<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
FIRST INDUSTRIAL REALTY TRUST, INC. FIRST INDUSTRIAL, L.P.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
MARYLAND DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
36-3935116 36-3924586
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
</TABLE>
150 N. WACKER DRIVE, SUITE 150
CHICAGO, ILLINOIS 60606
(312) 704-9000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
MICHAEL T. TOMASZ
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST INDUSTRIAL REALTY TRUST, INC.
150 N. WACKER DRIVE, SUITE 150
CHICAGO, ILLINOIS 60606
(312) 704-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
GERALD S. TANENBAUM, ESQ. ROBERT E. KING, JR., ESQ.
ROGER ANDRUS, ESQ. ROGERS & WELLS
CAHILL GORDON & REINDEL 200 PARK AVENUE
80 PINE STREET NEW YORK, NEW YORK 10166
NEW YORK, NEW YORK 10005 (212) 878-8000
(212) 701-3000
</TABLE>
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED(1)(2) REGISTERED(3)(4)(5)(6) PRICE PER UNIT(7) PRICE(3)(4)(5)(7)(8) REGISTRATION FEE(9)
<S> <C> <C> <C> <C>
First Industrial Realty Trust, Inc.
Common Stock..........................
Preferred Stock....................... $300,000,000 N.A. $300,000,000
Depositary Shares..................... $151,515
First Industrial, L.P.
Debt Securities....................... $200,000,000 N.A. $200,000,000
</TABLE>
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<PAGE>
(CONTINUED FROM COVER PAGE)
- ------------------------------
(1) This Registration Statement also covers securities which may be issued by
the Registrants under contracts pursuant to which the counterparty may be
required to purchase Common Stock, Preferred Stock, Depositary Shares or
Debt Securities.
(2) Subject to footnotes (4) and (5), there is being registered hereunder (a) an
indeterminate amount of Preferred Stock, Depositary Shares and Common Stock
as may be sold, from time to time, by First Industrial Realty Trust, Inc.
and (b) an indeterminate amount of Debt Securities as may be sold, from time
to time, by First Industrial, L.P. There is also being registered hereunder
up to $300,000,000 of Common Stock that may be issued upon conversion of an
aggregate of up to $300,000,000 of Preferred Stock and Depositary Shares
registered hereunder.
(3) In no event will the aggregate maximum offering price of all securities
registered under this Registration Statement exceed $500,000,000. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(4) In no event will the aggregate maximum offering price of Common Stock,
Preferred Stock and Depositary Shares registered under this Registration
Statement exceed $300,000,000.
(5) In no event will the aggregate maximum offering price of Debt Securities
registered under this Registration Statement exceed $200,000,000.
(6) $89,525,000 of Common Stock registered on Form S-3, File No. 333-13225 and
$100,000,000 of Debt Securities registered on Form S-3, File No. 333-21873,
as to which filing fees of $25,378 and $30,303, respectively, were
previously paid and are being applied to this Registration Statement with
respect to such shares and Debt Securities, respectively, are being carried
forward pursuant to Rule 429 of the rules and regulations under the
Securities Act of 1933, as amended.
(7) The proposed maximum offering price per unit (a) has been omitted pursuant
to instruction II.D. of Form S-3 and (b) will be determined, from time to
time, by the Registrants in connection with the issuance by the Registrants
of the securities registered hereunder.
(8) In U.S. dollars or, the equivalent thereof, denominated in one or more
foreign currencies or units of two or more foreign currencies or composite
currencies (such as European Currency Units).
(9) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT CONTAINS A COMBINED PROSPECTUS THAT ALSO RELATES TO $89,525,000 OF
COMMON STOCK REGISTERED ON FORM S-3, FILE NO. 333-13225, WHICH WAS DECLARED
EFFECTIVE ON OCTOBER 4, 1996 (THE "PREVIOUSLY REGISTERED COMMON STOCK"), AND
$100,000,000 OF DEBT SECURITIES REGISTERED ON FORM S-3, FILE NO. 333-21873,
WHICH WAS DECLARED EFFECTIVE ON APRIL 30, 1997 (THE "PREVIOUSLY REGISTERED DEBT
SECURITIES"), WHICH HAVE NOT BEEN OFFERED OR SOLD AS OF THE DATE OF THE FILING
OF THIS REGISTRATION STATEMENT. THIS REGISTRATION STATEMENT CONSTITUTES
POST-EFFECTIVE AMENDMENT NO. 2 TO REGISTRATION STATEMENT FILE NO. 333-13225 AND
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT FILE NO.
333-21873, PURSUANT TO WHICH THE TOTAL AMOUNT OF UNSOLD PREVIOUSLY REGISTERED
COMMON STOCK AND PREVIOUSLY REGISTERED DEBT SECURITIES, REGISTERED ON
REGISTRATION STATEMENT FILE NO. 333-13225 AND REGISTRATION STATEMENT FILE NO.
333-21873, RESPECTIVELY, MAY BE OFFERED AND SOLD BY THE COMPANY AS COMMON STOCK
OR DEBT SECURITIES, AS THE CASE MAY BE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement relates to securities which may be offered from
time to time by First Industrial Realty Trust, Inc. (the "Company") and First
Industrial, L.P., a majority-owned subsidiary of the Company (the "Operating
Partnership"). This Registration Statement contains a form of base prospectus
(the "Base Prospectus") relating to both the Company and the Operating
Partnership which will be used in connection with an offering of securities by
the Company or the Operating Partnership. The specific terms of the securities
to be offered will be set forth in a Prospectus Supplement relating to such
securities. To the extent securities of the Operating Partnership, which are
limited to unsecured non-convertible investment grade debt securities, are
offered pursuant to the enclosed Base Prospectus, the Base Prospectus will
include the financial statements and other information listed on the Index to
Financial Statements and Other Information set forth on page F-1 of the Base
Prospectus.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 23, 1997
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
$689,525,000
FIRST INDUSTRIAL REALTY TRUST, INC.
Common Stock, Preferred Stock and Depositary Shares
FIRST INDUSTRIAL, L.P.
Debt Securities
First Industrial Realty Trust, Inc. (the "Company") may from time to time
offer in one or more series (i) shares of common stock, par value $.01 per share
("Common Stock"), (ii) shares of preferred stock, par value $.01 per share
("Preferred Stock"), and (iii) shares of Preferred Stock represented by
depositary shares ("Depositary Shares"), with an aggregate public offering price
of up to $389,525,000, in amounts, at prices and on terms to be determined at
the time of offering. First Industrial, L.P. (the "Operating Partnership") may
from time to time offer in one or more series unsecured non-convertible
investment grade debt securities ("Debt Securities"), with an aggregate public
offering price of up to $300,000,000, in amounts, at prices and on terms to be
determined at the time of offering. The Common Stock, Preferred Stock,
Depositary Shares and Debt Securities (collectively, the "Securities") may be
offered, separately or together, in separate series in amounts, at prices and on
terms to be set forth in one or more supplements to this Prospectus (each a
"Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and (iv) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Operating Partnership or repayment at the option
of the holder, terms for sinking fund payments, covenants and any initial public
offering price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be consistent with the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") or otherwise
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes. See "Description of Preferred
Stock--Restrictions on Ownership" and "Restrictions on Transfers of Capital
Stock."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement, not contained in this Prospectus.
The Securities may be offered directly to one or more purchasers, through
agents designated from time to time by the Company or the Operating Partnership
or to or through underwriters or dealers. If any agents or underwriters are
involved in the sale of any of the Securities, their names, and any applicable
purchase price, fee, commission or discount arrangement between or among them,
will be set forth, or will be calculable from the information set forth, in an
accompanying Prospectus Supplement. No Securities may be sold by the Company or
the Operating Partnership without delivery of a Prospectus Supplement describing
the method and terms of the offering of such series of Securities. See "Plan of
Distribution."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE SECURITIES, SEE "RISK FACTORS" COMMENCING ON PAGE 4.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, the Company files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission") and the Operating Partnership files reports and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C 20549 at prescribed rates.
In addition, the Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. Securities of the
Company are listed on the New York Stock Exchange (the "NYSE"), and all such
material filed by the Company with the NYSE also can be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005.
The Company and the Operating Partnership have filed with the Commission a
registration statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information
concerning the Company, the Operating Partnership and the Securities, reference
is made to the Registration Statement. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company (File No. 1-13102)
and the Operating Partnership (File No. 333-21873) with the Commission are
incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, as amended by Form 10-Q/A No. 1 filed May 30, 1997;
(c) the Company's Current Report on Form 8-K dated February 12, 1997, as
amended by Form 8-K/A No. 1 filed April 10, 1997;
(d) the Company's Current Report on Form 8-K dated May 13, 1997;
(e) the Company's Current Report on Form 8-K dated June 6, 1997;
(f) the description of the Common Stock included in the Company's
Registration Statement on Form 8-A dated June 23, 1994;
(g) the Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997;
(h) the Operating Partnership's Current Report on Form 8-K dated May 13,
1997;
(i) the Operating Partnership's Current Report on Form 8-K dated May 15,
1997; and
(j) the Operating Partnership's Current Report on Form 8-K dated June
13, 1997.
2
<PAGE>
All documents filed by the Company or the Operating Partnership pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and made a part hereof from the date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
document subsequently filed with the Commission which also is incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company and the Operating Partnership will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the information incorporated by reference herein (not including the exhibits
to the information that is incorporated by reference herein, unless such
exhibits are specifically incorporated by reference into the information that is
incorporated by reference herein). Requests for such copies should be directed
to: First Industrial Realty Trust, Inc., Attn: Investor Relations, 150 N. Wacker
Drive, Suite 150, Chicago, Illinois 60606, telephone (312) 704-9000.
Certain information, including, but not limited to, information relating to
the Operating Partnership's principal security holders, management, executive
compensation, certain relationships and related transactions and legal
proceedings that would be required to be disclosed in a prospectus included in a
registration statement on Form S-11 has been omitted from this Prospectus,
because such information is not materially different from the information
contained in the Company's periodic reports, proxy statements and other
information filed by the Company with the Commission.
3
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO
THE "COMPANY" REFER TO FIRST INDUSTRIAL REALTY TRUST, INC. AND ITS SUBSIDIARIES,
INCLUDING FIRST INDUSTRIAL, L.P. (THE "OPERATING PARTNERSHIP"), AND ALL
REFERENCES IN THIS PROSPECTUS TO THE "OTHER REAL ESTATE PARTNERSHIPS" REFER TO
ALL PARTNERSHIP SUBSIDIARIES OF FIRST INDUSTRIAL REALTY TRUST, INC. OTHER THAN
THE OPERATING PARTNERSHIP. UNLESS OTHERWISE INDICATED, ALL INFORMATION REGARDING
PROPERTIES RELATES TO PROPERTIES OWNED AND IN SERVICE AS OF MARCH 31, 1997.
The Company is a REIT which owns, manages, acquires and develops bulk
warehouse and light industrial properties. Markets in which the Company operates
include the following metropolitan areas: Atlanta, Georgia; Central
Pennsylvania; Chicago, Illinois; Cincinnati, Ohio; Cleveland, Ohio; Columbus,
Ohio; Dayton, Ohio; Des Moines, Iowa; Detroit, Michigan; Grand Rapids, Michigan;
Indianapolis, Indiana; Long Island, New York; Milwaukee, Wisconsin;
Minneapolis/St. Paul, Minnesota; Nashville, Tennessee; Northern New Jersey and
St. Louis, Missouri. As of March 31, 1997, the Company owned 430 in-service
properties containing an aggregate of approximately 37.4 million square feet of
gross leasable area ("GLA") which was approximately 96% leased to over 1,200
tenants. The Company is a self-administered and fully integrated industrial real
estate company.
The Company is the sole general partner of, and, as of March 31, 1997, held
approximately 88.3% of the outstanding units of partnership interest ("Units")
in, the Operating Partnership. As of such date, approximately 11.7% of the
outstanding Units were held by outside investors, including certain members of
the Company's management. Each Unit, other than those held by the Company, may
be exchanged by the holder thereof for one share (subject to certain
adjustments) of Common Stock. With each such exchange, the number of Units owned
by the Company, and, therefore, the Company's percentage interest in the
Operating Partnership, will increase.
Substantially all of the Company's assets are held through the Operating
Partnership and the Other Real Estate Partnerships. The Operating Partnership
owns a 99% limited partnership interest, and wholly owned subsidiaries of First
Industrial Realty Trust, Inc. own a 1% general partnership interest, in each of
the Other Real Estate Partnerships, except that in the case of one Other Real
Estate Partnership, First Industrial Securities L.P. ("Securities L.P."), the
general partner thereof also owns a preferred limited partnership interest the
terms of which mirror the terms of the Company's outstanding 9 1/2% Series A
Preferred Stock, par value $.01 per share ("Series A Preferred Stock"). See
"Description of Preferred Stock--Outstanding Preferred Stock."
The Company was incorporated in Maryland in August 1993. The Operating
Partnership was formed in Delaware in November 1993. The Company's and the
Operating Partnership's executive offices are located at 150 N. Wacker Drive,
Suite 150, Chicago, Illinois 60606, and their telephone number is (312)
704-9000.
RISK FACTORS
In evaluating an investment in the Securities, investors should consider the
following factors, in addition to other matters set forth or incorporated in
this Prospectus and in any applicable Prospectus Supplement.
REAL ESTATE INVESTMENT CONSIDERATIONS
GENERAL
Income from real property investments, and the Company's resulting ability
to make expected distributions to stockholders, may be adversely affected by the
general economic climate, local conditions such as oversupply or a reduction in
demand in the area, the attractiveness of the properties to tenants, tenant
defaults, zoning or other regulatory restrictions, competition from other
available real estate, the ability of the Company to provide adequate
maintenance and insurance and increased operating costs
4
<PAGE>
(including insurance premiums and real estate taxes). The Company's income would
also be adversely affected if tenants were unable to pay rent or the Company
were unable to rent properties on favorable terms. In addition, certain
expenditures associated with real estate investment (such as real estate taxes
and maintenance costs) generally are not reduced when circumstances cause a
reduction in income from the investment. Furthermore, real estate investments
are relatively illiquid and, therefore, will tend to limit the ability of the
Company to vary its portfolio promptly in response to changes in economic or
other conditions.
RENEWAL OF LEASES AND RELETTING OF SPACE
The Company will be subject to the risks that, upon expiration of leases,
the leases may not be renewed, the space subject to such leases may not be relet
or the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than expiring lease terms. If the Company
were unable promptly to renew a significant number of expiring leases or
promptly to relet the space covered by such leases, or if the rental rates upon
such renewal or reletting were significantly lower than the then current rates,
the Company's funds from operations and ability to make expected distributions
to stockholders might be adversely affected. Leases with respect to
approximately 4.6 million, 6.4 million and 6.5 million square feet of GLA expire
in 1997, 1998 and 1999, respectively.
POTENTIAL ENVIRONMENTAL LIABILITY
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate may be liable for the costs of clean-up of
certain conditions relating to the presence of hazardous or toxic materials on,
in or emanating from the property, and any related damages to natural resources.
Such laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the presence of hazardous or toxic materials.
The presence of such materials, or the failure to address such conditions
properly, may adversely affect the ability to rent or sell the property or to
borrow using the property as collateral. Persons who dispose of or arrange for
the disposal or treatment of hazardous or toxic materials may also be liable for
the costs of clean-up of such materials, or for related natural resource
damages, at or from an off-site disposal or treatment facility, whether or not
such facility is owned or operated by such persons. No assurance can be given
that existing environmental assessments with respect to any of the Company's
properties reveal all environmental liabilities, that any prior owner or
operator of any of the properties did not create any material environmental
condition not known to the Company or that a material environmental condition
does not otherwise exist as to any one or more properties.
LIMITED GEOGRAPHIC CONCENTRATION
Approximately 68% of the Properties owned by the Company as of March 31,
1997 are located in the midwest region of the United States. A fundamental
element of the Company's growth strategy is to acquire additional properties in
its current markets. Consequently, the Company may be dependent upon the demand
for industrial space in those markets. The Company's revenues and the value of
its properties may be affected by a number of factors in its current markets,
including the local economic climate (which may be adversely impacted by
business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of, or
reduced demand for, properties). Therefore, the Company's performance and its
ability to make distributions to stockholders will likely be dependent, to a
significant extent, on the economic conditions in its current markets.
TAX RISKS
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company intends to operate so as to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). Although the Company believes
that it is organized and will operate in a
5
<PAGE>
manner so as to qualify as a REIT, qualification as a REIT involves the
satisfaction of numerous requirements (some of which must be met on a recurring
basis) established under highly technical and complex Code provisions of which
there are only limited judicial or administrative interpretations, and involves
the determination of various factual matters and circumstances not entirely
within the Company's control. If the Company were to fail to qualify as a REIT
in any taxable year, the Company would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
corporate rates and, unless entitled to relief under certain statutory
provisions, the Company also would be disqualified from treatment as a REIT for
the four taxable years that follow. See "Federal Income Tax Considerations."
EFFECT OF DISTRIBUTION REQUIREMENTS
The Company could, in certain instances, have taxable income without
sufficient cash to enable the Company to meet the distribution requirements of
the REIT provisions of the Code. Accordingly, the Company could be required to
borrow funds or sell properties on adverse terms in order to meet such
distribution requirements. In addition, because the Company must distribute to
its stockholders at least 95% of its REIT taxable income each year, the
Company's ability to accumulate capital may be limited. Thus, it may be more
dependent on outside sources of financing, such as debt financing or issuances
of additional capital stock, in connection with future acquisitions. See
"Federal Income Tax Considerations."
RESTRICTIONS ON TRANSFER OF SHARES
As noted below under "Description of Preferred Stock--Restrictions on
Ownership" and "Restrictions on Transfers of Capital Stock," in order to
maintain its qualification as a REIT under the Code, no more than 50% in value
of the outstanding capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. Accordingly, the
Company's Articles of Incorporation contain, and the Designating Amendment for
each series of Preferred Stock may contain, provisions restricting the ownership
and transfer of the Company's capital stock.
RISKS ASSOCIATED WITH DEBT FINANCING AND LEVERAGE; COLLATERALIZATION AND CROSS-
COLLATERALIZATION
GENERAL
Where possible, the Company intends to continue to use leverage to increase
the rate of return on its investments and to allow the Company to make more
investments than it otherwise could. Such use of leverage presents an additional
element of risk in the event that the cash flow from the Company's properties is
insufficient to meet both debt payment obligations and the distribution
requirements of the REIT provisions of the Code. To the extent the Operating
Partnership determines to obtain additional debt financing in the future, it may
do so through mortgages on some or all of its properties. These mortgages may be
on recourse, non-recourse or crossed-collateralized bases. Holders of
indebtedness which is so secured will have a claim against these properties
which is senior to the claim of holders of Debt Securities. In addition, to the
extent indebtedness is crossed-collateralized, lenders may seek to foreclose
upon properties which are not the primary collateral for their loan, which may,
in turn, result in acceleration of other indebtedness secured by properties.
Foreclosure of properties would result in a loss of income and asset value to
the Operating Partnership and the Company.
BALLOON PAYMENTS
The Operating Partnership is required to make lump-sum or "balloon" payments
pursuant to the terms of certain of its indebtedness, including the Operating
Partnership's $100,000,000 aggregate principal amount 7.15% Notes due 2027 (the
"2027 Notes"), the Operating Partnership's $100,000,000 aggregate
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<PAGE>
principal amount 7 3/8% Notes due 2011 (the "Trust Notes"), the Operating
Partnership's $150,000,000 aggregate principal amount 7.60% Notes due 2007 (the
"2007 Notes") and a $200,000,000 unsecured revolving credit facility (the
"Acquisition Facility") under which the Company, through the Operating
Partnership, may borrow to finance the acquisition of additional properties and
for other corporate purposes, including working capital. The holders of the 2027
Notes have the right to require the Operating Partnership to redeem their 2027
Notes, in whole or in part, on May 15, 2002. The trust to which the Trust Notes
were issued must exercise its right to require the Operating Partnership to
redeem the Trust Notes on May 15, 2004 if the holder of a call option with
respect to the Trust Notes fails to give written notice on or before May 1, 2004
that it intends to exercise such option. The Acquisition Facility provides for
the repayment of principal in a lump-sum or "balloon" payment at maturity in
2000 (subject to successive one-year extensions at the Operating Partnership's
option, subject to certain conditions). The Company's ability to make required
payments of principal on outstanding indebtedness, whether at maturity or
otherwise, may depend on its ability either to refinance the applicable
indebtedness or to sell properties. The Company has no commitments to refinance
the 2027 Notes, the Trust Notes, the 2007 Notes or the Acquisition Facility.
Certain other existing debt obligations of the Company are secured by its
properties, and therefore such obligations will permit the lender to foreclose
on those properties in the event of a default.
NO LIMITATION ON DEBT IN ORGANIZATIONAL DOCUMENTS
The Operating Partnership has no separate policy regarding the amount of
debt it may incur, but rather is encompassed by the Company's policy in this
regard. The Company currently has a policy of maintaining a ratio of debt to
total market capitalization (I.E., total consolidated debt of the Company as a
percentage of the aggregate market value of all outstanding shares of Common
Stock, assuming the exchange of all Units for Common Stock, plus the aggregate
stated value of all outstanding shares of preferred stock, plus total
consolidated debt) which generally will not exceed 50% and a coverage ratio
(computed as total revenues minus property expenses and general and
administrative expenses divided by interest expense plus dividends on preferred
stock) of at least 2.0:1. As of March 31, 1997, the Company's ratio of debt to
total market capitalization was 32.8%, and for the twelve months ended March 31,
1997, the Company's coverage ratio was 3.09. However, the organizational
documents of the Company do not contain any limitation on the amount or
percentage of indebtedness the Company may incur and the Company's Board of
Directors has the power to alter the current policy. Accordingly, the Company
could become more highly leveraged, resulting in an increase in debt service
that could adversely affect the Company's ability to make expected distributions
to stockholders and in an increased risk of default on its obligations. In
addition, except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provision that would afford holders of Debt
Securities protection in the event of a highly leveraged transaction or change
in control of the Operating Partnership or the Company.
RISING INTEREST RATES
The Acquisition Facility bears interest at a floating rate. Increases in the
interest rate payable on balances outstanding under the Acquisition Facility
would have an adverse effect on the Company's cash available for distribution.
LIMITS ON CHANGES IN CONTROL
GENERAL
Certain provisions of the Articles of Incorporation may have the effect of
delaying, deferring or preventing a third party from making an acquisition
proposal for the Company and thus inhibit a change in control of the Company and
limit the opportunity for stockholders to receive a premium for their Common
Stock over then-prevailing market prices. See "Certain Provisions of Maryland
Law and the Company's Articles of Incorporation and Bylaws." These provisions
include the following:
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RISKS ASSOCIATED WITH PREFERRED STOCK
Under its Articles of Incorporation, the Company has authority to issue up
to 10,000,000 shares of Preferred Stock, par value $.01 per share (of which
1,650,000 shares of Series A Preferred Stock, 40,000 shares of the Company's
8 3/4% Series B Preferred Stock (the "Series B Preferred Stock") and 20,000
shares of the Company's 8 5/8% Series C Preferred Stock ( the "Series C
Preferred Stock") were outstanding on June 20, 1997), on such terms as may be
authorized by the Board of Directors of the Company. Although the Board of
Directors has no such intention at the present time, it has the power to
establish a series of Preferred Stock that could, depending on the terms of such
series, have the effect referred to above.
MARYLAND BUSINESS COMBINATION LAW
Under the Maryland General Corporation Law, as amended ("MGCL"), certain
"business combinations" (including certain issuances of equity securities)
between a Maryland corporation, such as the Company, and any person who
beneficially owns 10% or more of the voting power of the corporation's shares
(an "Interested Stockholder") or, in certain circumstances, an associate or an
affiliate thereof (as defined in the MGCL) are prohibited for five years after
the most recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors and approved by two super-majority stockholder votes
unless, among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares, in cash or in the same
form as previously paid by the Interested Stockholder for its shares. The
provisions of the MGCL do not apply to business combinations that are approved
or exempted by the Board of Directors prior to the time that the Interested
Stockholder becomes an Interested Stockholder. In addition, the Company's
Articles of Incorporation exempt from these provisions of the MGCL any business
combination in which there is no Interested Stockholder other than Jay H.
Shidler, the Chairman of the Board of Directors of the Company, or any entity
controlled by Mr. Shidler, unless Mr. Shidler is an Interested Stockholder
without taking into account Mr. Shidler's ownership of shares of Common Stock of
the Company and the right to acquire shares in an aggregate amount which does
not exceed the number of shares which Mr. Shidler owned and had the right to
acquire (including through the exchange of Units) at the time of the
consummation of the Company's initial public offering.
MARYLAND CONTROL SHARE ACQUISITION STATUTE
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights, except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror, by officers of the corporation and by
directors who are also employees of the corporation. If voting rights with
respect to control shares have not been approved at a meeting of stockholders,
then, subject to certain conditions and limitations, the issuer may redeem any
or all of such control shares for fair value. If voting rights for control
shares are approved at a stockholders meeting and the acquiror becomes entitled
to vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights. The Company's Bylaws contain a provision exempting
any and all acquisitions of the Company's shares of capital stock from the
control shares provisions of the MGCL. There can be no assurance that this
provision will not be amended or eliminated in the future.
CLASSIFIED BOARD OF DIRECTORS
The Company's directors are divided into three classes by its Articles of
Incorporation, with terms expiring over a three year period. The classified
board provision could make it more difficult and time consuming to remove the
incumbent directors, thus discouraging a third party from attempting to take
control of the Company.
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RISKS ASSOCIATED WITH DILUTION
To the extent the Company issues Common Stock, the ownership interest of
existing stockholders would be diluted.
RISKS ASSOCIATED WITH POSSIBLE CONFLICTS OF INTEREST
COMPETITION FROM OTHER BUSINESS INTERESTS OF CERTAIN OFFICERS AND DIRECTORS
Entities affiliated with or controlled by certain officers and directors of the
Company hold equity interests in industrial properties not owned by the Company.
Some of these properties may compete with properties owned by the Company. There
can be no assurance that decisions by officers and directors of the Company will
fully represent the interests of stockholders of the Company rather than such
individuals and their affiliates.
TAX CONSEQUENCES TO CERTAIN OFFICERS AND DIRECTORS
Certain officers and directors of the Company own Units which may be
exchanged for Common Stock. Prior to the exchange of Units for Common Stock,
officers and directors of the Company who own Units may suffer different and
more adverse tax consequences than holders of Common Stock upon the sale of
certain of the Company's properties, the refinancing of debt associated with
those properties or in connection with a proposed tender offer or merger
involving the Company and, therefore, such individuals and the Company, as
partners in the Operating Partnership, may have different objectives regarding
the appropriate terms of any such transaction.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company and the Operating Partnership intend to use the net proceeds from the
sale of Securities offered by this Prospectus and the applicable Prospectus
Supplement for general corporate purposes, which may include the acquisition of
additional properties, the repayment of outstanding debt or the improvement of
certain properties already in the Company's portfolio. Any proceeds from the
sale of Common Stock, Preferred Stock or Depositary Shares by the Company will
be invested in the Operating Partnership, which will use such proceeds for the
above-described purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges plus preferred dividend
requirements for the years ended December 31, 1996, 1995 and 1994 and the three
months ended March 31, 1997 and 1996 were 1.88, 1.56 and 1.33 and 2.19 and 1.71,
respectively. The Operating Partnership's ratios of earnings to fixed charges
for the years ended December 31, 1996, 1995 and 1994 and the three months ended
March 31, 1997 and 1996 were 6.96, 2.68 and 1.65 and 6.09 and 10.40,
respectively.
For purposes of computing the ratios of earnings to fixed charges, earnings
have been calculated by adding fixed charges (excluding capitalized interest) to
income (loss) before disposition of interest rate protection agreement, gain on
sales of properties, minority interest and extraordinary items. Fixed charges
consist of interest costs, whether expensed or capitalized, and amortization of
interest rate protection agreements and deferred financing costs.
With respect to the Company and the Operating Partnership, earnings were
inadequate to cover fixed charges by approximately $3.4 million and $4.3 million
for the years ended December 31, 1993 and 1992, respectively, which periods were
prior to the Company's initial public offering. No preferred stock of the
Company was outstanding during such years.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an indenture (the "Indenture"),
dated as of May 13, 1997, between the Operating Partnership and First Trust
National Association, as trustee (the "Trustee"), which has been incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part, subject to such amendments or supplements as may be adopted from time
to time. The Indenture is subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). The statements made under this heading relating to
the Debt Securities and the Indenture are summaries of certain provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indenture and such Debt Securities. All material terms of the
Debt Securities and the Indenture, other than those disclosed in the applicable
Prospectus Supplement, are described in this Prospectus.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the Indenture.
The Debt Securities to be offered hereby and in any applicable Prospectus
Supplement will be "investment grade" securities, meaning at the time of the
offering of such Debt Securities, at least one nationally recognized statistical
rating organization (as defined in the Exchange Act) will have rated such Debt
Securities in one of its generic rating categories which signifies investment
grade (typically the four highest rating categories, within which there may be
sub-categories or gradations indicating relative standing, signify investment
grades). An investment grade rating is not a recommendation to buy, sell or hold
securities, is subject to revision or withdrawal at any time by the assigning
entity and should be evaluated independently of any other rating.
TERMS
GENERAL. The Debt Securities will be direct unsecured obligations of the
Operating Partnership. The indebtedness represented by the Debt Securities will
rank equally with all other unsecured and unsubordinated indebtedness of the
Operating Partnership. No partner (whether limited or general, including the
Company) of the Operating Partnership has any obligation for the payment of
principal of (or premium, if any) or interest, if any, on, or any other amount
with respect to, the Debt Securities. The particular terms of the Debt
Securities offered by a Prospectus Supplement will be described in the
applicable Prospectus Supplement, along with any applicable modifications of or
additions to the general terms of the Debt Securities as described herein and in
the Indenture and any applicable federal income tax considerations. Accordingly,
for a description of the terms of any series of Debt Securities, reference must
be made to both the Prospectus Supplement relating thereto and the description
of the Debt Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time by the Operating Partnership or as
set forth in the Indenture or in one or more indentures supplemental to the
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuance of additional
Debt Securities of such series.
The Indenture provides that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under the Indenture may resign or be
removed with respect to one or more series of Debt Securities, and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the Indenture.
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The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) The title of such Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day year
of twelve 30-day months;
(7) The place or places where the principal of (and premium or Make-Whole
Amount, if any) and interest, if any, on such Debt Securities will be
payable, where such Debt Securities may be surrendered for registration
of transfer or exchange and where notices or demands to or upon the
Operating Partnership in respect of such Debt Securities and the
Indenture may be served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, as a whole or in part, at the option of the
Operating Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any, including any amount due upon redemption, if
any) or interest, if any, on such Debt Securities may be determined
with reference to an index, formula or other method (which index,
formula or method may, but need not be, based on the yield on or
trading price of other securities, including United States Treasury
securities, or on a currency, currencies, currency unit or units, or
composite currency or currencies) and the manner in which such amounts
shall be determined;
(12) Whether the principal of (and premium or Make-Whole Amount, if any) or
interest on the Debt Securities of the series are to be payable, at the
election of the Operating Partnership or a holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are
denominated or stated to be payable, the period or periods within
which, and the terms and conditions upon which, such election may be
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made, and the time and manner of, and identity of the exchange rate
agent with responsibility for, determining the exchange rate between
the currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are denominated or
stated to be payable and the currency or currencies, currency unit or
units or composite currency or currencies in which such Debt Securities
are to be so payable;
(13) Provisions, if any, granting special rights to the holders of Debt
Securities of the series upon the occurrence of such events as may be
specified;
(14) Any deletions from, modifications of or additions to the Events of
Default or covenants of the Operating Partnership with respect to Debt
Securities of the series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants
described herein;
(15) Whether and under what circumstances the Operating Partnership will pay
any additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu
of making such payment;
(16) Whether Debt Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may
be exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Debt
Securities of the series are to be issuable initially in temporary
global form and whether any Debt Securities of the series are to be
issuable in permanent global form with or without coupons and, if so,
whether beneficial owners of interests in any such permanent global
Security may exchange such interests for Debt Securities of such series
and of like tenor of any authorized form and denomination and the
circumstances under which any such exchanges may occur, if other than
in the manner provided in the Indenture, and, if Registered Securities
of the series are to be issuable as a Global Security, the identity of
the depository for such series;
(17) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of
the series shall be dated if other than the date of original issuance
of the first Security of the series to be issued;
(18) The Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, the
manner in which, or the Person to whom, any interest on any Bearer
Security of the series shall be payable, if otherwise than upon
presentation and surrender of the coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary Global Security on an Interest Payment
Date will be paid if other than in the manner provided in the
Indenture;
(19) Whether such Debt Securities will be issued in certificated or book
entry form;
(20) The applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture to the Debt Securities of the series;
(21) If the Debt Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates or
other documents or satisfaction of other conditions, then the form
and/or terms of such certificates, documents or conditions; and
(22) Any other terms of the series (which terms shall not be inconsistent
with the provisions of the Indenture).
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If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Indenture does
not contain any provisions that would limit the ability of the Operating
Partnership to incur indebtedness or that would afford holders of Debt
Securities protection in the event of a highly leveraged or similar transaction
involving the Operating Partnership or in the event of a change of control.
Restrictions on ownership and transfers of the Common Stock and Preferred Stock
are designed to preserve the Company's status as a REIT and, therefore, may act
to prevent or hinder a change of control. See "Restrictions on Transfers of
Capital Stock." Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of, or additions
to, the Events of Default or covenants of the Operating Partnership that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated in the applicable
Prospectus Supplement; provided that, at the option of the Operating
Partnership, payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the applicable register for such
Debt Securities or by wire transfer of funds to such person at an account
maintained within the United States.
Unless otherwise specified in the applicable Prospectus Supplement, any
interest not punctually paid or duly provided for on any Interest Payment Date
with respect to a Debt Security in registered form ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, in which case notice thereof shall be given to the holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Operating Partnership for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Operating Partnership for such purpose. Every Debt Security in registered form
surrendered for registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting such
action must provide evidence of title and
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identity satisfactory to the applicable Trustee or transfer agent. No service
charge will be made for any registration of transfer or exchange of any Debt
Securities, but the Operating Partnership may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the applicable Trustee) initially designated by the Operating
Partnership with respect to any series of Debt Securities, the Operating
Partnership may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
except that the Operating Partnership will be required to maintain a transfer
agent in each place of payment for such series. The Operating Partnership may at
any time designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Operating Partnership nor any Trustee shall be required to (a)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the selection of
any Debt Securities for redemption and ending at the close of business on (i) if
such Debt Securities are issuable only as Registered Securities, the day of the
mailing of the relevant notice of redemption and (ii) if such Debt Securities
are issuable as Bearer Securities, the day of the first publication of the
relevant notice of redemption or, if such Debt Securities are also issuable as
Registered Securities and there is no publication, the mailing of the relevant
notice of redemption; (b) register the transfer of or exchange any Debt
Security, or portion thereof, so selected for redemption, in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part; (c)
exchange any Bearer Security so selected for redemption except that, to the
extent provided with respect to such Bearer Security, such Bearer Security may
be exchanged for a Registered Security of that series and of like tenor,
PROVIDED that such Registered Security shall be simultaneously surrendered for
redemption; or (d) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the holder, except the
portion, if any, of such Debt Security not to be so repaid.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Operating Partnership may appoint from time to time.
The paying agents outside the United States, if any, initially appointed by the
Operating Partnership for a series of Debt Securities will be named in the
applicable Prospectus Supplement. Unless otherwise provided in the applicable
Prospectus Supplement, the Operating Partnership may at any time designate
additional paying agents or rescind the designation of any paying agents, except
that, if Debt Securities of a series are issuable in registered form, the
Operating Partnership will be required to maintain at least one paying agent in
each place of payment for such series and if Debt Securities of a series are
issuable in bearer form, the Operating Partnership will be required to maintain
at least one paying agent in a place of payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other entity provided that (a) either the Operating Partnership
shall be the continuing entity, or the successor entity (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets is organized
under the laws of any domestic jurisdiction and expressly assumes the Operating
Partnership's obligations to pay principal of (and premium or Make-Whole Amount,
if any) and interest on all of the Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of the Operating
Partnership or any subsidiary as a result thereof as having been incurred by the
Operating Partnership or such subsidiary at the time of such transaction, no
Event of Default under the Indenture, and no event which, after notice or the
lapse of time, or both, would become such an Event of Default, shall have
occurred and be continuing; and (c) an officers' certificate and legal opinion
covering such conditions shall be delivered to each Trustee.
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CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will include the following covenants of the Operating
Partnership:
EXISTENCE. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indenture requires the Operating Partnership to do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises; PROVIDED, HOWEVER, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
MAINTENANCE OF PROPERTIES. The Indenture requires the Operating Partnership
to cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that the Operating Partnership and its subsidiaries shall not be
prevented from selling or otherwise disposing of their properties for value in
the ordinary course of business.
INSURANCE. The Indenture requires the Operating Partnership to cause each
of its and its subsidiaries' insurable properties to be insured against loss or
damage at least equal to their then full insurable value with insurers of
recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
PAYMENT OF TAXES AND OTHER CLAIMS. The Indenture requires the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income, profits
or property of the Operating Partnership or any subsidiary and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Operating Partnership or any subsidiary; PROVIDED,
HOWEVER, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture provides that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (b) default in
the payment of the principal of (or premium or Make-Whole Amount, if any, on)
any Debt Security of such series when due and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Operating Partnership in the Indenture with respect to the Debt Securities of
such series and continuance of such default or breach for a period of 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Operating Partnership (or by any subsidiary the repayment of
which the Operating Partnership has guaranteed or for which the Operating
Partnership is directly responsible or liable as obligor or guarantor) having an
aggregate principal amount outstanding of at least $10,000,000, whether such
indebtedness now exists or shall hereafter be created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
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to the date on which it would otherwise have become due and payable, without
such indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after written notice to the
Operating Partnership as provided in the Indenture; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Operating Partnership or any Significant
Subsidiary; and (g) any other event of default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" has the
meaning ascribed to such term in Regulation S-X promulgated under the Securities
Act.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be due
and payable immediately by written notice thereof to the Operating Partnership
(and to the applicable Trustee if given by the holders); PROVIDED, that in the
case of an Event of Default described under clause (f) of the preceding
paragraph, acceleration is automatic. However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has been
obtained by the applicable Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (a) the Operating Partnership
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest on the Debt
Securities of such series, plus certain fees, expenses, disbursements and
advances of the applicable Trustee, and (b) all Events of Default, other than
the non-payment of accelerated principal (or specified portion thereof and the
premium or Make-Whole Amount, if any), with respect to Debt Securities of such
series have been cured or waived as provided in the Indenture. The Indenture
will also provide that the holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series may waive any past
default with respect to such series and its consequences, except a default (i)
in the payment of the principal of (or premium or Make-Whole Amount, if any) or
interest on any Debt Security of such series or (ii) in respect of a covenant or
provision contained in the Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security affected thereby.
The Indenture requires each Trustee to give notice to the holders of Debt
Securities within 90 days of a default under the Indenture unless such default
shall have been cured or waived; PROVIDED, HOWEVER, that such Trustee may
withhold notice to the holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal of
(or premium or Make-Whole Amount, if any) or interest on any Debt Security of
such series or in the payment of any sinking fund installment in respect of any
Debt Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indenture provides that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and premium
or Make-Whole Amount, if any) and interest on such Debt Securities at the
respective due dates or redemption dates thereof.
The Indenture provides that, subject to provisions in the Indenture relating
to its duties in case of default, a Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
the
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Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the Indenture, which may
involve such Trustee in personal liability or which may be unduly prejudicial to
the holders of Debt Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed by
one of several specified officers of the Company, stating whether or not such
officer has knowledge of any default under the Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture are permitted to be made only
with the consent of the holders of not less than a majority in principal amount
of all outstanding Debt Securities issued under the Indenture affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium or Make-Whole Amount, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium or Make-Whole Amount payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of any such Debt Security; (c) change the
place of payment, or the coin or currency, for payment of principal of (or
premium or Make-Whole Amount, if any) or interest on any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (e) reduce the above-stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Operating Partnership with certain restrictive covenants of the Indenture.
Modifications and amendments of the Indenture are permitted to be made by
the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (a)
to evidence the succession of another person to the Operating Partnership as
obligor under the Indenture; (b) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in the Indenture; (c) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (d) to add or change any
provisions of the Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, PROVIDED that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (e) to change or eliminate any provisions
of the Indenture, PROVIDED that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (f)
to secure the Debt Securities; (g) to establish
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the form or terms of Debt Securities of any series; (h) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee; (i)
to cure any ambiguity, defect or inconsistency in the Indenture, provided that
such action shall not adversely affect the interests of holders of Debt
Securities of any series issued under the Indenture in any material respect; or
(j) to supplement any of the provisions of the Indenture to the extent necessary
to permit or facilitate defeasance and discharge of any series of such Debt
Securities, PROVIDED that such action shall not adversely affect the interests
of the holders of the outstanding Debt Securities of any series in any material
respect.
The Indenture provides that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount of such Debt Security (or, in
the case of an Original Issue Discount Security, the U.S. dollar equivalent on
the issue date of such Debt Security of the amount determined as provided in (a)
above), (c) the principal amount of an indexed security that shall be deemed
Outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to the Indenture, and (d) Debt Securities owned by the
Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 25% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in the Indenture. Except for any consent that must be given by the
holder of each Debt Security affected by certain modifications and amendments of
the Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; PROVIDED, HOWEVER, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting or adjourned meeting duly reconvened at which a
quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage in principal amount
of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indenture provides that if any
action is to be taken at a meeting of holders of Debt Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver and other action that the Indenture expressly provides may be made, given
or taken by the holders of a specified percentage in principal amount of all
outstanding Debt Securities affected thereby, or of the holders of such series
and one or more additional series: (a) there
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shall be no minimum quorum requirement for such meeting, and (b) the principal
amount of the outstanding Debt Securities of such series that vote in favor of
such request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under the
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium or Make-Whole Amount, if any) and interest to the date of such deposit
(if such Debt Securities have become due and payable) or to the stated maturity
or redemption date, as the case may be.
The Indenture provides that, unless otherwise indicated in the applicable
Prospectus Supplement, the Operating Partnership may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities, and to hold moneys for payment in trust)
("defeasance") or (b) to be released from certain obligations with respect to
such Debt Securities under the Indenture (including the restrictions described
under "--Certain Covenants") or, if provided in the applicable Prospectus
Supplement, its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute an Event of Default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Operating Partnership with the applicable Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities, which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the applicable Trustee an
opinion of counsel (as specified in the Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from the Internal Revenue Service or a change in applicable
United States federal income tax law occurring after the date of the Indenture.
In the event of such defeasance, the holders of such Debt Securities would
thereafter be able to look only to such trust fund for payment of principal (and
premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged or (b) obligations of a person
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controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a foreign currency that ceases to be used by its government of issuance shall be
made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "--Events of Default, Notice and
Waiver" with respect to specified sections of the Indenture (which sections
would no longer be applicable to such Debt Securities) or described in clause
(g) under "--Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been covenant defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities are
payable, and Government Obligations on deposit with the applicable Trustee, will
be sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of Default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
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NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
book-entry form consisting of one or more global securities (the "Global
Securities") that will be deposited with, or on behalf of, a depositary (the
"Depositary") identified in the applicable Prospectus Supplement relating to
such series. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to a series of Debt Securities will be described in the
applicable Prospectus Supplement relating to such series.
PAYMENT AND PAYING AGENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the Trustee, the address of which will be stated in the applicable Prospectus
Supplement; provided that, at the option of the Operating Partnership, payment
of interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium, Make-Whole Amount or
interest on any Debt Security which remain unclaimed at the end of two years
after such principal, premium, Make-Whole Amount or interest has become due and
payable will be repaid to the Operating Partnership, and the holder of such Debt
Security thereafter may look only to the Operating Partnership for payment
thereof.
DESCRIPTION OF PREFERRED STOCK
The description of the Preferred Stock set forth below does not purport to
be complete and is qualified in its entirety by reference to the Company's
Amended and Restated Articles of Incorporation, as amended (the "Articles of
Incorporation"), and Amended and Restated Bylaws (the "Bylaws"). All material
terms of the Preferred Shares, except those disclosed in the applicable
Prospectus Supplement, are described in this Prospectus.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 10
million shares of Preferred Stock, par value $.01 per share. The Preferred Stock
may be issued from time to time, in one or more series, as authorized by the
Board of Directors of the Company. Prior to issuance of shares of each series,
the Board of Directors is required by the Maryland General Corporation Law
("MGCL") and the Articles of Incorporation to fix for each series, subject to
the provisions of the Articles of Incorporation regarding excess stock, par
value $.01 per share ("Excess Stock"), the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption of such
shares as may be permitted by Maryland law. Such rights, powers, restrictions
and limitations could include the right to receive specified dividend payments
and payments on liquidation prior to any such payments to holders of Common
Stock or other capital stock of the Company ranking junior to the Preferred
Stock. The outstanding shares of Preferred Stock are, and additional shares of
Preferred Stock will be, when issued, fully paid and nonassessable and will have
no preemptive rights. The Board of Directors could authorize the issuance of
shares of Preferred Stock with terms and conditions that could have the effect
of discouraging a takeover or other transaction that holders
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of Common Stock might believe to be in their best interests or in which holders
of some, or a majority, of the shares of Common Stock might receive a premium
for their shares over the then market price of such shares of Common Stock.
OUTSTANDING PREFERRED STOCK
At June 13, 1997, the Company had outstanding 1,650,000 shares of Series A
Preferred Stock, 40,000 shares of Series B Preferred Stock and 20,000 shares of
Series C Preferred Stock, constituting all of the Company's then outstanding
Preferred Stock. The terms of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock provide for a preference as to the payment of
dividends over shares of Common Stock and any other capital stock ranking junior
to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, and for cumulative quarterly dividends at the rate of $2.375, $218.75 and
$215.625, respectively, per share per year. On and after November 17, 2000, May
14, 2002 and June 6, 2007, the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, respectively, are subject to redemption, in
each case in whole or in part, at the option of the Company, at a cash
redemption price of $25.00 per share, $2,500.00 per share and $2,500.00 per
share, respectively, plus accrued and unpaid dividends. The Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock rank on a parity as
to payment of dividends and amounts upon liquidation, however, the Series A
Preferred Stock has the benefit of the Guarantee Agreement, as described below.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock will be entitled to receive out of
the Company's assets available for distribution to stockholders, before any
distribution of assets is made to holders of Common Stock or any other shares of
capital stock ranking as to such distributions junior to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, liquidating
distributions in the amount of $25.00 per share, $2,500.00 per share and
$2,500.00 per share, respectively, plus all accrued and unpaid dividends.
The Series A Preferred Stock is entitled to the benefits of a Guarantee and
Payment Agreement between Securities L.P. and its general partner, First
Industrial Securities Corporation (each a subsidiary of the Company), for the
benefit of American National Bank and Trust Company of Chicago as Guarantee
Agent thereunder (the "Guarantee Agreement") pursuant to which Securities L.P.
has guaranteed, subject to the terms of the Guarantee Agreement, dividends on,
and redemption and liquidation payments with respect to, the Series A Preferred
Stock. No other Preferred Stock of the Company is or will be entitled to the
benefits of the Guarantee Agreement and the Series B Preferred Stock and Series
C Preferred Stock do not have the benefit of any such guarantee.
Except as expressly required by law and in certain other limited
circumstances, the holders of the Preferred Stock are not entitled to vote. The
consent of holders of at least 66% of the outstanding Preferred Stock and any
other series of Preferred Stock ranking on a parity therewith (collectively,
"Parity Preferred Stock"), voting as a single class, is required to authorize
another class of shares senior to such Parity Preferred Stock. The affirmative
vote or consent of the holders of at least 66% of the outstanding shares of each
series of Preferred Stock is required to amend or repeal any provision of, or
add any provision to, the Articles of Incorporation, including the Articles
Supplementary relating to such series of Preferred Stock, if such action would
materially and adversely alter or change the rights, preferences or privileges
of such series of Preferred Stock.
FUTURE SERIES OF PREFERRED STOCK
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable
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provisions of the Articles of Incorporation and Bylaws and any applicable
amendment to the Articles of Incorporation designating terms of a series of
Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock, and to all equity securities ranking junior to such Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; (ii) on a parity with all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
on a parity with the Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company; and (iii) junior to
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company. The term "equity securities" does not include convertible debt
securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement.
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Each such dividend shall be payable to holders of record as they appear on the
share transfer books of the Company on such record dates as shall be fixed by
the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared PRO RATA so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series of
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, and (ii) if a
series of Preferred Stock does not have a cumulative dividend, full dividends on
all shares of the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, no shares of such
series of Preferred Stock shall be redeemed unless all outstanding shares of
Preferred Stock of such series are simultaneously redeemed; PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of Preferred Stock of such series. In addition, unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of such series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); PROVIDED,
HOWEVER, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by any other equitable manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of
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shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or
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evidencing the right to purchase any such shares; or (ii) amend, alter or repeal
the provisions of the Company's Articles of Incorporation or the Designating
Amendment for such series of Preferred Stock, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of such series of Preferred Stock or the
holders thereof; PROVIDED, HOWEVER, with respect to the occurrence of any of the
Events set forth in (ii) above, so long as the Preferred Stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event the Company may not be the surviving
entity, the occurrence of any such Event shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting power of holders
of Preferred Stock, and PROVIDED FURTHER that (x) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Stock, or (y) any increase in the amount of authorized shares of
such series or any other series of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock of such series with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by individuals of the Company's outstanding
equity securities, including any Preferred Stock. Therefore, the Designating
Amendment for each series of Preferred Stock may contain provisions restricting
the ownership and transfer of the Preferred Stock. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a series
of Preferred Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The Company may, at its option, elect to offer Depositary Shares rather than
full shares of Preferred Stock. In the event such option is exercised, each of
the Depositary Shares will represent ownership of and entitlement to all rights
and preferences of a fraction of a share of Preferred Stock of a specified
series (including dividend, voting, redemption and liquidation rights). The
applicable fraction will be specified in
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the Prospectus Supplement. The shares of Preferred Stock represented by the
Depositary Shares will be deposited with a Depositary (the "Depositary") named
in the applicable Prospectus Supplement, under a Deposit Agreement (the "Deposit
Agreement"), among the Company, the Depositary and the holders of the Depositary
Receipts. Certificates evidencing Depositary Shares ("Depositary Receipts") will
be delivered to those persons purchasing Depositary Shares in the offering. The
Depositary will be the transfer agent, registrar and dividend disbursing agent
for the Depositary Shares. Holders of Depositary Receipts agree to be bound by
the Deposit Agreement, which requires holders to take certain actions such as
filing proof of residence and paying certain charges.
The summary of terms of the Depositary Shares contained in this Prospectus
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of the Deposit Agreement, the Articles of Incorporation and
the form of Designating Amendment for the applicable series of Preferred Stock.
All material terms of the Depository Shares, except those disclosed in the
applicable Prospectus Supplement, are described in this Prospectus.
DIVIDENDS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the series of Preferred Stock represented
by the Depositary Shares to the record holders of Depositary Receipts in
proportion to the number of Depositary Shares owned by such holders on the
relevant record date, which will be the same date as the record date fixed by
the Company for the applicable series of Preferred Stock. The Depositary,
however, will distribute only such amount as can be distributed without
attributing to any Depositary Share a fraction of one cent, and any balance not
so distributed will be added to and treated as part of the next sum received by
the Depositary for distribution to record holders of Depositary Receipts then
outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Receipts
entitled thereto, in proportion, as nearly as may be practicable, to the number
of Depositary Shares owned by such holders on the relevant record date, unless
the Depositary determines (after consultation with the Company) that it is not
feasible to make such distribution, in which case the Depositary may (with the
approval of the Company) adopt any other method for such distribution as it
deems equitable and appropriate, including the sale of such property (at such
place or places and upon such terms as it may deem equitable and appropriate)
and distribution of the net proceeds from such sale to such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into Excess Stock.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the affairs of
the Company, whether voluntary or involuntary, the holders of each Depositary
Share will be entitled to the fraction of the liquidation preference accorded
each share of the applicable series of Preferred Stock, as set forth in the
Prospectus Supplement.
REDEMPTION
If the series of Preferred Stock represented by the applicable series of
Depositary Shares is redeemable, such Depositary Shares will be redeemed from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of Preferred Stock held by the Depositary. Whenever the Company
redeems any Preferred Stock held by the Depositary, the Depositary will redeem
as of the same redemption date the number of Depositary Shares representing the
Preferred Stock so redeemed. The Depositary will mail the notice of redemption
promptly upon receipt of such notice from the Company and not less than 30 nor
more than 60 days prior to the date fixed for redemption of the Preferred Stock
and the Depositary Shares to the record holders of the Depositary Receipts.
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VOTING
Promptly upon receipt of notice of any meeting at which the holders of the
series of Preferred Stock represented by the applicable series of Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Receipts as of
the record date for such meeting. Each such record holder of Depositary Receipts
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock represented by such
record holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote such Preferred Stock represented by such Depositary Shares
in accordance with such instructions, and the Company will agree to take all
action which may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting any of the
Preferred Stock to the extent that it does not receive specific instructions
from the holders of Depositary Receipts.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at the principal office of the
Depositary, upon payment of any unpaid amount due the Depositary, and subject to
the terms of the Deposit Agreement, the owner of the Depositary Shares evidenced
thereby is entitled to delivery of the number of whole shares of Preferred Stock
and all money and other property, if any, represented by such Depositary Shares.
Partial shares of Preferred Stock will not be issued. If the Depositary Receipts
delivered by the holder evidence a number of Depositary Shares in excess of the
number of Depositary Shares representing the number of whole shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares. Holders of Preferred Stock thus withdrawn will not thereafter be
entitled to deposit such shares under the Deposit Agreement or to receive
Depositary Receipts evidencing Depositary Shares therefor.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Depositary. However, any
amendment which materially and adversely alters the rights of the holders (other
than any change in fees) of Depositary Shares will not be effective unless such
amendment has been approved by at least a majority of the Depositary Shares then
outstanding. No such amendment may impair the right, subject to the terms of the
Deposit Agreement, of any owner of any Depositary Shares to surrender the
Depositary Receipt evidencing such Depositary Shares with instructions to the
Depositary to deliver to the holder the Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with mandatory
provisions of applicable law.
The Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days prior written notice to the applicable Depositary if (i)
such termination is necessary to preserve the Company's status as a REIT or (ii)
a majority of each series of Preferred Stock affected by such termination
consents to such termination, whereupon such Depositary will be required to
deliver or make available to each holder of Depositary Receipts, upon surrender
of the Depositary Receipts held by such holder, such number of whole or
fractional shares of Preferred Stock as are represented by the Depositary Shares
evidenced by such Depositary Receipts together with any other property held by
such Depositary with respect to such Depositary Receipts. The Company will agree
that if the Deposit Agreement is terminated to preserve the Company's status as
a REIT, then the Company will use its best efforts to list the Preferred Stock
issued upon surrender of the related Depositary Shares on a national securities
exchange. In addition, the Deposit Agreement will automatically terminate if (i)
all outstanding Depositary Shares thereunder shall have been redeemed, (ii)
there shall have been a final distribution in respect of the related Preferred
Stock in connection with any liquidation, dissolution or winding up of the
Company and such distribution shall have been distributed to the holders of
Depositary Receipts evidencing the
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Depositary Shares representing such Preferred Stock or (iii) each share of the
related Preferred Stock shall have been converted into stock of the Company not
so represented by Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and initial issuance of the Depositary Shares, and redemption of
the Preferred Stock and all withdrawals of Preferred Stock by owners of
Depositary Shares. Holders of Depositary Receipts will pay transfer, income and
other taxes and governmental charges and certain other charges as are provided
in the Deposit Agreement to be for their accounts. In certain circumstances, the
Depositary may refuse to transfer Depositary Shares, may withhold dividends and
distributions and sell the Depositary Shares evidenced by such Depositary
Receipt if such charges are not paid.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Receipts all
reports and communications from the Company which are delivered to the
Depositary and which the Company is required to furnish to the holders of the
Preferred Stock. In addition, the Depositary will make available for inspection
by holders of Depositary Receipts at the principal office of the Depositary, and
at such other places as it may from time to time deem advisable, any reports and
communications received from the Company which are received by the Depositary as
the holder of Preferred Stock.
Neither the Depositary nor the Company assumes any obligation or will be
subject to any liability under the Deposit Agreement to holders of Depositary
Receipts other than for its negligence or willful misconduct. Neither the
Depositary nor the Company will be liable if it is prevented or delayed by law
or any circumstance beyond its control in performing its obligations under the
Deposit Agreement. The obligations of the Company and the Depositary under the
Deposit Agreement will be limited to performance in good faith of their duties
thereunder, and they will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares or Preferred Stock unless
satisfactory indemnity is furnished. The Company and the Depositary may rely on
written advice of counsel or accountants, on information provided by holders of
the Depositary Receipts or other persons believed in good faith to be competent
to give such information and on documents believed to be genuine and to have
been signed or presented by the proper party or parties.
In the event the Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and the
Company, on the other hand, the Depositary shall be entitled to act on such
claims, requests or instructions received from the Company.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice for
resignation or removal and must be a bank or trust company having its principal
office in the United States of America and having a combined capital and surplus
of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of Depositary Shares will be treated for Federal income tax purposes
as if they were owners of the Preferred Stock represented by such Depositary
Shares. Accordingly, such owners will be entitled to
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take into account, for Federal income tax purposes, income and deductions to
which they would be entitled if they were holders of such Preferred Stock. In
addition, (i) no gain or loss will be recognized for Federal income tax purposes
upon the withdrawal of Preferred Stock in exchange for Depositary Shares, (ii)
the tax basis of each share of Preferred Stock to an exchanging owner of
Depositary Shares will, upon such exchange, be the same as the aggregate tax
basis of the Depositary Shares exchanged therefor, and (iii) the holding period
for Preferred Stock in the hands of an exchanging owner of Depositary Shares
will include the period during which such person owned such Depositary Shares.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Articles of Incorporation and the Bylaws. All material terms of the Company's
Common Stock are included in this Prospectus.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At March 31, 1997, the Company had outstanding 30,081,117 shares of
Common Stock.
TERMS
Subject to the preferential rights of any other shares or series of stock
(including Preferred Stock outstanding from time to time) and to the provisions
of the Articles of Incorporation regarding Excess Stock, holders of shares of
Common Stock will be entitled to receive dividends on shares of Common Stock if,
as and when authorized and declared by the Board of Directors of the Company out
of assets legally available therefor and to share ratably in the assets of the
Company legally available for distribution to its stockholders in the event of
its liquidation, dissolution or winding up after payment of, or adequate
provision for, all known debts and liabilities of the Company.
Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
Directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of Common Stock will
possess the exclusive voting power. There is no cumulative voting in the
election of Directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the Directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Articles of Incorporation regarding Excess
Stock, all shares of Common Stock will have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Articles of Incorporation do not provide for a lesser
percentage in such situations.
31
<PAGE>
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by individuals of the Company's outstanding
equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York, New York.
CERTAIN PROVISIONS OF MARYLAND LAW AND
THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The following summary of certain provisions of Maryland law and the
Company's Articles of Incorporation and Bylaws does not purport to be complete
and is qualified by reference to Maryland law and the Company's Articles of
Incorporation and Bylaws.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and an Interested Stockholder or in certain circumstances, an
associate or an affiliate thereof are prohibited for five years after the most
recent date on which the Interested Stockholder became an Interested
Stockholder. Thereafter, any such business combination must be recommended by
the board of directors of the corporation and approved by the affirmative vote
of at least (a) 80% of the vote entitled to be cast by holders of outstanding
voting shares of the corporation and (b) two-thirds of the vote entitled to be
cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Stockholder with whom the business combination is
to be effected, unless, among other things, the corporation's stockholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. The Articles of Incorporation
exempt from these provisions of the MGCL any business combination in which there
is no Interested Stockholder other than Mr. Shidler or any entity controlled by
Mr. Shidler unless Mr. Shidler is an Interested Stockholder without taking into
account Mr. Shidler's ownership of shares of the Company's Common Stock and the
right to acquire shares of the Company's Common Stock in an aggregate amount
which does not exceed the number of shares of the Company's Common Stock which
Mr. Shidler owned and had the right to acquire (including through the exchange
of Units) at the time of the consummation of the Company's initial public
offering.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror or by officers or directors who
are employees of the corporation. "Control shares" are voting shares of stock
that, if aggregated, with all other shares of stock previously acquired by that
person, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power; (i) one-fifth or
more but less than
32
<PAGE>
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
of all voting power. Control shares do not include shares the acquiring person
is then entitled to vote as a result of having previously obtained stockholder
approval. A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions.
A person who has made or proposes to make a control share acquisition may
compel the board of directors, upon satisfaction of certain conditions
(including an undertaking to pay expenses), to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by statute, then
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to voting rights, as of
the date of the last control share acquisition or of any meeting of stockholders
at which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of the appraisal rights may not be less than the
highest price per share paid in the control share acquisition. Certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the Company's Articles
of Incorporation or Bylaws.
The Company's Bylaws contain a provision exempting any and all acquisitions
of the Company's shares of capital stock from the control shares provisions of
the MGCL. There can be no assurance that this provision will not be amended or
eliminated in the future.
AMENDMENT OF ARTICLES OF INCORPORATION
The Company's Articles of Incorporation, including its provisions on
classification of the Board of Directors (discussed below), may be amended only
by the affirmative vote of the holders of not less than two-thirds of all of the
votes entitled to be cast on the matter.
MEETINGS OF STOCKHOLDERS
The Company's Bylaws provide for annual meetings of stockholders to be held
on the third Wednesday in April or on any other day as may be established from
time to time by the Board of Directors. Special meetings of stockholders may be
called by (i) the Company's Chairman of the Board or the Company's President,
(ii) a majority of the Board of Directors or (iii) stockholders holding at least
25% of the outstanding capital stock of the Company entitled to vote at the
meeting.
The Company's Bylaws provide that any stockholder of record wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting must provide written notice and certain supporting documentation to the
Company relating to the nomination or proposal not less than 75 days nor more
than 180 days prior to the anniversary date of the prior year's annual meeting
or special meeting in lieu thereof (the "Anniversary Date"). In the event that
the annual meeting is called for a date more than seven calendar days before the
Anniversary Date, stockholders generally must provide written notice within 20
calendar days after the date on which notice of the meeting is mailed to
stockholders or the date of the meeting is publicly disclosed.
33
<PAGE>
The purpose of requiring stockholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Directors, to inform stockholders and make
recommendations about the qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of stockholders. Although the
Company's Bylaws do not give the Board of Directors any power to disapprove
stockholder nominations for the election of directors or proposals for action,
they may have the effect of precluding a contest for the election of directors
or the consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of the nominees or
proposal might be harmful or beneficial to the Company and its stockholders.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Company's Bylaws provide that the number of directors of the Company may
be established by the Board of Directors but may not be fewer than the minimum
number required by Maryland law nor more than nine. Any vacancy will be filled,
at any regular meeting or at any special meeting called for that purpose, by a
majority of the remaining directors, except that a vacancy resulting from an
increase in the number of directors will be filled by a majority of the entire
Board of Directors. Pursuant to the terms of the Articles of Incorporation, the
directors are divided into three classes. One class holds office for a term
expiring at the annual meeting of stockholders to be held in 1997, and the other
two classes hold office for terms expiring at the annual meetings of
stockholders to be held in 1998 and 1999, respectively. As the term of each
class expires, directors in that class will be elected for a term of three years
and until their successors are duly elected and qualified. The Company believes
that classification of the Board of Directors will help to assure the continuity
and stability of the Company's business strategies and policies as determined by
the Board of Directors.
The classified board provision could have the effect of making the removal
of incumbent directors more time-consuming and difficult, which could discourage
a third party from making a tender offer or otherwise attempting to obtain
control of the Company, even though such an attempt might be beneficial to the
Company and its stockholders. At least two annual meetings of stockholders,
instead of one, will generally be required to effect a change in a majority of
the Board of Directors. Thus, the classified board provision could increase the
likelihood that incumbent directors will retain their positions. Holders of
shares of Common Stock will have no right to cumulative voting for the election
of directors. Consequently, at each annual meeting of stockholders, the holders
of a majority of the shares of Common Stock will be able to elect all of the
successors of the class of directors whose term expires at that meeting.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year, and such capital stock
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter tax year.
See "Certain Federal Income Tax Considerations." To ensure that the Company
remains a qualified REIT, the Articles of Incorporation, subject to certain
exceptions, provide that no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than an aggregate of 9.9% in value of
the Company's capital stock. Any transfer of capital stock or any security
convertible into capital stock that would create a direct or indirect ownership
of capital stock in excess of the ownership limit or that would result in the
disqualification of the Company as a REIT, including any transfer that results
in the capital stock being owned by fewer than 100 persons or results in the
Company being "closely held" within the meaning of Section 856(h) of the Code,
shall be null
34
<PAGE>
and void, and the intended transferee will acquire no rights to the capital
stock. Capital stock owned, or deemed to be owned, or transferred to a
stockholder in excess of the ownership limit will automatically be exchanged for
shares of Excess Stock that will be transferred, by operation of law, to the
Company as trustee of a trust for the exclusive benefit of the transferees to
whom such capital stock may be ultimately transferred without violating the
ownership limit. While the Excess Stock is held in trust, it will not be
entitled to vote, it will not be considered for purposes of any stockholder vote
or the determination of a quorum for such vote, and it will not be entitled to
participate in the accumulation or payment of dividends or other distributions.
A transferee of Excess Stock may, at any time such Excess Stock is held by the
Company in trust, designate as beneficiary of the transferee stockholder's
interest in the trust representing the Excess Stock any individual whose
ownership of the capital stock exchanged into such Excess Stock would be
permitted under the ownership limit, and may transfer such interest to such
beneficiary at a price not in excess of the price paid by the original
transferee-stockholder for the capital stock that was exchanged into Excess
Stock. Immediately upon the transfer to the permitted beneficiary, the Excess
Stock will automatically be exchanged for capital stock of the class from which
it was converted. In addition, the Company will have the right, for a period of
90 days during the time any Excess Stock is held by the Company in trust, and,
with respect to Excess Stock resulting from the attempted transfer of Preferred
Stock, at any time when any outstanding shares of Preferred Stock of such series
are being redeemed, to purchase all or any portion of the Excess Stock from the
original transferee-stockholder at the lesser of the price paid for the capital
stock by the original transferee-stockholder and the market price (as determined
in the manner set forth in the Articles of Incorporation) of the capital stock
on the date the Company exercises its option to purchase or, in the case of a
purchase of Excess Stock attributed to Preferred Stock which has been called for
redemption, at its stated value, plus all accumulated and unpaid dividends to
the date of redemption. The 90-day period begins on the date of the violative
transfer if the original transferee-stockholder gives notice to the Company of
the transfer or, if no such notice is given, the date the Board of Directors
determines that a violative transfer has been made.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF THE OPERATING PARTNERSHIP
The following is a discussion of certain investment, financing, conflicts of
interest and other policies of the Operating Partnership. These policies have
been determined by the Board of Directors of the Company, which is the General
Partner of the Operating Partnership, and generally may be amended or revised
from time to time by the Board of Directors without a vote of stockholders.
INVESTMENT POLICIES
It is the Company's policy that First Industrial Realty Trust, Inc. ("First
Industrial") will only engage in business activities through the Operating
Partnership and its subsidiaries. For the purpose of these policies, the term
"subsidiaries" when used with respect to the Operating Partnership includes
partnerships in which the Operating Partnership owns a majority of the economic
interests and Securities L.P.
INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE. The Operating
Partnership's investment objectives are to increase cash flow and the value of
its properties, to acquire established income-producing industrial properties
with cash flow growth potential and, in limited circumstances, to develop
build-to-suit properties or undertake redevelopment projects. Additionally,
where prudent and possible, the Operating Partnership will seek to expand and
upgrade both its existing properties and any newly acquired properties. The
Operating Partnership's business will be focused solely on industrial
properties. The Operating Partnership's policy is to acquire assets primarily
for generation of current income and long-term value appreciation; however,
where appropriate, the Operating Partnership may sell certain properties.
The Operating Partnership expects to pursue its investment objectives
through the direct and indirect ownership of properties and the ownership of
interests in other entities. The Operating Partnership currently expects that it
will make further investments in the Company's current markets and will expand
35
<PAGE>
into other markets within the Company's operating region as investment
opportunities the Operating Partnership considers attractive become available.
The Operating Partnership believes that opportunities exist to acquire, on
attractive terms, established properties which do not pose the risks of
development.
The Operating Partnership also may participate with other entities in
property ownership through joint ventures or other types of co-ownership. Equity
investments may be subject to existing mortgage financing and other
indebtedness, or such financing or indebtedness may be incurred in connection
with acquiring investments. Any such financing or indebtedness will have
priority over the Company's equity interest in such property.
INVESTMENTS IN REAL ESTATE MORTGAGES. While the Operating Partnership will
emphasize equity real estate investments in industrial properties, it may, in
its discretion, invest in mortgage loans and other interests related to
industrial properties. The Operating Partnership does not presently intend to
invest to a significant extent in mortgage loans, but may do so subject to the
investment restrictions applicable to REITs. The mortgage loans in which the
Operating Partnership may invest may be either first mortgage loans or junior
mortgage loans, and may or may not be insured by a government agency.
SECURITIES OF OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES AND OTHER ISSUERS. Subject to the ownership limitations and gross
income tests necessary for REIT qualification, the Operating Partnership also
may invest in securities of entities engaged in real estate activities or
securities of other issuers, including for the purpose of exercising control
over such entities. The Operating Partnership may acquire all or substantially
all of the securities or assets of other REITs or similar entities where such
investments would be consistent with the Operating Partnership's investment
policies. In any event, the Operating Partnership does not intend that its
investments in securities will require it to register as an "investment company"
under the Investment Company Act of 1940, and the Operating Partnership would
intend to divest securities before any such registration would be required.
FINANCING POLICIES
It is the Company's policy that First Industrial shall not incur
indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness shall instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities conducted by
the Operating Partnership and its subsidiaries.
The Operating Partnership has no separate policy regarding the amount of
debt it may incur, but rather is encompassed by the Company's policy in this
regard. The Company currently has a policy of maintaining a ratio of debt to
total market capitalization (I.E., total consolidated debt of the Company as a
percentage of the aggregate market value of all outstanding shares of Common
Stock, assuming the exchange of all Units for Common Stock, plus the aggregate
stated value of all outstanding shares of preferred stock, plus total
consolidated debt) which generally will not exceed 50% and a coverage ratio
(computed as total revenues minus property expenses and general and
administrative expenses divided by interest expense plus dividends on preferred
stock) of at least 2.0:1. As of March 31, 1997, the Company's ratio of debt to
total market capitalization was 32.8%, and for the twelve months ended March 31,
1997, the Company's coverage ratio was 3.09. However, the organizational
documents of the Company do not contain any limitation on the amount or
percentage of indebtedness the Company may incur and the Company's Board of
Directors has the power to alter the current policy. Accordingly, the Company
could become more highly leveraged, resulting in an increase in debt service
that could adversely affect the Company's ability to make expected distributions
to stockholders and in an increased risk of default on its obligations. In
addition, except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provision that would afford holders of Debt
Securities protection in the event of a highly leveraged transaction or change
in control of the Operating Partnership or the Company.
To the extent that the Board of Directors determines to obtain additional
debt financing, the Company intends to do so generally through mortgages on its
properties and lines of credit, but also may
36
<PAGE>
do so through the issuance of debt securities. These mortgages may be recourse,
non-recourse or cross-collateralized and may contain cross-default provisions.
The Company does not have a policy limiting the number or amount of mortgages
that may be placed on any particular property, but mortgage financing
instruments usually limit additional indebtedness on such properties. Future
credit facilities and lines of credit may be used for the purpose of making
acquisitions or capital improvements or providing working capital to the Company
or meeting the taxable income distribution requirements for REITs under the Code
if the Company has taxable income without receipt of cash sufficient to enable
the Company to meet such distribution requirements.
In the future, the Company may seek to extend, expand, reduce or renew its
acquisition facility, or obtain new credit facilities or lines of credit or
issue debt securities, subject to its general policy on debt capitalization.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Operating Partnership may, but does not presently intend to, make
investments other than as previously described. The Operating Partnership has
authority to offer Units and other equity or debt securities in exchange for
property and to repurchase or otherwise reacquire Units or any other securities
and may engage in such activities in the future. The Operating Partnership also
may make loans to joint ventures in which it participates. The Operating
Partnership will not engage in trading, underwriting or the agency distribution
or sale of securities of other issuers. At all times, the Operating Partnership
intends to make investments in such a manner as to be consistent with the
requirements of the Code for the Company to qualify as a REIT unless, because of
circumstances or changes in the Code (or the regulations promulgated
thereunder), the Company's Board of Directors determines that it is no longer in
the best interests of the Company to continue to have the Company qualify as a
REIT. The Company's policies with respect to such activities may be reviewed and
modified from time to time by the Company's directors without notice to or the
vote of the stockholders.
PROPERTIES OF THE OPERATING PARTNERSHIP
AND THE OTHER REAL ESTATE PARTNERSHIPS
GENERAL
The Operating Partnership and the Other Real Estate Partnerships
collectively owned, as of March 31, 1997, 430 in service properties (184 of
which were owned by the Operating Partnership and 246 of which were owned by the
Other Real Estate Partnerships) containing an aggregate of approximately 37.4
million square feet of GLA in 16 states (16.7 million square feet of which
comprised the properties owned by the Operating Partnership and 20.7 million
square feet of which comprised the properties owned by the Other Real Estate
Partnerships) with a diverse base of 1,238 tenants (647 of which were tenants of
the Operating Partnership and 591 of which were tenants of the Other Real Estate
Partnerships) engaged in a wide variety of businesses, including manufacturing,
retailing, wholesale trade, distribution and professional services. The
properties are generally located in business parks which have convenient access
to interstate highways and rail and air transportation. The median age of the
properties is approximately 14 years. The Operating Partnership and the Other
Real Estate Partnerships maintain insurance coverage on their respective
properties which the Operating Partnership believes to be adequate.
The Operating Partnership and the Other Real Estate Partnerships classify
their properties into two industrial categories: bulk warehouse and light
industrial. The bulk warehouse properties are generally used for bulk storage of
materials and manufactured goods and the light industrial properties are
generally used for the design, assembly, packaging and distribution of goods
and, in some cases, the provision of services.
The Operating Partnership and the Other Real Estate Partnerships compete
with numerous commercial developers, real estate companies and other owners of
real estate in seeking properties for acquisition
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<PAGE>
and land for development. In addition, many of the properties owned by the
Operating Partnership and the Other Real Estate Partnerships are located in
areas that include other bulk warehouse and light industrial properties which
compete for the same tenants as the Operating Partnership and the Other Real
Estate Parterships.
The following table summarizes certain information as of March 31, 1997 with
respect to properties owned by the Operating Partnership. Information in the
table excludes properties under development at March 31, 1997.
<TABLE>
<CAPTION>
BULK WAREHOUSE LIGHT INDUSTRIAL TOTAL GLA AS
-------------------------- -------------------------- ----------------------------------------- A % OF
NUMBER OF NUMBER OF NUMBER OF AVERAGE TOTAL
METROPOLITAN AREA GLA PROPERTIES GLA PROPERTIES GLA PROPERTIES OCCUPANCY PORTFOLIO
- ------------------ --------- --------------- --------- --------------- --------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta........... 2,722,936 10 294,264 4 3,017,200 14 93% 18%
Chicago........... 1,311,881 6 627,426 6 1,939,307 12 100% 12%
Cincinnati........ 951,080 3 111,375 5 1,062,455 8 80% 6%
Cleveland......... -- -- 102,500 1 102,500 1 100% (1)
Columbus.......... 1,110,334 2 56,849 1 1,167,183 3 99% 7%
Dayton............ -- -- 322,746 6 322,746 6 99% 2%
Detroit........... 958,910 24 499,066 13 1,457,976 37 92% 9%
Indianapolis...... 1,169,586 6 1,063,780 25 2,233,366 31 99% 13%
Long Island....... 924,385 8 1,703,182 30 2,627,567 38 94% 16%
Milwaukee......... -- -- 173,390 3 173,390 3 100% 1%
Minneapolis/St.
Paul............. 534,527 6 1,225,825 18 1,760,352 24 91% 11%
Nashville......... 538,811 3 -- -- 538,811 3 100% 3%
Northern New
Jersey........... 106,184 1 -- -- 106,184 1 100% (1)
St. Louis......... 198,413 3 -- -- 198,413 3 100% 1%
--
--------- --------- --- --------- ---
Total or
Average.......... 10,527,047 72 6,180,403 112 16,707,450 184 95% 100%
--
--
--------- --------- --- --------- ---
--------- --------- --- --------- ---
</TABLE>
- ------------------------------
(1) Less than 1%.
The following table summarizes certain information as of March 31, 1997 with
respect to properties owned by the Other Real Estate Partnerships. Information
in the table excludes properties under development at March 31, 1997.
<TABLE>
<CAPTION>
BULK WAREHOUSE LIGHT INDUSTRIAL TOTAL GLA AS
-------------------------- -------------------------- ----------------------------------------- A % OF
NUMBER OF NUMBER OF NUMBER OF AVERAGE TOTAL
METROPOLITAN AREA GLA PROPERTIES GLA PROPERTIES GLA PROPERTIES OCCUPANCY PORTFOLIO
- ------------------ --------- --------------- --------- --------------- --------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta........... 985,501 9 213,467 5 1,198,968 14 97% 6%
Central
Pennsylvania(1).. 2,273,586 15 843,508 14 3,117,094 29 99% 15%
Chicago........... 1,602,121 13 528,740 8 2,130,861 21 97% 10%
Des Moines........ 878,992 5 -- -- 878,992 5 100% 4%
Detroit........... 1,557,468 34 2,001,865 47 3,559,333 81 94% 17%
Grand Rapids...... 2,769,591 22 40,400 3 2,809,991 25 90% 14%
Indianapolis...... 976,273 1 -- -- 976,273 1 98% 5%
Milwaukee......... -- -- 133,173 3 133,173 3 100% (3)
Minneapolis/St.
Paul............. 1,330,460 10 1,877,406 25 3,207,866 35 97% 15%
Nashville......... 760,229 4 227,267 3 987,496 7 100% 5%
St. Louis......... 674,682 12 385,713 3 1,060,395 15 100% 5%
Other (2)......... 301,355 4 378,603 6 679,958 10 100% 3%
--------- --- --------- --- --------- ---
Total or
Average.......... 14,110,258 129 6,630,142 117 20,740,400 246 96% 100%
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
- ------------------------------
(1) Includes the Harrisburg, Allentown and Reading markets.
(2) Includes Denton, TX; Wichita, KS; West Lebanon, NH and Abilene, TX.
(3) Less than 1%.
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<PAGE>
As of March 31, 1997, 25 properties owned by the Operating Partnership were
subject to encumbrances securing indebtedness thereof and 222 properties owned
by the Other Real Estate Partnerships, including 195 properties encumbered by a
$300 million mortgage loan which was defeased in April 1997, were subject to
encumbrances securing indebtedness thereof.
TENANT AND LEASE INFORMATION
As of March 31, 1997, the Operating Partnership and the Other Real Estate
Partnerships had a diverse base of 1,238 tenants (647 of which were tenants of
the Operating Partnership and 591 of which were tenants of the Other Real Estate
Partnerships), engaged in a wide variety of businesses including manufacturing,
retailing, wholesale trade, distribution and professional services. Most 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 March
31, 1997, approximately 95% and 96% of the GLA of the properties owned by the
Operating Partnership and the Other Real Estate Partnerships, respectively, was
leased, and no single tenant or group of related tenants accounted for more than
2.6% of the Operating Partnership's rent revenues or more than 3.2% of the Other
Real Estate Partnerships' rent revenues, nor did any single tenant or group of
related tenants occupy more than 4.2% of the total GLA of the Operating
Partnership or more than 3.7% of the total GLA of the Other Real Estate
Partnerships.
The following table shows scheduled lease expirations for all leases for the
properties owned by the Operating Partnership as of March 31, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF TOTAL
GLA SUBJECT TO GLA ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF EXPIRING REPRESENTED BY UNDER EXPIRING REPRESENTED BY
YEAR OF EXPIRATION(1) LEASES EXPIRING LEASES(2) EXPIRING LEASES LEASES(3) EXPIRING LEASES
- ----------------------- ------------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
1997................... 155 2,309,155 14.6% $ 9,940 15.0%
1998................... 171 2,411,519 15.2% 10,485 15.8%
1999................... 139 3,126,141 19.8% 13,745 20.7%
2000................... 91 2,203,451 13.9% 8,787 13.2%
2001................... 74 1,934,629 12.2% 8,474 12.8%
2002................... 29 678,363 4.3% 2,889 4.4%
2003................... 18 538,510 3.4% 1,886 2.8%
2004................... 11 848,631 5.4% 2,680 4.0%
2005................... 7 324,838 2.1% 2,317 3.5%
2006................... 7 315,366 2.0% 1,159 1.7%
Thereafter............. 8 1,116,351 7.1% 4,056 6.1%
--- ----------------- ------- -------- -------
Total................ 710 15,806,954 100.0% $ 66,418 100.0%
--- ----------------- ------- -------- -------
--- ----------------- ------- -------- -------
</TABLE>
- ------------------------------
(1) Lease expirations as of March 31, 1997, assuming tenants do not exercise
existing renewal, termination or purchase options.
(2) Does not include existing vacancies of 900,496 aggregate square feet.
(3) In thousands, reflects monthly base rent provided for under the terms of
each expiring lease as in effect at March 31, 1997, multiplied by 12, and
does not take into account contractual rent escalations.
39
<PAGE>
The following table shows scheduled lease expirations for all leases for the
properties owned by the Other Real Estate Partnerships as of March 31, 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF TOTAL
GLA SUBJECT TO GLA ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF EXPIRING REPRESENTED BY UNDER EXPIRING REPRESENTED BY
YEAR OF EXPIRATION(1) LEASES EXPIRING LEASES(2) EXPIRING LEASES LEASES(3) EXPIRING LEASES
- ----------------------- ------------------- ----------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
1997................... 103 2,149,313 10.7% $ 9,484 11.0%
1998................... 140 3,953,594 19.8% 17,096 19.9%
1999................... 127 3,341,561 16.7% 17,780 20.6%
2000................... 91 3,185,533 15.9% 14,206 16.5%
2001................... 65 3,077,807 15.4% 11,101 12.9%
2002................... 27 1,449,056 7.3% 5,859 6.8%
2003................... 16 1,217,905 6.1% 3,328 3.9%
2004................... 6 363,465 1.8% 1,475 1.7%
2005................... 6 585,747 2.9% 2,416 2.8%
2006................... 7 278,280 1.4% 1,402 1.6%
Thereafter............. 7 403,814 2.0% 1,959 2.3%
--- ----------------- ------- -------- -------
Total................ 595 20,006,075 100.0% $ 86,106 100.0%
--- ----------------- ------- -------- -------
--- ----------------- ------- -------- -------
</TABLE>
- ------------------------------
(1) Lease expirations as of March 31, 1997, assuming tenants do not exercise
existing renewal, termination or purchase options.
(2) Does not include existing vacancies of 734,325 aggregate square feet.
(3) In thousands, reflects monthly base rent provided for under the terms of
each expiring lease as in effect at March 31, 1997, multiplied by 12, and
does not take into account contractual rent escalations.
FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of the material federal income tax matters of
general application pertaining to REITs under the Code. The discussion is based
on current law and does not purport to deal with all aspects of federal income
taxation that may be relevant to investors subject to special treatment under
the federal income tax laws, such as tax-exempt investors, dealers in securities
or foreign persons. The provisions of the Code pertaining to REITs are highly
technical and complex and sometimes involve mixed questions of fact and law. In
addition, this section does not discuss foreign, state or local taxation. In the
opinion of Cahill Gordon & Reindel, the conclusions of law expressed in this
summary are correct in all material respects. Prospective investors should
consult their own tax advisors regarding the federal, state, local, foreign and
other tax consequences specific to them of holding and disposing of the
Securities.
TAXATION OF THE COMPANY
In the opinion of Cahill Gordon & Reindel, commencing with its taxable year
ended December 31, 1994, the Company has been organized in conformity with the
requirements for qualification as a REIT under the Code, the Company's method of
operation has enabled it to meet the requirements for qualification as a REIT
under the Code, and, provided that the Company continues to satisfy the various
requirements applicable under the Code to REITs, as described herein, it will
continue to so qualify. Cahill Gordon & Reindel's opinion is based on various
assumptions and is conditioned upon certain representations as to factual
matters made by the Company and, the Operating Partnership and the Other Real
Estate Partnerships (such partnerships being hereinafter collectively referred
to as the "Partnerships"). Moreover, such qualification and taxation as a REIT
depend upon the Company's ability to meet, as a matter of fact, through actual
annual operating results, distribution levels, diversity of stock ownership and
various other qualification tests imposed under the Code discussed below, the
results of which will not be reviewed by Cahill Gordon & Reindel. Accordingly,
no assurance can be given that the actual results of the Company's operation for
any one taxable year will satisfy such requirements.
To qualify as a REIT under the Code for a taxable year, the Company must
meet certain organizational and operational requirements, which generally
require it to be a passive investor in operating real
40
<PAGE>
estate and to avoid excessive concentration of ownership of its capital stock.
Initially, its principal activities must be real estate related. Generally, at
least 75% of the value of the total assets of the Company at the end of each
calendar quarter must consist of real estate assets, cash or governmental
securities. The Company may not own more than 10% of the outstanding voting
securities of any corporation and the value of any one issuer's securities may
not exceed 5% of the Company's gross assets; shares of qualified REITs,
qualified temporary investments and shares of certain wholly owned subsidiary
corporations are exempt from these prohibitions. The Company holds assets
through certain wholly owned subsidiary corporations and holds Preferred Stock
interests in certain corporations that provide property management services to
third parties; in the opinion of Cahill Gordon & Reindel, based on certain
factual representations, these holdings do not violate the prohibition on
ownership of voting securities. Additionally, gross income from the sale or
other disposition of stock and securities held for less than one year and of
real property held for less than four years must constitute less than 30% of the
gross income for each taxable year of a REIT. For each taxable year, at least
75% of a REIT's gross income must be derived from specified real estate sources
and 95% must be derived from such real estate sources plus certain other
permitted sources. Real estate income for purposes of these requirements
includes gain from the sale of real property not held primarily for sale to
customers in the ordinary course of business, dividends on REIT shares, interest
on loans secured by mortgages on real property, certain rents from real property
and income from foreclosure property. For rents to qualify, they may not be
based on the income or profits of any person, except that they may be based on a
percentage or percentages of gross income or receipts and, subject to certain
limited exceptions, the REIT may not manage the property or furnish services to
tenants except through an independent contractor which is paid an arm's-length
fee and from which the REIT derives no income. Substantially all of the
Company's assets are held through the Partnerships. In general, in the case of a
REIT that is a partner in a partnership, applicable regulations treat the REIT
as holding directly its proportionate share of the assets of the partnership and
as being entitled to the income of the partnership attributable to such share.
The Company must satisfy certain ownership restrictions that limit (i)
concentration of ownership of the Company's capital stock by a few individuals
and (ii) ownership by the Company of its tenants. The outstanding capital stock
of the Company must be held by at least 100 stockholders. No more than 50% in
value of the outstanding capital stock, including in some circumstances capital
stock into which outstanding securities might be converted, may be owned
actually or constructively by five or fewer individuals or certain other
entities at any time during the last half of the Company's taxable year.
Accordingly, the Articles of Incorporation contain certain restrictions
regarding the transfer of Common Stock, Preferred Stock and any other
outstanding securities convertible into Common Stock when necessary to maintain
the Company's qualification as a REIT under the Code. However, because the Code
imposes broad attribution rules in determining constructive ownership, no
assurance can be given that the restrictions contained in the Articles of
Incorporation will be effective in maintaining the Company's REIT status. See
"Restrictions on Transfers of Capital Stock."
So long as the Company qualifies for taxation as a REIT and distributes at
least 95% of its REIT taxable income (computed without regard to net capital
gain or the dividends paid deduction) for its taxable year to its stockholders
annually, the Company itself will not be subject to federal income tax on that
portion of such income distributed to stockholders. The Company will be taxed at
regular corporate rates on all income not distributed to stockholders. The
Company's policy is to distribute at least 95% of its taxable income. REITs also
may incur taxes for certain other activities or to the extent distributions do
not satisfy certain other requirements.
Failure of the Company to qualify during any taxable year as a REIT could,
unless certain relief provisions were available, have a material adverse effect
upon its stockholders. If disqualified for taxation as a REIT for a taxable
year, the Company also would be disqualified for taxation as a REIT for the next
four taxable years, unless the failure were considered to be due to reasonable
cause and not willful neglect. The Company would be subject to federal income
tax at corporate rates on all of its taxable income and
41
<PAGE>
would not be able to deduct the dividends paid, which could result in a
discontinuation of or substantial reduction in dividends to stockholders.
Dividends also would be subject to the regular tax rules applicable to dividends
received by stockholders of corporations. Should the failure to qualify as a
REIT be determined to have occurred retroactively in an earlier tax year of the
Company, the imposition of a substantial federal income tax liability on the
Company attributable to any nonqualifying tax years may adversely affect the
Company's ability to pay dividends. In the event that the Company fails to meet
certain income tests applicable to REITs, it may, generally, nonetheless retain
its qualification as a REIT if it pays a 100% tax on the amount by which it
failed to meet the relevant income test so long as such failure was considered
to be due to reasonable cause and not willful neglect. Any such taxes would
adversely affect the Company's ability to pay dividends and distributions.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities through
underwriters or dealers, directly to one or more purchasers, through agents or
through a combination of any such methods of sale. Any underwriter or agent
involved in the offer and sale of the Securities will be named in the applicable
Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company, from the Operating Partnership or from
purchasers of Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company or the Operating Partnership and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company or
the Operating Partnership will be described, in the applicable Prospectus
Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock, which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company or the Operating Partnership
may elect to list any series of Debt Securities, Preferred Stock or Depositary
Shares on an exchange, but neither is obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of the
trading market for the Securities.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be tenants of, the Company or the Operating Partnership in the
ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership will authorize underwriters or other persons acting as the
Company's or the Operating Partnership's agents to solicit offers by certain
institutions to purchase Securities from the Company or the Operating
Partnership pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension
42
<PAGE>
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by the Company or the
Operating Partnership, as the case may be. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of Securities offered hereby may not engage in
market making activities with respect to the Securities for a period of two
business days prior to the commencement of such distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities covered by
this Prospectus and certain tax matters, will be passed upon for the Company by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York, and for any underwriters, dealers or agents by Rogers &
Wells, New York, New York. Cahill Gordon & Reindel and Rogers & Wells will rely
as to all matters of Maryland law on the opinion of McGuire Woods Battle &
Boothe LLP, Baltimore, Maryland.
EXPERTS
The financial statements and schedule thereto of the Company and the
Contributing Businesses, the financial statements of the Acquisition Properties
(as defined in the Company's Current Report on Form 8-K dated February 12, 1997)
and the financial statements of the Lazarus Burman Properties (as defined in the
Company's Current Report on Form 8-K/A No. 1 filed April 10, 1997), each
incorporated by reference in this Prospectus or elsewhere in the Registration
Statement, and the financial statements and schedule thereto of the Operating
Partnership and the Contributing Businesses and the financial statements of the
Other Real Estate Partnerships included in this Prospectus, to the extent and
for the periods indicated in their reports, have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are included or incorporated herein
in reliance upon the authority of said firm as experts in giving said reports.
43
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
AND
OTHER REAL ESTATE PARTNERSHIPS
INDEX TO FINANCIAL STATEMENTS AND OTHER INFORMATION
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
FINANCIAL STATEMENTS
Report of Independent Accountants......................................................................... F-2
Balance Sheets of First Industrial, L.P. (the "Operating Partnership") as of December 31, 1996 and 1995... F-3
Statements of Operations of the Operating Partnership for the Years Ended December 31, 1996 and 1995 and
for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Operations of the
Contributing Businesses for the Period January 1, 1994 to June 30, 1994................................. F-4
Statements of Changes in Partners' Capital of the Operating Partnership for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Changes in
Net Deficit of the Contributing Businesses for the Period January 1, 1994 to June 30, 1994.............. F-5
Statements of Cash Flows of the Operating Partnership for the Years Ended December 31, 1996 and 1995 and
for the Period July 1, 1994 to December 31, 1994 and Combined Statement of Cash Flows of the
Contributing Businesses for the Period January 1, 1994 to June 30, 1994................................. F-6
Notes to Financial Statements............................................................................. F-7
Schedule III: Real Estate and Accumulated Depreciation.................................................... F-19
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Balance Sheet of the Operating Partnership as of December 31, 1996.................... F-24
Unaudited Pro Forma Statement of Operations of the Operating Partnership for the Year Ended December 31,
1996.................................................................................................... F-25
Notes to Unaudited Pro Forma Financial Statements......................................................... F-26
OTHER INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of Operations..................... F-28
Selected Financial Data................................................................................... F-32
OTHER REAL ESTATE PARTNERSHIPS
FINANCIAL STATEMENTS
Report of Independent Accountants......................................................................... F-33
Combined Balance Sheets of the Other Real Estate Partnerships as of December 31, 1996 and 1995............ F-34
Combined Statements of Operations of the Other Real Estate Partnerships for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994...................................... F-35
Combined Statements of Changes in Partners' Capital of the Other Real Estate Partnerships for the Years
Ended December 31, 1996 and 1995 and for the Period July 1, 1994 to December 31, 1994................... F-36
Combined Statements of Cash Flows of the Other Real Estate Partnerships for the Years Ended December 31,
1996 and 1995 and for the Period July 1, 1994 to December 31, 1994...................................... F-37
Notes to Combined Financial Statements.................................................................... F-38
OTHER INFORMATION
Selected Financial Data................................................................................... F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of First Industrial, L.P.
We have audited the financial statements and the financial statement
schedule of First Industrial, L.P. (the "Operating Partnership") and the
combined financial statements of the Contributing Businesses as listed on page
F-1 of this Prospectus. These financial statements and the financial statement
schedule are the responsibility of the Operating Partnership's and the
Contributing Businesses' (as defined in Note 2 hereof) 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 the Operating Partnership as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years ended December 31, 1996 and 1995 and for the period July 1,
1994 through December 31, 1994 and of the Contributing Businesses for the period
January 1, 1994 to June 30, 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>
FIRST INDUSTRIAL, L.P.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate:
Land............................................................................. $ 55,425 $ 14,253
Buildings and Improvements....................................................... 291,942 81,384
Furniture, Fixtures and Equipment................................................ -- 362
Construction in Progress......................................................... 6,414 393
Less: Accumulated Depreciation................................................... (8,133) (4,852)
------------ ------------
Net Investment in Real Estate.................................................. 345,648 91,540
Investment in Other Real Estate Partnerships....................................... 258,411 241,918
Cash and Cash Equivalents.......................................................... 4,295 6,493
Restricted Cash.................................................................... -- 2,557
Tenant Accounts Receivable, Net.................................................... 1,021 533
Deferred Rent Receivable........................................................... 1,280 676
Interest Rate Protection Agreements, Net........................................... 1,723 664
Deferred Financing Costs, Net...................................................... 1,140 2,269
Prepaid Expenses and Other Assets, Net............................................. 8,604 9,410
------------ ------------
Total Assets................................................................... $ 622,122 $ 356,060
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................................. $ 45,578 $ --
Construction Loans Payable......................................................... -- 4,873
Acquisition Facilities Payable..................................................... 4,400 48,235
Promissory Notes Payable........................................................... 9,919 --
Accounts Payable and Accrued Expenses.............................................. 8,770 5,735
Rents Received in Advance and Security Deposits.................................... 1,942 494
Distributions Payable.............................................................. 16,281 9,954
------------ ------------
Total Liabilities.............................................................. 86,890 69,291
------------ ------------
Commitments and Contingencies........................................................ -- --
Partners' Capital:
General Partner................................................................ 496,169 269,357
Limited Partners............................................................... 39,063 17,412
------------ ------------
Total Partners' Capital........................................................ 535,232 286,769
------------ ------------
Total Liabilities and Partners' Capital........................................ $ 622,122 $ 356,060
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF OPERATIONS
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING PARTNERSHIP CONTRIBUTING
---------------------------------------- BUSINESSES
SIX MONTHS -------------
YEAR ENDED YEAR ENDED ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED
1996 1995 1994 JUNE 30, 1994
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income........................................ $ 29,166 $ 22,094 $ 7,731 $ 18,041
Tenant Recoveries and Other Income................... 8,421 5,348 1,873 4,775
------------ ------------ ------------ -------------
Total Revenues................................... 37,587 27,442 9,604 22,816
------------ ------------ ------------ -------------
Expenses:
Real Estate Taxes.................................... 6,109 4,863 1,485 3,273
Repairs and Maintenance.............................. 1,071 848 213 1,225
Property Management.................................. 1,153 904 195 677
Utilities............................................ 1,047 235 82 570
Insurance............................................ 271 279 81 184
Other................................................ 284 349 64 107
General and Administrative........................... 4,014 3,792 1,047 795
Interest............................................. 4,685 6,581 807 9,868
Interest (affiliated)................................ -- -- -- 1,905
Amortization of Interest Rate Protection Agreements
and Deferred Financing Costs....................... 196 222 187 858
Depreciation and Other Amortization.................. 6,310 5,087 1,916 4,744
------------ ------------ ------------ -------------
Total Expenses................................... 25,140 23,160 6,077 24,206
------------ ------------ ------------ -------------
Income (Loss) Before Gain on Sales of Properties,
Management and Construction Loss, Equity in Income of
Other Real Estate Partnerships and Extraordinary
Item................................................. 12,447 4,282 3,527 (1,390)
Gain on Sales of Properties............................ 4,344 -- -- --
------------ ------------ ------------ -------------
Income (Loss) Before Management and Construction Loss,
Equity in Income of Other Real Estate Partnerships
and Extraordinary Item............................... 16,791 4,282 3,527 (1,390)
Management and Construction Loss....................... -- -- -- (81)
------------ ------------ ------------ -------------
Income (Loss) Before Equity in Income of Other Real
Estate Partnerships and Extraordinary Item........... 16,791 4,282 3,527 (1,471)
Equity in Income of Other Real Estate Partnerships..... 20,130 7,841 6,767 --
------------ ------------ ------------ -------------
Income (Loss) Before Extraordinary Item................ 36,921 12,123 10,294 (1,471)
Extraordinary Loss..................................... (2,273) -- -- (1,449)
------------ ------------ ------------ -------------
Net Income (Loss)...................................... $ 34,648 $ 12,123 $ 10,294 $ (2,920)
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF CHANGES
IN NET DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING CONTRIBUTING
PARTNERSHIP BUSINESSES
--------------------- ------------
GENERAL LIMITED NET
TOTAL PARTNER PARTNERS DEFICIT
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993.................................... $ (37,548) $ 216 $ -- $ (37,764)
Contributions................................................. 343,501 324,705 -- 18,796
Distributions................................................. (29,011) -- -- (29,011)
Net Loss...................................................... (2,920) -- -- (2,920)
Acquisition and Contribution of Contributing Businesses'
Interests................................................... 18,112 (53,869) 21,082 50,899
---------- ---------- --------- ------------
Balance at June 30, 1994........................................ 292,134 271,052 21,082 --
---------- ---------- --------- ------------
Contributions................................................. 30,412 30,412 -- --
Distributions................................................. (19,296) (17,843) (1,453) --
Net Income.................................................... 10,294 9,519 775 --
---------- ---------- --------- ------------
Balance at December 31, 1994.................................... 313,544 293,140 20,404 --
---------- ---------- --------- ------------
Distributions................................................. (38,898) (36,003) (2,895) --
Unit Conversions.............................................. -- 1,005 (1,005) --
Net Income.................................................... 12,123 11,215 908 --
---------- ---------- --------- ------------
Balance at December 31, 1995.................................... 286,769 269,357 17,412 --
---------- ---------- --------- ------------
Contributions................................................. 268,133 244,269 23,864 --
Distributions................................................. (54,318) (50,418) (3,900) --
Unit Conversions.............................................. -- 943 (943) --
Net Income.................................................... 34,648 32,018 2,630 --
---------- ---------- --------- ------------
Balance at December 31, 1996.................................... $ 535,232 $ 496,169 $ 39,063 $ --
---------- ---------- --------- ------------
---------- ---------- --------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
FIRST INDUSTRIAL, L.P.
STATEMENTS OF CASH FLOWS
AND CONTRIBUTING BUSINESSES
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE OPERATING PARTNERSHIP CONTRIBUTING
----------------------------------------- BUSINESSES
SIX MONTHS -------------
YEAR ENDED YEAR ENDED ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED
1996 1995 1994 JUNE 30, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss).................................... $ 34,648 $ 12,123 $ 10,294 $ (2,920)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation....................................... 5,115 4,092 1,532 4,661
Amortization of Interest Rate Protection Agreements
and Deferred Financing Costs..................... 196 222 187 858
Other Amortization................................. 1,195 995 384 83
Equity in Income of Other Real Estate
Partnerships..................................... (20,130) (7,841) (6,767) --
Provision for Bad Debts............................ 35 158 -- --
Gain on Sales of Properties........................ (4,344) -- -- --
Extraordinary Items................................ 2,273 -- -- 1,449
(Increase) Decrease in Accounts Receivable and
Other Assets..................................... (965) (3,903) 1,223 (4,544)
Increase in Deferred Rent Receivable............... (1,179) (606) (457) (92)
Increase (Decrease) in Accounts Payable, Accrued
Expenses, Rents Received in Advance and Security
Deposits......................................... (498) 2,295 (16,695) 7,692
Increase in Organization Costs..................... (32) (115) -- (1,466)
(Increase) Decrease in Restricted Cash............. 2,557 (3,238) -- (810)
------------ ------------- ------------ -------------
Net Cash Provided by Operating Activities........ 18,871 4,182 (10,299) 4,911
------------ ------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real
Estate............................................. (221,282) (67,605) (62,449) (367,257)
Proceeds from Sale of Investment in Real Estate...... 14,972 -- -- --
(Increase) Decrease in Restricted Cash............... -- -- -- (7,500)
Contributions to Investment in Other Real Estate
Partnerships....................................... (25,473) (6,664) (4,051) --
Distributions from Investment in Other Real Estate
Partnerships....................................... 29,110 33,363 5,148 --
------------ ------------- ------------ -------------
Net Cash Used in Investing Activities............ (202,673) (40,906) (61,352) (374,757)
------------ ------------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions........................................ 244,269 -- 30,412 348,243
Distributions........................................ (47,991) (38,592) (9,648) (29,011)
Proceeds from Mortgage Loans Payable................. 36,750 -- -- 381,743
Repayments on Mortgage Loans Payable................. (589) -- -- (268,935)
Proceeds from Acquisition Facilities Payable......... 103,523 83,943 48,700 5,000
Repayments on Acquisition Facilities Payable......... (147,358) (2,958) -- --
Proceeds from Construction Loans Payable............. -- 4,873 -- --
Repayment of Construction Loans Payable.............. (4,873) -- -- --
Repayment of Notes Payable........................... -- -- -- (34,553)
Cost of Debt Issuance and Interest Rate Protection
Agreements......................................... (1,768) (4,084) (3,232) (28,335)
Prepayment Fee....................................... (359) -- -- --
------------ ------------- ------------ -------------
Net Cash Provided by Financing Activities........ 181,604 43,182 66,232 374,152
------------ ------------- ------------ -------------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ (2,198) 6,458 (5,419) 4,306
Cash and Cash Equivalents, Beginning of Period....... 6,493 35 5,454 2,812
------------ ------------- ------------ -------------
Cash and Cash Equivalents, End of Period............. $ 4,295 $ 6,493 $ 35 $ 7,118
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
1. ORGANIZATION AND FORMATION
First Industrial, L.P. (the "Operating Partnership") was organized as a
limited partnership in the state of Delaware on November 23, 1993. The sole
general partner is First Industrial Realty Trust, Inc. (the "Company") with an
approximate 92.4% ownership interest at December 31, 1996. The limited partners
owned approximately a 7.6% aggregate ownership interest at December 31, 1996.
The Company is a real estate investment trust (REIT) as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through the
Operating Partnership. As of December 31, 1996, the Operating Partnership
directly owned 137 in-service properties, containing an aggregate of
approximately 12.7 million square feet (unaudited) of gross leasable area
("GLA"), as well as a 99% limited partnership interest (subject in one case as
described below to a preferred limited partnership interest) in First Industrial
Financing Partnership, L.P. (the "Financing Partnership"), First Industrial
Securities, L.P. (the "Securities Partnership"), First Industrial Mortgage
Partnership, L.P. (the "Mortgage Partnership"), First Industrial Pennsylvania
Partnership, L.P. (the "Pennsylvania Partnership"), First Industrial Harrisburg,
L.P. (the "Harrisburg Partnership"), First Industrial Indianapolis, L.P. (the
"Indianapolis Partnership") and First Industrial Development Services Group,
L.P. (together, the "Other Real Estate Partnerships"). On a combined basis, as
of December 31, 1996, the Other Real Estate Partnerships owned 242 in-service
properties containing an aggregate of approximately 20.0 million square feet
(unaudited) of GLA. Of the 242 properties owned by the Other Real Estate
Partnerships, 195 were owned by the Financing Partnership, 19 were owned by the
Securities Partnership, 23 were owned by the Mortgage Partnership, one was owned
by the Pennsylvania Partnership, three were owned by the Harrisburg Partnership
and one was owned by the Indianapolis Partnership.
The general partners of the Other Real Estate Partnerships are separate
corporations, each with a one percent general partnership interest. Each general
partner of the Other Real Estate Partnerships is a wholly owned subsidiary of
the Company. The general partner of the Securities Partnership, First Industrial
Securities Corporation, also owns a preferred limited partnership interest which
entitles it to receive a fixed quarterly distribution, and results in it being
allocated income in the same amount, equal to the fixed quarterly dividend the
Company pays on its 9.5% Series A Preferred Stock.
Profits, losses and distributions of the Operating Partnership are allocated
to the general partner and the limited partners in accordance with the
provisions contained within its restated and amended partnership agreement.
On June 30, 1994, the Company completed its initial public offering of
15,175,000 shares of $.01 par value common stock (the "Initial Offering") and,
in July 1994, issued an additional 1,400,000 shares pursuant to an
over-allotment option. The proceeds per share in the Initial Offering and the
over-allotment option was $23.50, resulting in gross offering proceeds of
approximately $389,512. Net of underwriters' discount and total offering
expenses, the Company received approximately $355,217 in proceeds from the
Initial Offering and the over-allotment option. The net proceeds received from
the Initial Offering and subsequent equity offerings (See Note 6) are reflected
in the Operating Partnership's financial statements as contributions. On June
30, 1994, the Company (through the Financing Partnership) borrowed $300,000 (the
"1994 Mortgage Loan") from an institutional lender. The net proceeds from the
Initial Offering and the 1994 Mortgage Loan were used primarily to acquire
properties, repay indebtedness and pay certain fees and expenses. The Company
and the Operating Partnership began operations on July 1, 1994.
F-7
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. BASIS OF PRESENTATION
The accompanying financial statements as of December 31, 1996 and 1995 and
for the years ended December 31, 1996 and 1995 and for the six month period
ended December 31, 1994 present the ownership and operating results of the
properties owned directly by the Operating Partnership. Such financial
statements present the Operating Partnership's limited partnership interests in
each of the Other Real Estate Partnerships under the equity method of
accounting.
The combined statements of operations, changes in partners' capital and net
deficit and cash flows for the six months ended June 30, 1994 reflect the
operations, equity and deficit and cash flows of the properties and business
contributed by The Shidler Group and the properties and business contributed by
three other contributing businesses (together, the "Contributing Businesses") at
or prior to the consummation of the Initial Offering.
Purchase accounting has been applied when ownership interests in properties
were acquired for cash. The historical cost basis of properties has been carried
over when the Contributing Businesses ownership interests were exchanged for
units in the Operating Partnership (the "Units") and purchase accounting has
been used for all other properties that were acquired for Units.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In order to conform with generally accepted accounting principles,
management, in preparation of the Operating Partnership'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 as
of December 31, 1996 and 1995, and the reported amounts of revenues and expenses
for the years ended December 31, 1996 and 1995 and the six months ended December
31, 1994 and June 30, 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 is recognized as revenues in the same period the
related expenses are incurred by the Operating Partnership.
The Operating Partnership provides an allowance for doubtful accounts
against the portion of tenant accounts receivable which is estimated to be
uncollectible. Accounts receivable in the consolidated balance sheets are shown
net of an allowance for doubtful accounts of $221 and $186 as of December 31,
1996 and December 31, 1995, respectively.
INVESTMENT IN REAL ESTATE AND DEPRECIATION:
Effective January 1, 1995, the Operating Partnership 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 of depreciated cost or fair value as determined
by the Operating Partnership. The Operating Partnership reviews its properties
on a quarterly basis for impairment and provides a provision if impairments are
determined. First, to determine if impairment may exist, the Operating
Partnership reviews its properties and identifies those which have had either an
event
F-8
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of change or event of circumstances warranting further assessment of
recoverability. Then, the Operating Partnership 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.
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>
<CAPTION>
YEARS
-----------
<S> <C>
Buildings and Improvements....................................................... 31.5 to 40
Land Improvements................................................................ 15
Furniture, Fixtures and Equipment................................................ 5 to 10
</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 related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss.
INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS:
Investment in Other Real Estate Partnerships represents the Operating
Partnership's limited partnership interests in the Other Real Estate
Partnerships. The Operating Partnership accounts for its Investment in Other
Real Estate Partnerships under the equity method of accounting. Under the equity
method of accounting, the Operating Partnership's share of earnings or losses of
the Other Real Estate Partnerships is reflected in income as earned and
contributions or distributions increase or decrease, respectively, the Operating
Partnership's Investment in Other Real Estate Partnerships as paid or received,
respectively.
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:
In accordance with partnership taxation, each of the partners are
responsible for reporting their shares of taxable income or loss.
The Operating Partnership is subject to certain state and local income,
excise and franchise taxes. The provision for such state and local taxes has
been reflected in general and administrative expense in the statement of
operations and has not been separately stated due to its insignificance.
F-9
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Operating Partnership's financial instruments include short-term
investments, tenant accounts receivable, accounts payable, other accrued
expenses, construction loans payable, acquisition facilities payable and
promissory notes payable. The fair values of these financial instruments were
not materially different from their carrying or contract values. The Operating
Partnership's financial instruments also include mortgage loans for which the
fair value was not materially different from its carrying value. The
determination of the fair value of the mortgage loans was made using available
market information and appropriate valuation techniques. The Operating
Partnership's financial instruments also include interest rate protection
agreements as described in the next paragraph.
DERIVATIVE FINANCIAL INSTRUMENTS:
The Operating Partnership's interest rate protection agreements (together,
the "Agreements") are used to hedge the interest rate on the 1994 Mortgage Loan.
As such, receipts or payments resulting from the Agreements are recognized as
adjustments to equity in income of Other Real Estate Partnerships (specifically,
the Financing Partnership). The credit risks associated with the Agreements are
controlled through the evaluation and monitoring of the creditworthiness of the
counterparty. In the event that the counterparty fails to meet the terms of the
Agreements, the Operating Partnership's exposure is limited to the current value
of the interest rate differential, not the notional amount, and the Operating
Partnership's carrying balance of the Agreements on the balance sheet. The
Agreements have been executed with a creditworthy financial institution. As
such, the Operating Partnership considers the risk of nonperformance to be
remote. In the event that the Operating Partnership terminates the Agreements,
the Operating Partnership would recognize a gain (loss) from the disposition of
the Agreements equal to the amount of cash received or paid at termination less
the carrying balance of the Agreements on the Operating Partnership's balance
sheet.
At December 31, 1996, the fair market value of the Agreements was
approximately $3.8 million, which was greater than the $1.7 million net book
value by approximately $2.1 million. The fair market value was determined by a
third party evaluation and is based on estimated discounted future cash flows.
DEFERRED FINANCING COSTS:
Deferred financing costs include fees and costs incurred to obtain long-term
financing. These fees and costs are being amortized over the terms of the
respective loans. Accumulated amortization of deferred financing costs was $32
and $957 at December 31, 1996 and 1995, respectively. Unamortized deferred
financing fees are written-off when debt is retired before the maturity date
(see Note 12).
4. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS
The Investment in Other Real Estate Partnerships reflects the Operating
Partnership's 99% limited partnership equity interest in the entities described
in Note 1 to these financial statements.
Summarized financial information as derived from the audited financial
statements of the Other Real Estate Partnerships is shown below.
F-10
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT IN OTHER REAL ESTATE PARTNERSHIPS (CONTINUED)
Combined Balance Sheets:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate, Net....................................... $ 613,685 $ 597,227
Other Assets......................................................... 48,602 45,938
------------ ------------
Total Assets..................................................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................... $ 346,504 $ 346,850
Other Liabilities.................................................... 13,326 10,714
------------ ------------
Total Liabilities................................................ 359,830 357,564
------------ ------------
Partners' Capital........................................................ 302,457 285,601
------------ ------------
Total Liabilities and Partners' Capital.......................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
</TABLE>
Combined Statements of Operations:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Total Revenues............................................ $ 102,322 $ 79,032 $ 36,953
------------ ------------ ------------
Property Expenses......................................... 28,933 20,824 9,733
Interest Expense.......................................... 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and
Deferred Financing Costs................................ 3,090 4,216 2,717
Depreciation and Other Amortization....................... 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement......... -- 6,410 --
------------ ------------ ------------
Net Income................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE
MORTGAGE LOANS:
On March 20, 1996, the Operating Partnership entered into a $36,750 mortgage
loan (the "CIGNA Loan") that is collateralized by seven properties in
Indianapolis, Indiana and three properties in Cincinnati, Ohio. The CIGNA Loan
bears interest at a fixed interest rate of 7.5% and provides for monthly
principal and interest payments based on a 25-year amortization schedule. The
CIGNA Loan will mature on April 1, 2003. The outstanding mortgage loan balance
at December 31, 1996 was approximately $36,363. Interest payable related to the
CIGNA Loan was $0 at December 31, 1996.
F-11
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
On March 20, 1996, the Operating Partnership assumed a $6,424 mortgage loan
and a $2,993 mortgage loan (together, the "Assumed Loans") that are
collateralized by 13 properties in Indianapolis, Indiana and one property in
Indianapolis, Indiana, respectively. The Assumed Loans bear interest at a fixed
rate of 9.25% and provide for monthly principal and interest payments based on a
16.75-year amortization schedule. The Assumed Loans will mature on January 1,
2013. At December 31, 1996, the outstanding mortgage loan balances under the
$6,424 mortgage loan and $2,993 mortgage loan were approximately $6,286 and
$2,929, respectively. Interest payable related to the Assumed Loans was $0 at
December 31, 1996.
ACQUISITION FACILITIES:
On June 30, 1994, the Operating Partnership entered into a three-year,
$100,000 collateralized revolving credit facility (the "1994 Acquisition
Facility"). During the quarter ended June 30, 1995, the capacity of the 1994
Acquisition Facility was increased to $150,000. The Operating Partnership could
borrow under the facility to finance the acquisition of additional properties
and for other purposes, including to obtain additional working capital. The
Company had guaranteed repayment of the 1994 Acquisition Facility. Borrowings
under the 1994 Acquisition Facility bore interest at a floating rate equal to
LIBOR plus 2.0% or a "Corporate Base Rate" plus .5%, at the Operating
Partnership's election. Effective July 12, 1996, the lenders reduced the
interest rate to LIBOR plus 1.75%. Under the 1994 Acquisition Facility, LIBOR
contracts were entered into by the Operating Partnership as draws were made.
Borrowings under the 1994 Acquisition Facility at December 31, 1995 were
$36,941. Interest payable related to the 1994 Acquisition Facility was $488 at
December 31, 1995. In December 1996, the Operating Partnership terminated the
1994 Acquisition Facility (see Note 12) and entered into a $200 million
unsecured revolving credit facility (the "1996 Unsecured Acquisition Facility")
which initially bears interest at LIBOR plus 1.10% or a "Corporate Base Rate"
plus .25% and provides for interest only payments until the maturity date. At
December 31, 1996, borrowings under the 1996 Acquisition Facility bore interest
at a weighted average interest rate of 8.25%. The borrowings under the 1996
Unsecured Acquisition Facility were converted to an interest rate of 6.6% on
January 7, 1997. The Operating Partnership may borrow under the facility to
finance the acquisition of additional properties and for other purposes,
including to obtain additional working capital. The 1996 Unsecured Acquisition
Facility matures in April 2000. Borrowings under the 1996 Unsecured Acquisition
Facility at December 31, 1996 were $4,400. Interest payable related to the 1996
Unsecured Acquisition Facility was $3 at December 31, 1996. The 1996 Unsecured
Acquisition Facility contains certain financial covenants relating to debt
service coverage, market value net worth, distribution payout ratio and total
funded indebtedness.
In December 1995, the Operating Partnership entered into a $24,219
collateralized revolving credit facility (the "1995 Acquisition Facility"). The
1995 Acquisition Facility was paid off in full and retired in February 1996 with
a portion of the proceeds of the February 1996 Equity Offering (hereinafter
defined). The 1995 Acquisition Facility was collateralized by six properties and
bore interest at a floating rate of LIBOR plus 2.45%. As of December 31, 1995,
borrowings under the 1995 Acquisition Facility were $11,294 and bore interest at
a rate of 8.3%. Interest payable related to the 1995 Acquisition Facility was
$27 at December 31, 1995. The Operating Partnership terminated the 1995
Acquisition Facility in February 1996 (See Note 12).
F-12
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
In May 1996, the Operating Partnership entered into a $10,000 collateralized
revolving credit facility (the "1996 Credit Line"). The 1996 Credit Line was
collateralized by three properties. The Company had guaranteed repayment of the
1996 Credit Line. Borrowings under the 1996 Credit Line bore interest at a
floating rate from LIBOR plus 2.45% to LIBOR plus 2.75%, depending on the term
of the interest rate option. The 1996 Credit Line would have matured on December
14, 1998. The Operating Partnership terminated the 1996 Credit Line in November
1996 (See Note 12).
In September 1996, the Operating Partnership entered into a $40,000
revolving credit facility (the "1996 Acquisition Facility"). The Operating
Partnership could have borrowed under the facility to finance the acquisition of
additional properties and for other purposes, including to obtain additional
working capital. The Company had guaranteed the repayment of the 1996
Acquisition Facility. The 1996 Acquisition Facility would have matured on March
31, 1997. Borrowings under the 1996 Acquisition Facility bore interest at a
floating rate equal to LIBOR plus 2.0% or a "Corporate Base Rate" plus .5%, at
the Operating Partnership's election. The Operating Partnership terminated the
1996 Acquisition Facility in November 1996 (See Note 12).
CONSTRUCTION LOANS:
In 1995, the Operating Partnership entered into two construction loans
(together, the "Construction Loans") with commercial banks providing total
funding commitments of $5,860. Both construction loans were paid off in full and
retired in February 1996 with a portion of the proceeds of the February 1996
Equity Offering (hereinafter defined) (See Note 12). At December 31, 1995, the
Operating Partnership had borrowed $4,873 under such construction loans which
were collateralized by two properties held by the Operating Partnership. Such
borrowings bore interest at LIBOR plus 2.0% and provided for interest only
payments.
PROMISSORY NOTES PAYABLE:
On September 30, 1996, the Operating Partnership entered into a $6,489
promissory note and a $3,430 promissory note (together, the "Promissory Notes")
as partial consideration for the purchase of two properties in Columbus, Ohio.
The $6,489 promissory note was collateralized by a letter of credit pledged by
the Operating Partnership in the amount of $2,715. The $3,430 promissory note
was collateralized by a letter of credit pledged by the Operating Partnership in
the amount of $967. Both promissory notes bore interest at 8% and matured on
January 6, 1997, at which time they were repaid and the letters of credit were
released. Interest payable related to both promissory notes was $68 at December
31, 1996.
F-13
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MORTGAGE LOANS, ACQUISITION FACILITIES, CONSTRUCTION LOANS AND PROMISSORY
NOTES PAYABLE (CONTINUED)
The following is a schedule of mortgage principal payments and maturities of
the mortgage loans, acquisition facilities and promissory notes for the next
five years ending December 31, and thereafter:
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
1997............................................................................... $ 10,663
1998............................................................................... 877
1999............................................................................... 950
2000............................................................................... 5,430
2001............................................................................... 1,117
Thereafter....................................................................... 40,860
---------
Total $ 59,897
---------
---------
</TABLE>
6. PARTNERS' CAPITAL
On February 2, 1996, the Company issued 5,175,000 shares of $.01 par value
common stock (the "February 1996 Equity Offering"). The net proceeds of $106,343
received from the February 1996 Equity Offering are reflected in the Operating
Parnership's financial statements as contributions.
On October 25, 1996, the Company issued 5,750,000 shares of $.01 par value
common stock (the "October 1996 Equity Offering"). The net proceeds of $137,697
received from the October 1996 Equity Offering are reflected in the Operating
Parnership's financial statements as contributions.
7. SALES OF REAL ESTATE
In 1996, the Operating Partnership sold a property located in suburban
Detroit, Michigan, three properties located in Huntsville, Alabama, one property
located in Grand Rapids, Michigan, and one property located in Atlanta, Georgia.
Gross proceeds from these sales were approximately $15.0 million. The gain on
sales was approximately $4.3 million.
8. RELATED PARTY TRANSACTIONS
The Operating Partnership leases office space in Chicago, Illinois from an
affiliate of The Shidler Group at an aggregate annual cost of approximately
$131.
On December 5, 1994, the Operating Partnership purchased for approximately
$.9 million, five acres of land from a partnership in which an officer and
director of the Company owns approximately a 2.5% general partner interest.
The Operating Partnership often obtains title insurance coverage for its
properties from an entity which an independent director of the Company became
the President, Chief Executive Officer and a director of in 1996.
F-14
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS
In September 1994, the Board of Directors approved and the Company adopted a
401(k)/Profit Sharing Plan on behalf of the employees of the Operating
Partnership. Under the Company's 401(k)/Profit Sharing Plan, all eligible
employees may participate by making voluntary contributions. The Operating
Partnership may make, but is not required to make, matching contributions. For
the years ended December 31, 1996 and 1995, the Operating Partnership did not
make any matching contributions. In March 1996, the Board of Directors approved
and the Company adopted a Deferred Income Plan (the "Plan") on behalf of the
employees of the Operating Partnership. Under the Plan, 138,500 unit awards were
granted, providing the recipients with deferred income benefits which vest over
three years in quarterly installments. The expense related to these deferred
income benefits is included in general and administrative expenses in the
statements of operations. In the first quarter of 1997, approximately $141 was
paid to the recipients under the Plan.
10. FUTURE RENTAL REVENUES
The Operating Partnership'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.............................................................. $ 36,864
1998.............................................................. 31,207
1999.............................................................. 25,706
2000.............................................................. 17,384
2001.............................................................. 13,020
Thereafter........................................................ 35,684
---------
Total $ 159,865
---------
---------
</TABLE>
F-15
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
CONTRIBUTING
THE OPERATING PARTNERSHIP BUSINESSES
---------------------------------------- ------------
SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1995 1994 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest paid, net of capitalized interest............ $ 5,069 $ 6,255 $ 678 $ 13,697
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Interest capitalized.................................. $ 501 $ 266 $ 20 $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Supplemental schedule of noncash investing and financing
activities:
Distribution payable on Units......................... $ 16,281 $ 9,954 $ 9,648 $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Sale of interest rate protection agreements........... $ -- $ 4,380 $ -- $ --
Purchase of interest rate protection agreements....... -- (4,380) -- --
------------ ------------ ------------ ------------
$ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
In conjunction with the property acquisitions, the
following assets and liabilities were assumed:
Purchase of real estate............................... $ 252,991 $ 63,855 $ 66,230 $ 372,642
Mortgage loans........................................ (9,417) -- -- --
Promissory notes...................................... (9,919) -- -- --
Units................................................. (23,863) -- -- --
Accounts receivable................................... -- 153 80 2,453
Accounts payable and accrued expenses................. (2,626) (1,115) (991) (4,642)
Acquisitions of interests in properties............... -- -- -- (4,281)
------------ ------------ ------------ ------------
Acquisition of real estate............................ $ 207,166 $ 62,893 $ 65,319 $ 366,172
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
In conjunction with the capitalization of the Other Real Estate Partnerships
in 1995, the following assets and liabilities were contributed:
<TABLE>
<CAPTION>
Land............................................................... $ 20,151
<S> <C>
Building and improvements.......................................... 115,192
Accumulated depreciation........................................... (3,446)
Restricted cash.................................................... 802
Deferred rent receivable........................................... 387
Deferred financing costs........................................... 854
Prepaid expenses and other assets.................................. 579
Acquisition facilities payable..................................... (81,450)
Accounts payable and accrued expenses.............................. (513)
---------
Investment in affiliates....................................... $ 52,556
---------
---------
</TABLE>
F-16
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. EXTRAORDINARY ITEMS
Upon consummation of the Initial Offering, certain Contributing Businesses'
loans were paid off and the related unamortized deferred financing fees totaling
$1,449 were written off. The write-off is shown as an extraordinary loss in the
combined statement of operations of the Contributing Businesses for the six
months ended June 30, 1994.
In 1996, the Operating Partnership terminated the 1994 Acquisition Facility,
the 1995 Acquisition Facility, the 1996 Acquisition Facility, the Construction
Loans and the 1996 Credit Line before their contractual maturity date. The
resulting write-off of unamortized deferred financing costs and prepayment fee
incurred to retire the above mentioned loans is shown as an extraordinary loss
in the statement of operations for the year ended December 31, 1996.
13. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Operating Partnership 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 Operating Partnership.
Nine properties have leases granting the tenants options to purchase the
property. Such options are exercisable at various times and at appraised fair
market value or at a fixed purchase price generally in excess of the Operating
Partnership's purchase price. The Operating Partnership has not received notice
for the exercise of any tenant purchase options.
The Operating Partnership has committed to the construction of two light
industrial and five bulk warehouse properties totaling approximately 1.0 million
square feet (unaudited). The estimated total construction costs are
approximately $27.4 million (unaudited). The Operating Partnership is not acting
as the general contractor for these construction projects.
The Operating Partnership is the guarantor of the 1994 Mortgage Loan.
14. SUBSEQUENT EVENTS (UNAUDITED)
On January 9, 1997, the Operating Partnership purchased a 482,400 square
foot bulk warehouse located in Indianapolis, Indiana for approximately $7.1
million.
On January 31, 1997, the Operating Partnership purchased 10 bulk warehouses
and 29 light industrial properties located in Long Island, New York and northern
New Jersey totaling 2,733,414 square feet for approximately $138.8 million.
On February 20, 1997, the Operating Partnership purchased a 58,746 square
foot light industrial property in Dayton, Ohio. The purchase price for the
property was approximately $1.5 million.
On March 4, 1997, the Operating Partnership declared a distribution of $.505
per unit payable on April 21, 1997 to unitholders of record on March 31, 1997.
On March 21, 1997, the Operating Partnership purchased a 179,400 square foot
bulk warehouse in Taylor, Michigan for approximately $5.1 million.
On March 28, 1997, the Operating Partnership purchased a 84,956 square foot
light industrial property in Buffalo Grove, Illinois for approximately $4.1
million.
F-17
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO FINANCIAL STATEMENTS
AND CONTRIBUTING BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
14. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
On March 31, 1997, the Operating Partnership purchased a 112,082 square foot
light industrial property in New Brighton, Minnesota for approximately $3.2
million.
On March 31, 1997, the Operating Partnership purchased a 79,675 square foot
light industrial property in Brooklyn Park, Minnesota for approximately $4.4
million.
On April 3, 1997, the Operating Partnership purchased a 49,190 square foot
light industrial property in Eden Prairie, Minnesota for approximately $2.1
million.
On April 4, 1997, the Operating Partnership purchased a 243,000 square foot
bulk warehouse property in Columbus, Ohio for approximately $5.4 million.
On April 4, 1997, the Operating Partnership borrowed $309.8 million from an
institutional lender (the "Defeasance Loan"). The Defeasance Loan is unsecured,
bears interest at LIBOR plus 1% and matures July 1, 1999, unless extended by the
Operating Partnership, subject to certain conditions, for an additional two-year
period, thereby maturing July 1, 2001. The gross proceeds from the Defeasance
Loan were contributed to the Financing Partnership, which used the gross
proceeds to defease (as defined by the terms of the 1994 Mortgage Loan
agreement) the 1994 Mortgage Loan.
15. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following Pro Forma Condensed Statements of Operations for the years
ended December 31, 1996 and 1995 are presented as if the acquisition of 128
properties between January 1, 1995 and December 31, 1996 and the February 1996
Equity Offering and the October 1996 Equity Offering had occurred at January 1,
1995, and therefore include pro forma information. The pro forma information is
based upon historical information and does not purport to present what actual
results would have been had such transactions, in fact, occurred at January 1,
1995, or to project results for any future period.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Total Revenues....................................................................... $ 52,283 $ 57,918
Property Expenses.................................................................... 13,914 16,723
General and Administrative Expense................................................... 4,014 3,792
Interest Expense..................................................................... 4,991 7,811
Depreciation and Amortization........................................................ 8,695 10,059
------------ ------------
Income Before Gain on Sales of Properties, Equity in Income of Other Real Estate
Partnerships and Extraordinary loss................................................. 20,669 19,533
Gain on Sales of Properties.......................................................... 4,344 --
------------ ------------
Income Before Equity in Income of Other Real Estate Partnerships..................... 25,013 19,533
Equity in Income of Other Real Estate Partnerships................................... 20,130 7,841
------------ ------------
Income Before Extraordinary Loss..................................................... $ 45,143 $ 27,374
------------ ------------
------------ ------------
</TABLE>
F-18
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ATLANTA
700 Westlake Parkway Atlanta, GA $ 213 $ 1,551 $ 509 $ 223
800 Westlake Parkway Atlanta, GA 450 2,645 350 479
900 Westlake Parkway Atlanta, GA 266 0 1 267
4050 Southmeadow Parkway Atlanta, GA 401 2,813 157 425
4051 Southmeadow Parkway Atlanta, GA 697 3,486 686 726
4071 Southmeadow Parkway Atlanta, GA 750 4,460 714 828
4081 Southmeadow Parkway Atlanta, GA 1,012 5,450 611 1,157
1875 Rockdale Industrial Atlanta, GA
Blvd. 386 2,264 30 386
1605 Indian Brook Way Gwinnett, GA 1,008 3,800 1,180 1,012
3312 N. Berkeley Lake Road Duluth, GA 2,937 16,644 777 3,045
5015 Oakbrook Parkway Atlanta, GA 1,183 0 3,271 1,247
]5570 Tulane Drive (c) Atlanta, GA 527 2,984 129 546
3495 Bankhead Highway (c) Atlanta, GA 983 5,568 148 1,003
755 Selig Drive Atlanta, GA 143 808 88 155
CHICAGO
305-311 Era Drive Northbrook, IL 200 1,154 133 205
700-714 Landwehr Road Northbrook, IL 357 2,052 101 357
4330 South Racine Avenue Chicago, IL 448 1,893 239 468
13040 S. Crawford Ave. Alsip, IL 1,073 6,193 24 1,073
12241 Melrose Street Franklin Park, IL 332 1,931 1,066 469
7200 S Leamington Bedford Park, IL 798 4,595 159 818
12301-12325 S Laramie Ave Alsip, IL 650 3,692 424 659
6300 W Howard Street Niles, IL 743 4,208 343 782
301 Hintz Wheeling, IL 160 905 71 167
301 Alice Wheeling, IL 218 1,236 58 225
410 W 169th Street South Holland, IL 462 2,618 124 476
CINCINNATI
9900-9970 Princeton Cincinnati, OH (a) 545 3,088 616 566
2940 Highland Avenue Cincinnati, OH (a) 1,717 9,730 415 1,770
4700-4750 Creek Road Cincinnati, OH (a) 1,080 6,118 267 1,109
4860 Duff Drive Cincinnati, OH 67 378 8 68
4866 Duff Drive Cincinnati, OH 67 379 7 68
4884 Duff Drive Cincinnati, OH 104 591 13 106
4890 Duff Drive Cincinnati, OH 104 592 12 106
9636-9643 Interocean Drive Cincinnati, OH 123 695 14 125
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
ATLANTA
700 Westlake Parkway $ 2,050 $ 2,273 $ 165 1990 (g)
800 Westlake Parkway 2,966 3,445 204 1991 (g)
900 Westlake Parkway 0 267 0
4050 Southmeadow Parkway 2,946 3,371 203 1991 (g)
4051 Southmeadow Parkway 4,143 4,869 295 1989 (g)
4071 Southmeadow Parkway 5,096 5,924 351 1991 (g)
4081 Southmeadow Parkway 5,916 7,073 394 1989 (g)
1875 Rockdale Industrial
Blvd. 2,294 2,680 142 1966 (g)
1605 Indian Brook Way 4,976 5,988 138 1995 (g)
3312 N. Berkeley Lake Road 17,313 20,358 395 1969 (g)
5015 Oakbrook Parkway 3,207 4,454 0 (i)
]5570 Tulane Drive (c) 3,094 3,640 6 1996 (g)
3495 Bankhead Highway (c) 5,696 6,699 12 1986 (g)
755 Selig Drive 884 1,039 0 (i)
CHICAGO
305-311 Era Drive 1,282 1,487 83 1978 (g)
700-714 Landwehr Road 2,153 2,510 139 1978 (g)
4330 South Racine Avenue 2,112 2,580 1,135 1978 (g)
13040 S. Crawford Ave. 6,217 7,290 362 1976 (g)
12241 Melrose Street 2,860 3,329 175 1969 (g)
7200 S Leamington 4,734 5,552 128 1950 (g)
12301-12325 S Laramie Ave 4,107 4,766 105 1975 (g)
6300 W Howard Street 4,512 5,294 110 1956/1964 (g)
301 Hintz 969 1,136 24 1960 (g)
301 Alice 1,287 1,512 32 1965 (g)
410 W 169th Street 2,728 3,204 56 1974 (g)
CINCINNATI
9900-9970 Princeton 3,683 4,249 70 1970 (g)
2940 Highland Avenue 10,092 11,862 209 1969/1974 (g)
4700-4750 Creek Road 6,356 7,465 132 1960 (g)
4860 Duff Drive 385 453 1 1979 (g)
4866 Duff Drive 385 453 1 1979 (g)
4884 Duff Drive 602 708 1 1979 (g)
4890 Duff Drive 602 708 1 1979 (g)
9636-9643 Interocean Drive 707 832 1 1983 (g)
</TABLE>
F-19
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLEVELAND
6675 Parkland Blvd Cleveland, OH $ 548 $ 3,103 $ 154 $ 569
COLUMBUS
6911 Americana Parkway Columbus, OH 314 1,777 74 321
3800 Lockbourne Industrial Columbus, OH
Parkway 1,133 6,421 165 1,153
3800 Groveport Road Columbus, OH 2,145 12,154 173 2,163
DAYTON
6094-6104 Executive Blvd Dayton, OH 181 1,025 66 186
6202-6220 Executive Blvd Dayton, OH 268 1,521 86 275
6268-6294 Executive Blvd Dayton, OH 255 1,444 85 261
5749-5753 Executive Blvd Dayton, OH 50 282 37 53
6230-6266 Executive Blvd Dayton, OH 271 1,534 72 279
DETROIT
21477 Bridge Street Southfield, MI 244 1,386 214 253
46750 Port Street Plymouth, MI 360 33 1,072 361
32450 N Avis Drive Madison Heights, MI 281 1,590 50 286
32200 N Avis Drive Madison Heights, MI 408 2,311 39 411
32440-32442 Industrial Drive Madison Heights, MI 120 679 81 123
32450 Industrial Drive Madison Heights, MI 65 369 18 66
11813 Hubbard Livonia, MI 177 1,001 34 180
11844 Hubbard Livonia, MI 189 1,069 61 191
11866 Hubbard Livonia, MI 189 1,073 24 191
12050-12300 Hubbard (c) Livonia, MI 425 2,410 42 428
12707 Eckles Road Plymouth Township, MI 255 1,445 106 267
9300-9328 Harrison Rd Romulus, MI 147 834 50 154
9330-9358 Harrison Rd Romulus, MI 81 456 29 84
28420-28448 Highland Rd Romulus, MI 143 809 48 149
28450-28478 Highland Rd Romulus, MI 81 461 28 85
28421-28449 Highland Rd Romulus, MI 109 617 37 114
28451-28479 Highland Rd Romulus, MI 107 608 36 112
28825-28909 Highland Rd Romulus, MI 70 395 24 73
28933-29017 Highland Rd Romulus, MI 112 634 38 117
28824-28908 Highland Rd Romulus, MI 134 760 43 140
28932-29016 Highland Rd Romulus, MI 123 694 40 128
9710-9734 Harrison Rd Romulus, MI 125 706 41 130
9740-9772 Harrison Rd Romulus, MI 132 749 43 138
9840-9868 Harrison Rd Romulus, MI 144 815 46 150
9800-9824 Harrison Rd Romulus, MI 117 664 40 123
29265-29285 Airport Dr Romulus, MI 140 794 46 147
29185-29225 Airport Dr Romulus, MI 140 792 46 146
29149-29165 Airport Dr Romulus, MI 216 1,225 70 226
29101-29115 Airport Dr Romulus, MI 130 738 43 136
29031-29045 Airport Dr Romulus, MI 124 704 41 130
29050-29062 Airport Dr Romulus, MI 127 718 42 133
29120-29134 Airport Dr Romulus, MI 161 912 52 168
29200-29214 Airport Dr Romulus, MI 170 963 55 178
9301-9339 Middlebelt Rd Romulus, MI 124 703 41 130
38200 Plymouth Livonia, MI 2,700 0 2,617 2,753
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
CLEVELAND
6675 Parkland Blvd $ 3,236 $ 3,805 $ 20 1991 (g)
COLUMBUS
6911 Americana Parkway 1,844 2,165 38 1980 (g)
3800 Lockbourne Industrial
Parkway 6,566 7,719 54 1986 (g)
3800 Groveport Road 12,309 14,472 102 1986 (g)
DAYTON
6094-6104 Executive Blvd 1,086 1,272 16 1975 (g)
6202-6220 Executive Blvd 1,600 1,875 23 1976 (g)
6268-6294 Executive Blvd 1,523 1,784 22 1989 (g)
5749-5753 Executive Blvd 316 369 4 1975 (g)
6230-6266 Executive Blvd 1,598 1,877 13 1979 (g)
DETROIT
21477 Bridge Street 1,591 1,844 66 1986 (g)
46750 Port Street 1,104 1,465 1 1996 (g)
32450 N Avis Drive 1,635 1,921 37 1974 (g)
32200 N Avis Drive 2,347 2,758 53 1973 (g)
32440-32442 Industrial Drive 757 880 19 1979 (g)
32450 Industrial Drive 386 452 9 1979 (g)
11813 Hubbard 1,032 1,212 23 1979 (g)
11844 Hubbard 1,128 1,319 25 1979 (g)
11866 Hubbard 1,095 1,286 25 1979 (g)
12050-12300 Hubbard (c) 2,449 2,877 56 1981 (g)
12707 Eckles Road 1,539 1,806 16 1990 (g)
9300-9328 Harrison Rd 877 1,031 4 1978 (g)
9330-9358 Harrison Rd 482 566 2 1978 (g)
28420-28448 Highland Rd 851 1,000 4 1979 (g)
28450-28478 Highland Rd 485 570 2 1979 (g)
28421-28449 Highland Rd 649 763 3 1980 (g)
28451-28479 Highland Rd 639 751 3 1980 (g)
28825-28909 Highland Rd 416 489 2 1981 (g)
28933-29017 Highland Rd 667 784 3 1982 (g)
28824-28908 Highland Rd 797 937 3 1982 (g)
28932-29016 Highland Rd 729 857 3 1982 (g)
9710-9734 Harrison Rd 742 872 3 1987 (g)
9740-9772 Harrison Rd 786 924 3 1987 (g)
9840-9868 Harrison Rd 855 1,005 4 1987 (g)
9800-9824 Harrison Rd 698 821 3 1987 (g)
29265-29285 Airport Dr 833 980 3 1983 (g)
29185-29225 Airport Dr 832 978 3 1983 (g)
29149-29165 Airport Dr 1,285 1,511 5 1984 (g)
29101-29115 Airport Dr 775 911 3 1985 (g)
29031-29045 Airport Dr 739 869 3 1985 (g)
29050-29062 Airport Dr 754 887 3 1986 (g)
29120-29134 Airport Dr 957 1,125 4 1986 (g)
29200-29214 Airport Dr 1,010 1,188 4 1985 (g)
9301-9339 Middlebelt Rd 738 868 3 1983 (g)
38200 Plymouth 2,564 5,317 0
</TABLE>
F-20
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
INDIANAPOLIS
1445 Brookville Way Indianpolis, IN (a) $ 459 $ 2,603 $ 242 $ 475
1440 Brookville Way Indianpolis, IN (a) 665 3,770 219 684
1240 Brookville Way Indianpolis, IN (a) 247 1,402 128 258
1220 Brookville Way Indianpolis, IN (a) 223 40 30 226
1345 Brookville Way Indianpolis, IN (b) 586 3,321 239 601
1350 Brookville Way Indianpolis, IN (a) 205 1,161 77 211
1315 Sadlier Circle E Dr Indianpolis, IN (b) 57 322 39 61
1341 Sadlier Circle E Dr Indianpolis, IN (b) 131 743 50 136
1322-1438 Sadlier Circle E Indianpolis, IN
Dr (b) 145 822 75 152
1327-1441 Sadlier Circle E Indianpolis, IN
Dr (b) 218 1,234 88 225
1304 Sadlier Circle E Dr Indianpolis, IN (b) 71 405 46 75
1402 Sadlier Circle E Dr Indianpolis, IN (b) 165 934 66 170
1504 Sadlier Circle E Dr Indianpolis, IN (b) 219 1,238 70 225
1311 Sadlier Circle E Dr Indianpolis, IN (b) 54 304 60 57
1365 Sadlier Circle E Dr Indianpolis, IN (b) 121 688 49 126
1352-1354 Sadlier Circle E Indianpolis, IN
Dr (b) 178 1,008 90 188
1338 Sadlier Circle E Dr Indianpolis, IN (b) 81 460 48 85
1327 Sadlier Circle E Dr Indianpolis, IN (b) 52 295 31 56
1428 Sadlier Circle E Dr Indianpolis, IN (b) 21 117 23 23
1230 Brookville Way Indianpolis, IN (a) 103 586 40 109
6951 E 30th St Indianpolis, IN 256 1,449 91 265
6701 E 30th St Indianpolis, IN 78 443 40 82
6737 E 30th St Indianpolis, IN 385 2,181 122 398
6555 E 30th St Indianpolis, IN 840 4,760 129 855
2432-2436 Shadeland Indianpolis, IN 212 1,199 167 229
8402-8440 E 33rd St Indianpolis, IN 222 1,260 35 227
8520-8630 E 33rd St Indianpolis, IN 326 1,848 50 333
8710-8768 E 33rd St Indianpolis, IN 175 993 30 184
3316-3346 N. Pagosa Court Indianpolis, IN 325 1,842 50 332
3331 Raton Court Indianpolis, IN 138 802 22 141
MILWAUKEE
6523 N. Sydney Place Milwaukee, WI 172 976 140 176
8800 W Bradley Milwaukee, WI 375 2,125 130 388
1435 North 113th St Wauwatosa, WI 300 1,699 79 309
MINNEAPOLIS
6701 Parkway Circle Brooklyn Center, MN 350 2,131 343 377
6601 Shingle Creek Parkway Brooklyn Center, MN 411 2,813 484 502
10120 W 76th Street Eden Prairie, MN 315 1,804 85 315
7615 Golden Triangle Eden Prairie, MN 268 1,532 255 268
7625 Golden Triangle Eden Prairie, MN 415 2,375 133 415
2605 Fernbrook Lane North Plymouth, MN 443 2,533 263 445
12155 Nicollet Ave. Burnsville, MN 286 0 1,673 287
73rd Avenue North Brooklyn Park, MN 504 2,856 73 512
1905 W Country Road C Roseville, MN 402 2,278 64 409
2730 Arthur Street Roseville, MN 824 4,671 76 832
10205 51st Avenue North Plymouth, MN 180 1,020 68 187
4100 Peavey Road Chaska, MN 399 2,261 124 415
11300 Hamshire Ave South Bloomington, MN 527 2,985 125 541
375 Rivertown Drive Woodbury, MN 1,083 6,135 266 1,119
5205 Highway 169 Plymouth, MN 446 2,525 331 473
6451-6595 Citywest Parkway Eden Prairie, MN 525 2,975 110 538
7100-7198 Shady Oak Rd (d) Eden Prairie, MN 1,118 6,333 146 1,135
7500-7546 Washington Square Eden Prairie, MN 229 1,300 28 233
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
INDIANAPOLIS
1445 Brookville Way $ 2,829 $ 3,304 $ 61 1989 (g)
1440 Brookville Way 3,970 4,654 81 1990 (g)
1240 Brookville Way 1,519 1,777 32 1990 (g)
1220 Brookville Way 67 293 1 1990 (g)
1345 Brookville Way 3,545 4,146 74 1992 (g)
1350 Brookville Way 1,232 1,443 25 1994 (g)
1315 Sadlier Circle E Dr 357 418 7 1970/1992 (g)
1341 Sadlier Circle E Dr 788 924 16 1971/1992 (g)
1322-1438 Sadlier Circle E
Dr 890 1,042 18 1971/1992 (g)
1327-1441 Sadlier Circle E
Dr 1,315 1,540 28 1992 (g)
1304 Sadlier Circle E Dr 447 522 9 1971/1992 (g)
1402 Sadlier Circle E Dr 995 1,165 20 1970/1992 (g)
1504 Sadlier Circle E Dr 1,302 1,527 27 1971/1992 (g)
1311 Sadlier Circle E Dr 361 418 8 1971/1992 (g)
1365 Sadlier Circle E Dr 732 858 15 1971/1992 (g)
1352-1354 Sadlier Circle E
Dr 1,088 1,276 22 1970/1992 (g)
1338 Sadlier Circle E Dr 504 589 10 1971/1992 (g)
1327 Sadlier Circle E Dr 322 378 7 1971/1992 (g)
1428 Sadlier Circle E Dr 138 161 3 1971/1992 (g)
1230 Brookville Way 620 729 13 1995 (g)
6951 E 30th St 1,531 1,796 32 1995 (g)
6701 E 30th St 479 561 10 1992 (g)
6737 E 30th St 2,290 2,688 47 1995 (g)
6555 E 30th St 4,874 5,729 71 1969/1981 (g)
2432-2436 Shadeland 1,349 1,578 16 1968 (g)
8402-8440 E 33rd St 1,290 1,517 8 1977 (g)
8520-8630 E 33rd St 1,891 2,224 12 1976 (g)
8710-8768 E 33rd St 1,014 1,198 7 1979 (g)
3316-3346 N. Pagosa Court 1,885 2,217 12 1977 (g)
3331 Raton Court 821 962 5 1979 (g)
MILWAUKEE
6523 N. Sydney Place 1,112 1,288 29 1978 (g)
8800 W Bradley 2,242 2,630 32 1982 (g)
1435 North 113th St 1,769 2,078 11 1993 (g)
MINNEAPOLIS
6701 Parkway Circle 2,447 2,824 178 1987 (g)
6601 Shingle Creek Parkway 3,206 3,708 243 1985 (g)
10120 W 76th Street 1,889 2,204 87 1987 (g)
7615 Golden Triangle 1,787 2,055 123 1987 (g)
7625 Golden Triangle 2,508 2,923 150 1987 (g)
2605 Fernbrook Lane North 2,794 3,239 168 1987 (g)
12155 Nicollet Ave. 1,672 1,959 48 1995 (g)
73rd Avenue North 2,921 3,433 54 1995 (g)
1905 W Country Road C 2,335 2,744 44 1993 (g)
2730 Arthur Street 4,739 5,571 89 1995 (g)
10205 51st Avenue North 1,081 1,268 20 1990 (g)
4100 Peavey Road 2,369 2,784 34 1988 (g)
11300 Hamshire Ave South 3,096 3,637 38 1983 (g)
375 Rivertown Drive 6,365 7,484 53 1996 (g)
5205 Highway 169 2,829 3,302 26 1960 (g)
6451-6595 Citywest Parkway 3,072 3,610 25 1984 (g)
7100-7198 Shady Oak Rd (d) 6,462 7,597 40 1982 (g)
7500-7546 Washington Square 1,324 1,557 3 1975 (g)
</TABLE>
F-21
<PAGE>
FIRST INDUSTRIAL, L.P.
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS
AMOUNT
CARRIED
AT CLOSE
COSTS OF PERIOD
(F) CAPITALIZED 12/31/96
INITIAL COST SUBSEQUENT TO ---------
LOCATION (E) ---------------------- ACQUISITION
BUILDING ADDRESS (CITY/STATE) ENCUMBRANCES LAND BUILDINGS OR COMPLETION LAND
- ---------------------------- ---------------------------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
7550-7588 Washington Square Eden Prairie, MN $ 153 $ 867 $ 19 $ 156
5240-5300 Valley Industrial Eden Prairie, MN
Blvd S 362 2,049 73 370
6656 Wedgewood Road Maple Grove, MN 219 -- 109 219
NASHVILLE
3099 Barry Drive Portland, TN 418 2,368 49 424
3150 Barry Drive Portland, TN 941 5,333 326 987
5599 Highway 31 West Portland, TN 564 3,196 62 571
ST. LOUIS
2337 Centerline Drive St. Louis, MO (b) 239 1,370 110 239
6951 N Hanley (c) Hazelwood, MO 405 2,295 93 417
------------- --------- ----------- ------------- ---------
$45,578 $ 53,570 $ 272,934 $ 27,277 $ 55,425
------------- --------- ----------- ------------- ---------
------------- --------- ----------- ------------- ---------
<CAPTION>
ACCUMULATED
BUILDING AND DEPRECIATION YEAR BUILT/ DEPRECIABLE
BUILDING ADDRESS IMPROVEMENTS TOTAL 12/31/96 RENOVATED LIVES (YEARS)
- ---------------------------- ------------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
7550-7588 Washington Square $ 883 $ 1,039 $ 2 1973 (g)
5240-5300 Valley Industrial
Blvd S 2,114 2,484 4 1975 (g)
6656 Wedgewood Road 109 328 7 1989 (g)
NASHVILLE
3099 Barry Drive 2,411 2,835 15 1995 (g)
3150 Barry Drive 5,613 6,600 35 1993 (g)
5599 Highway 31 West 3,251 3,822 20 1995 (g)
ST. LOUIS
2337 Centerline Drive 1,480 1,719 88 1967 (g)
6951 N Hanley (c) 2,376 2,793 5 1965 (g)
------------- --------- -------------
$ 298,356 $ 353,781 $ 8,133
------------- --------- -------------
------------- --------- -------------
</TABLE>
- ------------------------
NOTES:
(a) Collateralizes the CIGNA Loan.
(b) Collateralizes the Assumed Loans.
(c) Comprised of 2 properties.
(d) Comprised of 3 properties.
(e) See description of encumbrances in Note 4 to Notes to Financial Statements.
(f) Initial cost for each respective property is total acquisition costs
associated with its purchase.
(g) Depreciation is computed based upon the following estimated lives:
Buildings, Improvements 31.5 to 40 years
Tenant Improvements, Leasehold Improvements Life of lease
Furniture, Fixtures and equipment 5 to 10 years
(h) At December 31, 1996, the aggregate cost of land and buildings and equipment
for federal income tax purpose was approximately $326,284.
(i) These properties represent property developments that haven't been placed in
service.
F-22
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
SCHEDULE III:
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
The changes in total real estate assets for three years ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, Beginning of Year................................................... $ 96,392 $ 163,168 $ 209,177
Transfer of Assets Between Contributing Businesses........................... -- -- (496,147)
Transfer of Assets Between Other Real Estate Partnerships.................... -- (135,343) --
Disposition of Real Estate Assets............................................ (11,890) -- --
Acquisition, Construction Costs and Improvements............................. 269,279 68,567 450,138
---------- ---------- ----------
Balance, End of Year......................................................... $ 353,781 $ 96,392 $ 163,168
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The changes in accumulated depreciation for three years ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, Beginning of Year................................................... $ 4,852 $ 4,112 $ 38,015
Transfer of Assets Between Contributing Businesses........................... -- -- (38,022)
Transfer of Assets Between Other Real Estate Partnerships.................... -- (3,352) --
Disposition of Real Estate Assets............................................ (1,834) -- --
Depreciation for Year........................................................ 5,115 4,092 4,119
---------- ---------- ----------
Balance, End of Year......................................................... $ 8,133 $ 4,852 $ 4,112
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-23
<PAGE>
FIRST INDUSTRIAL, L.P.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST INDUSTRIAL,
L.P. LAZARUS BURMAN FIRST INDUSTRIAL,
(HISTORICAL) PROPERTIES L.P.
NOTE 2(A) NOTE 2 (B) PRO FORMA
------------------ --------------- ------------------
<S> <C> <C> <C>
ASSETS
ASSETS:
Investment in Real Estate:
Land................................................... $ 55,425 $ 20,826 $ 76,251
Buildings and Improvements............................. 291,942 118,014 409,956
Construction in Progress............................... 6,414 -- 6,414
Less: Accumulated Depreciation......................... (8,133) -- (8,133)
-------- --------------- --------
Net Investment in Real Estate........................ 345,648 138,840 484,488
-------- --------------- --------
Investment in Other Real Estate Partnerships............. 258,411 -- 258,411
Cash and Cash Equivalents................................ 4,295 -- 4,295
Tenant Accounts Receivable, Net.......................... 1,021 -- 1,021
Deferred Rent Receivable................................. 1,280 -- 1,280
Interest Rate Protection Agreements, Net................. 1,723 -- 1,723
Deferred Financing Costs, Net............................ 1,140 -- 1,140
Prepaid Expenses and Other Assets, Net................... 8,604 -- 8,604
-------- --------------- --------
Total Assets......................................... $ 622,122 $ 138,840 $ 760,962
-------- --------------- --------
-------- --------------- --------
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage Loans Payable................................... $ 45,578 $ 4,505 $ 50,083
Acquisition Facilities Payable........................... 4,400 86,476 90,876
Promissory Notes Payable................................. 9,919 -- 9,919
Accounts Payable and Accrued Expenses.................... 8,770 -- 8,770
Rents Received in Advance and Security Deposits.......... 1,942 -- 1,942
Distributions Payable.................................... 16,281 -- 16,281
-------- --------------- --------
Total Liabilities.................................... 86,890 90,981 177,871
-------- --------------- --------
Commitments and Contingencies.............................. -- -- --
PARTNERS' CAPITAL:
General Partner...................................... 496,169 -- 496,169
Limited Partners..................................... 39,063 47,859 86,922
-------- --------------- --------
Total Partners' Capital.............................. 535,232 47,859 583,091
-------- --------------- --------
Total Liabilities and Partners' Capital.............. $ 622,122 $ 138,840 $ 760,962
-------- --------------- --------
-------- --------------- --------
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma financial
statements.
F-24
<PAGE>
FIRST INDUSTRIAL, L.P.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AGGREGATE
FIRST 1996 LAZARUS
INDUSTRIAL, ACQUISITION BURMAN
L.P. PROPERTIES PRO FORMA PROPERTIES PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS (HISTORICAL) ADJUSTMENTS
NOTE 3(A) NOTE 3(B) NOTE 3(C) SUBTOTAL NOTE 3(D) NOTE 3(E)
--------------- ----------- ------------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental Income.......................... $ 29,166 $ 12,953 $ -- $ 42,119 $ 18,606 $ --
Tenant Recoveries and Other Income..... 8,421 1,743 -- 10,164 4,636 --
------- ----------- ------------- --------- ----------- -------------
Total Revenues................... 37,587 14,696 -- 52,283 23,242 --
------- ----------- ------------- --------- ----------- -------------
Expenses:
Real Estate Taxes...................... 6,109 2,178 -- 8,287 4,767 --
Repairs and Maintenance................ 1,071 813 -- 1,884 1,477 --
Property Management.................... 1,153 567 -- 1,720 732 --
Utilities.............................. 1,047 273 -- 1,320 959 --
Insurance.............................. 271 147 -- 418 275 --
Other.................................. 284 1 -- 285 457 --
General and Administrative............. 4,014 -- -- 4,014 -- --
Interest............................... 4,685 -- 306 4,991 -- 6,101
Amortization of Interest Rate
Protection Agreements, and Deferred
Financing Costs...................... 196 -- -- 196 -- --
Depreciation and Other Amortization.... 6,310 -- 2,189 8,499 -- 2,950
------- ----------- ------------- --------- ----------- -------------
Total Expenses................... 25,140 3,979 2,495 31,614 8,667 9,051
------- ----------- ------------- --------- ----------- -------------
Income Before Gain on Sales of
Properties, Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 12,447 10,717 (2,495) 20,669 14,575 (9,051)
Gain on Sales of Properties.............. 4,344 -- -- 4,344 -- --
------- ----------- ------------- --------- ----------- -------------
Income Before Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 16,791 10,717 (2,495) 25,013 14,575 (9,051)
Equity in Income of Other Real Estate
Partnerships............................ 20,130 -- -- 20,130 -- --
------- ----------- ------------- --------- ----------- -------------
Income Before Extraordinary Item......... $ 36,921 $ 10,717 $ (2,495) $ 45,143 $ 14,575 $ (9,051)
------- ----------- ------------- --------- ----------- -------------
------- ----------- ------------- --------- ----------- -------------
<CAPTION>
FIRST
INDUSTRIAL,
L.P.
PRO FORMA
---------------
<S> <C>
Revenues:
Rental Income.......................... $ 60,725
Tenant Recoveries and Other Income..... 14,800
-------
Total Revenues................... 75,525
-------
Expenses:
Real Estate Taxes...................... 13,054
Repairs and Maintenance................ 3,361
Property Management.................... 2,452
Utilities.............................. 2,279
Insurance.............................. 693
Other.................................. 742
General and Administrative............. 4,014
Interest............................... 11,092
Amortization of Interest Rate
Protection Agreements, and Deferred
Financing Costs...................... 196
Depreciation and Other Amortization.... 11,449
-------
Total Expenses................... 49,332
-------
Income Before Gain on Sales of
Properties, Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 26,193
Gain on Sales of Properties.............. 4,344
-------
Income Before Equity in Income of Other
Real Estate Partnerships and
Extraordinary Item...................... 30,537
Equity in Income of Other Real Estate
Partnerships............................ 20,130
-------
Income Before Extraordinary Item......... $ 50,667
-------
-------
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma financial
statements.
F-25
<PAGE>
FIRST INDUSTRIAL, L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma balance sheet and pro forma statement
of operations for First Industrial, L.P. (the "Operating Partnership") reflect
the historical financial position of the Operating Partnership as of December
31, 1996, the historical operations for the year ended December 31, 1996, the
acquisition of 111 properties between January 1, 1996 and December 31, 1996 (the
"Aggregate 1996 Acquisition Properties") and the acquisition of 39 properties on
January 31, 1997 (the "Lazarus Burman Properties"). The accompanying unaudited
pro forma balance sheet and pro forma statement of operations exclude the other
properties acquired between December 31, 1996 and April 29, 1997. The pro forma
financial statements would not be materially different if such other properties
acquired between December 31, 1996 and April 29, 1997 were included in the pro
forma financial statements. The accompanying unaudited pro forma financial
statements have been prepared based upon certain pro forma adjustments to the
historical December 31, 1996 financial statements of the Operating Partnership.
The unaudited pro forma balance sheet as of December 31, 1996 has been prepared
as if the Lazarus Burman Properties had been acquired on December 31, 1996. The
unaudited pro forma statement of operations for the year ended December 31, 1996
have been prepared as if the Aggregate 1996 Acquisition Properties and the
Lazarus Burman Properties had been acquired on January 1, 1996 or the lease
commencement date if the property was developed during 1996 and as if the
5,175,000 Operating Partnership units (the "Units") issued on February 2, 1996
(the "February 1996 Capital Contribution") and the 5,750,00 Units issued on
October 25, 1996 (the "October 1996 Capital Contribution") had been issued on
January 1, 1996.
2. PRO FORMA ASSUMPTIONS - BALANCE SHEET
(a) The historical balance sheet reflects the financial position of the
Operating Partnership as of December 31, 1996 as reported in this
Prospectus.
(b) Represents the purchase of the Lazarus Burman Properties as if the
acquisition had occurred on December 31, 1996. The Lazarus Burman Properties
were acquired in a purchase transaction for approximately $138.8 million
which was funded with $86.4 million in cash through borrowings under the
Operating Partnership's $200 million unsecured revolving credit facility
(the "1996 Unsecured Acquisition Facility"), the assumption of $4.5 million
of mortgage debt and the issuance of 1,595,282 Units valued in the aggregate
at $47.9 million.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS - STATEMENT OF OPERATIONS
(a) The historical operations reflect the income from continuing operations of
the Operating Partnership for the year ended December 31, 1996 as reported
in this Prospectus.
(b) Represents the operations of the Aggregate 1996 Acquisition Properties for
the period January 1, 1996 through their respective acquisition dates or the
lease commencement date if the property was developed.
(c) In connection with the acquisition of certain properties which are included
in the Aggregate 1996 Acquisition Properties, the Operating Partnership
assumed two mortgage loans totaling $9.4 million (the "Assumed
Indebtedness") and also entered into a new mortgage loan in the amount of
$36.8 million (the "CIGNA Loan"). The interest expense adjustment reflects
interest on the Assumed Loans and the CIGNA Loan as if such indebtedness was
outstanding beginning January 1, 1996. The interest expense adjustment also
reflects an increase in the acquisition facility borrowings at LIBOR plus 2%
for borrowings under the Operating Partnership's $150 million secured
revolving credit facility or LIBOR plus 1.1% for borrowings under the 1996
Unsecured Acquisition Facility for the
F-26
<PAGE>
assumed earlier purchase of certain properties which are included in the
Aggregate 1996 Acquisition Properties, offset by a reduction in interest
expense related to the assumed earlier repayment of $59.4 million and $84.2
million of acquisition facility borrowings on January 1, 1996 from the
proceeds of the February 1996 Capital Contribution and the October 1996
Capital Contribution, respectively.
The depreciation and other amortization adjustment reflects the incremental
depreciation and other amortization expense for the Aggregate 1996
Acquisition Properties from January 1, 1996 through their respective
acquisition date.
(d) The historical operations reflect the operations of the Lazarus Burman
Properties for the year ended December 31, 1996.
(e) In connection with the purchase of the Lazarus Burman Properties, the
Operating Partnership assumed two mortgage loans totaling $4.5 million (the
"Lazarus Burman Mortgage Loans"). The interest expense adjustment reflects
interest on the Lazarus Burman Mortgage Loans as if such indebtedness was
outstanding beginning January 1, 1996. The interest expense adjustment also
reflects an increase in the acquisition facility borrowings at LIBOR plus
1.1% for borrowings under the Operating Partnership's 1996 Unsecured
Acquisition Facility for the assumed earlier purchase of the Lazarus Burman
Properties.
The depreciation and other amortization adjustment reflects the incremental
depreciation and other amortization expense for the Lazarus Burman
Properties from January 1, 1996 through December 31, 1996.
F-27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the historical
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
At December 31, 1996, the Operating Partnership owned 137 in-service
properties containing approximately 12.7 million square feet of GLA, compared to
30 in-service properties with approximately 3.5 million square feet of GLA at
December 31, 1995. During 1996, the Operating Partnership acquired 111
properties containing approximately 9.4 million square feet of GLA, completed
development of two properties totaling .2 million square feet of GLA and sold
six properties totaling .4 million square feet of GLA.
Revenues increased in 1996 over 1995 by $10.1 million or 37.0% due primarily
to the properties acquired after December 31, 1994. Revenues from properties
owned prior to January 1, 1995 increased in 1996 over 1995 by $.5 million or
7.4% due primarily to a lease termination fee, an increase in rental rates and
an increase in tenant recovery income.
Property expenses, which include real estate taxes, repairs and maintenance,
property management, utilities, insurance and other expenses, increased in 1996
over 1995 by $2.5 million or 32.9% due primarily to properties acquired after
December 31, 1994. For properties owned prior to January 1, 1995, property
expenses remained unchanged.
General and administrative expense increased in 1996 over 1995 by $.2
million due primarily to the additional expenses associated with managing the
Operating Partnership's growing operations (including additional professional
fees relating to additional properties owned and personnel to manage and expand
the Operating Partnership's business).
Interest expense decreased from $6.6 million in 1995 to $4.7 million in
1996. The average outstanding debt balance was approximately $24.2 million lower
in 1996 due to capital contributions from the general partner of the Operating
Partnership that were used to pay down debt.
Depreciation and amortization increased in 1996 over 1995 by $1.2 million
due primarily to the additional depreciation and amortization related to the
properties acquired after December 31, 1994.
The $4.3 million gain on sales of properties in 1996 resulted from the sale
of three properties located in Huntsville, Alabama, one property located in
Detroit, Michigan, one property located in Grand Rapids, Michigan and one
property located in Atlanta, Georgia. Gross proceeds for these property sales
totaled approximately $15.0 million.
Equity in income of Other Real Estate Partnerships increased in 1996 over
1995 by $12.3 million or 156.7% due primarily to four of the Other Real Estate
Partnerships having a full year of operations in 1996 compared to a partial year
of operations in 1995 as well as one of the Other Real Estate Partnerships
incurring a loss from the disposition of an interest rate protection agreement
in 1995.
The $2.3 million extraordinary loss in 1996 represents the write-off of
unamortized deferred financing costs and a prepayment fee for loans that were
paid off in full and retired in 1996.
F-28
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
The results of operations for the year ended December 31, 1994 include the
operations of the Contributing Businesses from January 1, 1994 through June 30,
1994 and the operations of the Operating Partnership from July 1, 1994 through
December 31, 1994.
At December 31, 1995, the Operating Partnership owned 30 in-service
properties containing approximately 3.5 million square feet of GLA, compared to
50 in-service properties with approximately 4.9 million square feet of GLA at
December 31, 1994. During 1995, the Operating Partnership acquired 17 properties
containing approximately 2.0 million square feet of GLA. The Operating
Partnership also completed the development of three properties totaling
approximately .3 million square feet of GLA. In addition, the Operating
Partnership also contributed 40 properties with approximately 3.7 million square
feet of GLA to the Other Real Estate Partnerships.
Revenues decreased in 1995 over 1994 by $5.0 million or 15.4% due primarily
to the Contributing Businesses' properties that were contributed to the Other
Real Estate Partnerships, the operating results of which are accounted for by
the Operating Partnership under the equity method of accounting. Revenues from
properties owned prior to January 1, 1994 remained unchanged.
Property expenses, which include real estate taxes, repairs and maintenance,
property management, utilities, insurance and other expenses, decreased in 1995
over 1994 by $.7 million or 8.3% due primarily to the Contributing Businesses'
properties that were contributed to the Other Real Estate Partnerships. For
properties owned prior to January 1, 1994, property expenses remained unchanged.
General and administrative expense increased in 1995 over 1994 by $2.0
million due primarily to the additional expenses of the Company associated with
being a public company and to the additional expenses associated with managing
the Operating Partnership's growing operations (including additional
professional fees relating to additional properties owned and personnel to
manage and expand the Operating Partnership's and the Other Real Estate
Partnership's business).
Interest expense decreased from $12.6 million in 1994 to $6.6 million in
1995. The decrease results primarily from lower average debt levels in 1995.
Depreciation and amortization decreased in 1995 over 1994 by $2.4 million
due primarily to the Contributing Businesses' properties that were contributed
to the Other Real Estate Partnerships of the Operating Partnership which are
accounted for under the equity method of accounting.
Equity in income of Other Real Estate Partnerships increased in 1995 over
1994 by $1.1 million or 15.9% due primarily to one of the Other Real Estate
Partnerships having a full year of operations in 1995 compared to a partial year
of operations in 1994 which was partially offset by a loss from the disposition
of an interest rate protection agreement in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Operating Partnership's unrestricted cash and cash
equivalents totaled $4.3 million.
Net cash provided by operating activities was $18.9 million for the year
ended December 31, 1996 compared to $4.2 million for the year ended December 31,
1995 and $(5.3) million for the year ended December 31, 1994. The increases are
primarily due to the factors discussed in "Results of Operations" above.
Net cash used in investing activities was $202.7 million for the year ended
December 31, 1996 compared to $40.9 million and $436.1 million for the years
ended December 31, 1995 and December 31, 1994, respectively. The majority of the
cash used in investing activities was for acquisition of additional properties.
F-29
<PAGE>
Net cash provided by financing activities for the year ended December 31,
1996 increased to $181.6 million from $43.2 million for the year ended December
31, 1995, reflecting capital contributions from the general partner and proceeds
from the CIGNA Loan, offset in part by increased distributions, repayment of the
Construction Loans, and a net pay down on the Operating Partnership's
acquisition facilities. Net cash provided by financing activities for the year
ended December 31, 1995 was $43.2 million, compared to $440.4 million for the
year ended December 31, 1994, reflecting primarily debt and equity transactions
relating to the Company's Initial Offering in June 1994 and an increase in
indebtedness due to the properties acquired subsequent to the Initial Offering.
The ratio of earnings to fixed charges was 6.96 for the year ended December
31, 1996 compared to 2.56 for the year ended December 31, 1995 and 1.65 for the
year ended December 31, 1994. The increases are primarily due to increased
income from continuing operations resulting from additional properties acquired
by the Operating Partnership and increased equity in income of the Other Real
Estate Partnerships, as discussed in "Results of Operations" above.
In 1996, the Operating Partnership acquired 111 industrial properties
comprising approximately 9.4 million square feet of GLA for a total purchase
price of approximately $237 million, completed the development of two build-to
suit properties comprising approximately .2 million square feet of GLA at a cost
of approximately $9.0 million and sold six properties comprising approximately
.4 million square feet of GLA for $15 million. The acquisitions and developments
were financed in part by proceeds from capital contributions from the general
partner of the Operating Partnership, borrowings under the Operating
Partnership's acquisition facilities and by new mortgage debt.
The Operating Partnership has committed to the construction of two light
industrial and five bulk warehouse properties totaling approximately 1.0 million
square feet. The estimated total construction costs are approximately $27.4
million. These developments are expected to be funded with cash flow from
operations as well as borrowings under the 1996 Unsecured Acquisition Facility.
In 1996, the Operating Partnership paid a quarterly distribution of $.4875
per unit related to each of the first, second and third quarters. In addition,
the Operating Partnership paid a fourth quarter 1996 distribution of $.505 per
unit on January 20, 1997. The total distributions paid to the Operating
Partnership's partners related to 1996 totaled $54.3 million.
On February 2, 1996, the Company completed an offering of 5.175 million
shares (inclusive of the underwriters' over-allotment option) of common stock at
a purchase price of $22 per share. The net proceeds of $106.3 million were
contributed to the Operating Partnership and used to repay outstanding
borrowings totaling $59.4 million and to fund acquisitions closed subsequently
in the first quarter of 1996.
On October 25, 1996, the Company completed an offering of 5.75 million
shares (inclusive of the underwriters' over-allotment option) of common stock at
a purchase price of $25.50 per share. The net proceeds of $137.7 million were
contributed to the Operating Partnership and used to repay outstanding
borrowings totaling $84.2 million and to fund acquisitions closed in the fourth
quarter of 1996.
On March 20, 1996, the Operating Partnership entered into a $36.7 million
mortgage loan (the "CIGNA Loan") that is collateralized by seven properties in
Indianapolis, Indiana and three properties in Cincinnati, Ohio. The CIGNA Loan
bears interest at a fixed interest rate of 7.5% and provides for monthly
principal and interest payments based on a 25-year amortization schedule. The
CIGNA Loan will mature on April 1, 2003. The CIGNA Loan may be prepaid only
after April 30, 1999, in exchange for the greater of a 1% premium or a yield
maintenance premium.
On March 20, 1996, the Operating Partnership, assumed an approximately $6.4
million mortgage loan and an approximately $3.0 million mortgage loan (together,
the "Assumed Loans") that are collateralized by 13 properties in Indianapolis,
Indiana and one property in Indianapolis, Indiana, respectively. The Assumed
Loans bear interest at a fixed rate of 9.25% and provide for monthly principal
and interest payments based on a 16.75-year amortization schedule. The Assumed
Loans will mature on January 1,
F-30
<PAGE>
2013. The Assumed Loans may be prepaid only after December 22, 1999, in exchange
for the greater of a 1% premium or a yield maintenance premium.
In 1997, the Operating Partnership obtained investment grade ratings on its
senior unsecured debt from Moody's Investors Service, Standard & Poor's, Duff &
Phelps Credit Rating Co. and Fitch Investors Service, Inc.
In December 1996, the Operating Partnership terminated its $150 million 1994
Acquisition Facility and entered into a $200 million 1996 Unsecured Acquisition
Facility. Borrowings under the 1996 Unsecured Acquisition Facility will be used
to finance the acquisitions and development of additional properties and for
other purposes, including to obtain working capital. It is the Operating
Partnership's intent to, from time to time, replace borrowings under the 1996
Unsecured Acquisition Facility with long term sources of capital as the
Operating Partnership deems appropriate.
The Operating Partnership 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 Operating Partnership
believes that its principal short-term liquidity needs are to fund normal
recurring expenses, debt service requirements and the minimum distribution
required by the Company to maintain the Company's REIT qualification under the
Internal Revenue Code. The Operating Partnership anticipates that these needs
will be met with cash flows provided by operating activities.
The Operating Partnership expects to meet long-term (greater than one year)
liquidity requirements such as property acquisitions, scheduled debt maturities,
major renovations, expansions and other non-recurring capital improvements
through long-term unsecured indebtedness and capital contributions from the
general partner of the Operating Partnership. The Operating Partnership may
finance the acquisition or development of additional properties through
borrowings under the 1996 Unsecured Acquisition Facility. At December 31, 1996,
borrowings under the 1996 Unsecured Acquisition Facility bore interest at a
weighted average interest rate of 8.25%. The borrowings under the 1996 Unsecured
Acquisition Facility were converted to an interest rate of 6.6% on January 7,
1997. As of March 20, 1997, the Operating Partnership had $68.1 million
available in additional borrowings under the 1996 Unsecured Acquisition
Facility. While the Operating Partnership may sell properties if property or
market conditions make it desirable, the Operating Partnership does not expect
to sell assets in the foreseeable future to satisfy its liquidity requirements.
In April 1997, the Operating Partnership incurred the $309.8 million
Defeasance Loan, the proceeds of which were contributed to the Financing
Partnership and used by it to defease (as defined by the terms of the 1994
Mortgage Loan agreement) the 1994 Mortgage Loan.
INFLATION
For the last several years, inflation has not had a significant impact on
the Operating Partnership because of the relatively low inflation rates in the
Operating Partnership's markets of operation. Most of the Operating
Partnership's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Operating Partnership's exposure to increases in costs and
operating expenses resulting from inflation. In addition, many of the
outstanding leases expire within five years which may enable the Operating
Partnership to replace existing leases with new leases at higher base rentals if
rents of existing leases are below the then-existing market rate.
F-31
<PAGE>
FIRST INDUSTRIAL, L.P. AND CONTRIBUTING BUSINESSES
SELECTED FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<TABLE>
<CAPTION>
CONTRIBUTING
BUSINESSES
FIRST INDUSTRIAL, L.P. (COMBINED)
---------------------------------------------------------------------------- -----------
SIX MONTH SIX MONTH
PERIOD PERIOD
THREE MONTHS THREE MONTHS YEAR ENDED YEAR ENDED ENDED ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
MARCH 31, 1997 MARCH 31, 1996 1996 1995 1994 1994
--------------- -------------- ------------- ------------- ------------- -----------
STATEMENTS OF OPERATIONS
DATA:
<S> <C> <C> <C> <C> <C> <C>
Total Revenues.............. $ 18,899 $ 5,920 $ 37,587 $ 27,442 $ 9,604 $ 22,816
Property Expenses........... 6,086 1,507 9,935 7,478 2,120 6,036
General and Administrative
Expense................... 1,257 1,098 4,014 3,792 1,047 795
Interest Expense............ 2,349 591 4,685 6,581 807 11,773
Amortization of Interest
Rate Protection Agreements
and Deferred Financing
Costs..................... (179) 14 196 222 187 858
Depreciation and Other
Amortization.............. 3,000 1,080 6,310 5,087 1,916 4,744
Management and Construction
Income (Loss), Net........ -- -- -- -- -- (81)
Gain on Sales of
Properties................ -- -- 4,344 -- -- --
Equity in Income of Other
Real Estate
Partnerships.............. 5,834 4,496 20,130 7,841 6,767 --
--------------- -------------- ------------- ------------- ------------- -----------
Income (Loss) Before
Extraordinary Items....... 12,220 6,126 $ 36,921 $ 12,123 $ 10,294 $ (1,471)
Extraordinary Gain (Loss)... -- (821) (2,273) -- -- (1,449)
--------------- -------------- ------------- ------------- ------------- -----------
Net Income.................. $ 12,220 $ 5,305 $ 34,648 $ 12,123 $ 10,294 $ (2,920)
--------------- -------------- ------------- ------------- ------------- -----------
--------------- -------------- ------------- ------------- ------------- -----------
BALANCE SHEET DATA (AT END
OF PERIOD):
Net Investment In Real
Estate.................... $ 513,876 $ 193,288 $ 345,648 $ 91,540 $ 159,056 $ 556,902
Investment in Other
Real Estate
Partnerships.............. 273,318 258,825 258,411 241,918 208,274 --
Total Assets................ $ 809,042 $ 468,204 $ 622,122 $ 356,060 $ 375,220 $ 616,767
Mortgage Loans/Acquisition
Facilities Payable,
Promissory Notes Payable
and Construction Loans
Payable................... $ 197,985 $ 50,167 $ 59,897 $ 53,108 $ 48,700 $ 305,000
Mortgage Loans
(Affiliated).............. -- -- -- -- --
Total Liabilities........... 228,874 70,183 86,890 69,291 61,676 323,703
Partners' Capital/(Net
Deficit).................. $ 580,168 $ 398,021 $ 535,232 $ 286,769 $ 313,544 $ 269,326
OTHER DATA:
Cash Flows From:
Operating Activities...... $ 1,768 $ 1,608 $ 18,871 $ 4,182 $ (10,299) $ 4,911
Investing Activities...... (124,037) (91,975) (202,673) (40,906) (61,352) (374,757)
Financing Activities...... 117,974 83,874 181,604 43,182 66,232 374,152
Gross Leasable Area at End
of Period................. 16,707,462 7,601,480 12,650,986 3,488,921 4,857,281 17,393,813
Total Properties at End of
Period.................... 184 72 137 30 50 226
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------- -------------
STATEMENTS OF OPERATIONS
DATA:
<S> <C> <C>
Total Revenues.............. $ 33,237 $ 31,145
Property Expenses........... 8,832 7,308
General and Administrative
Expense................... 1,416 1,699
Interest Expense............ 18,187 18,350
Amortization of Interest
Rate Protection Agreements
and Deferred Financing
Costs..................... 997 1,644
Depreciation and Other
Amortization.............. 7,105 6,328
Management and Construction
Income (Loss), Net........ (99) 136
Gain on Sales of
Properties................ -- --
Equity in Income of Other
Real Estate
Partnerships.............. -- --
------------- -------------
Income (Loss) Before
Extraordinary Items....... $ (3,399) $ (4,048)
Extraordinary Gain (Loss)... -- 2,340
------------- -------------
Net Income.................. $ (3,399) $ (1,708)
------------- -------------
------------- -------------
BALANCE SHEET DATA (AT END
OF PERIOD):
Net Investment In Real
Estate.................... $ 171,162 $ 160,735
Investment in Other
Real Estate
Partnerships.............. -- --
Total Assets................ $ 189,789 $ 175,693
Mortgage Loans/Acquisition
Facilities Payable,
Promissory Notes Payable
and Construction Loans
Payable................... $ 179,568 $ 168,559
Mortgage Loans
(Affiliated).............. 7,624 7,951
Total Liabilities........... 227,553 208,569
Partners' Capital/(Net
Deficit).................. $ (37,764) $ (32,876)
OTHER DATA:
Cash Flows From:
Operating Activities...... $ 8,700 $ 1,877
Investing Activities...... (17,124) (2,317)
Financing Activities...... 9,093 1,250
Gross Leasable Area at End
of Period................. 6,376,349 5,883,730
Total Properties at End of
Period.................... 124 118
</TABLE>
- ------------------------
(1) The selected financial data includes the combined statements of the
Contributing Businesses for the period prior to July 1, 1994 and the
financial statements of First Industrial, L.P., for the periods after June
30, 1994.
F-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of the Other
Real Estate Partnerships
We have audited the combined financial statements of the Other Real Estate
Partnerships as listed on page F-1 of this Prospectus. These financial
statements are the responsibility of the Other Real Estate Partnerships'
management. Our responsibility is to express an opinion on these financial
statements 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 combined financial position of the Other Real
Estate Partnerships as of December 31, 1996 and 1995, and the combined results
of their operations and their cash flows for the years ended December 31, 1996
and 1995 and for the period July 1, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 12, 1997
F-33
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Assets:
Investment in Real Estate:
Land............................................................................. $ 97,965 $ 94,974
Buildings and Improvements....................................................... 588,993 564,488
Furniture, Fixtures and Equipment................................................ 1,662 1,662
Construction in Progress......................................................... 8,389 --
Less: Accumulated Depreciation................................................... (83,324) (63,897)
------------ ------------
Net Investment in Real Estate.................................................. 613,685 597,227
Cash and Cash Equivalents.......................................................... 3,314 1,880
Restricted Cash.................................................................... 11,837 9,175
Tenant Accounts Receivable, Net.................................................... 3,637 2,028
Deferred Rent Receivable........................................................... 7,010 7,000
Interest Rate Protection Agreements, Net........................................... 6,653 7,865
Deferred Financing Costs, Net...................................................... 6,302 7,153
Prepaid Expenses and Other Assets, Net............................................. 9,849 10,837
------------ ------------
Total Assets................................................................... $ 662,287 $ 643,165
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable............................................................. $ 346,504 $ 346,850
Accounts Payable and Accrued Expenses.............................................. 9,144 7,084
Rents Received in Advance and Security Deposits.................................... 4,182 3,630
------------ ------------
Total Liabilities.............................................................. 359,830 357,564
------------ ------------
Commitments and Contingencies........................................................ -- --
Partners' Capital.................................................................... 302,457 285,601
------------ ------------
Total Liabilities and Partners' Capital........................................ $ 662,287 $ 643,165
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental Income....................................................... $ 79,947 $ 61,428 $ 29,152
Tenant Recoveries and Other Income.................................. 22,375 17,604 7,801
------------ ------------ ------------
Total Revenues.................................................... 102,322 79,032 36,953
------------ ------------ ------------
Expenses:
Real Estate Taxes................................................... 17,261 12,135 5,924
Repairs and Maintenance............................................. 4,337 3,024 1,369
Property Management................................................. 3,558 2,635 1,162
Utilities........................................................... 2,535 1,825 740
Insurance........................................................... 605 624 304
Other............................................................... 637 581 234
Interest............................................................ 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and Deferred
Financing Costs................................................... 3,090 4,216 2,717
Depreciation and Other Amortization................................. 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement................... -- 6,410 --
------------ ------------ ------------
Total Expenses.................................................... 78,028 70,637 30,117
------------ ------------ ------------
Net Income............................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
------------
<S> <C>
Balance at June 30, 1994............................................................................ $ --
Contributions....................................................................................... 209,270
Distributions....................................................................................... (5,200)
Net Income.......................................................................................... 6,836
------------
Balance at December 31, 1994........................................................................ 210,906
------------
Contributions....................................................................................... 100,468
Distributions....................................................................................... (34,168)
Net Income.......................................................................................... 8,395
------------
Balance at December 31, 1995........................................................................ 285,601
------------
Contributions....................................................................................... 25,874
Distributions....................................................................................... (33,312)
Net Income.......................................................................................... 24,294
------------
Balance at December 31, 1996........................................................................ $ 302,457
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................................. $ 24,294 $ 8,395 $ 6,836
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation.............................................................. 19,427 15,232 7,174
Amortization of Interest Rate Protection Agreements and Deferred Financing
Costs................................................................... 3,090 4,216 2,717
Other Amortization........................................................ 2,310 1,945 712
Provision for Bad Debts................................................... 65 194 120
Loss from Disposition of Interest Rate Protection Agreement............... -- 6,410 --
Increase in Accounts Receivable and Other Assets.......................... (2,956) (3,339) (5,818)
Decrease (Increase) in Deferred Rent Receivable........................... 308 (978) (665)
Increase (Decrease) in Accounts Payable, Accrued Expenses, Rents Received
in Advance and Security Deposits........................................ 2,424 (2,931) (14,614)
Increase in Organization Costs............................................ (37) (27) --
(Increase) Decrease in Restricted Cash.................................... (4,275) 546 (12,155)
------------ ------------- -------------
Net Cash Provided by (Used in) Operating Activities......................... 44,650 29,663 (15,693)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of and Additions to Investment in Real Estate.................... (35,697) (19,341) (235,076)
Decrease (Increase) in Restricted Cash.................................... 1,613 3,749 (927)
------------ ------------- -------------
Net Cash Used in Investing Activities....................................... (34,084) (15,592) (236,003)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions............................................................. 25,556 47,915 236,645
Distributions............................................................. (33,312) (34,168) (5,200)
Proceeds from Mortgage Loans Payable...................................... -- 46,850 300,000
Repayments on Mortgage Loans Payable...................................... (346) -- (241,672)
Repayments on Acquisition Facility Payable................................ -- (81,450) --
Cost of Debt Issuance and Interest Rate Protection Agreements............. (1,030) (289) (29,126)
------------ ------------- -------------
Net Cash (Used in) Provided by Financing Activities......................... (9,132) (21,142) 260,647
------------ ------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents........................ 1,434 (7,071) 8,951
Cash and Cash Equivalents, Beginning of Period.............................. 1,880 8,951 --
------------ ------------- -------------
Cash and Cash Equivalents, End of Period.................................... $ 3,314 $ 1,880 $ 8,951
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND FORMATION
First Industrial, L.P. (the "Operating Partnership") was organized as a
limited partnership in the state of Delaware on November 23, 1993. The sole
general partner is First Industrial Realty Trust, Inc. (the "Company") with an
approximate 92.4% ownership interest at December 31, 1996. The limited partners
owned approximately a 7.6% aggregate ownership interest at December 31, 1996.
The Company is a real estate investment trust (REIT) as defined in the Internal
Revenue Code. The Company's operations are conducted primarily through the
Operating Partnership. As of December 31, 1996, the Operating Partnership
directly owned 137 in-service properties, containing an aggregate of
approximately 12.7 million square feet (unaudited) of gross leasable area
("GLA"), as well as a 99% limited partnership interest (subject in one case as
described below to a preferred limited partnership interest) in First Industrial
Financing Partnership, L.P. (the "Financing Partnership"), First Industrial
Securities, L.P. (the "Securities Partnership"), First Industrial Mortgage
Partnership, L.P. (the "Mortgage Partnership"), First Industrial Pennsylvania
Partnership, L.P. (the "Pennsylvania Partnership"), First Industrial Harrisburg,
L.P. (the "Harrisburg Partnership"), First Industrial Indianapolis, L.P. (the
"Indianapolis Partnership") and First Industrial Development Services Group,
L.P. (together, the "Other Real Estate Partnerships"). On a combined basis, as
of December 31, 1996, the Other Real Estate Partnerships owned 242 in-service
properties containing an aggregate of approximately 20.0 million square feet
(unaudited) of GLA. Of the 242 properties owned by the Other Real Estate
Partnerships, 195 were owned by the Financing Partnership, 19 were owned by the
Securities Partnership, 23 were owned by the Mortgage Partnership, one was owned
by the Pennsylvania Partnership, three were owned by the Harrisburg Partnership
and one was owned by the Indianapolis Partnership.
The general partners of the Other Real Estate Partnerships are separate
corporations, each with a one percent general partnership interest. Each general
partner of the Other Real Estate Partnerships is a wholly-owned subsidiary of
the Company. The general partner of the Securities Partnership, First Industrial
Securities Corporation, also owns a preferred limited partnership interest which
entitles it to receive a fixed quarterly distribution, and results in it being
allocated income in the same amount, equal to the fixed quarterly dividend the
Company pays on its 9.5% Series A Preferred Stock.
Profits, losses and distributions of the Other Real Estate Partnerships are
allocated to the general partners and the limited partner in accordance with the
provisions contained within the partnership agreement of each of the Other Real
Estate Partnerships.
2. BASIS OF PRESENTATION
The Combined Balance Sheets as of December 31, 1996 and 1995 and the
Combined Statements of Operations, Changes in Partners Capital and Cash Flows
for the years ended December 31, 1996 and 1995 and for the six months ended
December 31, 1994 reflect the operations, capital, and cash flows of the Other
Real Estate Partnerships on a combined basis.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In order to conform with generally accepted accounting principles,
management, in preparation of the Other Real Estate Partnerships' 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 years ended
F-38
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 31, 1996 and 1995 and the six months 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 is recognized as revenues in the same period the
related expenses are incurred by the Other Real Estate Partnerships.
The Other Real Estate Partnerships provide an allowance for doubtful
accounts against the portion of tenant accounts receivable which is estimated to
be uncollectible. Accounts receivable in the combined balance sheets are shown
net of an allowance for doubtful accounts of $379 and $314 as of December 31,
1996 and December 31, 1995, respectively.
INVESTMENT IN REAL ESTATE AND DEPRECIATION:
Effective January 1, 1995, the Other Real Estate Partnerships 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 of depreciated cost or fair value as determined
by the Other Real Estate Partnerships. The Other Real Estate Partnerships review
their properties on a quarterly basis for impairment and provide a provision if
impairments are determined. First, to determine if impairment may exist, the
Other Real Estate Partnerships review their properties and identify those which
have had either an event of change or event of circumstances warranting further
assessment of recoverability. Then, the Other Real Estate Partnerships estimate
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.
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>
<CAPTION>
YEARS
-----------
<S> <C>
Buildings and Improvements....................................................... 31.5 to 40
Land Improvements................................................................ 15
Furniture, Fixtures and Equipment................................................ 5 to 10
</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 related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss.
F-39
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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:
In accordance with partnership taxation, each of the partners are
responsible for reporting their shares of taxable income or loss. Accordingly,
no provision has been made in the accompanying combined financial statements for
federal, state or local income taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Other Real Estate Partnerships' financial instruments include short-term
investments, tenant accounts receivable, accounts payable, other accrued
expenses and mortgage loans payable. The fair values of these financial
instruments were not materially different from their carrying or contract
values. The Other Real Estate Partnerships' financial instruments also include
interest rate protection agreements (see Note 4).
DERIVATIVE FINANCIAL INSTRUMENTS:
The Other Real Estate Partnerships' interest rate protection agreements (the
"Agreements") are used to limit the interest rate on the 1994 Mortgage Loan
(hereinafter defined) to 7.2%. As such, receipts resulting from the Agreements
are recognized as adjustments to interest expense. The credit risks associated
with the Agreements are controlled through the evaluation and monitoring of the
creditworthiness of the counterparty. In the event that the counterparty fails
to meet the terms of the Agreements, the Financing Partnership's exposure is
limited to the current value of the interest rate differential, not the notional
amount, and the Financing Partnership's carrying value of the Agreements on the
balance sheet. The Agreements have been executed with a creditworthy financial
institution. As such, the Other Real Estate Partnerships consider the risk of
nonperformance to be remote. In the event that the Financing Partnership
terminates the Agreements, the Financing Partnership would recognize a gain
(loss) from the disposition of the Agreements equal to the amount of cash
received or paid at termination less the carrying value of the Agreements on the
Financing Partnership's balance sheet.
DEFERRED FINANCING COSTS:
Deferred financing costs include fees and costs incurred to obtain long-term
financing. These fees and costs are being amortized over the terms of the
respective loans. Accumulated amortization of deferred financing costs was
$4,517 and $2,636 at December 31, 1996 and 1995, respectively.
4. MORTGAGE LOANS
On June 30, 1994, the Financing Partnership borrowed $300,000 under a
mortgage loan (the "1994 Mortgage Loan"). The 1994 Mortgage Loan is
cross-collateralized by, among other things, first mortgage liens on the 195
properties owned by the Financing Partnership. The 1994 Mortgage Loan will
mature on June 30, 1999, unless extended by the Financing Partnership, subject
to certain conditions, for an
F-40
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS (CONTINUED)
additional two-year period, thereby maturing on June 30, 2001. The Operating
Partnership has guaranteed certain obligations of the Financing Partnership
under the 1994 Mortgage Loan. The 1994 Mortgage Loan provides for interest only
payments which have been effectively limited to 7.2% through June 30, 1999 by
certain interest rate protection agreements. Interest payable related to the
1994 Mortgage Loan was $1,750 and $1,905 at December 31, 1996 and 1995,
respectively. Payments to the Financing Partnership under the interest rate
protection agreements during 1996, 1995 and 1994 totaled $0, $584 and $51,
respectively, which have been included as a component of interest expense.
In conjunction with obtaining the 1994 Mortgage Loan, the Financing
Partnership purchased an interest rate protection agreement which effectively
limited the interest rate during the initial five-year term of the 1994 Mortgage
Loan to 7.2% per annum. Prior to the subsequent replacement of this interest
rate protection agreement, its cost of $18,450 had been capitalized and was
being amortized over the five-year term of the agreement.
Effective July 1, 1995, the Financing Partnership replaced such interest
rate protection agreement with new interest rate protection agreements with a
notional value of $300,000, which effectively limit the annual interest rate on
the 1994 Mortgage Loan to 7.2% through June 30, 1999. As a result of the
replacement of the interest rate protection agreement, the Financing Partnership
incurred a one-time loss of $6,410, of which $6,288 represents the difference
between the unamortized cost of the replaced interest rate protection agreement
and the cost of the new agreements. The costs of the new interest rate
protection agreements have been capitalized and are being amortized over the
respective terms of the agreements. Under the terms of the new interest rate
protection agreements, certain collateral may be required to be set aside for
amounts that could become due under the agreements. Accumulated amortization on
the interest rate protection agreements was $1,819 and $607 as of December 31,
1996 and 1995, respectively.
At December 31, 1996, the fair market value of the interest rate protection
agreements was approximately $3,900. The fair market value was determined by a
third party evaluation and is based on estimated discounted future cash flows.
Under the terms of the 1994 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payment of tenant improvements,
capital expenditures, interest, real estate taxes, insurance and potential
environmental costs. The amount of cash reserves for payment of potential
environmental costs was determined by the lender and was established at the
closing of the 1994 Mortgage Loan. The amounts included in the cash reserves
relating to payments of tenant improvements, capital expenditures, interest,
real estate taxes and insurance were determined by the lender and approximate
the next periodic payment of such items. At December 31, 1996 and 1995, these
reserves totaled $10,223 and $8,787, respectively, and are included in
Restricted Cash. Such cash reserves were invested in a money market fund at
December 31, 1996. The maturity of these investments is one day; accordingly,
cost approximates fair market value.
On December 29, 1995, the Mortgage Partnership borrowed $40,200 under a
mortgage loan (the "1995 Mortgage Loan"). In the first quarter of 1996, the
Mortgage Partnership made a one time paydown of $200 on the 1995 Mortgage Loan
decreasing the outstanding balance to $40,000. The 1995 Mortgage Loan matures on
January 11, 2026 and provides for interest only payments through January 11,
1998, after which monthly principal and interest payments are required based on
a 28-year amortization schedule. The
F-41
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
4. MORTGAGE LOANS (CONTINUED)
interest rate under the 1995 Mortgage Loan is fixed at 7.22% per annum through
January 11, 2003. After January 11, 2003, the interest rate adjusts through a
predetermined formula based on the applicable Treasury rate. Interest payable
related to the 1995 Mortgage Loan was $168 and $24 at December 31, 1996 and
1995, respectively. The 1995 Mortgage Loan is collateralized by 23 properties
held by the Mortgage Partnership.
Under the terms of the 1995 Mortgage Loan, certain cash reserves are
required to be and have been set aside for payments of security deposits,
capital expenditures, interest, real estate taxes and insurance. The amount of
cash reserves segregated for security deposits is adjusted as tenants turn over.
The amounts included in the cash reserves relating to payments of capital
expenditures, interest, real estate taxes and insurance were determined by the
lender and approximate the next periodic payment of such items. At December 31,
1996 and 1995, these reserves totaled $1,614 and $388, respectively, and are
included in Restricted Cash. Such cash reserves were invested in a money market
fund at December 31, 1996. The maturity of these investments is one day;
accordingly, cost approximates fair market value.
On December 14, 1995, the Harrisburg Partnership entered into a $6,650
mortgage loan (the "Harrisburg Mortgage Loan") that is collateralized by three
properties in Harrisburg, Pennsylvania. The Harrisburg Mortgage Loan bears
interest at a rate based on LIBOR plus 1.5% or prime plus 2.25%, at the
Company's option, and provides for interest only payments through May 31, 1996,
with monthly principal and interest payments required subsequently based on a
26.5-year amortization schedule. At December 31, 1996, the interest rate was
6.875%. The Harrisburg Mortgage Loan will mature on December 15, 2000. The
outstanding mortgage loan balance at December 31, 1996 and 1995 was
approximately $6,504 and $6,650, respectively. Interest payable related to the
Harrisburg Mortgage Loan was $39 and $0 at December 31, 1996 and 1995,
respectively.
The following is a schedule of mortgage principal payments and maturities of
the mortgage loans for the next five years ending December 31, and thereafter:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
1997 $ 251
1998 686
1999 300,760
2000 6,298
2001 566
Thereafter 37,943
----------
Total $ 346,504
----------
----------
</TABLE>
The 1994 Mortgage Loan matures in 1999 but may be extended at the Financing
Partnership's option, subject to certain conditions, for an additional two
years, thereby maturing on June 30, 2001.
F-42
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. FUTURE RENTAL REVENUES
The Other Real Estate Partnerships' 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 $ 79,638
1998 67,685
1999 53,070
2000 39,469
2001 24,893
Thereafter 62,247
---------
Total $ 327,002
---------
---------
</TABLE>
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest paid, net of capitalized interest............................... $ 24,240 $ 21,993 $ 7,920
------------ ------------ ------------
------------ ------------ ------------
Interest capitalized..................................................... $ 0 $ 58 $ 30
------------ ------------ ------------
------------ ------------ ------------
Supplemental schedule of noncash investing and financing activities:
Sale of interest rate protection agreement............................... $ -- $ 8,472 $ --
Purchase of interest rate protection agreements.......................... -- (8,472) --
------------ ------------ ------------
$ -- $ -- $ --
------------ ------------ ------------
------------ ------------ ------------
In conjunction with the property acquisitions, the following assets, liabilities and capital were assumed:
Purchase of real estate, net............................................. $ -- $ 131,897 $ 496,147
Deferred rent receivable................................................. 318 387 --
Restricted cash.......................................................... -- 388 --
Deferred financing costs................................................. -- 854 --
Other assets............................................................. -- 993 --
Accounts receivable...................................................... -- -- 3,276
Accounts payable and accrued expenses.................................... -- (513) (29,949)
Mortgage loans........................................................... -- -- (241,672)
Acquisition facilities payable........................................... -- (81,450) --
Limited partnership interest............................................. (318) (52,556) --
------------ ------------ ------------
Acquisition of Real Estate............................................... $ -- $ -- $ 227,802
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
On June 30, 1994, the Other Real Estate Partnerships received the following
non-cash contributions:
<TABLE>
<S> <C> <C> <C>
Acquisition of interest in properties, net.................. $ (34,436)
Deferred rent receivable.................................... 4,743
Other assets, net........................................... 2,318
Contributions other, net.................................... 27,375
-----------
$ --
-----------
-----------
</TABLE>
F-43
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
7. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Other Real Estate Partnerships are
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
combined financial position, operations or liquidity of the Other Real Estate
Partnerships.
Sixteen properties have leases granting the tenants options to purchase the
property. Such options are exercisable at various times and at appraised fair
market value or at a fixed purchase price generally in excess of the Other Real
Estate Partnerships' purchase price. The Other Real Estate Partnerships have not
received notice for the exercise of any tenant purchase options.
8. SUBSEQUENT EVENTS (UNAUDITED)
On March 17, 1997, the Pennsylvania Partnership purchased a 312,500 square
foot bulk warehouse in York, Pennsylvania for approximately $8.4 million.
On March 24, 1997, the Pennsylvania Partnership purchased a 162,500 square
foot light industrial warehouse in Mechanicsburg, Pennsylvania for approximately
$3.4 million.
On April 4, 1997, the Operating Partnership borrowed $309.8 million from an
institutional lender (the "Defeasance Loan"). The Defeasance Loan is unsecured,
bears interest at LIBOR plus 1% and matures July 1, 1999, unless extended by the
Operating Partnership, subject to certain conditions, for an additional two-year
period, thereby maturing July 1, 2001. The gross proceeds from the Defeasance
Loan were contributed to the Financing Partnership which used the gross proceeds
to defease (as defined by the terms of the 1994 Mortgage Loan agreement) the
1994 Mortgage Loan.
F-44
<PAGE>
OTHER REAL ESTATE PARTNERSHIPS
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PROPERTY DATA)
<TABLE>
<CAPTION>
OTHER REAL ESTATE PARTNERSHIPS
----------------------------------------
SIX MONTH
PERIOD
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total Revenues........................................................ $ 102,322 $ 79,032 $ 36,953
Property Expenses..................................................... 28,933 20,824 9,733
Interest Expense...................................................... 24,268 22,010 9,781
Amortization of Interest Rate Protection Agreements and Deferred
Financing Costs...................................................... 3,090 4,216 2,717
Depreciation and Other Amortization................................... 21,737 17,177 7,886
Disposition of Interest Rate Protection Agreement..................... -- 6,410 --
------------ ------------ ------------
Net Income............................................................ $ 24,294 $ 8,395 $ 6,836
------------ ------------ ------------
------------ ------------ ------------
BALANCE SHEET DATA (AT END OF PERIOD):
Net Investment in Real Estate......................................... $ 613,685 $ 597,227 $ 461,238
Total Assets.......................................................... 662,287 643,165 524,042
Mortgage Loans Payable................................................ 346,504 346,850 300,000
Total Liabilities..................................................... 359,830 357,564 313,136
Partners' Capital..................................................... $ 302,457 $ 285,601 $ 210,906
OTHER DATA:
Cash Flows From:
Operating Activities................................................ $ 44,650 $ 29,663 $ (15,693)
Investing Activities................................................ (34,084) (15,592) (236,003)
Financing Activities................................................ (9,132) (21,142) 260,647
Gross Leasable Area at End of Period.................................. 20,049,083 19,073,834 14,312.040
Total Properties at End of Period..................................... 242 241 196
</TABLE>
F-45
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities registered hereby, which will be
borne by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 151,515
NASD filing fee................................................. 30,500
Fees of Rating Agencies......................................... 412,500
Printing and duplicating expenses............................... 600,000
Legal fees and expenses......................................... 600,000
Blue sky fees and expenses...................................... 30,000
Accounting fees and expenses.................................... 75,000
Miscellaneous................................................... 100,000
---------
Total....................................................... $1,999,515
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Articles of Incorporation and Amended and Restated
Bylaws provide certain limitations on the liability of the Company's directors
and officers for monetary damages to the Company. The Articles of Incorporation
and Bylaws obligate the Company to indemnify its directors and officers, and
permit the Company to indemnify its employees and other agents, against certain
liabilities incurred in connection with their service in such capacities. These
provisions could reduce the legal remedies available to the Company and its
stockholders against these individuals. The provisions of Maryland law provide
for the indemnification of officers and directors of a company under certain
circumstances.
The Fourth Amended and Restated Agreement of Limited Partnership of the
Operating Partnership contains provisions indemnifying the Company and its
officers, directors and stockholders to the fullest extent permitted by the
Delaware Revised Uniform Limited Partnership Act.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
4.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit
3.1 of the Form 10-Q of the Company for the fiscal quarter ended June 30, 1996, File No. 1-13102).
4.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-3, File No. 333-03999).
4.3 Articles of Amendment to the Company's Articles of Incorporation dated June 20, 1994 (incorporated by
reference to Exhibit 3.2 of the Form 10-Q of the Company for the fiscal quarter ended June 30, 1996,
File No. 1-13102).
4.4 Articles Supplementary relating to the Company's 9 1/2% Series A Cumulative Preferred Stock, $.01 par
value (incorporated by reference to Exhibit 3.4 of the Form 10-Q of the Company for the fiscal
quarter ended June 30, 1996, File No. 1-13102).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
4.5 Articles of Amendment to the Company's Articles of Incorporation dated May 31, 1996 (incorporated by
reference to Exhibit 3.3 of the Form 10-Q of the Company for the fiscal quarter ended June 30, 1996,
File No. 1-13102).
4.6 Articles Supplementary relating to the Company's 8 3/4% Series B Cumulative Preferred Stock, $.01 par
value (incorporated by reference to Exhibit 3.1 of the Form 10-Q of the Company for the fiscal
quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of the Company filed May 30, 1997, File
No. 1-13102).
4.7 Deposit Agreement, dated May 14, 1997, by and among the Company, First Chicago Trust Company of New
York and holders from time to time of Depositary Receipts (incorporated by reference to Exhibit 4.3
of the Form 10-Q of the Company for the fiscal quarter ended March 31, 1997, as amended by Form
10-Q/A No. 1 of the Company filed May 30, 1997, File No. 1-13102).
4.8 Articles Supplementary relating to the Company's 8 5/8% Series C Cumulative Preferred Stock, $.01 par
value (incorporated by reference to Exhibit 4.1 of the Form 8-K of the Company dated June 6, 1997,
File No. 1-13102).
4.9 Deposit Agreement, dated June 6, 1997, by and among the Company, First Chicago Trust Company of New
York and holders from time to time of Depositary Receipts (incorporated by reference to Exhibit 4.3
of the Form 8-K of the Company dated June 6, 1997, File No. 1-13102).
4.10 Certificate of Limited Partnership of the Operating Partnership, as amended (incorporated by
reference to Exhibit 4.6 of the Registration Statement on Form S-3 of the Company and the Operating
Partnership, File No. 333-21873).
4.11 Fourth Amended and Restated Limited Partnership Agreement of the Operating Partnership (incorporated
by reference to Exhibit 10.1 of the Form 8-K of the Company dated June 13, 1997, File No. 1-13102).
4.12 Indenture, dated as of May 13, 1997, between the Operating Partnership and First Trust National
Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Form 10-Q of the Company for
the fiscal quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of the Company filed May 30,
1997, File No. 1-13102).
4.13 Supplemental Indenture No. 1, dated as of May 13, 1997, between the Operating Partnership and First
Trust National Association as Trustee relating to $150 million of 7.60% Notes due 2007 and $100
million of 7.15% Notes due 2027 (incorporated by reference to Exhibit 4.2 of the Form 10-Q of the
Company for the fiscal quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of the Company
filed May 30, 1997, file No. 1-13102).
4.14 Supplemental Indenture No. 2, dated as of May 22, 1997, between the Operating Partnership and First
Trust National Association as Trustee relating to $100 million of 7 3/8% Notes due 2011 (incorporated
by reference to exhibit 4.4 of the Form 10-Q of the Operating Partnership for the fiscal quarter
ended March 31, 1997, file No. 333-21873).
4.15 Trust Agreement, dated as of May 16, 1997, between the Operating Partnership and First Bank National
Association, as trustee (incorporated by reference to exhibit 4.5 of the Form 10-Q of the Operating
Partnership for the fiscal quarter ended March 31, 1997, file No. 333-21873).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
5* Opinion of Cahill Gordon & Reindel, counsel to the Registrants, as to the legality of the securities
being registered, together with the opinion of McGuire Woods Battle & Boothe LLP.
8* Opinion of Cahill Gordon & Reindel, counsel to the Registrants, as to certain tax matters.
12.1* Computation of ratios of earnings to fixed charges and preferred stock dividends of the Company.
12.2* Computation of ratios of earnings to fixed charges of the Operating Partnership.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Cahill Gordon & Reindel (included in Exhibit 5 and Exhibit 8).
23.3* Consent of McGuire Woods Battle & Boothe LLP (included in Exhibit 5).
24* Power of Attorney (included on page II-5).
25 Statement of eligibility of Trustee on Form T-1 (incorporated by reference to Exhibit 25 of the
Registration Statement on Form S-3 of the Company and the Operating Partnership, File No. 333-21873).
27.1 Financial Data Schedule of the Company (incorporated by reference to Exhibit 27 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-13102).
27.2* Financial Data Schedule of the Operating Partnership.
</TABLE>
- ------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act of 1933 if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in
II-3
<PAGE>
periodic reports filed with or furnished to the Commission by the
undersigned registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrants hereby undertake that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the annual report
of either of the registrants pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the provisions described under Item 15 above, or
otherwise, the registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer, or controlling person of the registrants in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(d) The undersigned registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on June 23, 1997.
FIRST INDUSTRIAL REALTY TRUST, INC.
By: /s/ MICHAEL T. TOMASZ
-----------------------------------------
Name: Michael T. Tomasz
Title: President and Chief Executive
Officer
FIRST INDUSTRIAL, L.P.
By: First Industrial Realty Trust, Inc.
By: /s/ MICHAEL T. TOMASZ
-----------------------------------------
Name: Michael T. Tomasz
Title: President and Chief Executive
Officer
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Michael T. Tomasz, Michael W. Brennan and
Michael J. Havala, and each of them (with full power to each of them to act
alone), his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each of such attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection with such matters, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of such attorneys-in-fact and agents or
his substitute or his substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ MICHAEL T. TOMASZ
- ------------------------------ Principal Executive June 23, 1997
Michael T. Tomasz Officer and Director
/s/ MICHAEL J. HAVALA
- ------------------------------ Principal Financial and June 23, 1997
Michael J. Havala Accounting Officer
/s/ MICHAEL W. BRENNAN
- ------------------------------ Chief Operating Officer June 23, 1997
Michael W. Brennan and Director
/s/ MICHAEL G. DAMONE
- ------------------------------ Director June 23, 1997
Michael G. Damone
/s/ KEVIN W. LYNCH
- ------------------------------ Director June 23, 1997
Kevin W. Lynch
/s/ JOHN E. RAU
- ------------------------------ Director June 23, 1997
John E. Rau
/s/ JAY H. SHIDLER
- ------------------------------ Chairman of the Board of June 23, 1997
Jay H. Shidler Directors
/s/ ROBERT J. SLATER
- ------------------------------ Director June 23, 1997
Robert J. Slater
/s/ J. STEVEN WILSON
- ------------------------------ Director June 23, 1997
J. Steven Wilson
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------------------- ---------------
<S> <C> <C>
/s/ JOHN L. LESHER
--------------------------------- Director June 23, 1997
John L. Lesher
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ---------- ------------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
4.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 of the Form 10-Q of the Company for the fiscal quarter ended June 30, 1996, File No.
1-13102).
4.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-3, File No. 333-03999).
4.3 Articles of Amendment to the Company's Articles of Incorporation dated June 20, 1994
(incorporated by reference to Exhibit 3.2 of the Form 10-Q of the Company for the fiscal quarter
ended June 30, 1996, File No. 1-13102).
4.4 Articles Supplementary relating to the Company's 9 1/2% Series A Cumulative Preferred Stock, $.01
par value (incorporated by reference to Exhibit 3.4 of the Form 10-Q of the Company for the
fiscal quarter ended June 30, 1996, File No. 1-13102).
4.5 Articles of Amendment to the Company's Articles of Incorporation, dated May 31, 1996
(incorporated by reference to Exhibit 3.3 of the Form 10-Q of the Company for the fiscal quarter
ended June 30, 1996, File No. 1-13102).
4.6 Articles Supplementary relating to the Company's 8 3/4% Series B Cumulative Preferred Stock, $.01
par value (incorporated by reference to Exhibit 3.1 of the Form 10-Q of the Company for the
fiscal quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of the Company filed May 30,
1997, File No. 1-13102).
4.7 Deposit Agreement, dated May 14, 1997, by and among the Company, First Chicago Trust Company of
New York and holders from time to time of Depositary Receipts (incorporated by reference to
Exhibit 4.3 of the Form 10-Q of the Company for the fiscal quarter ended March 31, 1997, as
amended by Form 10-Q/A No. 1 of the Company filed May 30, 1997, File No. 1-13102).
4.8 Articles Supplementary relating to the Company's 8 5/8% Series C Cumulative Preferred Stock, $.01
par value (incorporated by reference to Exhibit 4.1 of the Form 8-K of the Company dated June 6,
1997, File No. 1-13102).
4.9 Deposit Agreement dated, June 6, 1997, by and among the Company, First Chicago Trust Company of
New York and holders from time to time of Depositary Receipts (incorporated by reference to
Exhibit 4.3 of the Form 8-K of the Company dated June 6, 1997, File No. 1-13102).
4.10 Certificate of Limited Partnership of the Operating Partnership, as amended (incorporated by
reference to Exhibit 4.6 of the Registration Statement on Form S-3 of the Company and the
Operating Partnership, File No. 333-21873).
4.11 Fourth Amended and Restated Limited Partnership Agreement of the Operating Partnership
(incorporated by reference to Exhibit 10.1 of the Form 8-K of the Company dated June 13, 1997,
File No. 1-13102).
4.12 Indenture, dated as of May 13, 1997, between the Operating Partnership and First Trust National
Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Form 10-Q of the Company
for the fiscal quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of the Company filed
May 30, 1997, File No. 1-13102).
4.13 Supplemental Indenture No. 1, dated as of May 13, 1997, between the Operating Partnership and
First Trust National Association as Trustee relating to $150 million of 7.60% Notes due 2007 and
$100 million of 7.15% Notes due 2027 (incorporated by reference to Exhibit 4.2 of the Form 10-Q
of the Company for the fiscal quarter ended March 31, 1997, as amended by Form 10-Q/A No. 1 of
the Company filed May 30, 1997, File No. 1-13102).
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
4.14 Supplemental Indenture No. 2, dated as of May 22, 1997, between the Operating Partnership and
First Trust National Association as Trustee relating to $100 million of 7 3/8% Notes due 2011
(incorporated by reference to exhibit 4.4 of the Form 10-Q of the Operating Partnership for the
fiscal quarter ended March 31, 1997, file No. 333-21873).
4.15 Trust Agreement, dated as of May 16, 1997, between the Operating Partnership and First Bank
National Association, as trustee (incorporated by reference to Exhibit 4.5 of the Form 10-Q of
the Operating Partnership for the fiscal quarter ended March 31, 1997, file No. 333-21873).
5* Opinion of Cahill Gordon & Reindel, counsel to the Registrants, as to the legality of the
securities being registered, together with the opinion of McGuire Woods Battle & Boothe LLP.
8* Opinion of Cahill Gordon & Reindel, counsel to the Registrants, as to certain tax matters.
12.1* Computation of ratios of earnings to fixed charges and preferred stock dividends of the Company.
12.2* Computation of ratios of earnings to fixed charges of the Operating Partnership.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Cahill Gordon & Reindel (included in Exhibit 5 and Exhibit 8).
23.3* Consent of McGuire Woods Battle & Boothe LLP (included in Exhibit 5).
24* Power of Attorney (included on page II-5).
25 Statement of eligibility of Trustee on Form T-1 (incorporated by reference to Exhibit 25 of the
Registration Statement on Form S-3 of the Company and the Operating Partnership, File No.
333-21873).
27.1 Financial Data Schedule of the Company (incorporated by reference to Exhibit 27 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-13102).
27.2* Financial Data Schedule of the Operating Partnership.
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
[Letterhead of Cahill Gordon & Reindel]
June 23, 1997
First Industrial Realty Trust, Inc.
150 N. Wacker Drive, Suite 150
Chicago, IL 60606
Ladies and Gentlemen:
We have acted as counsel for First Industrial Realty Trust, Inc. (the
"Company") and First Industrial, L.P. (the "Operating Partnership") in
connection with the Registration Statement on Form S-3 (the "Registration
Statement"), filed by the Company and the Operating Partnership with the
Securities and Exchange Commission (the "Commission") for registration under the
Securities Act of 1933, as amended (the "Securities Act"), of (A) securities of
the Company consisting of (i) common stock, par value $.01 per share (the
"Common Stock"), (ii) preferred stock, par value $.01 per share (the "Preferred
Stock"), and (iii) depositary shares which may represent shares of Preferred
Stock (the "Depositary Shares") to be offered from time to time by the Company
for aggregate proceeds of up to $300,000,000 and (B) senior debt securities of
the Operating Partnership, to be offered from time to time by the Operating
Partnership, pursuant to the Indenture (the "Indenture"), dated as of May 13,
1997, between the Operating Partnership and First Trust National Association, as
trustee (the "Trustee"), for aggregate proceeds of up to $200,000,000.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Registration Statement.
<PAGE>
-2-
In connection therewith, we have examined, among other things,
originals or copies, certified or otherwise identified to our satisfaction, of
the Amended and Restated Articles of Incorporation and Bylaws of the Company,
each as amended to date, the Fourth Amended and Restated Limited Partnership
Agreement of the Operating Partnership, resolutions of the Board of Directors of
the Company with respect to the filing of the Registration Statement and such
other documents as we have deemed necessary or appropriate for the purpose of
rendering this opinion.
In our examination of documents, instruments and other papers, we have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to us as conformed, photostatic or other copies. As to matters of fact, we have
relied upon representations of officers of the Company.
Based upon the foregoing examination, information supplied and assumptions, it
is our opinion that:
1. the Common Stock has been duly authorized by all necessary
corporate action of the Company and when the shares of Common Stock have
been issued, delivered and paid for or upon conversion, exchange or
exercise of any Preferred Stock or Depositary Shares in accordance with the
terms of such Preferred Stock or Depositary Shares or the instrument
governing such Preferred Stock or Depositary Shares providing for such
conversion, exchange or exercise as approved by the Company's Board of
Directors, for the consideration approved by the Company's Board of
Directors, such shares of Common Stock will be legally issued, fully paid
and non-assessable;
2. assuming that the Preferred Stock does not exceed 8,290,000
shares, the Preferred Stock and the representation of such Preferred Stock
by Depositary Shares, as described in the prospectus contained in the
Registration Statement, have been duly authorized by all necessary
corporate action of the Company and when (a) the Company's Board of
Directors has classified the Preferred Stock by setting the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption and the
Maryland State Department of Assessments and Taxation has accepted for
record Articles Supplementary setting forth the foregoing characteristics
of each series of Preferred Stock prior to the issuance thereof, and (b)
the shares of Preferred Stock and, if applicable, Depositary Shares, have
been issued, delivered and paid for, such shares of Preferred Stock and, if
applicable, Depositary Shares, will be legally issued, fully paid and
non-assessable; and
<PAGE>
-3-
3. with respect to Debt Securities, when (a) the definitive terms of
any series of Debt Securities and of their issue and sale have been duly
established in accordance with the provisions of the Indenture so as not to
violate any applicable law or agreement or instrument then binding on the
Operating Partnership, (b) such series of Debt Securities has been duly
executed by the Operating Partnership and authenticated by the Trustee,
(c) such series of Debt Securities has been issued and delivered in the
manner contemplated by the Indenture, the Registration Statement, the
prospectus contained therein and the applicable prospectus supplement, and
(d) such series of Debt Securities has been duly paid for by the purchasers
thereof, such series of Debt Securities will be entitled to the benefits of
the Indenture, and will be the valid and binding obligation of the
Operating Partnership, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by the laws of bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and subject, as to enforceability, to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
We are attorneys admitted to practice in the State of New York. We
express no opinion concerning the laws of any jurisdiction other than the
Delaware Revised Uniform Limited Partnership Act, the laws of the United States
of America and the laws of the State of New York. With respect to matters of
Maryland law, we have relied, without independent investigation, upon the
opinion of McGuire Woods Battle & Boothe LLP, a copy of which is attached
hereto.
We hereby consent to the reference to our firm in the Registration
Statement under the caption "Legal Matters" and to the inclusion of this opinion
as an exhibit to the Registration Statement. Our consent to such reference does
not constitute a consent under Section 7 of the Securities Act as in consenting
to such reference we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under Section 7 or under the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ Cahill Gordon & Reindel
<PAGE>
MCGUIRE WOODS
BATTLE&BOOTHELLP
The Blaustein Building
One North Charles Street
Baltimore, Maryland 21201-3793
June 23, 1997
First Industrial Realty Trust, Inc.
150 N. Wacker Drive, Suite 150
Chicago, Illinois 60606
Ladies and Gentlemen:
This opinion is furnished in our capacity as special Maryland counsel
for First Industrial Realty Trust, Inc., a Maryland corporation (the "Company"),
in connection with the filing on June 23, 1997 with the Securities and Exchange
Commission by the Company and First Industrial, L.P., a Delaware limited
partnership ("FILP"), of a registration statement on Form S-3 (the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the shelf registration of $389,525,000 in maximum
aggregate offering price of (i) shares of the Company's preferred stock, par
value $.01 per share (the "Preferred Stock"), (ii) shares of Preferred Stock
represented by depositary shares (the "Depositary Shares"), as described in the
prospectus included in the Registration Statement (the "Prospectus"), and
(iii) shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and $300,000,000 in maximum offering price of debt securities
of FILP (the "Debt Securities").
In connection with rendering this opinion, we have examined originals,
or copies certified or otherwise identified to our satisfaction, of the Articles
of Amendment and Restatement of the Company, dated June 13, 1994, and the
Articles of Amendment of the Company, dated June 20, 1994 and May 31, 1996,
respectively; Amended and Restated Bylaws of the Company, as amended to date;
resolutions of the board of directors of the Company; the Registration
Statement; the Prospectus and such other certificates, receipts, records and
documents relating to the Company, the authorization of the Preferred Stock,
Depositary Shares and Common Stock, and the filing of the Registration Statement
as we considered necessary for the purposes of rendering this opinion.
<PAGE>
First Industrial Realty Trust, Inc.
June 23, 1997
Page 2
In conducting our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as copies. As to
the Company's good standing with the Maryland State Department of Assessments
and Taxation (the "SDAT"), we have relied upon representations from the
Corporation Trust Incorporated, registered agent for the Company in Maryland,
and as to matters of fact which have not been independently established, we have
relied upon representations of officers of the Company.
We are attorneys admitted to practice in the State of Maryland. We
express no opinion concerning the laws of any jurisdictions other than the laws
of the United States of America and the State of Maryland.
Based upon the foregoing, we are of the opinion that:
(1) Assuming that the Preferred Stock does not exceed 8,290,000
shares, the Preferred Stock and the representation of such Preferred Stock by
Depositary Shares, as described in the Prospectus, have been duly authorized by
all necessary corporate action of the Company and when (a) the Company's board
of directors or a duly authorized committee of the board of directors has
classified the Preferred Stock by setting the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption and the SDAT has accepted for record
Articles Supplementary setting forth the foregoing characteristics of each
series of Preferred Stock prior to the issuance thereof, and (b) the shares of
Preferred Stock and, if applicable, Depositary Shares, have been legally and
validly authorized for issuance by the board of directors or a duly authorized
committee of the board of directors, issued, delivered, and paid for, such
shares of Preferred Stock and, if applicable, Depositary Shares, will be legally
issued, fully paid, and nonassessable.
(2) The Common Stock has been duly authorized by all necessary
corporate action of the Company and when the shares of Common Stock have been
legally and validly authorized for issuance by the board of directors or a duly
authorized committee of the board of directors, issued, delivered, and paid for,
or upon conversion, exchange or exercise of any Preferred Stock of Depositary
Shares in accordance with the terms of such Preferred Stock or Depositary Shares
or the instrument governing such Preferred Stock or Depositary Shares providing
for such conversion, exchange or exercise as approved by the Company's board of
directions, for the consideration approved by the Company's board of directors,
such shares of Common Stock will be legally issued, fully paid, and
nonassessable.
<PAGE>
First Industrial Realty Trust, Inc.
June 23, 1997
Page 3
We do not provide any opinion with respect to the Debt Securities, nor
do we provide any opinion with respect to the Depositary Shares other than our
opinion set forth herein concerning the Preferred Stock, fractional shares of
which may be offered as Depositary Shares.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of state
laws regulating the offer and sale of securities.
This opinion may be relied upon by Messrs. Cahill Gordon & Reindel
with respect to that firm's opinion to be filed as an exhibit to the
Registration Statement. In addition, we hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to our
firm under the caption "Legal Matters" in the Prospectus. Our consent to such
reference does not constitute a consent under Section 7 of the Securities Act
and in consenting to such reference we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or under the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ McGuire Woods Battle & Boothe LLP
<PAGE>
[Letterhead of Cahill Gordon & Reindel]
June 23, 1997
(212) 701-3000
First Industrial Realty Trust, Inc.
150 North Wacker Drive, Suite 150
Chicago, Illinois 60606
Ladies and Gentlemen:
We have acted as tax counsel to First Industrial Realty Trust, Inc.
(the Company) in connection with the Form S-3 Registration Statement filed by
the Company with the Securities and Exchange Commission on June 17, 1997, as
amended through the date hereof and including the documents incorporated by
reference therein (the Registration Statement).* We have been asked to
provide our opinion on certain federal income tax matters arising under the
Internal Revenue Code of 1986, as amended (the Code), relating to the
Company's qualification for taxation as a real estate investment trust (a
REIT) under the Code.
The opinions set forth in this letter are based on relevant provisions
of the Code, Treasury Regulations thereunder
- -------------------------------------
* Capitalized terms used in this letter that are not otherwise
defined herein have the meanings ascribed to them in the
Registration Statement.
<PAGE>
-2-
(including proposed and temporary regulations) and interpretations of the
foregoing as expressed in court decisions and administrative determinations
as of the date hereof. These provisions and interpretations are subject to
changes that might result in modifications of our opinions.
For purposes of rendering the opinions contained in this letter, we
have reviewed (i) the Registration Statement; (ii) the Articles of
Incorporation of each of the Company, First Industrial Finance Corporation
(the Financing Partnership Subsidiary), First Industrial Management
Corporation (the Mortgage Loan Properties Management Company), First
Industrial Third-Party Management Corporation (First Industrial Management),
First Industrial Enterprises of Michigan, Inc. (Damone/Andrew), First
Industrial Pennsylvania Corporation (First Industrial Pennsylvania), First
Industrial Harrisburg Corporation (First Industrial Harrisburg), First
Industrial Securities Corporation (First Industrial Securities), First
Industrial Mortgage Corporation (First Industrial Mortgage), FR Acquisitions,
Inc. (FR Acquisitions), First Industrial Indianapolis Corporation (First
Industrial Indianapolis), FI Development Services Corporation (First
Industrial Development), and First Industrial Development Services Group,
Inc. (Development Services Group); (iii) the partnership agreement of each of
First Industrial, L.P. (the Operating Partnership), First Industrial
Financing Partnership, L.P. (the Financing Partnership), First Industrial
Pennsylvania, L.P. (the Pennsylvania Partnership), First Industrial
Harrisburg, L.P. (the Harrisburg Partnership), First Industrial Securities,
L.P. (the Securities Partnership), First Industrial Mortgage Partnership,
L.P. (the Mortgage Partnership), First Industrial Indianapolis, L.P. (the
Indianapolis Partnership), First Industrial Development Services Group, L.P.
(the Development Partnership) and FI Development Services Group, L.P. (the FI
Development Partnership); and (iv) such other documents, law and facts as we
have deemed necessary to render the opinions set forth in this letter. In
our review, we have assumed the genuineness of all signatures; the proper
execution of all documents; the authenticity of all documents submitted to us
as originals; the conformity to originals of all documents submitted to us as
copies; and the authenticity of the originals of any copies.
In addition, for purposes of rendering the opinions set forth herein,
we have assumed that (i) each of the Company, the Financing Partnership
Subsidiary, the Mortgage Loan Properties Management Company, First Industrial
Management, First Industrial Pennsylvania, First Industrial Harrisburg, First
Industrial Securities, First Industrial Mortgage, FR Acquisitions, First
Industrial Indianapolis, First Industrial Development and Development
Services Group is a validly organized and duly incorporated corporation under
the laws of the State of Maryland; (ii) Damone/Andrew is a validly organized
and duly incorporated
<PAGE>
-3-
corporation under the laws of the State of Michigan; and (iii) each of the
Operating Partnership, the Financing Partnership, the Pennsylvania
Partnership, the Harrisburg Partnership, the Securities Partnership, the
Mortgage Partnership, the Indianapolis Partnership, the Development
Partnership and the FI Development Partnership is a duly organized and
validly existing limited partnership subject to the Delaware Revised Uniform
Limited Partnership Act.
These opinions also are premised on certain written representations
made by (i) the Company, both in its capacity as a corporate entity and as
general partner of the Operating Partnership; (ii) the Financing Partnership
Subsidiary in its capacity as general partner of the Financing Partnership;
(iii) First Industrial Pennsylvania in its capacity as general partner of the
Pennsylvania Partnership; (iv) First Industrial Harrisburg in its capacity as
general partner of the Harrisburg Partnership; (v) First Industrial
Securities in its capacity as general partner of the Securities Partnership;
(vi) First Industrial Mortgage in its capacity as general partner of the
Mortgage Partnership; (vii) First Industrial Indianapolis in its capacity as
general partner of the Indianapolis Partnership; and (viii) First Industrial
Development in its capacity as general partner of the Development Partnership
and the FI Development Partnership, in certificates dated the date hereof
(the Certificates). For purposes of our opinions, we have not made an
independent investigation of the representations contained in the
Certificates, and consequently we have relied on the representations therein
that the information contained in the Certificates or otherwise furnished to
us accurately describes all material facts relevant to our opinions.
Based upon and subject to the foregoing:
(i) We are of the opinion that, commencing with the Company's
taxable year ended on December 31, 1994, the Company has been organized in
conformity with the requirements for qualification as a REIT under the Code
and the Company's method of operation, as described in the Registration
Statements and as set forth in the Certificates, has enabled it to meet the
requirements for qualification as a REIT under the Code and, provided that
the Company continues to satisfy the applicable asset composition, source of
income, shareholder diversification, distribution, recordkeeping and other
requirements of the Code necessary to qualify as a REIT, it will continue to
so qualify; and
<PAGE>
-4-
(ii) We hereby confirm the legal conclusions stated as opinions
in the Registration Statement under the heading Federal Income Tax
Considerations.
We express no opinion with respect to the matters described herein or
in the Registration Statement other than those expressly set forth herein.
Our opinions are not binding on the Internal Revenue Service (the IRS) and
the IRS may disagree with the opinions contained herein. Although we believe
that our opinions would be sustained if challenged, there can be no assurance
that this will be the case. The opinions expressed herein are based upon the
law as it currently exists. Consequently, future changes in the law may
cause the federal income tax treatment of the matters referred to herein to
be materially and adversely different from that described above. In
addition, any variation in the facts from those set forth in the Registration
Statement, the representations contained in the Certificates or otherwise
provided to us may affect the conclusions stated herein. Moreover, the
Company's qualification and taxation as a REIT depend upon the Company's
ability to meet, through actual annual operating results, distribution
levels, diversity of stock ownership and various other qualification tests
imposed under the Code, none of which will be reviewed by us. Accordingly,
no assurance can be given that the actual results of the Company's operations
for any taxable year will satisfy the requirements for the Company to
maintain its qualification as a REIT.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm therein as counsel to
the Company. Our consent to such reference does not constitute a consent
under Section 7 of the Securities Act of 1933, as amended, as in consenting
to such reference we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under such Section 7 or under the rules and regulations
of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Cahill Gordon & Reindel
<PAGE>
EX.12.1
FIRST INDUSTRIAL REALTY TRUST, INC.
COMPUTATION OF RATIOS OF EARNINGS TO
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(A)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before disposition of
interest rate protection agreement,
gain on sales of properties,
extraordinary items and minority
interest........................... $ 13,190 $ 6,986 $ 36,524 $ 19,756 $ 8,855 $ (3,399) $ (4,048)
Plus interest expense and
amortization of deferred financing
costs and interest rate protection
agreements......................... 8,927 7,413 32,240 33,029 26,461 19,184 19,994
--------- --------- --------- --------- --------- --------- ---------
Earnings before disposition of
interest rate protection
agreements, gain on sales of
properties, extraordinary items,
minority interest and fixed
charges............................ $ 22,117 $ 14,399 $ 68,764 $ 52,785 $ 35,316 $ 15,785 $ 15,946
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fixed charges and preferred stock
dividends (b)...................... $ 10,100 $ 8,435 $ 36,660 $ 33,821 $ 26,511 $ 19,197 $ 20,277
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to combined fixed
charges and preferred stock
dividends (c)...................... 2.19x 1.71x 1.88x 1.56x 1.33x --(c) --(c)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(a) The Company completed its initial public offering on June 30, 1994.
Information prior to the initial public offering includes the operations and
accounts of the Company's predecessor and information subsequent to the
initial public offering includes the historical operations and accounts of
the Company.
(b) There was no preferred stock outstanding prior to November, 1995.
(c) Earnings represent earnings before disposition of interest rate protection
agreements, gain on sales of properties, extraordinary items, minority
interest and fixed charges. Fixed charges consist of interest expenses,
capitalized interest, and amortization of interest rate protection
agreements and deferred financing costs. For the fiscal years ended December
31, 1993 and 1992, earnings were not sufficient to cover fixed charges.
Additional earnings of $3.4 million and $4.3 million, respectively would
have been required to achieve a ratio of 1.0 for such periods.
<PAGE>
EX.12.2
FIRST INDUSTRIAL, L.P.
AND CONTRIBUTING BUSINESSES
COMPUTATION OF RATIOS OF EARNINGS TO
FIXED CHARGES (A)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before gain on sales of
properties and extraordinary
items.............................. $ 12,220 $ 6,126 $ 32,577 $ 12,123 $ 8,823 $ (3,399) $ (4,048)
Plus interest expense and
amortization of deferred financing
costs and interest rate protection
agreements......................... 2,170 605 4,881 6,803 13,625 19,184 19,994
--------- --------- --------- --------- --------- --------- ---------
Earnings before gain on sales of
properties, extraordinary items and
fixed charges...................... $ 14,390 $ 6,731 $ 37,458 $ 18,926 $ 22,448 $ 15,785 $ 15,946
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fixed charges........................ $ 2,363 $ 647 $ 5,382 $ 7,069 $ 13,645 $ 19,197 $ 20,277
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Ratio of earnings to fixed charges
(b)................................ 6.09x 10.40x 6.96x 2.68x 1.65x --(b) --(b)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(a) First Industrial Realty Trust, Inc., the general partner of First
Industrial, L.P. (the "Operating Partnership"), completed its initial public
offering on June 30, 1994. Information prior to the initial public offering
includes the operations and accounts of the Operating Partnership's
predecessors and information subsequent to the initial public offering
includes the historical operations and accounts of the Operating
Partnership.
(b) Earnings represent earnings before gain on sales of properties,
extraordinary items and fixed charges. Fixed charges consist of interest
expenses, capitalized interest and amortization of interest rate protection
agreements and deferred financing costs. For the fiscal years ended December
31, 1993 and 1992, earnings were not sufficient to cover fixed charges.
Additional earnings of $3.4 million and $4.3 million, respectively would
have been required to achieve a ratio of 1.0 for such periods.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 dated
June 23, 1997 of our reports dated February 12, 1997 on our audits of the
financial statements and the financial statement schedule of First Industrial,
L.P. and the combined financial statements of the Contributing Businesses and of
the combined financial statements of the Other Real Estate Partnerships and the
incorporation by reference in this registration statement on Form S-3 of our
report dated February 12, 1997 on our audits of the consolidated financial
statements and the financial statement schedule of First Industrial Realty
Trust, Inc. and the combined financial statements of the Contributing Businesses
which is included in the 1996 Annual Report on Form 10-K, and our report, dated
February 11, 1997 on our audit of the combined historical statement of revenues
and certain expenses of the Acquisition Properties which is included in the Form
8-K dated February 12, 1997 as amended by Form 8-K/A No. 1 filed April 10, 1997,
and our report dated March 26, 1997 on our audit of the combined historical
statement of revenues and certain expenses of the Lazarus Burman Properties
which is included in the Form 8-K/A No. 1 filed April 10, 1997. We also consent
to the reference to our firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
June 23, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1996 JAN-01-1995 JUL-01-1994
<PERIOD-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<EXCHANGE-RATE> 1 1 1
<CASH> 4,295 6,493 0
<SECURITIES> 0 0 0
<RECEIVABLES> 1,242 719 0
<ALLOWANCES> (221) (186) 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 5,316 7,026 0
<PP&E> 353,781 96,392 0
<DEPRECIATION> (8,133) (4,852) 0
<TOTAL-ASSETS> (622,122) 356,060 0
<CURRENT-LIABILITIES> (26,993) (16,183) 0
<BONDS> (59,897) (53,108) 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (535,232) (286,769) 0
<TOTAL-LIABILITY-AND-EQUITY> (622,122) (356,060) 0
<SALES> 37,587 27,442 9,604
<TOTAL-REVENUES> 37,587 27,442 9,604
<CGS> 0 0 0
<TOTAL-COSTS> (9,935) (7,478) (2,120)
<OTHER-EXPENSES> (10,520) (9,601) (3,150)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (4,685) (6,581) (807)
<INCOME-PRETAX> 36,921 12,123 10,294
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 36,921 12,123 10,294
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> (2,273) 0 0
<CHANGES> 0 0 0
<NET-INCOME> 34,648 12,123 10,294
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
