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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
__________________
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.)
311 S. WACKER DRIVE, SUITE 4000, CHICAGO, ILLINOIS 60606
(Address of principal executive offices)
(312) 344-4300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No / /.
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FIRST INDUSTRIAL SECURITIES, L.P.
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1998
INDEX
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PART I: FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Balance Sheets of First Industrial
Securities, L.P. as of June 30, 1998
and December 31, 1997.................................. 2
Statements of Operations of First
Industrial Securities, L.P. for the
Six Months Ended June 30, 1998 and June 30, 1997....... 3
Statements of Operations of First
Industrial Securities, L.P. for the
Three Months Ended June 30, 1998 and June 30, 1997..... 4
Statements of Cash Flows of First
Industrial Securities, L.P. for the
Six Months Ended June 30, 1998 and June 30, 1997....... 5
Notes to Financial Statements.......................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations................................ 8-9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings............................. 10
Item 2. Changes in Securities......................... 10
Item 3. Defaults Upon Senior Securities............... 10
Item 4. Submission of Matters to a Vote of
Security Holders............................ 10
Item 5. Other Information............................. 10
Item 6. Exhibits and Reports on Form 8-K.............. 10
SIGNATURE................................................... 11
EXHIBIT INDEX............................................... 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST INDUSTRIAL SECURITIES, L.P.
BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
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June 30, December 31,
1998 1997
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ASSETS
Assets:
Investment in Real Estate:
Land................................................................ $ 11,626 $ 11,626
Buildings and Improvements.......................................... 68,344 65,767
Construction in Progress............................................ --- 2,098
Less: Accumulated Depreciation..................................... (6,256) (5,385)
------------ ------------
Net Investment in Real Estate.................................... 73,714 74,106
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Cash and Cash Equivalents............................................ 1,188 458
Restricted Cash...................................................... 411 411
Tenant Accounts Receivable, Net...................................... 268 99
Deferred Rent Receivable............................................. 1,289 1,102
Prepaid Expenses and Other Assets, Net............................... 545 646
------------ ------------
Total Assets.................................................... $ 77,415 $ 76,822
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts Payable and Accrued Expenses.............................. 532 1,053
Rents Received in Advance and Security Deposits.................... 398 468
------------ ------------
Total Liabilities.................................................... 930 1,521
------------ ------------
Commitments and Contingencies........................................ --- ---
Partners' Capital:
General Partner and Preferred Limited Partner...................... 41,269 41,258
Limited Partner.................................................... 35,216 34,043
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Total Partners' Capital......................................... 76,485 75,301
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Total Liabilities and Partners' Capital......................... $ 77,415 $ 76,822
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
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Six Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
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Revenues:
Rental Income........................................... $ 4,747 $ 4,166
Tenant Recoveries and Other Income...................... 1,492 1,390
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Total Revenues..................................... 6,239 5,556
----------- ----------
Expenses:
Real Estate Taxes....................................... 1,147 1,122
Repairs and Maintenance................................. 173 270
Property Management..................................... 200 179
Utilities............................................... 52 99
Insurance............................................... 16 18
Other................................................... 26 45
Depreciation and Amortization........................... 931 890
----------- ----------
Total Expenses..................................... 2,545 2,623
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Net Income............................................... $ 3,694 $ 2,933
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
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Three Three
Months Ended Months Ended
June 30, 1998 June 30, 1997
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Revenues:
Rental Income.............................. $ 2,384 $ 2,008
Tenant Recoveries and Other Income......... 825 669
- - --------- --------
Total Revenues........................ 3,209 2,677
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Expenses:
Real Estate Taxes.......................... 589 550
Repairs and Maintenance.................... 86 96
Property Management........................ 105 93
Utilities.................................. 19 45
Insurance.................................. 8 8
Other...................................... 17 37
Depreciation and Amortization.............. 469 443
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Total Expenses........................ 1,293 1,272
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Net Income.................................. $ 1,916 $ 1,405
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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FIRST INDUSTRIAL SECURITIES, L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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Six Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................... $ 3,694 $ 2,933
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization.............................. 931 890
(Increase) Decrease in Tenant Accounts Receivable.......... (169) 106
Increase in Deferred Rent Receivable....................... (187) (216)
Decrease in Prepaid Expenses and Other Assets, Net......... 41 93
(Decrease) Increase in Accounts Payable and Accrued
Expenses and Rents Received in Advance and Security
Deposits................................................ (142) 114
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Net Cash Provided by Operating Activities.............. 4,168 3,920
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate....... (928) (330)
---------- ----------
Net Cash Used in Investing Activities.................. (928) (330)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions................................................ (2,510) (3,260)
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Net Cash Used In Financing Activities.................. (2,510) (3,260)
---------- ----------
Net Increase in Cash and Cash Equivalents..................... 730 330
Cash and Cash Equivalents, Beginning of Period................ 458 1,428
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Cash and Cash Equivalents, End of Period...................... $ 1,188 $ 1,758
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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FIRST INDUSTRIAL SECURITIES, L.P.
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. ("FR"), and the 99% limited
partner of which is First Industrial, L.P. (the "Operating Partnership"), of
which FR is the sole general partner. Securities Corporation also owns a
preferred limited partnership interest in the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim financial statements have been prepared in
accordance with the accounting policies described in the financial statements
and related notes included in the Company's 1997 Form 10-K and should be read in
conjunction with such financial statements and related notes. The following
notes to these interim financial statements highlight significant changes to the
notes included in the December 31, 1997 audited financial statements included in
the Company's 1997 Form 10-K and present interim disclosures as required by the
Securities and Exchange Commission.
In order to conform with generally accepted accounting principles,
management, in preparation of the Company's 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 and the reported
amounts of revenues and expenses. Actual results could differ from those
estimates.
In the opinion of management, all adjustments consist of normal recurring
adjustments necessary to present fairly the financial position of the Company as
of June 30, 1998 and the results of its operations and its cash flows for the
six months and three months ended June 30, 1998 and 1997.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This
statement, effective for fiscal years beginning after December 15, 1997,
requires the Company to report components of comprehensive income in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income is defined by Concepts Statement No. 6,
"Elements of Financial Statements" as the change in the equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
The Company's net income approximates its comprehensive income as defined in
Concepts Statement No. 6, "Elements of Financial Statements".
Reclassification:
Certain 1997 items have been reclassified to conform to the 1998
presentation.
3. RELATED PARTY TRANSACTIONS
The 19 properties owned by the Company are managed by the Operating
Partnership. Management fees incurred are based on 3.25% of gross receipts.
Such fees totaled $200 and $179 for the six months ended June 30, 1998 and 1997,
respectively.
6
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FIRST INDUSTRIAL SECURITIES, L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in legal actions
arising from the ownership of its properties. In management's opinion, the
liabilities, if any, that may ultimately result from such legal actions are not
expected to have a materially adverse effect on the financial position,
operations or liquidity of the Company.
5. PARTNERS' CAPITAL
On March 24, 1998, the Company distributed $980 to Securities Corporation
in respect of its preferred limited partnership interest in the Company, and
Securities Corporation paid a preferred stock dividend of $980 to FR, in each
case, the amount equal to the aggregate dividend payable on FR's 9.5% Series A
Cumulative Preferred Stock.
On June 22, 1998, the Company distributed $980 to Securities Corporation in
respect of its preferred limited partnership interest in the Company, and
Securities Corporation paid a preferred stock dividend of $980 to FR, in each
case, the amount equal to the aggregate dividend payable on FR's 9.5% Series A
Cumulative Preferred Stock.
On June 29, 1998, the Company paid a pro rata general and limited partner
distribution to Securities Corporation and the Operating Partnership,
respectively, in the aggregate amount of $550.
7
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FIRST INDUSTRIAL SECURITIES, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of First Industrial Securities,
L.P.'s (the "Company") financial condition and the results of operations should
be read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
At June 30, 1998 and 1997, the Company owned 19 properties with
approximately 2.2 million square feet of gross leasable area ("GLA").
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 TO SIX MONTHS ENDED JUNE 30, 1997
Total revenues increased by approximately $.7 million, or 12.3%, due
primarily to an increase in rental income due to an increase in occupancy and
additional rental income from the expansion of one of the Company's properties
that was completed and placed in service on February 1, 1998. Average occupancy
for the six months ended June 30, 1998 and 1997 was 98.3% and 93.8%,
respectively.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
decreased by approximately $.1 million, or 6.9%. This decrease is due primarily
to a decrease in snow removal and related expenses incurred for properties
located in certain of the Company's metropolitan areas during the six months
ended June 30, 1998 as compared to the six months ended June 30, 1997.
Depreciation and amortization remained relatively unchanged.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1998 TO THREE MONTHS ENDED JUNE 30,
1997
Total revenues increased by approximately $.5 million, or 19.9%, due
primarily to an increase in rental income due to an increase in occupancy and
additional rental income from the expansion of one of the Company's properties
that was completed and placed in service on February 1, 1998. Average occupancy
for the three months ended June 30, 1998 and 1997 was 97.9% and 92.8%,
respectively.
Property expenses, which include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses,
remained relatively unchanged.
Depreciation and amortization remained relatively unchanged.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was approximately $4.2 million
for the six months ended June 30, 1998 compared to approximately $3.9 million
for the six months ended June 30, 1997. The increase is primarily attributable
to an increase in rental income due to an increase in occupancy and additional
rental income from the expansion of one of the Company's properties that was
completed and placed in service on February 1, 1998.
Net cash used in investing activities was approximately $.9 million for the
six months ended June 30, 1998 compared to approximately $.3 million for the six
months ended June 30, 1997. The majority of the cash used in investing
activities for the six months ended June 30, 1998 relates to an expansion of one
8
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of the Company's properties located in Auburn Hills, Michigan. This expansion
was placed in service on February 1, 1998.
Net cash used in financing activities for the six months ended June 30,
1998 consisted of preferred limited partner distributions of approximately $2.0
million and a general and limited partner distribution of approximately $.5
million. Net cash used in financing activities for the six months ended June
30, 1997 consisted of preferred limited partner distributions of approximately
$2.0 million and a general and limited partner distribution of approximately
$1.3 million.
The Company has considered its short-term (one year or less) 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 quarterly preferred limited partnership distribution. The Company
anticipates that these needs will be met with cash flows provided by operating
activities.
The Company expects to fund its long-term (greater than one year) liquidity
requirements for non-recurring capital improvements and property expansions with
its cash flow from operations, capital contributions and, in part, with a
deferred maintenance escrow established in connection with the issuance of First
Industrial Realty Trust, Inc.'s 9.5% Series A Cumulative Preferred Stock which
is included in restricted cash on the balance sheet.
OTHER
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This
statement, effective for fiscal years beginning after December 15, 1997,
requires the Company to report components of comprehensive income in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income is defined by Concepts Statement No. 6,
"Elements of Financial Statements" as the change in the equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. It includes all changes in equity during a period
except those resulting from investments by owners and distributions to owners.
The Company's net income approximates its comprehensive income as defined in
Concepts Statement No. 6, "Elements of Financial Statements".
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
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27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST INDUSTRIAL SECURITIES, L.P.,
BY: FIRST INDUSTRIAL SECURITIES CORPORATION,
ITS SOLE GENERAL PARTNER
Date: August 13, 1998 By: /s/ Michael J. Havala
---------------------------------------------
Michael J. Havala
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
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EXHIBIT INDEX
Exhibit No. Description
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EX-27 Financial Data Schedule
12
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST INDUSTRIAL SECURITIES, L.P. FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,188
<SECURITIES> 0
<RECEIVABLES> 318
<ALLOWANCES> (50)
<INVENTORY> 0
<CURRENT-ASSETS> 1,456
<PP&E> 79,970
<DEPRECIATION> (6,256)
<TOTAL-ASSETS> 77,415
<CURRENT-LIABILITIES> 532
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 76,485
<TOTAL-LIABILITY-AND-EQUITY> 77,415
<SALES> 0
<TOTAL-REVENUES> 6,239
<CGS> 0
<TOTAL-COSTS> (1,614)
<OTHER-EXPENSES> (931)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,694
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,694
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
