<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996 OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
------------------- ------------------
Commission File Number 33-97014-01
FIRST INDUSTRIAL SECURITIES, L.P.
(Exact name of Registrant as specified in its Charter)
DELAWARE 36-4036965
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 N. WACKER DRIVE, SUITE 150, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 704-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
GUARANTEE OF THE 9-1/2% SERIES A CUMULATIVE PREFERRED STOCK
OF FIRST INDUSTRIAL REALTY TRUST, INC.
(Title of class)
NEW YORK STOCK EXCHANGE
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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. Yes X No .
--- ---
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE> 2
FIRST INDUSTRIAL SECURITIES, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION> PAGE
----
<S> <C>
PART I.
Item 1. Business................................................................................ 3
Item 2. The Properties.......................................................................... 4
Item 3. Legal Proceedings....................................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders..................................... 8
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................... 8
Item 6. Selected Financial and Operating Data................................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations... 9
Item 8. Financial Statements and Supplementary Data............................................. 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures... 11
PART III.
Item 10. Directors and Executive Officers of the Registrant.................................... 12
Item 11. Executive Compensation................................................................ 12
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 12
Item 13. Certain Relationships and Related Transactions........................................ 12
PART IV.
Item 14. Exhibits, Financial Statements and Financial Statement Schedule and Reports on Form 8-K 13
SIGNATURES........................................................................................ 14
</TABLE>
2
<PAGE> 3
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of complying with these 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. The
Company's ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material
adverse affect on the operations and future prospects of the Company include,
but are not limited to, changes in: economic conditions generally and the real
estate market specifically, legislative/regulatory changes , availability of
capital, interest rates, competition, supply and demand for industrial
properties in the Company's current and proposed market areas and general
accounting principles, policies and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements. Further information
concerning the Company and its business, including additional factors that
could materially affect the Company's financial results, is included herein and
in the Company's other filings with the Securities and Exchange Commisssion.
PART I
ITEM 1. BUSINESS
THE COMPANY
GENERAL
First Industrial Securities, L.P. (the "Company") is a Delaware limited
partnership which owns 19 bulk warehouses and light industrial properties (the
"Properties"). The markets in which the Properties are located include:
Chicago, Minneapolis, Grand Rapids, Detroit, and Central Pennsylvania. The
Properties contain an aggregate of approximately 2.1 million square feet of
gross leasable area ("GLA") which, as of December 31, 1996, was 97% leased to
32 tenants. At December 31, 1996, the Company had no employees. The Company's
executive offices are located at 150 N. Wacker Drive, Suite 150, Chicago,
Illinois 60606, and its telephone number is (312) 704-9000.
The Company was formed in 1995 in connection with the issuance of a
class of preferred stock (the "Series A Preferred Shares") of First Industrial
Realty Trust, Inc. ("FI"). The 1% general partner of the Company is First
Industrial Securities Corporation ("Securities Corporation"), which is a
wholly owned subsidiary of FI. The 99% limited partner of the Company is
First Industrial, L.P. (the "Operating Partnership"), of which FI is the sole
general partner.
In connection with the issuance of the Series A Preferred Shares, FI
contributed to Securities Corporation the gross proceeds from the issuance of
the Series A Preferred Shares in exchange for preferred stock of Securities
Corporation, and Securities Corporation contributed such proceeds to the
Company in exchange for a preferred limited partnership interest in the
Company. The Operating Partnership and First Industrial Pennsylvania, L.P.
contributed the Properties to the Company in exchange for limited partnership
interests in the Company (the "Contribution"). The Pennsylvania Partnership
subsequently distributed its limited partnership interest to the Operating
Partnership, which is its sole limited partner.
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<PAGE> 4
THE GUARANTEE AND LIMITED PARTNERSHIP AGREEMENT
The Company has guaranteed the payment of dividends on, and payments on
liquidation or redemption of, the Series A Preferred Shares under a guarantee
(the "Guarantee") contained in a Guarantee and Payment Agreement (the
"Guarantee Agreement"). The Guarantee Agreement is administered by American
National Bank and Trust Company, as guarantee agent (together with any
subagents which it may appoint, the "Guarantee Agent"). The Guarantee Agent
may enforce the Guarantee directly against the Company only at the direction of
the holders of at least 25% of the outstanding Series A Preferred Shares. No
holder of Series A Preferred Shares may seek directly to enforce the Guarantee.
The Guarantee and the Guarantee Agreement will terminate upon confirmation to
the Company from Fitch Investors Service, L.P. and Standard & Poor's Ratings
Group that, immediately following such a termination, the Series A Preferred
Shares would be rated at least BBB, whether or not the Series A Preferred
Shares are so rated prior to such termination.
The limited partnership agreement of the Company (the "Limited
Partnership Agreement") and the Guarantee Agreement contain covenants
generally restricting the Company's activities to the ownership and operation
of the Properties and, under certain circumstances, other industrial
properties. These covenants shall cease to have any effect upon the
termination of the Guarantee. Under its Articles of Incorporation, Securities
Corporation's sole purpose will be to act as general partner of the Company
and to pay dividends on its common and preferred stock. These and other
restrictions are intended to assure that even in the event of FI, the
Operating Partnership or other affiliates of FI becoming subject to federal
bankruptcy proceedings, neither Securities Corporation nor the Company nor
their assets will be treated as subject to such bankruptcy proceedings under
the doctrine of substantive consolidation or other doctrines (except to the
extent liabilities are imposed by non-insolvency regulatory statutes on
affiliates) and that activities of FI, the Operating Partnership and other
affiliates will not cause Securities Corporation or the Company to become
insolvent or unable to pay their debts as they mature (including the Guarantee).
ITEM 2. THE PROPERTIES
GENERAL
At December 31, 1996, the Company owned 19 in-service properties
containing approximately 2.1 million square feet of GLA in four states. The
Properties are generally located in business parks which have convenient access
to interstate highways and air transportation. The median age of the
Properties as of December 31, 1996 was approximately nine years.
The Company classifies its Properties into two industrial categories:
bulk warehouse and light industrial. The Company's bulk warehouse properties
are generally used for bulk storage of materials and manufactured goods and its
light industrial properties are generally used for the design, assembly,
packaging and distribution of goods and, in some cases, the provision of
services. Each of the Properties is wholly owned by the Company. The
following table summarizes certain information as of December 31, 1996 with
respect to the Properties.
PROPERTY SUMMARY
<TABLE>
<CAPTION>
BULK WAREHOUSE LIGHT INDUSTRIAL TOTAL
---------------------- ------------------------ --------------------------------------
AVERAGE GLA AS A %
NUMBER OF NUMBER OF NUMBER OF OCCUPANCY OF TOTAL
METROPOLITAN AREA GLA PROPERTIES GLA PROPERTIES GLA PROPERTIES AT 12/31/96 PORTFOLIO
- ----------------- --------- ---------- ------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chicago 548,425 2 91,550 2 639,975 4 96% 30%
Minneapolis/St. Paul 409,905 2 207,227 2 617,132 4 100% 29%
Grand Rapids 447,500 4 - - 447,500 4 91% 21%
Detroit - - 287,142 5 287,142 5 100% 13%
Central PA 100,000 1 49,350 1 149,350 2 100% 7%
--------- ----- ------- ---- ---------- ----- ---- ----
Total or Average 1,505,830 9 635,269 10 2,141,099 19 97% 100%
========= ===== ======= ==== ========== ===== ==== ====
</TABLE>
4
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DETAIL PROPERTY LISTING
The following table lists all of the Properties as of December 31, 1996,
none of which were subject to mortgage liens as of such date.
PROPERTY LISTING
<TABLE>
<CAPTION>
LOCATION YEAR BUILT/ BUILDING LAND AREA OCCUPANCY
BUILDING ADDRESS (CITY/STATE) RENOVATED TYPE (ACRES) GLA AT 12/31/96
- ----------------------------- ---------------------- --------- ----------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
5020 Louise Drive Mechanicsburg, PA 1995 Light Industrial 5.06 49,350 100%
7195 Grayson Road Harrisburg, PA 1994 Bulk Warehouse 6.02 100,000 100%
2101-2125 Gardner Road Broadview, IL 1950/69 Bulk Warehouse 9.98 323,425 93%
2942 MacArthur Boulevard Northbrook, IL 1979 Light Industrial 3.12 49,730 100%
3150-3160 MacArthur Boulevard Northbrook, IL 1978 Light Industrial 2.14 41,820 100%
365 North Avenue Carol Stream, IL 1969 Bulk Warehouse 28.65 225,000 100%
2965 Technology Drive Rochester Hills, MI 1995 Light Industrial 4.92 66,395 100%
4177A Varsity Drive Ann Arbor, MI 1993 Light Industrial 2.48 11,050 100%
6515 Cobb Drive Sterling Heights, MI 1984 Light Industrial 2.91 47,597 100%
1451 Lincoln Avenue Madison, MI 1967 Light Industrial 3.92 75,000 100%
4400 Purks Drive Auburn Hills, MI 1987 Light Industrial 13.04 87,100 100%
425 Gordon Industrial Court Grand Rapids, MI 1990 Bulk Warehouse 8.77 156,875 100%
2851 Prairie Street Grand Rapids, MI 1989 Bulk Warehouse 5.45 117,251 100%
2945 Walkent Court Grand Rapids, MI 1993 Bulk Warehouse 4.45 93,374 100%
537 76th Street Grand Rapids, MI 1987 Bulk Warehouse 5.26 80,000 50%
6707 Shingle Creek Parkway Brooklyn Center, MN 1986 Light Industrial 4.22 75,939 100%
6655 Wedgwood Road Maple Grove, MN 1989 Light Industrial 17.88 131,288 100%
900 Apollo Road Eagan, MN 1970 Bulk Warehouse 39.00 312,265 100%
7316 Aspen Lane North Brooklyn Park, MN 1978 Bulk Warehouse 6.63 97,640 100%
--------- ----
TOTAL 2,141,099 97%
========= ====
</TABLE>
TENANT AND LEASE INFORMATION
Many of the Company's leases have an initial term of between three and
five years and provide for periodic rental increases that are either fixed or
based on changes in the Consumer Price Index. Industrial tenants typically
have net or semi-net leases and pay as additional rent their percentage of the
property's operating costs, including the costs of common area maintenance,
property taxes and insurance. As of December 31, 1996, 97% of the GLA of the
Properties was leased.
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<PAGE> 6
The following table sets forth, as of December 31, 1996, the base rent,
and the total GLA leased, by tenants responsible for more than one percent of
the aggregate December 1996 base rent.
<TABLE>
<CAPTION>
ANNUAL BASE RENT GLA
------------------------------ ----------------------
TENANT AMOUNT % OF TOTAL OCCUPIED % OF TOTAL
------ -------------- -------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
1 SciMed Life Systems, Inc. $1,129,268 13.4% 131,288 6.1%
2 Meyercord Company 853,526 10.1% 225,000 10.5%
3 Anchor Hocking Plastics 765,049 9.1% 312,265 14.6%
4 Yaskawa Electric America, Inc. 758,730 9.0% 91,550 4.3%
5 ASC, Inc. 435,500 5.2% 87,100 4.1%
6 American Axle & Manufacturing 383,177 4.5% 66,395 3.1%
7 B.L. Downey Company, Inc. 376,422 4.5% 138,986 6.5%
8 Grant-Durban, Inc. 364,000 4.3% 75,000 3.5%
9 Alabama Metals Industries Corp. 286,674 3.4% 100,000 4.7%
10 Nelson Metal Products Corp. 273,400 3.2% 87,938 4.1%
11 International Paper Company 261,005 3.1% 93,374 4.4%
12 Transpak, Inc. 214,200 2.5% 47,597 2.2%
13 TLC Group, Inc. 213,940 2.5% 96,875 4.5%
14 Auer Steel & Heating Supply 195,033 2.3% 47,861 2.2%
15 ITT Educational Services, Inc. 194,459 2.3% 21,000 1.0%
16 Espec Corp. 193,596 2.3% 60,000 2.8%
17 Independent Metals Corp. 192,528 2.3% 61,119 2.9%
18 Crest Engineering Company 173,305 2.1% 40,040 1.9%
19 St. Thomas Creations 149,971 1.8% 28,350 1.3%
20 Blevins, Inc. 140,000 1.7% 40,000 1.9%
21 Spartan Stores, Inc. 120,000 1.4% 80,000 3.7%
22 Total Plastics, Inc. 115,262 1.4% 29,313 1.4%
23 J.C. Penney 96,876 1.2% 28,078 1.3%
24 The Rugby Group, Inc. 85,560 1.0% 24,800 1.2%
---------- ---- --------- ----
Total $7,971,481 94.6% 2,013,929 94.2%
========== ==== ========= ====
</TABLE>
The following table shows scheduled lease expirations for all leases for
the Company's Properties as of December 31, 1996.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF TOTAL
GLA ANNUAL BASE RENT
NUMBER OF GLA SUBJECT REPRESENTED BY ANNUAL BASE RENT REPRESENTED BY
YEAR OF LEASES TO EXPIRING EXPIRING UNDER EXPIRING EXPIRING
EXPIRATION (1) EXPIRING LEASES LEASES LEASES (2) LEASES
- ---------------- -------- ------------ ------------- ---------------- -------------------
<C> <C> <C> <C> <C> <C>
1997 3 124,313 6% $ 453,252 5%
1998 7 250,219 12% 1,296,245 16%
1999 8 518,681 24% 1,435,008 17%
2000 7 462,460 21% 2,500,661 30%
2001 1 28,350 1% 149,971 2%
2002 2 230,500 11% 813,925 10%
2003 1 100,000 5% 286,675 3%
2004 1 40,000 2% 140,000 2%
2005 2 66,395 3% 383,178 5%
Thereafter 3 256,861 12% 839,712 10%
-- --------- --- ---------- ----
Total 35 2,077,779 97% $8,298,627 100%
== ========= === ========== ====
</TABLE>
- -------------------------
(1) Lease expirations as of December 31, assuming tenants do not exercise
existing renewal, termination, or purchase options.
(2) Includes minimum contractual rent increases during the term of the lease.
MATERIAL PROPERTIES
At December 31, 1996, three of the Company's Properties (the "Material
Properties") represent ten percent or more of the aggregate book value of the
Properties as of December 31, 1996, or ten percent or more of the aggregate
rental revenues as of December 31, 1996.
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The following table shows the occupancy rate and average annual base rent
per square foot for each of the Material Properties for the periods indicated:
<TABLE>
<CAPTION>
6655 WEDGEWOOD ROAD 365 NORTH AVENUE 2101-2125 GARDNER ROAD
MAPLE GROVE, MN CAROL STREAM, IL BROADVIEW, IL
----------------------------- --------------------------- ----------------------------
AVG ANNUAL AVG ANNUAL AVG ANNUAL
OCCUPANCY BASE RENT OCCUPANCY BASE RENT OCCUPANCY BASE RENT
YEAR RATE (1) PER SQ. FT. RATE (1) PER SQ. FT. RATE (1) PER SQ. FT.
- --------------------------- ---------------- ----------- --------- -------------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1996....................... 100% $8.60 100% $3.79 93% $3.09
1995....................... 100% 8.60 100% 4.00 100% 2.81
1994....................... 100% 7.63 100% 4.00 100% 2.67
1993....................... (2) (2) (3) (3) 100% 2.59
1992....................... (2) (2) (3) (3) 100% 2.42
1991....................... (2) (2) (3) (3) 100% 2.36
</TABLE>
- -----------------------
(1) As of December 31 of the year indicated
(2) The Company acquired this property on September 30, 1994. Information
for periods prior to January 1, 1994, is not available.
(3) The Company acquired this property on November 14, 1994. Information
for periods prior to January 1, 1994, is not available.
The following table sets forth certain information concerning the tenants
and leases at the Material Properties as of December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL BASE PRIMARY
GLA RENT AT LEASE MAXIMUM
OCCUPIED DECEMBER 31, TERM LEASE TERM
TENANT NATURE OF BUSINESS (SQ. FT.) 1996 EXPIRATION EXPIRATION
- ------ -------------------- ------------ ------------- -- -------- -----------
<S> <C> <C> <C> <C> <C>
6655 WEDGEWOOD ROAD
SciMed Life Systems, Inc. (1)............ Medical devices 131,288 $1,129,268 2000 2005
365 NORTH AVENUE
Meyercord Company........................ Printed transfers 225,000 (2) 853,526 2002 2012
and decals
2101-2125 GARDNER ROAD
B.L. Downey.............................. Plastics 138,986 347,460 1997 2012
Alabama Metals Industries Corp........... Rolled steel 100,000 286,674 1998 2003
processor
Independent Metals Corporation........... Rolled steel 61,119 192,528 1998 2003
processor
</TABLE>
- --------------------------------
(1) The tenant currently has the right to terminate the lease on 9 months
prior notice beginning December 31, 1998, without an early termination
fee.
(2) The tenant has subleased 87,571 sq. ft. of this property to CP&P,
Incorporated, which is a fast food paper and plastic supplier.
PROPERTY MANAGEMENT
The Company's properties are managed by the Operating Partnership, of
which FI is the sole general partner.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings arising in the ordinary
course of business. All such proceedings, taken together, are not expected to
have a material impact on the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
None.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
The following sets forth selected financial and operating data for the
Company and its Predecessor Businesses (herein after defined). The following
data should be read in conjunction with the financial statements and notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Form 10-K. "Predecessor
Businesses" include the historical statements of operations of the Properties
from the date of acquisition (or, if the Property was developed, the date
placed in service) by the Operating Partnership or the Pennsylvania Partnership
for the period January 1, 1995 to December 15, 1995 (or the earlier date of
contribution to the Company) and the year ended December 31, 1994.
<TABLE>
<CAPTION>
FIRST INDUSTRIAL SECURITIES, L.P. PREDECESSOR BUSINESSES
-------------------------------- -----------------------------
FOR THE PERIOD FOR THE PERIOD
FOR THE YEAR AUGUST 14, JANUARY 1, FOR THE YEAR
ENDED 1995 TO 1995, TO ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 15, DECEMBER
1996 1995 1995 31 1994
------------ --------------- -------------- -------------
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues.................................... $ 11,516 $ 1,223 $8,048 $ 2,940
Property Expenses................................. 3,394 269 2,291 771
Interest Expense.................................. --- --- 2,376 846
Depreciation and Amortization..................... 1,766 271 1,261 491
---------- ---------- ------ -----------
Net Income........................................ $ 6,356 $ 683 $2,120 $ 832
========== ========== ====== ===========
BALANCE SHEET DATA (END OF PERIOD):
Real Estate, Before Accumulated Depreciation $ 76,255 $ 75,319 $ 52,638
Real Estate, After Accumulated Depreciation 72,582 73,338 52,149
Total Assets...................................... 76,337 75,878 52,404
Acquisition Facility.............................. --- --- 25,175
Total Liabilities................................. 1,440 1,110 26,200
Partners' Capital................................. $ 74,897 $ 74,768 $ 26,204
OTHER DATA (END OF PERIOD):
Total Properties.................................. 19 19 12
Total GLA in sq. ft............................... 2,141,099 2,139,459 1,489,094
Occupancy %....................................... 97% 100% 99%
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with "Selected
Financial and Operating Data" and the historical Financial Statements and
Combined Financial Statements and Notes thereto appearing elsewhere in this
Form 10-K.
RESULTS OF OPERATIONS
The results of operations for the year ended December 31, 1996 include the
operations of the Company. The results of operations for the year ended
December 31, 1995 include the operations of the Predecessor Businesses from
January 1, 1995, to December 15, 1995 and the operations of the Company from
August 14, 1995, to December 31, 1995. The results of operations for the year
ended December 31, 1994, include the operations of the Predecessor Businesses
from January 1, 1994 through December 31, 1994.
At December 31, 1996 and 1995, the Company owned 19 in-service Properties
containing approximately 2.1 million square feet. At December 31, 1994, the
Company owned 12 in-service properties with approximately 1.4 million square
feet. Acquisition and construction of seven Properties containing
approximately .7 million square feet were made between December 31, 1994 and
December 31, 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996, TO YEAR ENDED DECEMBER 31,
1995
Revenues increased by $2.2 million or 24.2%, due primarily to the
Properties acquired or developed after December 31, 1994.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $.8 million or 32.6% due primarily to Properties acquired or
developed after December 31, 1994.
Interest expense decreased from $2.4 million to $0 due to the repayment of
indebtedness collateralized by the Properties at the time of the Contribution.
Depreciation and amortization increased by $.2 million due primarily to
the additional depreciation and amortization related to the Properties acquired
and developed after December 31, 1994.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995, TO YEAR ENDED DECEMBER 31,
1994
Revenues increased by $6.3 million or 215.3%, due primarily to the
Properties acquired or developed after December 31, 1993.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
increased by $1.8 million or 232.0% due primarily to Properties acquired or
developed after December 31, 1993.
Interest expense increased from $.8 million to $2.4 million due primarily
to additional debt incurred in connection with the acquisition and completion
of development of additional Properties after December 31, 1993. As of
December 31, 1995, the Company had no debt outstanding.
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Depreciation and amortization increased by $1.0 million due primarily to
the additional depreciation and amortization related to the Properties acquired
and developed after December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996 and 1995, the Company had no outstanding
indebtedness.
Net cash provided by operating activities was $7.5 million for the year
ended December 31, 1996 compared to $3.6 million for the year ended December
31, 1995. This increase is primarily due to increased net operating income due
to the Properties acquired or developed after December 31, 1994 and reduced
interest expense due to the repayment of indebtedness collateralized by the
Properties at the time of Contribution. Net cash provided by operating
activities was $3.6 million for the year ended December 31, 1995 compared to
$2.1 million for the year ended December 31, 1994. This increased is primarily
due to increased net operating income due to the Properties acquired or
developed after December 31, 1993.
Net cash used in investing activities was $.9 million for the year ended
December 31, 1996 compared to $22.7 million and $52.6 million for the years
ended December 31, 1995 and December 31, 1994, respectively. The significantly
higher net cash used in investing activities for the years ended December 31,
1995 and December 31, 1994 reflect the acquisition and development of
additional Properties.
Net cash used in financing activities for the year ended December 31, 1996
was $6.2 million, comprised of preferred limited partnership distributions to
Securities Corporation and pro rata general and limited partnership
distributions to Securities Corporation and the Operating Partnership,
respectively. Net cash provided by financing activities for the year ended
December 31, 1995 was $20.2 million composed primarily of increased borrowings
related to the purchase and development of additional Properties and Security
Corporation's capital contributions, which were partially offset by the
repayment of indebtedness collateralized by the Properties at the time of
Contribution. Net cash provided by financing activities for the year ended
December 31, 1994 was $50.5 million, reflecting primarily debt and equity
transactions relating to FI's initial public offering in June 1994 ("Initial
Offering") and an increase in indebtedness due to the Properties acquired
subsequent to the Initial Offering.
In 1996, the Company paid preferred limited partnership distributions of
$3.9 million to Securities Corporation. In 1996, the Company paid pro rata
general and limited partnership distributions to Securities Corporation and the
Operating Partnership, respectively, in the aggregate amount of $2.3 million.
The Company has considered its short-term liquidity needs and the adequacy
of its estimated cash flow from operations and other expected liquidity sources
to meet these needs. The Company believes that its principal short-term
liquidity needs are to fund normal recurring expenses and to pay the preferred
limited partnership distribution and other partnership distributions. The
Company anticipates that these needs will be met with cash flows provided by
operating activities.
The Company expects to fund its long-term liquidity requirements for
non-recurring capital improvements with its cash flow from operations and in
part with a deferred maintenance escrow established in connection with the
issuance of the Series A Preferred Shares.
INFLATION
Inflation has not had a significant impact on the Company because of the
relatively low inflation rates in the Company's markets of operation. Most of
the Company's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from
10
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inflation. In addition, many of the leases are for terms less than five years
which may enable the Company to replace existing leases with new leases at
higher base rentals if rents of existing leases are below the then-existing
market rate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedule on
page F-1 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
11
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PART III
ITEM 10 AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND
EXECUTIVE COMPENSATION
The directors and executive officers of Securities Corporation, the general
partner of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
Michael T. Tomasz 54 President, Chief Executive Officer and Director
Michael W. Brennan 40 Chief Operating Officer
Michael J. Havala 37 Chief Financial Officer and Director
Patrick J. Galvin 57 Independent Director
</TABLE>
The independent director receives an annual director's fee of $10,000.
No other director or executive officer of Securities Corporation receives any
separate compensation as such.
The following biographical descriptions set forth certain information with
respect to the directors and executive officers of Securities Corporation:
Michael T. Tomasz. Mr. Tomasz has been President, Chief Executive
Officer and Director of Securities Corporation since its inception and has been
President, Chief Executive Officer and Director of FI since April 1994.
Between 1986 and 1994, he was managing partner of the Chicago office of The
Shidler Group and was involved in the acquisition, financing, leasing, managing
and disposition of over $270 million of commercial property.
Michael W. Brennan. Mr. Brennan has been Chief Operating Officer of
Securities Corporation since its inception and has been Chief Operating Officer
of FI since December 1995 and a Director of FI since March, 1996, prior to
which time he was Senior Vice President, Asset Management of FI since April
1994. He was a partner of The Shidler Group between 1988 and 1994 and the
President of the Brennan/Tomasz/Shidler Investment Corporation and was in
charge of asset management, leasing, project finance, accounting and treasury
functions for The Shidler Group's Chicago operations.
Michael J. Havala. Mr. Havala has been Chief Financial Officer and
Director of Securities Corporation since its inception and has been the Chief
Financial Officer of FI since April 1994. Between 1989 and 1994 he was Chief
Financial Officer for The Shidler Group's Midwest region with responsibility
for accounting, finance and treasury functions.
Patrick J. Galvin. Mr. Galvin has been Director of Securities Corporation
since 1995. He has been a senior partner in the law firm of Galvin, Galvin &
Leeney in Hammond, Indiana since 1986. He is admitted to the practice of law
in the States of Indiana and Illinois and the District of Columbia and is a
member of the American Bar Asociation. Mr. Galvin holds a Bachelor of Arts
degree from the University of Notre Dame and received J.D. and L.L.M. in
taxation degrees from the Georgetown University Law Center. He serves on the
Board of Directors of Mercantile National Bank of Indiana.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Securities Corporation owns a 1% general partner interest and the
preferred limited partner interest in the Company. The Operating Partnership
owns a 99% limited partner interest in the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Properties are managed by the Operating Partnership pursuant
to a property management agreement. Management fees incurred are based on
3.25% of gross receipts. These fees totaled approximately $386,000 for the
period January 1, 1996 to December 31, 1996.
12
<PAGE> 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE AND EXHIBITS
(1 & 2) See Index to Financial Statements and Financial Statement
Schedule on page F-1 of this Form 10-K
(3) Exhibits:
Exhibit No. Description
----------- -----------
4.1 The Limited Partnership Agreement of First
Industrial Securities, L.P. (incorporated by
reference to Exhibit 4.1 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
4.2 Amended and Restated Articles of Incorporation
of First Industrial Securities Corporation
(incorporated by reference to Exhibit 4.2 of the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995, File No.
33-97014-01).
4.3 Articles Supplementary of First Industrial
Securities Corporation (incorporated by
reference to Exhibit 4.3 of the Company's Annual
Report on Form 10-K for the year ended December
31, 1995, File No. 33-97014-01)
4.4 Bylaws of First Industrial Securities
Corporation (incorporated by reference to
Exhibit 4.4 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995,
File No. 33-97014-01)
10.1 Guarantee and Payment Agreement (incorporated
by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
10.2 Agency and Advance Agreement (incorporated by
reference to Exhibit 10.2 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
10.3 Guarantee Agency Agreement (incorporated by
reference to Exhibit 10.3 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
10.4 Property Management Agreement (incorporated by
reference to Exhibit 10.4 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
10.5 Contribution Agreement by and between First
Industrial Pennsylvania, L.P. and First
Industrial Securities, L.P. (incorporated by
reference to Exhibit 10.5 of the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 33-97014-01)
10.6 Contribution Agreement by and between First
Industrial, L.P. and First Industrial
Securities, L.P. (incorporated by reference to
Exhibit 10.6 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995,
File No. 33-97014-01)
10.7 Contribution Agreement by and between First
Industrial, L.P. and First Industrial
Securities, L.P. relating to over-allotment
(incorporated by reference to Exhibit 10.7 of
the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, File No.
33-97014-01)
27 * Financial Data Schedule
* Filed herewith.
(b) REPORTS ON FORM 8-K None.
13
<PAGE> 14
SIGNATURES
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 SECURITIES, L.P.
BY: FIRST INDUSTRIAL SECURITIES CORPORATION,
ITS SOLE GENERAL PARTNER
Date: March 27, 1997 By:/s/ Michael T. Tomasz
-------------------------------------
Michael T. Tomasz
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 27, 1997 By:/s/ Michael J. Havala
------------------------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael T. Tomasz President, Chief Executive Officer March 27, 1997
--------------------- and Director
Michael T. Tomasz
/s/ Michael J. Havala Chief Financial Officer and Director March 27, 1997
---------------------
Michael J. Havala
/s/ Patrick J. Galvin Director March 27, 1997
---------------------
Patrick J. Galvin
14
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
----------- ------------------------
27 Financial Data Schedule
15
<PAGE> 16
FIRST INDUSTRIAL SECURITIES, L.P.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
FINANCIAL STATEMENTS
<S> <C>
Report of Independent
Accountants............................................... F-2
Balance Sheets of First Industrial Securities, L.P. (the
"Company") as of December 31, 1996 and 1995............... F-3
Statements of Operations of the Company for the Year
Ended December 31, 1996 and for the Period August 14,
1995 to December 31, 1995 and the Combined Statements of
Operations for the Predecessor Businesses for the Period
January 1, 1995 to December 15, 1995 and for the Year
Ended December 31, 1994................................... F-4
Statements of Changes in Partners' Capital of the Company
for the Year Ended December 31, 1996 and for the Period
August 14, 1995 to December 31, 1995 and the Combined
Statements of Changes in Partners' Capital of the
Predecessor Businesses for the Period January 1, 1995 to
December 15, 1995 and for the Year Ended December 31,
1994...................................................... F-5
Statements of Cash Flows of the Company for the Year
Ended December 31, 1996 and for the Period August 14,
1995 to December 31, 1995 and the Combined Statements of
Cash Flows of the Predecessor Businesses for the Period
January 1, 1995 to December 15, 1995 and for the Year
Ended December 31, 1994................................... F-6
Notes to Consolidated and Combined Financial Statements... F-7
FINANCIAL STATEMENT SCHEDULE
Schedule III: Real Estate and Accumulated Depreciation.... S-1
</TABLE>
F-1
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
First Industrial Securities, L.P.
We have audited the financial statements and the financial statement
schedule of First Industrial Securities, L.P. (the "Company") and the combined
financial statements of the Predecessor Businesses as listed on page F-1 of
this Form 10-K. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Industrial
Securities, L.P. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the year ended December 31, 1996 and for the
period August 14, 1995 through December 31, 1995 and the combined results of
operations and cash flows of the Predecessor Businesses for the period January
1, 1995 through December 15, 1995 and for the year ended December 31, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 12, 1997
F-2
<PAGE> 18
FIRST INDUSTRIAL SECURITIES, L.P.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
ASSETS:
Investment in Real Estate:
Land.................................................... $ 11,626 $ 11,626
Buildings and Improvements.............................. 64,629 63,693
Less: Accumulated Depreciation.......................... (3,673) (1,981)
--------------- -------------
Net Investment in Real Estate......................... 72,582 73,338
Cash and Cash Equivalents................................ 1,428 1,112
Restricted Cash.......................................... 411 414
Tenant Accounts Receivable, Net.......................... 568 163
Deferred Rent Receivable................................. 717 426
Prepaid Expenses and Other Assets, Net................... 631 425
--------------- -------------
Total Assets.......................................... $ 76,337 $ 75,878
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
LIALBILITIES:
Accounts Payable and Accrued Expenses................... $858 $ 677
Rents Received in Advance and Security Deposits......... 582 433
--------------- -------------
Total Liabilities................................... 1,440 1,110
--------------- -------------
Commitments and Contingencies........................... --- ---
PARTNERS' CAPITAL:
General Partner and Preferred Limited Partner........... 41,254 41,253
Limited Partner......................................... 33,643 33,515
--------------- -------------
Total Partners' Capital............................. 74,897 74,768
--------------- -------------
Total Liabilities and Partners' Capital............. $ 76,337 $ 75,878
=============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 19
FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF OPERATIONS AND
PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
First Industrial Securities, L.P. Predecessor Businesses
------------------------------------- --------------------------------------
For the Period For the Period
August 14, January 1, For the Year
Year Ended 1995 to 1995 to Ended
December 31, December 31, December 15, December 31,
1996 1995 1995 1994
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income........................... $ 8,644 $ 974 $6,261 $2,273
Tenant Recoveries and Other Income...... 2,872 249 1,787 667
------- ----- ------ ------
Total Revenues........................ 11,516 1,223 8,048 2,940
------- ----- ------ ------
Expenses:
Real Estate Taxes....................... 2,328 219 1,597 538
Repairs and Maintenance................. 390 6 217 68
Property Management..................... 386 36 271 91
Utilities............................... 106 2 72 42
Insurance............................... 70 6 81 26
Other................................... 114 --- 53 6
Interest Expense........................ --- --- 2,376 846
Depreciation and Other Amortization..... 1,766 271 1,261 491
------- ----- ------ ------
Total Expenses....................... 5,160 540 5,928 2,108
------- ----- ------ ------
Net Income.............................. $ 6,356 $ 683 $2,120 $ 832
======= ===== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 20
FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL AND
PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Predecessor
Businesses
-----------------
Total Partners' Capital
--------- -----------------
<S> <C> <C>
Balance at January 1, 1994.... $ --- $ ---
Contributions............... 25,372 25,372
Net Income.................. 832 832
-------- --------
Balance at December 31, 1994 $ 26,204 $ 26,204
Contributions............... $ 4,567 $ 4,567
Distributions (Note 2)...... (32,891) (32,891)
Net Income.................. 2,120 2,120
-------- --------
Balance at December 15, 1995.. $ --- $ ---
======== ========
</TABLE>
<TABLE>
<CAPTION>
First Industrial Securities, L.P.
-----------------------------------------------------
General
Partner and
Limited Preferred
Total Partner Limited Partner
-------- ------- ---------------
<S> <C> <C> <C>
Balance at August 14, 1995.... $ --- $ --- $ ---
Contributions: Cash......... 41,251 --- 41,251
Contributions: Other........ 33,302 33,302 ---
Distributions............... (468) --- (468)
Net Income.................. 683 213 470
-------- -------- ---------
Balance at December 31, 1995 $ 74,768 $ 33,515 $ 41,253
Distributions............... $ (6,227) $ (2,284) $ (3,943)
Net Income.................. 6,356 $ 2,412 $ 3,944
-------- -------- ---------
Balance at December 31, 1996.. $ 74,897 $ 33,643 $ 41,254
======== ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 21
FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF CASH FLOWS AND
PREDECESSOR BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
First Industrial Securities, L.P. Predecessor Businesses
--------------------------------- -----------------------
For the Period
For the Year August 14, For the Period For the Year
Ended 1995 to January 1, 1995 Ended
December 31, December 31, to December 15, December 31,
1996 1995 1995 1994
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................................... $6,356 $683 $2,120 $832
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization.................................... 1,766 271 1,261 491
Provision for Bad Debts.......................................... 50 --- --- ---
Increase in Tenant Accounts Receivable........................... (455) (163) --- ---
Increase in Deferred Rent Receivable, Prepaid
Expenses and Other Assets....................................... (568) (105) (534) (257)
Increase (Decrease) in Accounts Payable, Accrued Expenses,
Rents Received in Advance and Security Deposits................. 330 893 (808) 1,025
------ ------ -------- --------
Net Cash Provided by Operating Activities..................... 7,479 1,579 2,039 2,091
------ ------ -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of and Additions to Investment in Real Estate
and Construction in Progress..................................... (936) --- (22,681) (52,638)
------ ------ -------- --------
Net Cash Used In Investing Activities............................. (936) --- (22,681) (52,638)
------ ------ -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions..................................................... (6,227) (468) --- ---
Proceeds from Acquisition Facilities Payable...................... --- --- 16,075 35,555
Repayments on Acquisition Facilities Payable...................... --- (41,250) --- (10,380)
Capital Contributions............................................. --- 41,251 4,567 25,372
------ ------ -------- --------
Net Cash (Used In) Provided by Financing Activities............ (6,227) (467) 20,642 50,547
------ ------ -------- --------
Net Increase in Cash and Cash Equivalents............................. 316 1,112 --- ---
Cash and Cash Equivalents, Beginning of Period........................ 1,112 --- --- ---
------ ------ -------- --------
Cash and Cash Equivalents, End of Period.............................. $1,428 $1,112 $ 0 $ 0
====== ====== ======== ========
Supplemental Cash Flow Information
Cash Paid for Interest......................................... $ --- $ --- $ 1,957 $ 846
====== ====== ======== ========
Interest Capitalized........................................... $ --- $ --- $ 114 $ 20
====== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 22
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION
First Industrial Securities, L.P. ("the Company") is a Delaware limited
partnership formed on August 14, 1995, the 1% general partner of which is First
Industrial Securities Corporation ("Securities Corporation"), a wholly owned
subsidiary of First Industrial Realty Trust, Inc. ("FI"), and the 99% limited
partner of which is First Industrial, L.P. (the "Operating Partnership"), of
which FI is the sole general partner. Securities Corporation also owns a
preferred limited partnership interest in the Company.
The limited partnership agreement of the Company (the "Limited Partnership
Agreement") and the Guarantee Agreement contain covenants generally restricting
the Company's activities to the ownership and operation of the properties and,
under certain circumstances, other industrial properties. These covenants shall
cease to have any effect upon the termination of the Guarantee. Under its
Articles of Incorporation, Securities Corporation's sole purpose will be to act
as general partner of the Company and to pay dividends on its common and
preferred stock. These and other restrictions are intended to assure that even
in the event of FI, the Operating Partnership or other affiliates of FI
becoming subject to federal bankruptcy proceedings, neither Securities
Corporation nor the Company nor their assets will be treated as subject to such
bankruptcy proceedings under the doctrine of substantive consolidation or other
doctrines (except to the extent liabilities are imposed by non-insolvency
regulatory statutes on affiliates) and that activities of FI, the Operating
Partnership and other affiliates will not cause Securities Corporation or the
Company to become insolvent or unable to pay their debts as they mature
(including the Guarantee).
2. FORMATION TRANSACTIONS
The Initial Capitalization
The Company was capitalized with a capital contribution of $1 on August
28, 1995 by Securities Corporation.
The Contribution Transactions
On November 17, 1995, FI completed a public offering of 1,500,000 shares
of $.01 par value 9 1/2% Series A Cumulative Preferred Stock at $25.00 per
share, and on December 14, 1995, FI issued 150,000 shares of $.01 par value 9
1/2% Series A Cumulative Preferred Stock for $25.00 per share pursuant to the
underwriters' exercise of their over-allotment option (together the "Series A
Preferred Shares"). The issuance of 1,650,000 Series A Preferred Shares is
thus referred to as the "Offering". Gross proceeds to FI from the Offering
were $41,250. FI contributed to Securities Corporation the gross proceeds from
the Offering in exchange for preferred stock of Securities Corporation, and
Securities Corporation contributed such proceeds to the Company in exchange for
a preferred limited partnership interest in the Company. The Operating
Partnership and First Industrial Pennsylvania, L.P. (the "Pennsylvania
Partnership"), a Delaware limited partnership and a subsidiary of the Operating
Partnership, contributed to the Company, in return for limited partnership
interests, 14 properties and 5 properties (described below) on November 17,
1995 and December 14, 1995, respectively, encumbered by liens collateralizing
debt under the 1994 Acquisition Facility (herein after defined). An amount of
such debt equal to the gross proceeds of
F-7
<PAGE> 23
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
the Offering was repaid by the Company and such liens on the properties
described below have been released. The Pennsylvania Partnership contributed
its limited partnership interest in the Company to the Operating Partnership.
The foregoing is herein collectively referred to as the "Contribution
Transactions". The Company commenced operations on November 17, 1995.
The Properties
Upon consummation of the Offering and the Contribution Transactions
(collectively, the "Formation Transactions"), the Company owned 19 properties
located in four states containing an aggregate of approximately 2.1 million
square feet (unaudited) of gross leasable area ("GLA"). Of the properties:
(a) Four were acquired by the Operating Partnership prior to FI's
initial public offering (the "Initial Offering") in June, 1994;
(b) Two were acquired concurrently with the consummation of the
Initial Offering; and
(c) Thirteen were acquired or developed by either the Operating
Partnership or the Pennsylvania Partnership subsequent to the
Initial Offering.
The Guarantee
In connection with the Offering, the Company entered into a Guarantee and
Payment Agreement (the "Guarantee Agreement") pursuant to which the Company
guaranteed the payment of dividends on, and payments on liquidation or
redemption of, the Series A Preferred Shares.
The guarantee was created through the execution of the Guarantee Agreement
between the Company and Securities Corporation, for the benefit of a guarantee
agent. The Guarantee Agreement is administered and enforced for the benefit
for the holders of the Series A Preferred Shares by the guarantee agent. The
guarantee agent may enforce the guarantee directly against the Company only
with the approval of the holders of at least 25% of the outstanding Series A
Preferred Shares. No holder may seek directly to enforce the guarantee.
Under the terms of the Guarantee Agreement, the Company was required to
deposit approximately $414 into a restricted cash escrow account with the
guarantee agent. These funds were set aside to pay for certain repair and
maintenance items of the contributed properties.
3. BASIS OF PRESENTATION
The Statements of Operations for the Company present the operations of the
Company for the year ended December 31, 1996 and for the period August 14, 1995
to December 31, 1995. The Combined Statements of Operations for the
Predecessor Business present the historical operations
F-8
<PAGE> 24
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
of the properties from the date of acquisition (or, if the property was
developed, the date placed in service) by the Predecessor Businesses through
the dates of the Contribution Transactions.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In order to conform with the generally accepted accounting principles,
management, in preparation of the financial statements, is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of December
31, 1996 and 1995, and the reported amounts of revenues and expenses for the
year ended December 31, 1996, the period August 14, 1995 to December 31, 1995,
the period January 1, 1995 to December 15, 1995 and the year ended December 31,
1994. Actual results could differ from those estimates.
Revenue Recognition:
Rental income is recognized on a straight-line method under which
contractual rent increases are recognized evenly over the lease term. Tenant
recovery income includes payments from tenants for taxes, insurance and other
property operating expenses and are recognized as revenues in the period the
related expenses are incurred by the Company.
The Company evaluates and, if applicable, provides for an allowance for
doubtful accounts against the portion of accounts receivable which is estimated
to be uncollectible. Accounts receivable in the balance sheets are shown net
of an allowance for doubtful accounts of $50 and $0 as of December 31, 1996 and
1995, respectively.
General and Administrative
Expenses incurred related to the operations of the properties are
reflected in property management expense, therefore, there is no allocation of
FI's general and administrative expense.
Investment in Real Estate and Depreciation:
Effective from the Company's inception, the Company adopted Financial
Accounting Standards Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Real estate
assets are carried at the lower depreciated cost or fair value as determined by
the Company. The Company reviews its properties on a quarterly basis for
impairment and provides an allowance if impairments are determined. First, to
determine if impairment may exist, the Company reviews its properties and
identifies those which have had either an event of change or event of
circumstance warranting further assessment of recoverability. Then, the
Company estimates the fair value of those properties on an individual basis by
capitalizing the expected net operating income and discounting the expected
cash flows of the properties. Such amounts are then compared to the
property's depreciated cost to determine whether an impairment exists.
F-9
<PAGE> 25
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
Interest expense, real estate taxes and other directly related expenses
incurred during construction periods are capitalized and depreciated commencing
with the date placed in service, on the same basis as the related assets.
Depreciation expense is computed using the straight-line method based on the
following useful lives:
<TABLE>
<S> <C>
Years
--------
Buildings and Improvements................................ 38 to 40
Land Improvements......................................... 15
</TABLE>
Construction expenditures for tenant improvements and leasing commissions
are capitalized and amortized over the terms of each specific lease.
Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are capitalized.
When assets are sold or retired, their costs and accumulated depreciation
are removed from the accounts with the resulting gains or losses reflected in
net income or loss.
Cash and Cash Equivalents:
Cash and cash equivalents include all cash and liquid investments with an
initial maturity of three months or less. The carrying amount approximates
fair value due to the short maturity of these investments.
Income Taxes:
No federal income taxes are payable by the Company or the Predecessor
Businesses, and none have been provided for in the accompanying financial
statements and combined financial statements. Prior to the Offering, the
Predecessor Businesses were owned by the Operating Partnership and the
Pennsylvania Partnership. In accordance with partnership taxation, each of the
partners are responsible for reporting their share of taxable income or loss.
Fair Value of Financial Investments:
The Company's financial instruments include short-term investments, tenant
accounts receivable, accounts payable and other accrued expenses. The fair
value of these financial instruments was not materially different from their
carrying amount or contract values.
Reclassifications:
Certain amounts in the 1995 financial statements were reclassified to
conform with the current year presentation.
F-10
<PAGE> 26
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. RELATED PARTY TRANSACTIONS
The 19 properties owned by the Company are managed by the Operating
Partnership, of which FI is the sole general partner. Management fees incurred
are based on 3.25% of gross receipts. Such fees totaled $386 and $36 for the
year ended December 31, 1996 and the period August 14, 1995 to December 31,
1995, respectively. At December 31, 1996 and December 31, 1995, $42 and $36 of
accrued management fees were due to the Operating Partnership, respectively.
6. THE ACQUISITION FACILITY PAYABLE
On June 30, 1994, the Operating Partnership entered into a revolving
credit facility (the "1994 Acquisition Facility") under which the Operating
Partnership may borrow to finance the acquisition of additional properties and
for other corporate purposes, including working capital. The combined
financial statements of the Predecessor Business assume a loan balance
proportional to the total lender's estimated value of the properties compared
to the total lender's estimated value of all properties collateralizing the
1994 Acquisition Facility. Borrowings under the 1994 Acquisition Facility
bear interest at a floating rate based on a "Corporate Base Rate" plus .5% or
LIBOR plus 2.0%. Under the 1994 Acquisition Facility, interest only payments
are due monthly. The borrowings under the 1994 Acquisition Facility are
cross-collateralized by certain other properties acquired and held by the
Operating Partnership and the Pennsylvania Partnership. In connection with the
Contribution Transactions, the outstanding balance under the 1994 Acquisition
Facility allocable to the Predecessor Businesses was repaid and the liens on
the properties collateralizing such facility were released.
7. FUTURE RENTAL REVENUES
The Company's properties are leased to tenants under net and semi-net
operating leases. Minimum lease payments receivable, excluding tenant
reimbursements of expenses, under noncancelable operating leases in effect as
of December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997 $ 8,116
1998 7,470
1999 6,022
2000 5,011
2001 2,884
Thereafter 8,546
-------
Total $38,049
=======
</TABLE>
Three of the Company's properties represent ten percent or more of the
aggregate book value of the assets as of December 31, 1996, or ten percent or
more of the Company's aggregate rental revenues as of December 31, 1996.
F-11
<PAGE> 27
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of noncash investing and financing activities:
Exchange of Limited Partnership Interest for Assets and Liabilities
<TABLE>
<CAPTION>
First Industrial
Securities, L.P.
For the Period
August 14, 1995 to
December 31, 1995
-----------------
<S> <C>
Land....................................... $ 11,626
Buildings and Improvements................. 63,693
Accumulated Depreciation................... (1,718)
Restricted Cash............................ 414
Deferred Rent Receivable................... 387
Other Assets............................... 367
Acquisition Facility Payable............... (41,250)
Accrued Expenses........................... (217)
Limited Partnership Interest............... (33,302)
-----------------
$ 0
-----------------
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal actions
arising from the ownership of their properties. In management's opinion, the
liabilities, if any, that may ultimately result from such legal actions are not
expected to have a material adverse effect on the consolidated financial
position, results of operations or liquidity of the Company or the Predecessor
Businesses.
Two properties have leases granting the tenants options to purchase the
property. Such options are exercisable at various times and at an appraised
fair market value or at a fixed purchased price generally in excess of the
Company's purchase price. The Company has no notice of any exercise of any
tenant purchase option.
F-12
<PAGE> 28
FIRST INDUSTRIAL SECURITIES, L.P. AND PREDECESSOR BUSINESS
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Industrial Securities, L.P.
Year Ended December 31, 1996
----------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues..................... $2,742 $3,005 $ 2,876 $2,893
Property Expenses............ (680) (775) (1,059) (880)
Depreciation and Amortization (439) (439) (442) (446)
------ ------ ------- ------
Net Income................... $1,623 $1,791 $ 1,375 $1,567
====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
First Industrial Predecessor
Predecessor Businesses Securities. L.P. Businesses
Year Ended December 31, 1995 Year Ended December 31, 1995
----------------------------------------------------- -----------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Revenues..................... $1,927 $2,195 $2,739 $1,223 $1,187
Property Expenses............ (502) (595) (648) (269) (546)
Interest Expense............. (577) (659) (744) --- (396)
Depreciation and Amortization (324) (368) (389) (271) (180)
------------- -------------- ------------- -----------------------------
Net Income................... $524 $573 $958 $683 $65
============= ============== ============= ==============================
</TABLE>
F-13
<PAGE> 29
FIRST INDUSTRIAL SECURITIES, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COSTS
(A) CAPITALIZED
INITIAL COST SUBSEQUENT TO
LOCATION ---------------------- ACQUISITION OR
BUILDING ADDRESS (CITY/STATE) LAND BUILDINGS COMPLETION
- ---------------- ------------ ------- --------- ---------------
<S> <C> <C> <C> <C>
5020 Louise Drive Mechanisburg, PA $ 707 $ --- $2,773
7195 Grayson Harrisburg, IL 478 2,771 73
3150-3160 MacArthur Boulevard Northbrook, IL 439 2,518 103
2101-2125 Gardner Road Broadview, IL 1,177 6,818 103
365 North Avenue Carol Stream, IL 1,208 6,961 81
2942 MacArthur Boulevard Northbrook, IL 315 1,803 15
2965 Technology Drive Rochester Hills, MI 953 --- 2,403
1451 Lincoln Avenue Madison, MI 299 1,703 187
4400 Purks Drive Auburn Hills, MI 602 3,410 111
4177A Varsity Drive Ann Arbor, MI 90 536 59
6515 Cobb Drive Sterling Heights, MI 305 1,753 29
425 Gordon Industrial Court Grand Rapids, MI 611 3,747 692
2851 Prairie Street Grand Rapids, MI 337 2,778 271
2945 Walkent Court Grand Rapids, MI 310 2,074 294
537 76th Street Grand Rapids, MI 255 1,456 113
6655 Wedgewood Road Maple Grove, MN 1,465 8,410 75
900 Apollo Road Eagan, MN 1,029 5,855 193
7316 Aspen Lane North Brooklyn, MN 368 2,156 145
6707 Shingle Creek Parkway Brooklyn Center, MN 376 2,101 361
------- ------- ------
$11,324 $56,850 $8,081
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD (12/31/96)(C)
--------------------------------------
LOCATION BUILDING AND
BUILDING ADDRESS (CITY/STATE) LAND IMPROVEMENTS TOTAL
- ---------------- ------------ ------ ------------- ------
<S> <C> <C> <C> <C>
5020 Louise Drive Mechanisburg, PA $ 716 $ 2,764 $ 3,480
7195 Grayson Harrisburg, IL 479 2,843 3,322
3150-3160 MacArthur Boulevard Northbrook, IL 439 2,621 3,060
2101-2125 Gardner Road Broadview, IL 1,228 6,870 8,098
365 North Avenue Carol Stream, IL 1,208 7,042 8,250
2942 MacArthur Boulevard Northbrook, IL 315 1,818 2,133
2965 Technology Drive Rochester Hills, MI 964 2,392 3,356
1451 Lincoln Avenue Madison, MI 305 1,884 2,189
4400 Purks Drive Auburn Hills, MI 610 3,513 4,123
4177A Varsity Drive Ann Arbor, MI 90 595 685
6515 Cobb Drive Sterling Heights, MI 305 1,782 2,087
425 Gordon Industrial Court Grand Rapids, MI 644 4,406 5,050
2851 Prairie Street Grand Rapids, MI 445 2,941 3,386
2945 Walkent Court Grand Rapids, MI 352 2,326 2,678
537 76th Street Grand Rapids, MI 258 1,566 1,824
6655 Wedgewood Road Maple Grove, MN 1,466 8,484 9,950
900 Apollo Road Eagan, MN 1,029 6,048 7,077
7316 Aspen Lane North Brooklyn, MN 394 2,275 2,669
6707 Shingle Creek Parkway Brooklyn Center, MN 379 2,459 2,838
------- ------- -------
$11,626 $64,629 $76,255
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
LOCATION DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS (CITY/STATE) 12/31/96 RENOVATED LIVES(YEARS)
- ---------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C>
5020 Louise Drive Mechanisburg, PA $ 173 1995 (b)
7195 Grayson Harrisburg, IL 147 1994 (b)
3150-3160 MacArthur Boulevard Northbrook, IL 159 1978 (b)
2101-2125 Gardner Road Broadview, IL 398 1950/69 (b)
365 North Avenue Carol Stream, IL 395 1969 (b)
2942 MacArthur Boulevard Northbrook, IL 113 1979 (b)
2965 Technology Drive Rochester Hills, MI 114 1995 (b)
1451 Lincoln Avenue Madison, MI 79 1967 (b)
4400 Purks Drive Auburn Hills, MI 138 1987 (b)
4177A Varsity Drive Ann Arbor, MI 59 1993 (b)
6515 Cobb Drive Sterling Heights, MI 103 1984 (b)
425 Gordon Industrial Court Grand Rapids, MI 294 1990 (b)
2851 Prairie Street Grand Rapids, MI 203 1989 (b)
2945 Walkent Court Grand Rapids, MI 161 1993 (b)
537 76th Street Grand Rapids, MI 68 1987 (b)
6655 Wedgewood Road Maple Grove, MN 493 1989 (b)
900 Apollo Road Eagan, MN 276 1970 (b)
7316 Aspen Lane North Brooklyn, MN 100 1978 (b)
6707 Shingle Creek Parkway Brooklyn Center, MI 200 1986 (b)
------
$3,673
======
</TABLE>
NOTES:
(a) Initial cost for each respective property is total acquisition
costs associated with its purchase.
(b) Depreciation is computed based upon the following estimated
lives:
<TABLE>
<S> <C>
Buildings, Improvements 38 to 40 years
Tenant Improvements, Leasehold Improvements Life of lease
</TABLE>
(c) At December 31, 1996, aggregate cost of land, buildings and
improvements for federal income tax purposes was approximately
$76 million.
There were no encumbrances on the properties at December 31, 1996
S-1
<PAGE> 30
FIRST INDUSTRIAL SECURITIES, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
The changes in total real estate assets for the years ended December
31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
First Industrial Securities, L.P.
---------------------------------
1996 1995
------- -------
<S> <C> <C>
Balance, Beginning of Year................................................... $75,319 $ ---
Capital Contribution from Operating Partnership and Pennsylvania Partnership,
Acquisitions, Construction Costs and Improvements 936 75,319
------- -------
Balance, End of Year......................................................... $76,255 $75,319
======= =======
</TABLE>
The changes in accumulated depreciation for the years ended December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
First Industrial Securities, L.P.
---------------------------------
1996 1995
------ -----
<S> <C> <C>
Balance, Beginning of Year....................................................... $1,981 $ ---
Capital Contribution from Operating Partnership and Pennsylvania Partnership,
Acquisitions, Construction Costs and Improvements.............................. --- 1,718
Depreciation..................................................................... 1,692 263
------ ------
Balance, End of Year............................................................. $3,673 $1,981
====== ======
</TABLE>
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST INDUSTRIAL SECURITIES, L.P. FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,428
<SECURITIES> 0
<RECEIVABLES> 618
<ALLOWANCES> (50)
<INVENTORY> 0
<CURRENT-ASSETS> 1,996
<PP&E> 76,255
<DEPRECIATION> (3,673)
<TOTAL-ASSETS> 76,337
<CURRENT-LIABILITIES> 858
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 74,897
<TOTAL-LIABILITY-AND-EQUITY> 76,337
<SALES> 0
<TOTAL-REVENUES> 11,516
<CGS> 0
<TOTAL-COSTS> 3,394
<OTHER-EXPENSES> 1,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,356
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,356
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,356
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
