrolling Interests
(64
)
 
(82
)
Repayments on Mortgage Loans Payable
(161,964
)
 
(41,507
)
Prepayments of Penalties Associated with Retirement of Debt

 
(1,453
)
Proceeds from Senior Unsecured Notes
300,000

 
200,000

Repayments of Senior Unsecured Notes

 
(101,871
)
Proceeds from Unsecured Credit Facility
217,000

 
262,000

Repayments on Unsecured Credit Facility
(361,500
)
 
(324,500
)
Net Cash Provided by Financing Activities
76,754

 
14,764

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
31,031

 
(4,235
)
Cash, Cash Equivalents and Restricted Cash, Beginning of Year
46,482

 
21,461

Cash, Cash Equivalents and Restricted Cash, End of Period
$
77,513

 
$
17,226

 
 
 
 
 
 
 
 
 
 
 
 

12



FIRST INDUSTRIAL, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited; in thousands)
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS:
 
 
 
Interest Expense Capitalized in Connection with Development Activity
$
3,317

 
$
1,907

Supplemental Schedule of Non-Cash Investing and Financing Activities:
 
 
 
General and Limited Partner Unit Distributions Payable
$
28,771

 
$
26,715

Exchange of Limited Partner Units for General Partner Units:
 
 
 
Limited Partner Units
$
(12,327
)
 
$

General Partner Units
12,327

 

Total
$

 
$

Assumption of Indebtedness and Other Liabilities in Connection with the Acquisition of Real Estate
$
11,705

 
$
305

Accounts Payable Related to Construction in Progress and Additions to Investment in Real Estate
$
27,797

 
$
19,786

Write-off of Fully Depreciated Assets
$
(22,935
)
 
$
(15,295
)
The accompanying notes are an integral part of the consolidated financial statements.

13



FIRST INDUSTRIAL REALTY TRUST, INC. AND FIRST INDUSTRIAL, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; dollars in thousands, except per share and Unit data)
1. Organization
First Industrial Realty Trust, Inc. (the "Company") is a self-administered and fully integrated real estate company which owns, manages, acquires, sells, develops and redevelops industrial real estate. The Company is a Maryland corporation organized on August 10, 1993 and a real estate investment trust ("REIT") as defined in the Internal Revenue Code of 1986 (the "Code"). Unless stated otherwise or the context otherwise requires, the terms "we," "our" and "us" refer to the Company and its subsidiaries, including its operating partnership, First Industrial, L.P. (the "Operating Partnership"), and its consolidated subsidiaries.
We began operations on July 1, 1994. The Company's operations are conducted primarily through the Operating Partnership, of which the Company is the sole general partner (the "General Partner"), with an approximate 97.7% ownership interest ("General Partner Units") at June 30, 2018. The Operating Partnership also conducts operations through eight other limited partnerships (the "Other Real Estate Partnerships"), numerous limited liability companies ("LLCs") and certain taxable REIT subsidiaries ("TRSs"), the operating data of which, together with that of the Operating Partnership, is consolidated with that of the Company as presented herein. The Operating Partnership holds at least a 99% limited partnership interest in each of the Other Real Estate Partnerships. The general partners of the Other Real Estate Partnerships are separate corporations, wholly-owned by the Company, each with at least a .01% general partnership interest in the Other Real Estate Partnerships. The Company does not have any significant assets or liabilities other than its investment in the Operating Partnership and its 100% ownership interest in the general partners of the Other Real Estate Partnerships. Noncontrolling interest in the Operating Partnership of approximately 2.3% at June 30, 2018 represents the aggregate partnership interest held by the limited partners thereof ("Limited Partner Units" and together with the General Partner Units, the "Units").
We also own a 49% equity interest in, and provide various services to, a joint venture (the "Joint Venture") through a wholly- owned subsidiary of the Operating Partnership. The Joint Venture is accounted for under the equity method of accounting. The operating data of the Joint Venture is not consolidated with that of the Company or the Operating Partnership as presented herein. See Note 5 for more information related to the Joint Venture.
Profits, losses and distributions of the Operating Partnership, the LLCs, the Other Real Estate Partnerships, the TRSs and the Joint Venture are allocated to the general partner and the limited partners, the members or the shareholders, as applicable, of such entities in accordance with the provisions contained within their respective organizational documents.
As of June 30, 2018, we owned 471 industrial properties located in 21 states, containing an aggregate of approximately 61.1 million square feet of gross leasable area ("GLA"). Of the 471 properties owned on a consolidated basis, none of them are directly owned by the Company.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the accounting policies described in the consolidated financial statements and related notes included in our annual report on Form 10-K for the year ended December 31, 2017 ("2017 Form 10-K") and should be read in conjunction with such consolidated financial statements and related notes. The 2017 year end consolidated balance sheet data included in this Form 10-Q filing was derived from the audited consolidated financial statements in our 2017 Form 10-K, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). The following notes to these interim consolidated financial statements highlight significant changes to the notes included in the December 31, 2017 audited consolidated financial statements included in our 2017 Form 10-K and present interim disclosures as required by the Securities and Exchange Commission.
Use of Estimates
In order to conform with GAAP, in preparation of our consolidated financial statements we 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, 2018 and December 31, 2017, and the reported amounts of revenues and expenses for the three and six months ended June 30, 2018 and 2017. Actual results could differ from those estimates. In our opinion, the accompanying unaudited interim consolidated financial statements reflect all adjustments necessary for a fair statement of our financial position as of June 30, 2018 and December 31, 2017, the results of our operations and comprehensive income for each of the three and six months ended June 30, 2018 and 2017, and our cash flows for each of the six months ended June 30, 2018 and 2017. All adjustments are of a normal recurring nature.

14



Recent Accounting Pronouncements
Recent Accounting Standards Adopted
In May 2014, the Financial Accounting Standards Board ("the FASB") issued Accounting Standards Updates ("ASU") No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual periods beginning after December 15, 2017. We adopted the new standard effective January 1, 2018. The adoption of the standard did not impact our financial position or results of operations.
In August 2016 and November 2016, the FASB issued new ASUs impacting the statement of cash flows. ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" intends to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted both standards on January 1, 2018.
The adoption of ASU Nos. 2016-15 and 2016-18 modified our presentation of certain activities within the Consolidated Statements of Cash Flows. Restricted cash is comprised of gross proceeds from the sales of certain industrial properties that are held by intermediary agents to be used for tax-deferred, like-kind exchange transactions under Section 1031 of the Code. For the six months ended June 30, 2018 and 2017, $15,679 and $5,619 of restricted cash was included in "Cash, Cash Equivalents and Restricted Cash" in our Consolidated Statements of Cash Flows. Additionally, as a result of the adoption of these standards we reclassified $1,453 of prepayment penalties in connection with the payoff of certain mortgage loans from operating activities to financing activities for the six months ended June 30, 2017.
The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets to amounts reported within our Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017:
 
2018
 
2017
Cash and Cash Equivalents
$
61,834

 
$
11,607

Restricted Cash
15,679

 
5,619

Total Cash, Cash Equivalents and Restricted Cash
$
77,513

 
$
17,226


15



Recent Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"), which amends the existing accounting standards for lease accounting. ASU 2016-02 will require lessees, at lease commencement to record a right-of-use asset and lease liability for all leases with terms longer than twelve months. We are a lessee on a limited number of ground and office leases and expect to record a right-of-use asset and lease liability for these leases upon adoption of this standard. The expense pattern for these leases will be consistent with that of our historical recognition.
The accounting for lessors will remain largely unchanged from existing GAAP standards with the underlying leased asset being reported and recognized as a real estate asset and rental income being recognized on a straight line basis over the lease term. This standard may also impact the timing, recognition, presentation and disclosures related to our rental recoveries from tenants earned from leasing our operating properties, although we do not expect a significant impact.
Additionally, ASU 2016-02 requires that lessors expense certain initial direct costs that are not incremental in negotiating a lease as incurred. Based on our results for the year ended December 31, 2017, we anticipate this change will reduce our EPS/EPU by approximately $0.01 in the year of adoption.
ASU 2016-02 will become effective for us on January 1, 2019. We expect to adopt the practical expedients available for implementation under the standard. By adopting these practical expedients, we would not be required to reassess (1) whether an expired or existing contract meets the definition of a lease; (2) the lease classification for expired or existing leases; or (3) whether costs previously capitalized as initial direct costs would continue to be amortized. While we are well into our analysis of the adoption, we will continue to evaluate and assess the impact the adoption of ASU 2016-02 will have on the Consolidated Financial Statements and related disclosures.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeting Improvements to Accounting for Hedging Activities" ("ASU 2017-12"). ASU 2017-12 is intended to better align financial reporting for hedging activities with the economic objectives of those activities. As a result of the transition guidance, cumulative ineffectiveness that has been previously recognized on cash flow and net investment hedges that are still outstanding and designated as of the date of adoption will be adjusted and removed from beginning retained earnings and placed in accumulated other comprehensive income. ASU 2017-12 is effective for annual periods beginning after December 15, 2018. We continue to assess all the potential impacts of ASU 2017-12; however, we do not expect the adoption to have an impact on our financial condition or results of operations.

16



3. Investment in Real Estate
Acquisitions
During the six months ended June 30, 2018, we acquired six industrial properties comprised of approximately 0.5 million square feet of GLA and five land parcels. We considered these properties asset acquisitions and therefore capitalized acquisition costs to the basis of the acquired assets. The following table summarizes the amounts recognized for each major class of asset and liability for the industrial properties and land parcels acquired during the six months ended June 30, 2018:
 
Purchase Price
Land
$
50,262

Building and Improvements
45,393

Other Assets (leasing commissions)
526

In-Place Leases
2,483

Above Market Leases
73

Below Market Leases
(737
)
Total Purchase Price
$
98,000

Assumed Mortgage Loan (Note 4)
(11,654
)
Total Net Assets Acquired
$
86,346

The revenue and net income associated with the acquisition of the industrial properties, since their respective acquisition dates, are not significant for the six months ended June 30, 2018.
Real Estate Held for Sale
As of June 30, 2018, we had two industrial properties comprised of approximately 0.4 million square feet of GLA and four land parcels held for sale.
Sales
During the six months ended June 30, 2018, we sold 30 industrial properties comprised of approximately 1.3 million square feet of GLA and one land parcel. Gross proceeds from the sales of these industrial properties were $97,979. The gain on sale of real estate was $45,156.
Impairment Charges
The impairment charges of $2,756 recorded during the six months ended June 30, 2018 were due to marketing one industrial property and one land parcel for sale and our assessment of the likelihood and timing of a potential sale transaction. During the three months ended June 30, 2018, the one industrial property was sold.
The following table presents information about the one land parcel that was measured at fair value on a non-recurring basis and also indicates the fair value hierarchy of the valuation techniques we used to determine such fair value.
 
Fair Value Measurements on a Non-Recurring Basis Using:
 
 
Description
At June 30, 2018
 
Quoted Prices in
Active Markets for
Identical Assets
(Level  1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Impairment for the Six Months Ended
One land parcel
$
1,889

 

 

 
$
1,889

 
$
471

The following table presents quantitative information about the significant unobservable inputs we used to determine fair value of non-recurring items at June 30, 2018.
Quantitative Information about Level 3 Fair Value Measurements:
Description
 
Fair Value
 
Valuation Technique
 
Unobservable Inputs
 
Range
Impairment of one land parcel
 
$
1,889

 
Contracted Price
 
(A) 
 
N/A
_______________
(A) The fair value for the land parcel was based upon the value included in a third party purchase contract, which was subject to our corroboration for reasonableness.

17



4. Indebtedness
The following table discloses certain information regarding our indebtedness: 
 
Outstanding Balance at
 
Interest
Rate at
June 30, 2018
 
Effective
Interest
Rate at
Issuance
 
Maturity
Date
 
June 30,
2018
 
December 31,
2017
 
Mortgage Loans Payable, Gross
$
301,292

 
$
451,602

 
4.03% – 8.26%
 
3.82% – 8.26%
 
July 2019 –
August 2028
Unamortized Debt Issuance Costs
(1,490
)
 
(1,806
)
 
 
 
 
 
 
Unamortized Premiums
176

 
260

 
 
 
 
 
 
Mortgage Loans Payable, Net
$
299,978

 
$
450,056

 
 
 
 
 
 
Senior Unsecured Notes, Gross
 
 
 
 
 
 
 
 
 
2027 Notes
6,070

 
6,070

 
7.15%
 
7.11%
 
5/15/2027
2028 Notes
31,901

 
31,901

 
7.60%
 
8.13%
 
7/15/2028
2032 Notes
10,600

 
10,600

 
7.75%
 
7.87%
 
4/15/2032
2027 Private Placement Notes
125,000

 
125,000

 
4.30%
 
4.30%
 
4/20/2027
2028 Private Placement Notes
150,000

 

 
3.86%
 
3.86%
 
2/15/2028
2029 Private Placement Notes
75,000

 
75,000

 
4.40%
 
4.40%
 
4/20/2029
2030 Private Placement Notes
150,000

 

 
3.96%
 
3.96%
 
2/15/2030
Subtotal
$
548,571

 
$
248,571

 
 
 
 
 
 
Unamortized Debt Issuance Costs
(4,197
)
 
(1,814
)
 
 
 
 
 
 
Unamortized Discounts
(81
)
 
(84
)
 
 
 
 
 
 
Senior Unsecured Notes, Net
$
544,293

 
$
246,673

 
 
 
 
 
 
Unsecured Term Loans, Gross
 
 


 
 
 
 
 
 
2014 Unsecured Term Loan (A)
$
200,000

 
$
200,000

 
3.39%
 
N/A
 
1/29/2021
2015 Unsecured Term Loan (A)
260,000

 
260,000

 
2.89%
 
N/A
 
9/12/2022
Subtotal
$
460,000

 
$
460,000

 

 

 

Unamortized Debt Issuance Costs
(3,719
)
 
(4,232
)
 
 
 
 
 
 
Unsecured Term Loans, Net
$
456,281

 
$
455,768

 
 
 
 
 
 
Unsecured Credit Facility (B)
$

 
$
144,500

 
N/A
 
N/A
 
10/29/2021
_______________
(A) During the six months ended June 30, 2018, pursuant to the agreements for our unsecured term loans entered into in 2014 and 2015 (collectively, the "Unsecured Term Loans"), we elected to have the interest spread calculated based on our investment grade rating resulting in a 10 basis point reduction in the credit spread compared to the prior rate. The interest rate at June 30, 2018 also reflects the interest rate protection agreements we entered into to effectively convert the variable rate to a fixed rate. See Note 10.
(B) The maturity date may be extended an additional year at our election, subject to certain restrictions. Amounts exclude unamortized debt issuance costs of $4,182 and $4,781 as of June 30, 2018 and December 31, 2017, respectively, which are included in prepaid expenses and other assets on the consolidated balance sheets.
Mortgage Loans Payable, Net
During the six months ended June 30, 2018, we assumed a mortgage loan in the amount of $11,654 in conjunction with the acquisition of three industrial properties, totaling approximately 0.2 million square feet of GLA. The mortgage loan bears interest at a fixed rate of 4.17%, principal payments are amortized over 30 years and the loan matures in August 2028.
During the six months ended June 30, 2018, we paid off mortgage loans in the amount of $157,782. In connection with the mortgage loans paid off during the six months ended June 30, 2018, we recognized $39 as loss from retirement of debt representing the write-off of unamortized debt issuance costs offset by the write off of an unamortized premium.
As of June 30, 2018, mortgage loans payable are collateralized, and in some instances cross-collateralized, by industrial properties with a net carrying value of $450,187. We believe the Operating Partnership and the Company were in compliance with all covenants relating to mortgage loans as of June 30, 2018.

18



Senior Unsecured Notes, Net
During the six months ended June 30, 2018, the Operating Partnership issued $150,000 of 3.86% Series C Guaranteed Senior Notes due February 15, 2028 (the "2028 Private Placement Notes") and $150,000 of 3.96% Series D Guaranteed Senior Notes due February 15, 2030 (the "2030 Private Placement Notes") (together with the 2027 Private Placement Notes and the 2029 Private Placement Notes (each as described in Note 4), collectively, the "Private Placement Notes") in a private placement pursuant to a Note and Guaranty Agreement dated December 12, 2017. The 2028 Private Placement Notes and the 2030 Private Placement Notes are unsecured obligations of the Operating Partnership that are fully and unconditionally guaranteed by the Company and require semi-annual interest payments.
Indebtedness
The following is a schedule of the stated maturities and scheduled principal payments of our indebtedness, exclusive of premiums, discounts and debt issuance costs, for the next five years as of June 30, and thereafter: 
 
Amount
Remainder of 2018
$
3,682

2019
79,600

2020
59,046

2021
267,113

2022
341,552

Thereafter
558,870

Total
$
1,309,863

Our unsecured credit facility (the "Unsecured Credit Facility"), the Unsecured Term Loans, the Private Placement Notes and the indentures governing our senior unsecured notes contain certain financial covenants, including limitations on incurrence of debt and debt service coverage. Under the Unsecured Credit Facility and the Unsecured Term Loans an event of default can occur if the lenders, in their good faith judgment, determine that a material adverse change has occurred which could prevent timely repayment or materially impair our ability to perform our obligations under the loan agreements. We believe the Operating Partnership and the Company were in compliance with all covenants relating to the Unsecured Credit Facility, the Unsecured Term Loans, the Private Placement Notes and indentures governing our senior unsecured notes as of June 30, 2018. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by our lenders and noteholders in a manner that could impose and cause us to incur material costs.

19



Fair Value
At June 30, 2018 and December 31, 2017, the fair value of our indebtedness was as follows: 
 
June 30, 2018
 
December 31, 2017
 
Carrying
Amount (A)
 
Fair
Value
 
Carrying
Amount (A)
 
Fair
Value
Mortgage Loans Payable, Net
$
301,468

 
$
309,610

 
$
451,862

 
$
467,303

Senior Unsecured Notes, Net
548,490

 
549,593

 
248,487

 
269,731

Unsecured Term Loans
460,000

 
461,533

 
460,000

 
460,000

Unsecured Credit Facility

 

 
144,500

 
144,500

Total
$
1,309,958

 
$
1,320,736

 
$
1,304,849

 
$
1,341,534

_______________
(A) The carrying amounts include unamortized premiums and discounts and exclude unamortized debt issuance costs.
The fair values of our mortgage loans payable were determined by discounting the future cash flows using the current rates at which similar loans would be made based upon similar remaining maturities. The current market rates we utilized were internally estimated. The fair value of the senior unsecured notes were determined by using rates, as advised by our bankers, that are based upon recent trades within the same series of the senior unsecured notes, recent trades for senior unsecured notes with comparable maturities, recent trades for fixed rate unsecured notes from companies with profiles similar to ours, as well as overall economic conditions. The fair value of the Unsecured Credit Facility and the Unsecured Term Loans was determined by discounting the future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining term, assuming no repayment until maturity. We have concluded that our determination of fair value for each of our mortgage loans payable, senior unsecured notes, the Unsecured Term Loans and the Unsecured Credit Facility was primarily based upon Level 3 inputs.
5. Variable Interest Entities
Other Real Estate Partnerships
The Other Real Estate Partnerships are variable interest entities ("VIEs") of the Operating Partnership and the Operating Partnership is the primary beneficiary, thus causing the Other Real Estate Partnerships to be consolidated by the Operating Partnership. In addition, the Operating Partnership is a VIE of the Company and the Company is the primary beneficiary.
The following table summarizes the assets and liabilities of the Other Real Estate Partnerships included in our consolidated balance sheets, net of intercompany amounts:
 
June 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Assets:
 
 
 
Net Investment in Real Estate
$
266,260

 
$
270,708

Other Assets, Net
23,652

 
23,530

Total Assets
$
289,912

 
$
294,238

LIABILITIES AND PARTNERS' CAPITAL
 
 
 
Liabilities:
 
 
 
Mortgage Loans Payable, Net
$
20,723

 
$
61,256

Other Liabilities, Net
8,425

 
9,283

Partners' Capital
260,764

 
223,699

Total Liabilities and Partners' Capital
$
289,912

 
$
294,238


20



Joint Venture
During the six months ended June 30, 2018, we entered into the Joint Venture with a third party partner for the purpose of developing, selling, leasing and operating approximately 532 net developable acres of land located in the Phoenix, Arizona metropolitan area. The purchase price of the land was $49,000 and was acquired by the Joint Venture via cash equity contributions from us and our joint venture partner. Through a wholly-owned subsidiary of the Operating Partnership, we own a 49% interest in the Joint Venture.
Under the Joint Venture's operating agreement, we act as the managing member of the Joint Venture and are entitled to receive fees for providing management, leasing, development, construction supervision, disposition and asset management services to the Joint Venture. In addition, the Joint Venture's operating agreement provides us the ability to earn an incentive fee based on the ultimate financial performance of the Joint Venture.
As part of our assessment of the appropriate accounting treatment for the Joint Venture, we reviewed the operating agreement of the Joint Venture in order to determine our rights and the rights of our joint venture partner, including whether those rights are protective or participating. We found that the operating agreement contains certain protective rights, such as the requirement of member approval to sell, finance or refinance the property and to pay capital expenditures and operating expenditures outside of the approved budget. However, we also found that we and our Joint Venture partner jointly (i) approve the annual budget, (ii) approve certain expenditures, (iii) review and approve the Joint Venture's tax return before filing and (iv) approve each lease at a developed property. We consider the latter rights substantive participation rights that result in shared, joint power over the activities that most significantly impact the performance of the Joint Venture. As such, we concluded to account for our investment in the Joint Venture under the equity method of accounting.
6. Stockholders' Equity of the Company and Partners' Capital of the Operating Partnership
Issuance of Shares of Common Stock
During the six months ended June 30, 2018, the Company issued 4,800,000 shares of the Company's common stock in an underwritten public offering. Proceeds to the Company, net of the underwriter's discount, were $145,584. The proceeds were contributed to the Operating Partnership in exchange for General Partner Units and are reflected in the financial statements as a general partner contribution.
Noncontrolling Interest of the Company
The following table summarizes the changes in noncontrolling interest for the Company for the six months ended June 30, 2018 and 2017:
 
2018
 
2017
Balance as of December 31
$
48,077

 
$
43,184

    Net Income
2,367

 
2,073

    Other Comprehensive Income (Including a Reallocation of ($63) and $3)
200

 
30

    Common Stock Dividends and Unit Distributions
(1,418
)
 
(1,696
)
    Conversion of Limited Partner Units to Common Stock (A)
(12,327
)
 

    Retirement of Limited Partner Units (B)
(934
)
 

    Reallocation - Additional Paid-in-Capital
2,218

 
1,525

Balance as of June 30
$
38,183

 
$
45,116

_______________
(A) For the six months ended June 30, 2018, 1,019,677 Limited Partner Units were converted into an equivalent number of shares of common stock of the Company, resulting in a reclassification of $12,327 of noncontrolling interest to the Company's stockholders' equity.
(B) During the six months ended June 30, 2018, 33,333 Limited Partner Units were forfeited by a unitholder and were retired by the Operating Partnership.

21



Noncontrolling Interest of the Operating Partnership
The following table summarizes the changes in noncontrolling interest for the Operating Partnership for the six months ended June 30, 2018 and 2017:
 
2018
 
2017
Balance as of December 31
$
779

 
$
956

    Net Income
43

 
53

    Contributions
121

 
20

    Distributions
(64
)
 
(82
)
Balance as of June 30
$
879

 
$
947

Dividends/Distributions
During the six months ended June 30, 2018, we declared $55,316 common stock dividends and Unit distributions.
7. Accumulated Other Comprehensive Income
The following table summarizes the changes in accumulated other comprehensive income by component for the Company and the Operating Partnership for the six months ended June 30, 2018:
 
Interest Rate Protection Agreements
 
Accumulated Other Comprehensive Income of the Operating Partnership
 
Comprehensive Income Attributable to Noncontrolling Interest of the Company
 
Accumulated Other Comprehensive Income of the Company
Balance as of December 31, 2017
1,382

 
1,382

 
(44
)
 
1,338

Other Comprehensive Income Before Reclassifications
8,690

 
8,690

 
(200
)
 
8,490

Amounts Reclassified from Accumulated Other Comprehensive Income
607

 
607

 

 
607

Net Current Period Other Comprehensive Income
9,297

 
9,297

 
(200
)
 
9,097

Balance as of June 30, 2018
10,679

 
10,679

 
(244
)
 
10,435

The following table summarizes the reclassifications out of accumulated other comprehensive income for both the Company and the Operating Partnership for the three and six months ended June 30, 2018 and 2017:
 
 
Amounts Reclassified from Accumulated
Other Comprehensive Income
 
 
Details about Accumulated
Other Comprehensive Income Components
 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
 
Affected Line Items in the
Consolidated Statements of Operations
Interest Rate Protection Agreements:
 
 
 
 
 
 
 
 
 
 
Amortization of Previously Settled Interest Rate Protection Agreements
 
$
23

 
$
60

 
$
47

 
$
156

 
Interest Expense
Settlement Payments to our Counterparties
 
97

 
1,161

 
560

 
2,574

 
Interest Expense
Total
 
$
120

 
$
1,221

 
$
607

 
$
2,730

 
 
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in other comprehensive income and is subsequently reclassified to earnings through interest expense over the life of the derivative or over the life of the debt. In the next 12 months, we expect to amortize approximately $95 into net income by increasing interest expense for interest rate protection agreements we settled in previous periods. Additionally, recurring settlement amounts on the 2014 Swaps and 2015 Swaps (as defined in Note 10) will also be reclassified to net income. See Note 10 for more information about our derivatives.

22


8. Earnings Per Share and Earnings Per Unit ("EPS"/"EPU")
The computation of basic and diluted EPS of the Company is presented below: 
 
Three Months Ended
June 30, 2018
 
Three Months Ended
June 30, 2017
 
Six Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2017
Numerator:
 
 
 
 
 
 
 
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities
$
45,209

 
$
37,562

 
$
81,501

 
$
60,271

Net Income Allocable to Participating Securities
(151
)
 
(129
)
 
(248
)
 
(196
)
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders
$
45,058

 
$
37,433

 
$
81,253

 
$
60,075

Denominator (In Thousands):
 
 
 
 
 
 
 
Weighted Average Shares - Basic
123,616

 
117,299

 
121,741

 
117,070

Effect of Dilutive Securities:
 
 
 
 
 
 
 
        LTIP Unit Awards (As Defined in Note 9)
469

 
480

 
417

 
452

Weighted Average Shares - Diluted
124,085

 
117,779

 
122,158

 
117,522

Basic and Diluted EPS:
 
 
 
 
 
 
 
Net Income Available to First Industrial Realty Trust, Inc.'s Common Stockholders
$
0.36

 
$
0.32

 
$
0.67

 
$
0.51

The computation of basic and diluted EPU of the Operating Partnership is presented below:
 
Three Months Ended
June 30, 2018
 
Three Months Ended
June 30, 2017
 
Six Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2017
Numerator:
 
 
 
 
 
 
 
Net Income Available to Unitholders and Participating Securities
$
46,382

 
$
38,827

 
$
83,825

 
$
62,291

Net Income Allocable to Participating Securities
(151
)
 
(129
)
 
(248
)
 
(196
)
Net Income Available to Unitholders
$
46,231

 
$
38,698

 
$
83,577

 
$
62,095

Denominator (In Thousands):
 
 
 
 
 
 
 
Weighted Average Units - Basic
126,832

 
121,339

 
125,289

 
121,109

Effect of Dilutive Securities that Result in the Issuance of General Partner Units:
 
 
 
 
 
 
 
LTIP Unit Awards (As Defined in Note 9)
469

 
480

 
417

 
452

Weighted Average Units - Diluted
127,301

 
121,819

 
125,706

 
121,561

Basic and Diluted EPU:
 
 
 
 
 
 
 
Net Income Available to Unitholders
$
0.36

 
$
0.32

 
$
0.67

 
$
0.51

Participating securities include 413,193 and 404,276 of unvested restricted stock or restricted Unit awards outstanding at June 30, 2018 and 2017, respectively, which participate in non-forfeitable distributions. Under the two class method, participating security holders are allocated income, in proportion to total weighted average shares or Units outstanding, based upon the greater of net income or common stock dividends or Unit distributions declared.

23



9. Benefit Plans
Restricted Stock or Restricted Unit Awards
For the six months ended June 30, 2018, the Company awarded 211,890 shares of restricted stock awards to certain employees, which had an aggregate fair value of $6,068 on the date such awards were approved by the Compensation Committee of the Board of Directors. These restricted stock awards were granted based upon the achievement of certain corporate performance goals and generally vest over a period of three years. Additionally, during the six months ended June 30, 2018, the Company awarded 15,169 shares of restricted stock to non-employee members of the Board of Directors, which had an aggregate fair value of $490 on the date of approval. These restricted stock awards vest over a one-year period. The Operating Partnership issued restricted Unit awards to the Company in the same amount for both restricted stock awards.
Compensation expense is charged to earnings over the vesting periods for the restricted stock or restricted Unit awards expected to vest except if the recipient is not required to provide future service in exchange for vesting of such restricted stock or restricted Unit awards. If vesting of a recipient's restricted stock or restricted Unit awards is not contingent upon future service, the expense is recognized immediately at the date of grant. During the six months ended June 30, 2017, we recognized $1,590 of compensation expense related to restricted stock or restricted Unit awards granted to our former Chief Executive Officer for which future service was not required.
LTIP Unit Awards
For the six months ended June 30, 2018, the Company granted to certain employees 179,288 Long-Term Incentive Program ("LTIP") performance units ("LTIP Unit Awards"), which had a fair value of $2,381 on the grant date as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The LTIP Unit Awards vest based upon the relative total shareholder return ("TSR") of the Company's common stock compared to the weighted average TSRs of the MSCI US REIT Index and the NAREIT Industrial Index over a performance period of three years. Compensation expense is charged to earnings on a straight-line basis over the performance period. The Operating Partnership issues General Partner Units to the Company in the same amounts for vested LTIP Unit Awards.
Outstanding Restricted Stock or Restricted Unit Awards and LTIP Unit Awards
We recognized $1,997 and $1,822 for the three months ended June 30, 2018 and 2017, respectively and $3,686 and $4,923 for the six months ended June 30, 2018 and 2017 respectively, in amortization related to restricted stock or restricted Unit awards and LTIP Unit Awards. Restricted stock or restricted Unit award and LTIP Unit Award amortization capitalized in connection with development activities was not significant. At June 30, 2018, we had $12,453 in unrecognized compensation related to unvested restricted stock or restricted Unit awards and LTIP Unit Awards. The weighted average period that the unrecognized compensation is expected to be recognized is 1.03 years.
Severance Expense
During the six months ended June 30, 2018, we incurred $1,298 of severance costs related to a reduction in personnel as a result of changes in our real estate portfolio. The severance costs are included in general and administrative expense.
10. Derivatives
Our objectives in using derivatives are to add stability to interest expense and to manage our cash flow volatility and exposure to interest rate movements. To accomplish this objective, we primarily use interest rate protection agreements as part of our interest rate risk management strategy. Interest rate protection agreements designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

24



Fair Value Hedges
In connection with the originations of the Unsecured Term Loans (see Note 4), we entered into interest rate protection agreements to manage our exposure to changes in the one month LIBOR rate. The four interest rate protection agreements, which fix the variable rate of the 2014 Unsecured Term Loan, have an aggregate notional value of $200,000, mature on January 29, 2021 and fix the LIBOR rate at a weighted average rate of 2.29% (the "2014 Swaps"). The six interest rate protection agreements, which fix the variable rate of the 2015 Unsecured Term Loan, have an aggregate notional value of $260,000, mature on September 12, 2022 and fix the LIBOR rate at a weighted average rate of 1.79% (the "2015 Swaps"). We designated the 2014 Swaps and 2015 Swaps as cash flow hedges.
Our agreements with our derivative counterparties contain provisions where if we default on any of our indebtedness, then we could also be declared in default on our derivative obligations subject to certain thresholds. As of June 30, 2018, we had not posted any collateral related to these agreements and were not in breach of any of the provisions of these agreements. If we had breached these agreements, we could have been required to settle our obligations under the agreements at their termination value.
The following table sets forth our financial assets related to the 2015 Swaps and the 2014 Swaps which are included in prepaid expenses and other assets on the consolidated balance sheets and which are accounted for at fair value on a recurring basis as of June 30, 2018:
 
 
 
 
Fair Value Measurements:
Description
 
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
Derivatives designated as a hedging instrument:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
2014 Swaps
 
$
1,862

 

 
$
1,862

 

2015 Swaps
 
$
9,774

 

 
$
9,774

 

There was no ineffectiveness recorded on the 2014 Swaps and 2015 Swaps during the six months ended June 30, 2018. See Note 7 for more information regarding our derivatives.
The estimated fair value of the 2014 Swaps and the 2015 Swaps was determined using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments are incorporated in the fair value to account for potential non-performance risk, including our own non-performance risk and the respective counterparty's non-performance risk. We determined that the significant inputs used to value the 2014 Swaps and the 2015 Swaps fell within Level 2 of the fair value hierarchy.
11. Related Party Transactions
During the three months ended June 30, 2018, we recognized fees of $36 from the Joint Venture related to asset management services provided to the Joint Venture. At June 30, 2018, we had a receivable from the Joint Venture of $36 related to this asset management fee. See Note 5 for more information on the Joint Venture.
 At June 30, 2018 and December 31, 2017, the Operating Partnership had receivable balances of $10,183 and $10,129, respectively, from a direct wholly-owned subsidiary of the Company.

25



12. Commitments and Contingencies
In the normal course of business, we are involved in legal actions arising from the ownership of our industrial 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.
In conjunction with the development of industrial properties, we have entered into agreements with general contractors for the construction of industrial properties. At June 30, 2018, we had five industrial properties totaling approximately 2.9 million square feet of GLA under construction. The estimated total investment as of June 30, 2018 is approximately $186,000. Of this amount, approximately $79,100 remains to be funded. There can be no assurance that the actual completion cost will not exceed the estimated total investment.
13. Subsequent Events
From July 1, 2018 to July 26, 2018, we sold one building and one parcel of land for approximately $3,359.

26



Item 2.
Management's 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 consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q. Unless stated otherwise or the context otherwise requires, the terms "we," "our" and "us" refer to First Industrial Realty Trust, Inc. (the "Company") and its subsidiaries, including First Industrial, L.P. (the "Operating Partnership") and its consolidated subsidiaries.
Forward-Looking Statements
The following discussion may contain 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 (the "Exchange Act"). We intend for 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. Forward-looking statements are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identifiable by use of the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "project," "seek," "target," "potential," "focus," "may," "will," "should" or similar words. Although we believe the expectations reflected in forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. Factors which could have a materially adverse effect on our operations and future prospects include, but are not limited to:
changes in national, international, regional and local economic conditions generally and real estate markets specifically;
changes in legislation/regulation (including changes to laws governing the taxation of real estate investment trusts) and actions of regulatory authorities;
our ability to qualify and maintain our status as a real estate investment trust;
the availability and attractiveness of financing (including both public and private capital) and changes in interest rates;
the availability and attractiveness of terms of additional debt repurchases;
changes in our credit agency ratings;
our ability to comply with applicable financial covenants;
our competitive environment;
changes in supply, demand and valuation of industrial properties and land in our current and potential market areas;
difficulties in identifying and consummating acquisitions and dispositions;
our ability to manage the integration of properties we acquire;
potential liability relating to environmental matters;
defaults on or non-renewal of leases by our tenants;
decreased rental rates or increased vacancy rates;
higher-than-expected real estate construction costs and delays in development or lease-up schedules;
changes in general accounting principles, policies and guidelines applicable to real estate investment trusts; and
other risks and uncertainties described in this report, in Item 1A, "Risk Factors" and elsewhere in our annual report on Form 10-K for the year ended December 31, 2017 as well as those risks and uncertainties discussed from time to time in our other Exchange Act reports and in our other public filings with the Securities and Exchange Commission (the "SEC").
We caution you not to place undue reliance on forward-looking statements, which reflect our outlook only and speak only as of the date of this report. We assume no obligation to update or supplement forward-looking statements.

27



General
The Company is a self-administered and fully integrated real estate company which owns, manages, acquires, sells, develops and redevelops industrial real estate. The Company is a Maryland corporation organized on August 10, 1993 and a real estate investment trust ("REIT") as defined in the Internal Revenue Code of 1986 (the "Code").
We began operations on July 1, 1994. The Company's operations are conducted primarily through the Operating Partnership, of which the Company is the sole general partner (the "General Partner"), with an approximate 97.7% ownership interest ("General Partner Units") at June 30, 2018. The Operating Partnership also conducts operations through eight other limited partnerships (the "Other Real Estate Partnerships"), numerous limited liability companies ("LLCs") and certain taxable REIT subsidiaries ("TRSs"), the operating data of which, together with that of the Operating Partnership, is consolidated with that of the Company as presented herein. The Operating Partnership holds at least a 99% limited partnership interest in each of Other Real Estate Partnerships. The general partners of the Other Real Estate Partnerships are separate corporations, wholly-owned by the Company, each with at least a .01% general partnership interest in the Other Real Estate Partnerships. The Company does not have any significant assets or liabilities other than its investment in the Operating Partnership and its 100% ownership interest in the general partners of the Other Real Estate Partnerships. Noncontrolling interest in the Operating Partnership of approximately 2.3% at June 30, 2018 represents the aggregate partnership interest held by the limited partners thereof ("Limited Partner Units" and together with the General Partner Units, the "Units"). 
We also own a 49% equity interest in, and provide various services to, a joint venture (the "Joint Venture") through a wholly-owned subsidiary of the Operating Partnership. The Joint Venture is accounted for under the equity method of accounting. The operating data of the Joint Venture is not consolidated with that of the Operating Partnership or the Company as presented herein. See Note 5 to the Consolidated Financial Statements for more information related to the Joint Venture.