10-K 1 fr-20151231x10k.htm 10-K 10-K


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________
Form 10-K
_______________________________
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number 1-13102 (First Industrial Realty Trust, Inc.) 333-21873 (First Industrial, L.P.)
  _______________________________
FIRST INDUSTRIAL REALTY TRUST, INC.
FIRST INDUSTRIAL, L.P.
(Exact name of Registrant as specified in its Charter)
 
Maryland (First Industrial Realty Trust, Inc.)
 
36-3935116 (First Industrial Realty Trust, Inc.)
Delaware ( First Industrial, L.P.)
 
36-3924586 (First Industrial, L.P.)
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
311 S. Wacker Drive,
Suite 3900, Chicago, Illinois
 
60606
(Address of principal executive offices)
 
(Zip Code)
(312) 344-4300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (First Industrial Realty Trust, Inc.)
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
 _______________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
First Industrial Realty Trust, Inc.
Yes þ No o
First Industrial, L.P.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
First Industrial Realty Trust, Inc.
Yes o No þ
First Industrial, L.P.
Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
First Industrial Realty Trust, Inc.
Yes þ No o
First Industrial, L.P.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
First Industrial Realty Trust, Inc.
Yes þ No o
First Industrial, L.P.
Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
First Industrial Realty Trust, Inc.:
 
 
 
 
 
 
 
Large accelerated filer
 
þ
 
 
Accelerated filer
 
o
Non-accelerated filer
 
o
 
(Do not check if a smaller reporting company)
Smaller reporting company
 
o
First Industrial, L.P.:
 
 
 
 
 
 
 
Large accelerated filer
 
o
 
 
Accelerated filer
 
þ
Non-accelerated filer
 
o
 
(Do not check if a smaller reporting company)
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
First Industrial Realty Trust, Inc.
Yes o No þ
First Industrial, L.P.
Yes o No þ
The aggregate market value of the voting and non-voting stock held by non-affiliates of First Industrial Realty Trust, Inc. was approximately $2,035.9 million based on the closing price on the New York Stock Exchange for such stock on June 30, 2015.
At February 24, 2016, 111,237,685 shares of First Industrial Realty Trust, Inc.’s Common Stock, $0.01 par value, were outstanding.
  _______________________________
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to First Industrial Realty Trust, Inc.’s definitive proxy statement expected to be filed with the Securities and Exchange Commission no later than 120 days after the end of First Industrial Realty Trust, Inc.’s fiscal year.
 






EXPLANATORY NOTE
This report combines the Annual Reports on Form 10-K for the period ended December 31, 2015 of First Industrial Realty Trust, Inc., a Maryland corporation (the "Company"), and First Industrial, L.P., a Delaware limited partnership (the "Operating Partnership"). Unless stated otherwise or the context otherwise requires, the terms "we," "our" and "us" refer to the Company and its subsidiaries, including the Operating Partnership and its consolidated subsidiaries.
The Company is a real estate investment trust and the general partner of the Operating Partnership. At December 31, 2015, the Company owned an approximate 96.3% common general partnership interest in the Operating Partnership. The remaining approximate 3.7% common limited partnership interests in the Operating Partnership are owned by certain limited partners. As the sole general partner of the Operating Partnership, the Company exercises exclusive and complete discretion over the Operating Partnership’s day-to-day management and control and can cause it to enter into certain major transactions, including acquisitions, dispositions, and refinancings. The management of the Company consists of the same members as the management of the Operating Partnership.
The Company and the Operating Partnership are managed and operated as one enterprise. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of the Company’s assets are held by, and its operations are conducted through, the Operating Partnership and its subsidiaries. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.
We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. The main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership are:
Stockholders’ Equity, Noncontrolling Interest and Partners’ Capital. The 3.7% equity interest in the Operating Partnership held by entities other than the Company are classified within partners’ capital in the Operating Partnership’s financial statements and as a noncontrolling interest in the Company's financial statements.
Relationship to Other Real Estate Partnerships. The Company's operations are conducted primarily through the Operating Partnership and its subsidiaries, though operations are also conducted through eight other limited partnerships, which are referred to as the “Other Real Estate Partnerships." The Operating Partnership is a limited partner, holding at least a 99% interest, and the Company is a general partner, holding at least a .01% general partnership interest through eight separately wholly-owned corporations, in each of the Other Real Estate Partnerships. The Other Real Estate Partnerships are variable interest entities that both the Company and the Operating Partnership consolidate. The Company's direct general partnership interest in the Other Real Estate Partnerships is reflected as noncontrolling interest within the Operating Partnership's financial statements.
Relationship to Service Subsidiary. The Company has a direct wholly-owned subsidiary that does not own any real estate but provides services to various other entities owned by the Company. Since the Operating Partnership does not have an ownership interest in this entity, its operations are reflected in the consolidated results of the Company but not the Operating Partnership. Also, this entity owes certain amounts to the Operating Partnership, for which a receivable is included on the Operating Partnership’s balance sheet but is eliminated on the Company’s consolidated balance sheet, since both this entity and the Operating Partnership are fully consolidated by the Company.
We believe combining the Company’s and Operating Partnership’s annual reports into this single report results in the following benefits:
enhances investors' understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management views and operates the business;
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports; and
eliminates duplicative disclosures and provides a more streamlined and readable presentation for our investors to review since a substantial portion of the Company’s disclosure applies to both the Company and the Operating Partnership.
To help investors understand the differences between the Company and the Operating Partnership, this report provides the following separate disclosures for each of the Company and the Operating Partnership:
consolidated financial statements;
a single set of consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, as applicable; and
a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes distinct information related to each entity.
This report also includes separate Part II, Item 9A, Controls and Procedures sections and separate Exhibits 31 and 32 certifications for the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are both compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.





FIRST INDUSTRIAL REALTY TRUST, INC.
FIRST INDUSTRIAL, L.P.
TABLE OF CONTENTS
 
 
 
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
Item 15.



2



FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). We intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identifiable by use of the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "project," "seek," "target," "potential," "focus," "may," "will," "should" or similar words. Although we believe the expectations reflected in forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. Factors which could have a materially adverse effect on our operations and future prospects include, but are not limited to:

changes in national, international, regional and local economic conditions generally and real estate markets specifically;
changes in legislation/regulation (including changes to laws governing the taxation of real estate investment trusts) and actions of regulatory authorities;
our ability to qualify and maintain our status as a real estate investment trust;
the availability and attractiveness of financing (including both public and private capital) and changes in interest rates;
the availability and attractiveness of terms of additional debt repurchases;
changes in our credit agency ratings;
our ability to comply with applicable financial covenants;
our competitive environment;
changes in supply, demand and valuation of industrial properties and land in our current and potential market areas;
difficulties in identifying and consummating acquisitions and dispositions;
our ability to manage the integration of properties we acquire;
potential liability relating to environmental matters;
defaults on or non-renewal of leases by our tenants;
decreased rental rates or increased vacancy rates;
higher-than-expected real estate construction costs and delays in development or lease-up schedules;
changes in general accounting principles, policies and guidelines applicable to real estate investment trusts; and
other risks and uncertainties described in Item 1A, "Risk Factors" and elsewhere in this report as well as those risks and uncertainties discussed from time to time in our other Exchange Act reports and in our other public filings with the Securities and Exchange Commission (the “SEC”).

We caution you not to place undue reliance on forward-looking statements, which reflect our outlook only and speak only as of the date of this report. We assume no obligation to update or supplement forward-looking statements.

3



PART I
THE COMPANY
 
Item  1.
Business
Background
First Industrial Realty Trust, Inc. is a Maryland corporation organized on August 10, 1993, and is a real estate investment trust ("REIT") as defined in the Internal Revenue Code of 1986 (the "Code"). We are a self-administered and fully integrated real estate company which owns, manages, acquires, sells, develops, and redevelops industrial real estate. As of December 31, 2015, our in-service portfolio consisted of 234 light industrial properties, 78 R&D/flex properties, 167 bulk warehouse properties and 101 regional warehouse properties containing an aggregate of approximately 61.6 million square feet of gross leasable area ("GLA") located in 25 states. Our in-service portfolio includes all properties other than developed, redeveloped and acquired properties that have not yet reached stabilized occupancy (generally defined as properties that are 90% leased).
We began operations on July 1, 1994. The Company's operations are conducted primarily through the Operating Partnership, of which the Company is the sole general partner, with an approximate 96.3% and 96.2% ownership interest at December 31, 2015 and 2014, respectively. The Operating Partnership conducts operations itself and through eight other limited partnerships (the "Other Real Estate Partnerships"), numerous limited liability companies ("LLCs") and certain taxable REIT subsidiaries, the operating data of which, together with that of the Operating Partnership is consolidated with that of the Company as presented herein. The Company does not have any significant assets or liabilities other than its investment in the Operating Partnership and its 100% ownership interest in the general partners of the Other Real Estate Partnerships.
Profits, losses and distributions of the Operating Partnership, the LLCs and the Other Real Estate Partnerships are allocated to the general partner and the limited partners or the members, as applicable, of such entities in accordance with the provisions contained within their respective organizational documents.
We also provide various services to two joint ventures (the "2003 Net Lease Joint Venture" and the "2007 Europe Joint Venture"; collectively, the "Joint Ventures"). Our noncontrolling equity ownership interests in the 2003 Net Lease Joint Venture and the 2007 Europe Joint Venture are 15% and 10%, respectively. During the year ended December 31, 2015, the 2003 Net Lease Joint Venture sold its last remaining industrial property comprising approximately 0.8 million square feet of GLA. At December 31, 2015, the 2007 Europe Joint Venture did not own any properties. The Joint Ventures are accounted for under the equity method of accounting.
We utilize an operating approach which combines the effectiveness of decentralized, locally based property management, acquisition, sales and development functions with the cost efficiencies of centralized acquisition, sales and development support, capital markets expertise, asset management and fiscal control systems. At December 31, 2015, we had 170 employees.

4



Available Information
We maintain a website at www.firstindustrial.com. Information on this website shall not constitute part of this Form 10-K. Copies of our respective annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available without charge on our website as soon as reasonably practicable after such reports are filed with or furnished to the SEC. You may also read and copy any document filed at the public reference facilities of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information about the public reference facilities. These documents also may be accessed through the SEC’s Interactive Data Electronic Application via the SEC's home page on the Internet (www.sec.gov). In addition, the Company's Corporate Governance Guidelines, Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter and Nominating/Corporate Governance Committee Charter, along with supplemental financial and operating information prepared by us, are all available without charge on the Company's website or upon request to the Company. Amendments to, or waivers from, our Code of Business Conduct and Ethics that apply to our executive officers or directors will also be posted to our website. We also post or otherwise make available on our website from time to time other information that may be of interest to our investors. Please direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker Drive, Suite 3900
Chicago, IL 60606
Attention: Investor Relations
Business Objectives and Growth Plans
Our fundamental business objective is to maximize the total return to the Company's stockholders and the Operating Partnership's partners through distributions and increases in the value of our properties and operations. Our long-term business growth plans include the following elements:
Internal Growth. We seek to grow internally by (i) increasing revenues by renewing or re-leasing spaces subject to expiring leases at higher rental levels; (ii) increasing occupancy levels at properties where vacancies exist and maintaining occupancy elsewhere; (iii) controlling and minimizing property operating and general and administrative expenses; and (iv) renovating existing properties.
External Growth. We seek to grow externally through (i) the development of industrial properties; (ii) the acquisition of portfolios of industrial properties or individual properties which meet our investment parameters within our target markets; (iii) the expansion of our properties; and (iv) possible additional joint venture investments.
Portfolio Enhancement. We continually seek to upgrade our overall portfolio via new investments as well as through the sale of select assets that we believe do not exhibit favorable characteristics for long-term cash flow growth.
Our ability to pursue our long-term growth plans is affected by market conditions and our financial condition and operating capabilities. See "Summary of Significant Transactions in 2015" under Item 7,"Management's Discussion and Analysis of Financial Condition and Results of Operations."

5



Business Strategies
We utilize the following six strategies in connection with the operation of our business:
Organizational Strategy. We implement our decentralized property operations strategy through the deployment of experienced regional management teams and local property managers. We provide acquisition, development and financing assistance, asset management oversight and financial reporting functions from our headquarters in Chicago, Illinois to support our regional operations. We believe the size of our portfolio enables us to realize operating efficiencies by spreading overhead among many properties and by negotiating purchasing discounts.
Market Strategy. Our market strategy is to concentrate on the top industrial real estate markets in the United States. These markets have one or more of the following characteristics: (i) favorable industrial real estate fundamentals, including improving industrial demand and constrained supply that can lead to long-term rent growth; (ii) warehouse distribution markets with favorable economic and business environments that should benefit from increases in distribution activity driven by growth in global trade and local consumption; and (iii) sufficient size to provide ample opportunity for growth through incremental investments as well as offer asset liquidity.
Leasing and Marketing Strategy. We have an operational management strategy designed to enhance tenant satisfaction and portfolio performance. We pursue an active leasing strategy, which includes broadly marketing available space, seeking to renew existing leases at higher rents per square foot and seeking leases which provide for the pass-through of property-related expenses to the tenant. We also have local and national marketing programs which focus on the business and real estate brokerage communities and multi-national tenants.
Acquisition/Development Strategy. Our acquisition/development strategy is to invest in industrial properties in the top industrial real estate markets in the United States.
Disposition Strategy. We continuously evaluate local market conditions and property-related factors in all of our markets for purposes of identifying assets suitable for disposition.
Financing Strategy. To finance acquisitions, developments and debt maturities, as market conditions permit, we may utilize a portion of proceeds from property sales, unsecured debt offerings, term loans, mortgage financings and line of credit borrowings under our $625.0 million unsecured credit facility (the "Unsecured Credit Facility"), and proceeds from the issuance, when and as warranted, of additional equity securities. As of February 24, 2016, we had approximately $356.6 million available for additional borrowings under the Unsecured Credit Facility.
Future Property Acquisitions, Developments and Property Sales
We have acquisition and development programs through which we seek to identify portfolio and individual industrial property acquisitions and developments. We also sell properties based on market conditions and property related factors. As a result, we are currently engaged in negotiations relating to the possible acquisition, development or sale of certain industrial properties in our portfolio.
When evaluating potential industrial property acquisitions and developments, as well as potential industrial property sales, we will consider such factors as: (i) the geographic area and type of property; (ii) the location, construction quality, condition and design of the property; (iii) the terms of tenant leases, including the potential for rent increases; (iv) the potential for economic growth and the general business, tax and regulatory environment of the area in which the property is located; (v) the occupancy and demand by tenants for properties of a similar type in the vicinity; (vi) competition from existing properties and the potential for the construction of new properties in the area; (vii) the potential for capital appreciation of the property; (viii) the ability to improve the property’s performance through renovation; and (ix) the potential for expansion of the physical layout of the property and/or the number of sites.
Industry
Industrial properties are typically used for the design, assembly, packaging, storage and distribution of goods and/or the provision of services. As a result, the demand for industrial space in the United States is related to the level of economic output. Accordingly, the competition we face to lease our existing properties and acquire new properties varies with the level of economic output.

6



Item  1A.
Risk Factors
Our operations involve various risks that could adversely affect our financial condition, results of operations, cash flow, make distributions to holders of the Company's common stock and the Operating Partnership's general and limited partnership interests ("Units"), the market price of the Company's common stock and the market value of the Units. These risks, among others contained in our other filings with the SEC, include:
Disruptions in the financial markets could affect our ability to obtain financing and may negatively impact our liquidity, financial condition and operating results.
From time to time, the capital and credit markets in the United States and other countries experience significant price volatility, dislocations and liquidity disruptions, which can cause the market prices of many securities and the spreads on prospective debt financings to fluctuate substantially. These circumstances can materially impact liquidity in the financial markets, making terms for certain financings less attractive, and in some cases result in the unavailability of financing. A significant amount of our existing indebtedness was issued through capital markets transactions. We anticipate that the capital markets could be a source of refinancing of our existing indebtedness in the future. This source of refinancing may not be available if volatility in or disruption of the capital markets occurs. Furthermore, we could potentially lose access to available liquidity under our Unsecured Credit Facility if one or more participating lenders were to default on their commitments. If our ability to issue additional debt or equity securities or to borrow money under our Unsecured Credit Facility were to be impaired by volatility in or disruption of the capital markets, it could have a material adverse effect on our liquidity and financial condition.
In addition, price volatility in the capital and credit markets could make the valuation of our properties more difficult. There may be significant uncertainty in the valuation, or in the stability of the value, of our properties that could result in a substantial decrease in the value of our properties. As a result, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment loss in earnings.
Real estate investments fluctuate in value depending on conditions in the general economy and the real estate industry. These conditions may limit our revenues and available cash.
The factors that affect the value of our real estate and the revenues we derive from our properties include, among other things:
general economic conditions;
local, regional, national and international economic conditions and other events and occurrences that affect the markets in which we own properties;
local conditions such as oversupply or a reduction in demand in an area;
increasing labor and material costs;
the ability to collect on a timely basis all rents from tenants;
changes in tenant operations, real estate needs and credit;
changes in interest rates and in the availability, cost and terms of mortgage funding;
zoning or other regulatory restrictions;
competition from other available real estate;
operating costs, including maintenance, insurance premiums and real estate taxes; and
other factors that are beyond our control.
Our investments in real estate assets are concentrated in the industrial sector, and the demand for industrial space in the United States is related to the level of economic output. Accordingly, reduced economic output may lead to lower occupancy rates for our properties. In addition, if any of our tenants experiences a downturn in its business that weakens its financial condition, delays lease commencement, fails to make rental payments when due, becomes insolvent or declares bankruptcy, the result could be a termination of the tenant’s lease, which could adversely affect our cash flow from operations. These factors may be amplified by a disruption of financial markets.

7



Many real estate costs are fixed, even if income from properties decreases.
Our financial results depend on leasing space to tenants on terms favorable to us. Our income and funds available for distribution to our stockholders and Unitholders will decrease if a significant number of our tenants cannot pay their rent or we are unable to lease properties on favorable terms. In addition, if a tenant does not pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs. Costs associated with real property, such as real estate taxes and maintenance costs, generally are not reduced when circumstances cause a reduction in income from the property.
We may be unable to acquire properties on advantageous terms or acquisitions may not perform as we expect.
We have routinely acquired properties from third parties as conditions warrant and, as part of our business, we intend to continue to do so. The acquisition of properties entails various risks, including risks that our investments may not perform as expected and that our cost estimates for bringing an acquired property up to market standards may prove inaccurate. Further, we face significant competition for attractive investment opportunities from other well-capitalized real estate investors, including publicly-traded REITs and private investors. This competition increases as investments in real estate become attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional properties and purchase prices may increase. In addition, we expect to finance future acquisitions through a combination of borrowings under the Unsecured Credit Facility, proceeds from equity or debt offerings and debt originations and proceeds from property sales, which may not be available and which could adversely affect our cash flow. Any of the above risks could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units.
We may obtain only limited warranties when we purchase a property and would have only limited recourse in the event our due diligence did not identify any issues that lower the value of our property.
The seller of a property often sells such property in its "as is" condition on a "where is" basis and "with all faults," without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property as well as the loss of rental income from that property.
We may be unable to sell properties when appropriate or at all because real estate investments are not as liquid as certain other types of assets.
Real estate investments generally cannot be sold quickly, which could limit our ability to adjust our property portfolio in response to changes in economic conditions or in the performance of the portfolio. This could adversely affect our financial condition and our ability to service debt and make dividends/distributions to our stockholders and Unitholders. In addition, like other companies qualifying as REITs under the Code, our ability to sell assets may be restricted by tax laws that potentially result in punitive taxation on asset sales that fail to meet certain safe harbor rules or other criteria established under case law.
We may be unable to sell properties on advantageous terms.
We have routinely sold properties to third parties as conditions warrant and, as part of our business, we intend to continue to do so. However, our ability to sell properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers. If we are unable to sell properties on favorable terms or to redeploy the proceeds in accordance with our business strategy, then our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected. Further, if we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our operations and financial condition.

8



We may be unable to complete development and re-development projects on advantageous terms.
As part of our business, we develop new properties and re-develop existing properties as conditions warrant. This part of our business involves significant risks, including the following:
we may not be able to obtain financing for these projects on favorable terms;
we may not complete construction on schedule or within budget;
we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;
contractor and subcontractor disputes, strikes, labor disputes or supply chain disruptions may occur; and
properties may perform below anticipated levels, producing cash flow below budgeted amounts, which may result in us paying too much for a property, cause the property to not be profitable and limit our ability to sell such properties to third parties.
To the extent these risks result in increased debt service expense, construction costs and delays in budgeted leasing, they could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units.
We may be unable to renew leases or find other lessees.
We are subject to the risks that, upon expiration, 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 the expiring lease terms. If we were unable to promptly renew a significant number of expiring leases or to promptly relet the spaces covered by such leases, or if the rental rates upon renewal or reletting were significantly lower than the current rates, our financial condition, results of operation, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected.
The Company might fail to qualify as a REIT under existing laws and/or federal income tax laws could change.
The Company intends to operate so as to qualify as a REIT under the Code, and we believe that the Company is organized and will operate in a manner that allows us to continue to do so. However, qualification as a REIT involves the satisfaction of numerous requirements, some of which must be met on a recurring basis. These requirements are established under highly technical and complex Code provisions. There are only limited judicial and administrative interpretations of these provisions, and they involve the determination of various factual matters and circumstances not entirely within our 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 at corporate rates, including any applicable alternative minimum tax. This could result in a discontinuation or substantial reduction in distributions to our stockholders and Unitholders and could reduce the cash available to pay interest and principal on debt securities that we issue. Unless entitled to relief under certain statutory provisions, the Company would be disqualified from electing treatment as a REIT for the four taxable years following the year during which the Company failed to qualify. Additionally, since the Internal Revenue Service ("IRS"), the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify the Company's tax treatment and therefore, may adversely affect taxation of us and/or our stockholders and Unitholders. For example, the recently enacted Protecting Americans from Tax Hikes Act of 2015 (the “PATH Act”) contains numerous changes to the U.S. federal income tax rules applicable to REITs.  Such changes include modifications to various rules that apply to our ownership of, and business relationship with, any taxable REIT subsidiaries (including a reduction in the maximum allowable value of our assets attributable to taxable REIT subsidiaries from 25% to 20%) which could impact our ability to enter into future investments.  The provisions enacted by the PATH Act could result in changes in our tax positions or investments, and future legislative changes related to those rules described above could have a materially adverse impact on our results of operations.

9



Certain property transfers may generate prohibited transaction income, resulting in a penalty tax on the gain attributable to the transaction.
As part of our business, we sell properties to third parties as opportunities arise. Under the Code, a 100% penalty tax could be assessed on the tax gain recognized from sales of properties that are deemed to be prohibited transactions. The question of what constitutes a prohibited transaction is based on the facts and circumstances surrounding each transaction. The IRS could contend that certain sales of properties by us are prohibited transactions. While we have implemented controls to avoid prohibited transactions, if a dispute were to arise that was successfully argued by the IRS, the 100% penalty tax could be assessed against the Company's profits from these transactions.
The REIT distribution requirements may limit our ability to retain capital and require us to turn to external financing sources.
As a REIT, the Company must distribute to its stockholders at least 90% of its taxable income each year. The Company could, in certain instances, have taxable income without sufficient cash to enable it to meet this requirement. In that situation, we could be required to borrow funds or sell properties on adverse terms in order to do so. The distribution requirement could also limit our ability to accumulate capital to provide capital resources for our ongoing business, and to satisfy our debt repayment obligations and other liquidity needs, we may be more dependent on outside sources of financing, such as debt financing or issuances of additional capital stock, which may or may not be available on favorable terms. Additional debt financings may substantially increase our leverage and additional equity offerings may result in substantial dilution of stockholders’ and Unitholders' interests.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
Subject to maintaining the Company's qualification as a REIT, we may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements, such as interest cap agreements and interest rate swap agreements. These agreements may fail to protect or could adversely affect us because, among other things:
interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;
the duration of the hedge may not match the duration of the related liability;
the amount of income that a REIT may earn from hedging transactions (other than through taxable REIT subsidiaries) is limited by U.S. federal tax provisions governing REITs;
the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
the party owing money in the hedging transaction may default on its obligation to pay;
we could incur significant costs associated with the settlement of the agreements;
the underlying transactions could fail to qualify as highly-effective cash flow hedges under generally accepted accounting practices; and
a court could rule that such an agreement is not legally enforceable.
We have adopted a practice relating to the use of derivative financial instruments to hedge interest rate risks related to our borrowings. This practice requires the Company's Board of Directors to authorize our use of derivative financial instruments to manage the interest rates on our variable rate borrowings. Our practice is that we do not use derivatives for speculative or trading purposes and intend only to enter into contracts with major financial institutions based on their credit rating and other factors, but the Company's Board of Directors may choose to change these practices in the future. Hedging may reduce the overall returns on our investments, which could reduce our cash available for distribution to our stockholders and Unitholders. Failure to hedge effectively against interest rate changes may materially adversely affect our financial condition, results of operations and cash flow.

10



Debt financing, the degree of leverage and rising interest rates could reduce our cash flow.
We use debt to increase the rate of return to our stockholders and Unitholders and to allow us to make more investments than we otherwise could. Our use of leverage presents an additional element of risk in the event that the cash flow from our properties is insufficient to meet both debt payment obligations and the distribution requirements of the REIT provisions of the Code. In addition, rising interest rates would reduce our cash flow by increasing the amount of interest due on our floating rate debt and on our fixed rate debt as it matures and is refinanced. Our organizational documents do not contain any limitation on the amount or percentage of indebtedness we may incur.
Failure to comply with covenants in our debt agreements could adversely affect our financial condition.
The terms of our agreements governing our indebtedness require that we comply with a number of financial and other covenants, such as maintaining debt service coverage and leverage ratios and maintaining insurance coverage. Complying with such covenants may limit our operational flexibility. Our failure to comply with these covenants could cause a default under the applicable debt agreement even if we have satisfied our payment obligations. Consistent with our prior practice, we will continue to interpret and certify our performance under these covenants in a good faith manner that we deem reasonable and appropriate. However, these financial covenants are complex and there can be no assurance that these provisions would not be interpreted by the noteholders or lenders in a manner that could impose and cause us to incur material costs. Our ability to meet our financial covenants may be adversely affected if economic and credit market conditions limit our ability to reduce our debt levels consistent with, or result in net operating income below, our current expectations. Under our Unsecured Credit Facility, an event of default can also occur if the lenders, in their good faith judgment, determine that a material adverse change has occurred that could prevent timely repayment or materially impair our ability to perform our obligations under the loan agreement.
Upon the occurrence of an event of default, we would be subject to higher finance costs and fees, and the lenders under our Unsecured Credit Facility will not be required to lend any additional amounts to us. In addition, our indebtedness, together with accrued and unpaid interest and fees, could be accelerated and declared to be immediately due and payable. Furthermore, our Unsecured Credit Facility, our unsecured term loans and the indentures governing our senior unsecured notes contain certain cross-default provisions that may be triggered in the event that our other material indebtedness is in default. These cross-default provisions may require us to repay or restructure our Unsecured Credit Facility, our unsecured term loans or our senior unsecured notes, depending on which is in default, and such restructuring could adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units. If repayment of any of our indebtedness is accelerated, we cannot provide assurance that we would be able to borrow sufficient funds to refinance such indebtedness or that we would be able to sell sufficient assets to repay such indebtedness. Even if we were able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.
Cross-collateralization of mortgage loans could result in foreclosure on a significant portion of our properties if we are unable to service its indebtedness.
Certain of our mortgages were issued on a cross-collateralized basis. Cross-collateralization makes all of the subject properties available to the lender in order to satisfy the debt. To the extent indebtedness is cross-collateralized, lenders may seek to foreclose upon properties that do not comprise the primary collateral for a loan, which may, in turn, result in acceleration of other indebtedness collateralized by such properties. Foreclosure of properties would result in a loss of income and asset value to us, making it difficult for us to meet both debt payment obligations and the distribution requirements of the REIT provisions of the Code.
We may have to make lump-sum payments on our existing indebtedness.
We are required to make lump-sum or "balloon" payments under the terms of some of our indebtedness. Our ability to make required payments of principal on outstanding indebtedness, whether at maturity or otherwise, may depend on our ability to refinance the applicable indebtedness or to sell properties. Currently, we have no commitments to refinance any of our indebtedness.

11



Our mortgages may impact our ability to sell encumbered properties on advantageous terms or at all.
Certain of our mortgages contain, and some future mortgages may contain, substantial prepayment premiums that we would have to pay upon the sale of a property, thereby reducing the net proceeds to us from the sale of any such property. As a result, our willingness to sell certain properties and the price at which we may desire to sell a property may be impacted. If we are unable to sell properties on favorable terms or redeploy the proceeds of property sales in accordance with our business strategy, then our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected.
Adverse market and economic conditions could cause us to recognize impairment charges.
We regularly review our real estate assets for impairment indicators, such as a decline in a property’s occupancy rate, decline in general market conditions or a change in the expected hold period of an asset. If we determine that indicators of impairment are present, we review the properties affected by these indicators to determine whether an impairment charge is required. As a result, we may be required to recognize asset impairment, which could materially and adversely affect our business, financial condition and results of operations. We use considerable judgment in making determinations about impairments, from analyzing whether there are indicators of impairment, to the assumptions used in calculating the fair value of the investment. Accordingly, our subjective estimates and evaluations may not be accurate, and such estimates and evaluations are subject to change or revision.
Earnings and cash dividends, asset value and market interest rates affect the price of the Company's common stock.
The market value of the Company's common stock is based in large part upon the market’s perception of the growth potential of the Company's earnings and cash dividends. The market value of the Company's common stock is also based upon the value of the Company's underlying real estate assets. For this reason, shares of the Company's common stock may trade at prices that are higher or lower than the Company's net asset value per share. To the extent that the Company retains operating cash flow for investment purposes, working capital reserves, or other purposes, these retained funds, while increasing the value of the Company's underlying assets, may not correspondingly increase the market price of the Company's common stock. The Company's failure to meet the market’s expectations with regard to future earnings and cash dividends/distributions likely would adversely affect the market price of the Company's common stock. Further, the distribution yield on the common stock (as a percentage of the price of the common stock) relative to market interest rates may also influence the market price of the Company's common stock. An increase in market interest rates might lead prospective purchasers of the Company's common stock to expect a higher distribution yield, which would adversely affect the market price of the Company's common stock. Any reduction in the market price of the Company's common stock would, in turn, reduce the market value of the Units.
We may become subject to litigation, which could have a material and adverse effect on our financial condition, results of operations and cash flow.
We may become subject to litigation, including claims relating to our operations, offerings, and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. Resolution of these types of matters could adversely impact our financial condition, results of operations and cash flow. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.
We may incur unanticipated costs and liabilities due to environmental problems.
Under various federal, state and local laws, ordinances and regulations, we, as 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 a property and any related damages to natural resources. Environmental 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 those conditions properly, may adversely affect our ability to rent or sell a property or to borrow using a property as collateral. The disposal or treatment of or arrangement for the disposal or treatment of hazardous or toxic materials may cause us to also be liable for the costs of clean-up of such materials or for related natural resource damages occurring at or emanating from an off-site disposal or treatment facility, whether or not the facility is owned or operated by us. No assurance can be given that existing environmental assessments with respect to any of our properties reveal all environmental liabilities, that any prior owner or operator of any of our properties did not create any material environmental condition not known to us or that a material environmental condition does not otherwise exist as to any of our properties. In addition, changes to existing environmental regulations to address, among other things, climate change, could increase the scope of our potential liabilities.

12



Our insurance coverage does not include all potential losses.
Real property is subject to casualty risk including damage, destruction, or loss resulting from events that are unusual, sudden and unexpected. Some of our properties are located in areas where casualty risk is higher due to earthquake, wind and/or flood risk. We carry comprehensive insurance coverage to mitigate our casualty risk, in amounts and of a kind that we believe are appropriate for the markets where each of our properties and their business operations are located. Among other coverage, we carry property, boiler & machinery, liability, fire, flood, terrorism, earthquake, extended coverage and rental insurance. Our coverage includes policy specifications and limits customarily carried for similar properties and business activities.  We evaluate our level of insurance coverage and deductibles using analysis and modeling, as is customary in our industry. However, we do not insure against all types of casualty, and we may not fully insure against those casualty types where we do have insurance, either because coverage is not available or because we do not deem it to be economically feasible or prudent to do so. As a result, we could experience a significant loss of capital or revenues, and be exposed to obligations under recourse debt associated with a property. This could occur if an uninsured loss occurs, a loss in excess of insured limits occurs, or a loss is not paid due to insurer insolvency.
We could be subject to risks and liabilities in connection with joint venture arrangements.
Our organizational documents do not limit the amount of available funds that we may invest in joint ventures and we may selectively develop and acquire properties through joint ventures with other persons or entities when we deem such transactions are warranted by the circumstances. Joint venture investments, in general, involve certain risks, including:
joint venturers may share certain approval rights over major decisions;
joint venturers might fail to fund their share of any required capital commitments;
joint venturers might have economic or other business interests or goals that are inconsistent with our business interests or goals that would affect our ability to operate the property;
joint venturers may have the power to act contrary to our instructions, requests, policies or objectives, including our current policy with respect to maintaining the Company's qualification as a REIT;
the joint venture agreements often restrict the transfer of a member’s or joint venturer’s interest or “buy-sell” or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms;
disputes between us and our joint venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and subject the properties owned by the applicable joint venture to additional risk; and
we may in certain circumstances be liable for the actions of our joint venturers.
The occurrence of one or more of the events described above could adversely affect our financial condition, results of operations, cash flow and ability to to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units.
We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties and, in particular, costs associated with complying with regulations such as the Americans with Disabilities Act of 1990 (the "ADA") may result in unanticipated expenses.
The properties in our portfolio are subject to various covenants and U.S. federal, state and local laws and regulatory requirements, including permitting and licensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or restrict our use of our properties and may require us to obtain approval from local officials of community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic or hazardous material abatement requirements. There can be no assurance that existing laws and regulatory policies will not adversely affect us or the timing or cost of any future acquisitions or renovations, or that additional regulation will not be adopted that increase such delays or result in additional costs. Our growth strategy may be affected by our ability to obtain permits, licenses and zoning relief. Our failure to obtain such permits, licenses and zoning relief or to comply with applicable laws could have an adverse effect on our financial condition, results of operations and cash flow.

13



In addition, under the ADA, all places of public accommodation are required to meet certain U.S. federal requirements related to access and use by disabled persons. Noncompliance with the ADA could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. We do not conduct audits or investigations of all of these properties to determine their compliance and we cannot predict the ultimate cost of compliance with the ADA, or other legislation. If one or more of our properties in which we invest is not in compliance with the ADA, or other legislation, then we would be required to incur additional costs to bring the property into compliance. If we incur substantial costs to comply with the ADA or other legislation, our financial condition, results of operations, cash flow, our ability to satisfy debt service obligations and to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected.
Terrorist attacks and other acts of violence or war may affect the market for the Company's common stock, the industry in which we conduct our operations and our profitability.
Terrorist attacks may harm our results of operations and financial condition. We cannot assure you that there will not be terrorist attacks in the localities in which we conduct business. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the worldwide financial markets and economy. These attacks or armed conflicts may adversely impact our operations or financial condition. In addition, losses resulting from these types of events may be uninsurable.
We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.
We rely extensively on computer systems to manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password protection, frequent password change events, firewall detection systems, frequent backups, a redundant data system for core applications and annual penetration testing; however, there is no guarantee such efforts will be successful in preventing a cybersecurity attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could have a materially adverse effect on our business, financial condition and results of operations.
Adverse changes in our credit ratings could negatively affect our liquidity and business operations.
The credit ratings of our senior unsecured notes are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analyses. Our credit ratings can affect the availability, terms and pricing of any indebtedness and preferred stock that we may incur going forward. There can be no assurance that we will be able to maintain any credit rating and, in the event any credit rating is downgraded, we could incur higher borrowing costs or may be unable to access certain or any capital markets.
Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting which may occur could result in misstatements of our results of operations, restatements of our financial statements, a decline in the price/value of our securities, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity.

14



The Company is authorized to issue preferred stock. The issuance of preferred stock could adversely affect the holders of the Company's common stock issued pursuant to its public offerings.
Our declaration of trust authorizes the Company to issue 150,000,000 shares, of which 10,000,000 shares are designated as preferred stock. Subject to approval by the Company's Board of Directors, the Company may issue preferred stock with rights, preferences and privileges that are more beneficial than the rights, preferences and privileges of its common stock. Holders of the Company's common stock do not have preemptive rights to acquire any shares issued by the Company in the future. If the Company ever creates and issues preferred stock with a distribution preference over common stock, payment of any distribution preferences on outstanding preferred stock would reduce the amount of funds available for the payment of distributions to our common stockholders and Unitholders. In addition, holders of preferred stock are normally entitled to receive a preference payment in the event of liquidation, dissolution or winding up before any payment is made to our common stockholders, which would reduce the amount our common stockholders and Unitholders, might otherwise receive upon such an occurrence. Also, under certain circumstances, the issuance of preferred stock may have the effect of delaying or preventing a change in control of the Company.
The Company's Board of Directors may change its strategies, policies or procedures without stockholder approval, which may subject us to different and more significant risks in the future.
Our investment, financing, leverage and distribution policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, are determined by the Company's Board of Directors. These policies may be amended or revised at any time and from time to time at the discretion of the Company's Board of Directors without notice to or a vote of its stockholders. This could result in us conducting operational matters, making investments or pursuing different business or growth strategies. Under these circumstances, we may expose ourselves to different and more significant risks in the future, which could have a material adverse effect on our business and growth. In addition, the Company's Board of Directors may change its governance policies provided that such changes are consistent with applicable legal requirements. A change in these policies could have an adverse effect on our financial condition, results of operations, cash flow, ability to satisfy our principal and interest obligations, ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units.
We may be unable to retain and attract key management personnel.
We may be unable to retain and attract talented executives. In the event of the loss of key management personnel or upon unexpected death, disability or retirement, we may not be able to find replacements with comparable skill, ability and industry expertise. Until suitable replacements are identified and retained, if at all, our operating results and financial condition could be materially and adversely affected.

Item  1B.
Unresolved SEC Comments
None.

15



Item  2.
Properties
General
At December 31, 2015, we owned 580 in-service industrial properties containing an aggregate of approximately 61.6 million square feet of GLA in 25 states, with a diverse base of approximately 1,650 tenants engaged in a wide variety of businesses, including manufacturing, retail, wholesale trade, distribution and professional services. The average annual base rent per square foot on a portfolio basis, calculated at December 31, 2015, was $4.77. The properties are generally located in business parks that have convenient access to interstate highways and/or rail and air transportation. We maintain insurance on our properties that we believe is adequate.
We classify our properties into four industrial categories: light industrial, R&D/flex, bulk warehouse and regional warehouse. While some properties may have characteristics which fall under more than one property type, we use what we believe is the most dominant characteristic to categorize the property.
The following describes, generally, the different industrial categories:
Light industrial properties are of less than 100,000 square feet, have a ceiling height of 16-21 feet and are comprised of 5%-50% of office space;
R&D/flex buildings are of less than 100,000 square feet, have a ceiling height of less than 16 feet and are comprised of 50% or more of office space;
Bulk warehouse buildings are of more than 100,000 square feet, have a ceiling height of at least 22 feet and are comprised of 5%-15% of office space; and
Regional warehouses are of less than 100,000 square feet, have a ceiling height of at least 22 feet and are comprised of 5%-15% of office space.

16



The following tables summarize, by market, certain information as of December 31, 2015, with respect to the in-service properties.
In-Service Property Summary Totals
 
Light Industrial
 
R&D/Flex
 
Bulk Warehouse
 
Regional
Warehouse
 
Total
 
 
Metropolitan Area
GLA
(in 000's)
 
Number of
Properties
 
GLA
(in 000's)
 
Number of
Properties
 
GLA
(in 000's)
 
Number of
Properties
 
GLA
(in 000's)
 
Number of
Properties
 
GLA
(in 000's)
 
Number of
Properties
 
Average
Occupancy
at 12/31/15
Atlanta, GA
380

 
6

 

 

 
3,821

 
14

 
923

 
7

 
5,124

 
27

 
92
%
Baltimore, MD
453

 
8

 
168

 
5

 
1,231

 
4

 
96

 
1

 
1,948

 
18

 
96
%
Central PA
298

 
6

 

 

 
4,832

 
10

 
382

 
4

 
5,512

 
20

 
99
%
Chicago, IL
256

 
5

 
198

 
3

 
3,952

 
14

 
226

 
5

 
4,632

 
27

 
98
%
Cincinnati, OH
278

 
5

 
100

 
2

 
416

 
2

 
763

 
5

 
1,557

 
14

 
96
%
Cleveland, OH

 

 

 

 
1,318

 
7

 

 

 
1,318

 
7

 
100
%
Dallas, TX
1,249

 
30

 
209

 
9

 
3,494

 
23

 
582

 
8

 
5,534

 
70

 
98
%
Denver, CO
1,147

 
26

 
370

 
10

 
397

 
3

 
758

 
7

 
2,672

 
46

 
96
%
Detroit, MI
1,398

 
50

 
145

 
4

 
499

 
4

 
550

 
13

 
2,592

 
71

 
99
%
Houston, TX
470

 
8

 

 

 
2,809

 
12

 
356

 
5

 
3,635

 
25

 
98
%
Indianapolis, IN
583

 
13

 
25

 
2

 
2,177

 
7

 
504

 
6

 
3,289

 
28

 
87
%
Miami, FL
82

 
1

 

 

 
143

 
1

 
281

 
6

 
506

 
8

 
100
%
Milwaukee, WI
185

 
3

 
56

 
1

 
1,129

 
6

 
120

 
2

 
1,490

 
12

 
97
%
Minneapolis/St. Paul, MN
605

 
7

 
406

 
5

 
3,567

 
16

 
146

 
2

 
4,724

 
30

 
93
%
Nashville, TN
164

 
2

 

 

 
979

 
3

 

 

 
1,143

 
5

 
100
%
Northern New Jersey
750

 
13

 
172

 
3

 
329

 
2

 

 

 
1,251

 
18

 
97
%
Philadelphia, PA
161

 
5

 

 

 
691

 
2

 
330

 
4

 
1,182

 
11

 
98
%
Phoenix, AZ
38

 
1

 

 

 
834

 
6

 
452

 
7

 
1,324

 
14

 
97
%
Salt Lake City, UT
191

 
6

 
91

 
5

 
282

 
1

 
123

 
1

 
687

 
13

 
91
%
Seattle, WA

 

 

 

 
101

 
1

 
126

 
2

 
227

 
3

 
100
%
Southern California (a)
773

 
21

 

 

 
3,893

 
14

 
790

 
13

 
5,456

 
48

 
100
%
Southern New Jersey
116

 
2

 
45

 
1

 

 

 
191

 
2

 
352

 
5

 
76
%
St. Louis, MO
503

 
8

 
192

 
2

 
1,742

 
7

 

 

 
2,437

 
17

 
96
%
Tampa, FL
213

 
6

 
648

 
26

 
209

 
1

 

 

 
1,070

 
33

 
88
%
Other (b)
103

 
2

 

 

 
1,795

 
7

 
88

 
1

 
1,986

 
10

 
94
%
Total
10,396

 
234

 
2,825

 
78

 
40,640

 
167

 
7,787

 
101

 
61,648

 
580

 
96.1
%
Occupancy by Industrial Property Type
 
 
96.1
%
 
 
 
87.3
%
 
 
 
96.6
%
 
 
 
97.1
%
 
 
 
96.1
%
 
 
_______________
(a)
Southern California includes the markets of Los Angeles, the Inland Empire and San Diego.
(b)
Properties are located in Orlando, FL; Horn Lake, MS; Kansas City, MO; San Antonio, TX; Birmingham, AL; Jefferson County, KY; Greenville, KY; Des Moines, IA; Fort Smith, AR and Winchester, VA.
Indebtedness
As of December 31, 2015, 175 of our 580 in-service industrial properties, with a net carrying value of $727.0 million, are pledged as collateral under our mortgage financings, totaling $565.0 million. See Note 4 to the Consolidated Financial Statements and the accompanying Schedule III beginning on page S-1 for additional information.

17



Property Acquisitions
During the year ended December 31, 2015, we acquired eight industrial properties and several land parcels for an aggregate purchase price of approximately $169.2 million. The industrial properties were acquired at a capitalization rate of approximately 5.9%. The capitalization rate for these industrial property acquisitions was calculated using the estimated stabilized net operating income (excluding straight-line rent, lease inducement amortization and above and below market lease amortization) and dividing it by the sum of the purchase price plus estimated costs incurred to stabilize the properties. The acquired industrial properties have the following characteristics: 
Metropolitan Area
 
Number  of
Properties
 
GLA
 
Property Type
 
Occupancy
at  12/31/15
Baltimore, MD
 
2

 
992,768

 
Bulk Warehouse
 
65
%
Dallas, TX
 
1

 
79,887

 
Regional Warehouse
 
100
%
Houston, TX
 
2

 
287,560

 
Bulk Warehouse/Regional Warehouse
 
14
%
Southern California
 
3

 
582,380

 
Bulk Warehouse/Regional Warehouse
 
100
%
 
 
8

 
1,942,595

 
 
 
 
Development Activity
During the year ended December 31, 2015, we placed in-service six developments totaling approximately 1.8 million square feet of GLA at a total estimated cost of approximately $109.2 million. Included in the total estimated cost is $13.7 million of estimated leasing costs, including tenant improvements, lease inducements and leasing commissions, less one-time reimbursements of tenant improvements. The capitalization rate for these developments, calculated using the estimated stabilized net operating income (excluding straight-line rent and lease inducement amortization) divided by the total estimated investment in the developed properties is 7.3%. The placed in-service developments have the following characteristics:
Developments Placed In Service - Metropolitan Area
 
GLA
 
Property Type
 
Occupancy
at  12/31/15
Dallas, TX
 
376,601

 
Bulk Warehouse
 
100
%
Dallas, TX
 
221,844

 
Bulk Warehouse
 
100
%
Houston, TX
 
351,672

 
Bulk Warehouse
 
80
%
Minneapolis/St. Paul, MN
 
142,290

 
Bulk Warehouse
 
80
%
Southern California
 
555,670

 
Bulk Warehouse
 
100
%
Southern California (a)
 
171,676

 
Bulk Warehouse/Regional Warehouse
 
100
%
 
 
1,819,753

 
 
 
 
_______________
(a) Project includes the development of two industrial properties (108,414 square feet and 63,262 square feet).

18



During the year ended December 31, 2015, we completed four developments totaling approximately 1.2 million square feet of GLA and as of December 31, 2015 we have four developments that are under construction totaling approximately 1.4 million square feet of GLA. The estimated total costs for the four developments that are substantially complete are approximately $82.4 million, of which $66.2 million has been incurred as of December 31, 2015. The estimated total investment for the four development properties under construction is $78.7 million, of which $19.0 million has been incurred as of December 31, 2015. There can be no assurance that the actual completion cost will not exceed the estimated completion cost stated above. The completed developments and developments under construction have the following characteristics:
Developments Completed - Not In Service - Metropolitan Area
 
GLA
 
Property Type
 
Quarter of Building Completion
Dallas, TX
 
153,200

 
Bulk Warehouse
 
Q3 2015
Philadelphia, PA (a)
 
584,760

 
Bulk Warehouse
 
Q4 2015
Phoenix, AZ
 
386,100

 
Bulk Warehouse
 
Q4 2015
Southern California
 
65,324

 
Regional Warehouse
 
Q4 2015
 
 
1,189,384

 
 
 
 
Developments In Process - Metropolitan Area
 
GLA
 
Property Type
 
Anticipated Quarter of Building Completion
Chicago, IL
 
600,539

 
Bulk Warehouse
 
Q2 2016
Dallas, TX
 
231,803

 
Bulk Warehouse
 
Q2 2016
Southern California
 
187,800

 
Bulk Warehouse
 
Q2 2016
Atlanta, GA
 
402,304

 
Bulk Warehouse
 
Q4 2016
 
 
1,422,446

 
 
 
 
_______________
(a) Project includes the development of two industrial properties (341,400 square feet and 243,360 square feet).
Property Sales
During the year ended December 31, 2015, we sold 66 industrial properties comprising approximately 3.8 million square feet of GLA, at a weighted average capitalization rate of 6.7%, and several land parcels for total gross sales proceeds of approximately $158.4 million. The capitalization rate for the 66 industrial property sales is calculated by taking revenues of the property (excluding straight-line rent, lease inducement amortization and above and below market lease amortization) less operating expenses of the property for a period of the last twelve full months prior to sale and dividing the sum by the sales price of the property. The sold industrial properties have the following characteristics:
Metropolitan Area
 
Number  of
Properties
 
GLA
 
Property Type
Atlanta, GA
 
8

 
380,116

 
Light Industrial/R&D/Flex
Baltimore, MD
 
1

 
29,792

 
R&D/Flex
Chicago, IL
 
6

 
906,984

 
Bulk Warehouse/Light Industrial/Regional Warehouse
Detroit, MI
 
26

 
874,720

 
Bulk Warehouse/Light Industrial/R&D/Flex
Houston, TX
 
6

 
132,997

 
R&D/Flex
Milwaukee, WI
 
1

 
52,800

 
Light Industrial
Minneapolis/St. Paul, MN
 
7

 
377,012

 
Light Industrial/Regional Warehouse
Nashville, TN
 
2

 
269,719

 
Bulk Warehouse
Philadelphia, PA
 
1

 
25,546

 
Light Industrial
Salt Lake City, UT
 
1

 
55,785

 
R&D/Flex
Southern California
 
1

 
88,064

 
R&D/Flex
Southern New Jersey
 
1

 
172,100

 
Bulk Warehouse
Tampa, FL
 
1

 
7,200

 
R&D/Flex
Other (a)
 
4

 
400,317

 
Bulk Warehouse/Light Industrial
Total
 
66

 
3,773,152

 
 
_______________
(a)
Properties were located in Grand Rapids, MI and Austin, TX.

19



Tenant and Lease Information
We have a diverse base of approximately 1,650 tenants engaged in a wide variety of businesses including retail, wholesale trade, distribution, manufacturing and professional services. At December 31, 2015, our leases have a weighted average lease length of 6.4 years and provide for periodic rent 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, utilities, property taxes and insurance. As of December 31, 2015, approximately 96.1% of the GLA of our in-service properties was leased, and no single tenant or group of related tenants accounted for more than 2.9% of our rent revenues, nor did any single tenant or group of related tenants occupy more than 2.2% of the total GLA of our in-service properties.
Leasing Activity
The following table provides a summary of our leasing activity for the year ended December 31, 2015. The table does not include month-to-month leases or leases with terms less than twelve months.  
 
Number of
Leases
Commenced
 
Square Feet
Commenced
(in 000’s)
 
Net Rent Per
Square Foot (1)
 
GAAP  Basis
Rent  Growth (2)
 
Weighted
Average  Lease
Term (3)
 
Lease Costs
Per Square
Foot (4)
 
Weighted
Average Tenant
Retention (5)
New Leases
206

 
4,096

 
$
4.96

 
9.5
%
 
6.1

 
$
5.14

 
N/A

Renewal Leases
307

 
6,868

 
$
5.12

 
14.1
%
 
4.2

 
$
1.16

 
76.5
%
Development Leases
16

 
2,028

 
$
4.37

 
N/A

 
10.5

 
N/A

 
N/A

Total / Weighted Average
529

 
12,992

 
$
4.95

 
12.5
%
 
5.8

 
$
2.56

 
76.5
%
_______________
(1)
Net rent is the average base rent calculated in accordance with GAAP, over the term of the lease.
(2)
GAAP basis rent growth is a ratio of the change in net rent (on a GAAP basis, including straight-line rent adjustments as required by GAAP) compared to the net rent (on a GAAP basis) of the comparable lease. New leases where there were no prior comparable leases are excluded.
(3)
The lease term is expressed in years. Assumes no exercise of lease renewal options, if any.
(4)
Lease costs are comprised of the costs incurred or capitalized for improvements of vacant and renewal spaces, as well as the commissions paid and costs capitalized for leasing transactions. Lease costs per square foot represent the total turnover costs expected to be incurred on the leases signed during the period and do not reflect actual expenditures for the period.
(5)
Represents the weighted average square feet of tenants renewing their respective leases.
During the year ended December 31, 2015, 138 new leases commenced with free rent periods during the lease term with such leases constituting 3.3 million square feet of GLA. Total free rent concessions of $5.0 million were associated with these new leases. During the year ended December 31, 2015, 20 renewal leases commenced with free rent periods during the lease term with such leases constituting 0.6 million square feet of GLA. Total free rent concessions of $0.3 million were associated with these renewal leases. Additionally, during the year ended December 31, 2015, 13 development leases commenced with free rent periods during the lease term with such leases constituting 1.9 million square feet of GLA. Total free rent concessions of $4.3 million were associated with these development leases.

20



Lease Expirations
Fundamentals for the United States industrial real estate market continued to improve in 2015, as growth in the general economy, in particular e-commerce supply chain activity, drove additional demand for space. Development of new industrial space increased in response to this growth in demand, but incremental demand continued to exceed new supply. The fourth quarter of 2015 marked the 23rd consecutive quarter of positive net absorption for the overall market. These conditions resulted in improved market rental rate environments in virtually all of our markets. Based on our recent experience, the favorable supply-demand balance and the 2016 forecast from a leading national research company, we expect our average net rental rates for renewal leases on a cash basis to be slightly higher than the expiring rates. For 2016, net rental rates for new leases on a cash basis on average are expected to be comparable or slightly higher than the comparative prior leases, primarily due to recovery in market conditions as compared to the conditions prevailing when the comparative leases were structured. The following table shows scheduled lease expirations for all leases for our in-service properties as of December 31, 2015. 
Year of Expiration(1)
 
Number  of
Leases
Expiring
 
GLA
Expiring(2)
 
Percentage
of  GLA
Expiring(2)
 
Annualized Base Rent
Under
Expiring
Leases(3)
 
Percentage
of Total
Annualized
Base Rent
Expiring(3)
 
 
 
 
 
 
 
 
(In thousands)
 
 
2016
 
326

 
6,712,610

 
11
%
 
$
33,917

 
12
%
2017
 
318

 
8,008,301

 
14
%
 
40,202

 
14
%
2018
 
321

 
9,168,021

 
16
%
 
45,026

 
16
%
2019
 
266

 
8,793,147

 
15
%
 
42,451

 
15
%
2020
 
197

 
6,736,504

 
11
%
 
32,261

 
12
%
2021
 
104

 
6,840,041

 
12
%
 
29,230

 
11
%
2022
 
48

 
2,571,430

 
4
%
 
11,664

 
4
%
2023
 
25

 
1,718,850

 
3
%
 
8,511

 
3
%
2024
 
16

 
1,813,794

 
3
%
 
8,519

 
3
%
2025
 
26

 
2,692,509

 
5
%
 
12,199

 
4
%
Thereafter
 
28

 
3,555,155

 
6
%
 
15,648

 
6
%
Total
 
1,675

 
58,610,362

 
100
%
 
$
279,628

 
100
%
_______________
(1)
Includes leases that expire on or after January 1, 2016 and assumes tenants do not exercise existing renewal, termination or purchase options.
(2)
Does not include existing vacancies of 2,377,779 aggregate square feet and December 31, 2015 move outs of 659,891 aggregate square feet.
(3)
Annualized base rent is calculated as monthly base rent (cash basis) per the terms of the lease, as of December 31, 2015, multiplied by 12. If free rent is granted, then the first positive rent value is used.

Item  3.
Legal Proceedings
We are involved in legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material impact on our results of operations, financial position or liquidity.

Item  4.
Mine Safety Disclosures
None.

21


PART II
 
Item  5.
Market for Registrant’s Common Equity / Partners' Capital, Related Stockholder / Unitholder Matters and Issuer Purchases of Equity Securities
Market Information
The following table sets forth, for the periods indicated, the high and low closing prices per share of the Company's common stock, which trades on the New York Stock Exchange under the trading symbol “FR” and the dividends declared per share for the Company's common stock and the distributions declared per Unit for the Operating Partnership's Units. There is no established public trading market for the Units.
Quarter Ended
 
High
 
Low
 
Dividend/Distribution
Declared
December 31, 2015
 
$
23.08

 
$
21.08

 
$
0.1275

September 30, 2015
 
$
21.43

 
$
18.69

 
$
0.1275

June 30, 2015
 
$
21.53

 
$
18.73

 
$
0.1275

March 31, 2015
 
$
22.45

 
$
20.02

 
$
0.1275

December 31, 2014
 
$
21.16

 
$
16.96

 
$
0.1025

September 30, 2014
 
$
19.30

 
$
16.91

 
$
0.1025

June 30, 2014
 
$
19.37

 
$
17.86

 
$
0.1025

March 31, 2014
 
$
19.50

 
$
16.42

 
$
0.1025

As of February 22, 2016, the Company had 449 common stockholders of record and the Operating Partnership had 137 holders of record of general partner and limited partner Units registered with our transfer agent.
In order to comply with the REIT requirements of the Code, the Company is generally required to make common share distributions and preferred share distributions (other than capital gain distributions) to its shareholders in amounts that together at least equal i) the sum of a) 90% of the Company's “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and b) 90% of net income (after tax), if any, from foreclosure property, minus ii) certain excess non-cash income.
Our dividend/distribution policy is determined by the Company's board of directors and is dependent on multiple factors, including cash flow and capital expenditure requirements, as well as ensuring that the Company meets the minimum distribution requirements set forth in the Code. The Company met the minimum distribution requirements with respect to 2015.
Holders of Units are entitled to receive distributions when, as and if declared by the Company's Board of Directors, after the priority distributions required under the Operating Partnership's partnership agreement have been made with respect to preferred partnership interests in the Operating Partnership out of any funds legally available for that purpose.
During the year ended December 31, 2015, the Operating Partnership did not issue any limited partner Units.
Subject to lock-up periods and certain adjustments, holders of limited partner Units of the Operating Partnership can redeem their Units by providing written notification to the Company. Unless the Company provides notice of a redemption restriction to the holder, redemption must be made within seven business days after receipt of the holder’s notice. The redemption can be effectuated, as determined by the Company, either by exchanging the Units for shares of common stock of the Company on a one-for-one basis, subject to adjustment, or by paying cash in an amount equal to the fair market value of such shares. Prior requests for redemption have generally been fulfilled with shares of common stock of the Company, and we intend to continue this practice. If each Unit of the Operating Partnership were redeemed as of December 31, 2015, we could satisfy the redemption obligations by making an aggregate cash payment of approximately $95.3 million or by issuing 4,305,707 shares of the Company’s common stock.

22


Equity Compensation Plans
The following table sets forth information regarding the Company's equity compensation plans as of December 31, 2015.
Plan Category
 
Number  of
Securities
to be Issued
Upon
Exercise of
Outstanding
Options,
Warrants
and Rights
 
Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants
and Rights
 
Number  of
Securities
Remaining
Available
for Further
Issuance
Under Equity
Compensation
Plans
Equity Compensation Plans Approved by Security Holders
 
262,028

 
$

 
2,970,537

Equity Compensation Plans Not Approved by Security Holders
 

 

 

Total
 
262,028

 
$

 
2,970,537

Performance Graph
The following graph provides a comparison of the cumulative total stockholder return among the Company, the FTSE NAREIT Equity REIT Total Return Index (the “NAREIT Index”) and the Standard & Poor’s 500 Index (“S&P 500”). The historical information set forth below is not necessarily indicative of future performance.
*
$100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
 
12/10
 
12/11
 
12/12
 
12/13
 
12/14
 
12/15
FIRST INDUSTRIAL REALTY TRUST, INC.
$
100.00

 
$
116.78

 
$
160.73

 
$
203.37

 
$
244.85

 
$
270.09

S&P 500
$
100.00

 
$
102.11

 
$
118.45

 
$
156.82

 
$
178.29

 
$
180.75

FTSE NAREIT Equity REITs
$
100.00

 
$
108.29

 
$
127.85

 
$
131.01

 
$
170.49

 
$
175.94

_______________
*
The information provided in this performance graph shall not be deemed to be “soliciting material,” to be “filed” or to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 unless specifically treated as such.

23


Supplemental Tax Disclosures - Recent U.S. Federal Income Tax Legislation
The PATH Act was enacted on December 18, 2015 and contains several provisions pertaining to REIT qualification and taxation, some of which are briefly summarized below:
For taxable years beginning before January 1, 2018, no more than 25% of the value of our assets may consist of stock or securities of one or more taxable REIT subsidiaries. For taxable years beginning after December 31, 2017, the PATH Act reduces this limit to 20%. At this time, the securities we own in our taxable REIT subsidiaries do not, in the aggregate, exceed 20% of the total value of our assets.
For purposes of the REIT asset tests, the PATH Act provides that debt instruments issued by publicly offered REITs will constitute “real estate assets.” However, unless such a debt instrument is secured by a mortgage or otherwise would have qualified as a real estate asset under prior law, (i) interest income and gain from such a debt instrument is not qualifying income for purposes of the 75% gross income test and (ii) all such debt instruments may represent no more than 25% of the value of our total assets.
For taxable years beginning after December 31, 2015, certain obligations secured by a mortgage on both real property and personal property will be treated as a qualifying real estate asset and give rise to qualifying income for purposes of the 75% gross income test if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property.
A 100% excise tax is imposed on “redetermined TRS service income,” which is income of a taxable REIT subsidiary attributable to services provided to, or on behalf of its associated REIT and which would otherwise be increased on distribution, apportionment, or allocation under Section 482 of the Code.
For distributions made in taxable years beginning after December 31, 2014, the preferential dividend rules no longer to apply to us.
Additional exceptions to the rules under the Foreign Investment in Real Property Act (“FIRPTA”) were introduced for non-U.S. persons that constitute “qualified shareholders” (within the meaning of Section 897(k)(3) of the Code) or “qualified foreign pension funds” (within the meaning of Section 897(l)(2) of the Code).
After February 16, 2016, the FIRPTA withholding rate under Section 1445 of the Code for dispositions of U.S. real property interests is increased from 10% to 15%.
The PATH Act increases from 5% to 10% the maximum stock ownership of the REIT that a non-U.S. shareholder may have held to avail itself of the FIRPTA exception for shares regularly traded on an established securities market.











24



Item 6.
Selected Financial Data
The following tables set forth the selected financial and operating data for the Company and the Operating Partnership on a consolidated basis. The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
The Company
 
Year Ended
12/31/15
 
Year Ended
12/31/14
 
Year Ended
12/31/13
 
Year Ended
12/31/12
 
Year Ended
12/31/11
 
(In thousands, except per share data)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Total Revenues
$
365,762

 
$
344,599

 
$
318,454

 
$
304,517

 
$
292,757

Income (Loss) from Continuing Operations
76,705

 
23,182

 
4,862

 
(21,286
)
 
(35,571
)
Net Income (Loss) Available to First Industrial Realty Trust, Inc.’s Common Stockholders and Participating Securities
73,802

 
46,629

 
25,907

 
(22,069
)
 
(27,010
)
Basic Per Share Data:
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations Available to First Industrial Realty Trust, Inc.’s Common Stockholders
$
0.67

 
$
0.18

 
$
(0.09
)
 
$
(0.44
)
 
$
(0.65
)
Net Income (Loss) Available to First Industrial Realty Trust, Inc.’s Common Stockholders
0.67

 
0.42

 
0.24

 
(0.24
)
 
(0.34
)
Diluted Per Share Data:
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations Available to First Industrial Realty Trust, Inc.’s Common Stockholders
$
0.66

 
$
0.18

 
$
(0.09
)
 
$
(0.44
)
 
$
(0.65
)
Net Income (Loss) Available to First Industrial Realty Trust, Inc.’s Common Stockholders
0.66

 
0.42

 
0.24

 
(0.24
)
 
(0.34
)
Dividends/Distributions Per Share
$
0.51

 
$
0.41

 
$
0.34

 
$
0.00

 
$
0.00

Basic Weighted Average Shares
110,352

 
109,922

 
106,995

 
91,468

 
80,616

Diluted Weighted Average Shares
110,781

 
110,325

 
106,995

 
91,468

 
80,616

Balance Sheet Data (End of Period):
 
 
 
 
 
 
 
 
 
Real Estate, Before Accumulated Depreciation
$
3,293,968

 
$
3,183,369

 
$
3,119,547

 
$
3,121,448

 
$
2,992,096

Total Assets
2,718,051

 
2,581,995

 
2,597,510

 
2,608,842

 
2,666,657

Indebtedness
1,442,411

 
1,349,846

 
1,296,806

 
1,335,766

 
1,479,483

Total Equity
1,115,135

 
1,090,827

 
1,171,219

 
1,145,653

 
1,072,595

Cash Flow Data:
 
 
 
 
 
 
 
 
 
Cash Flow From Operating Activities
$
162,149

 
$
137,176

 
$
125,751

 
$
136,422

 
$
87,534

Cash Flow From Investing Activities
(197,074
)
 
(69,069
)
 
(61,313
)
 
(42,235
)
 
(3,779
)
Cash Flow From Financing Activities
29,426

 
(66,166
)
 
(61,748
)
 
(99,407
)
 
(99,504
)
Other Data:
 
 
 
 
 
 
 
 
 
Funds from Operations Available to First Industrial Realty Trust, Inc.’s Common Stockholders and Participating Securities (1)
$
140,841

 
$
127,890

 
$
105,011

 
$
80,640

 
$
72,151

_______________
(1)
Funds from operations ("FFO") is a non-GAAP measure used in the real estate industry. See definition and a complete reconciliation of FFO to Net Income (Loss) Available to First Industrial Realty Trust, Inc.'s Common Stockholders and Participating Securities under the caption "Supplemental Earnings Measure" under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

25



The Operating Partnership
 
Year Ended
12/31/15
 
Year Ended
12/31/14
 
Year Ended
12/31/13
 
Year Ended
12/31/12
 
Year Ended
12/31/11
 
(In thousands, except per Unit data)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Total Revenues
$
365,762

 
$
344,599

 
$
318,454

 
$
304,517

 
$
292,916

Income (Loss) from Continuing Operations
76,820

 
23,434

 
4,908

 
(21,142
)
 
(35,282
)
Net Income (Loss) Available to Unitholders and Participating Securities
76,682

 
48,704

 
27,033

 
(23,169
)
 
(28,527
)
Basic Per Unit Data:
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations Available to Unitholders
$
0.67

 
$
0.18

 
$
(0.09
)
 
$
(0.43
)
 
$
(0.64
)
Net Income (Loss) Available to Unitholders
0.67

 
0.42

 
0.24

 
(0.24
)
 
(0.33
)
Diluted Per Unit Data:
 
 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations Available to Unitholders
$
0.66

 
$
0.18

 
$
(0.09
)
 
$
(0.43
)
 
$
(0.64
)
Net Income (Loss) Available to Unitholders
0.66

 
0.42

 
0.24

 
(0.24
)
 
(0.33
)
Distributions Per Unit
$
0.51

 
$
0.41

 
$
0.34

 
$
0.00

 
$
0.00

Basic Weighted Average Units
114,709

 
114,388

 
111,646

 
96,509

 
85,913

Diluted Weighted Average Units
115,138

 
114,791

 
111,646

 
96,509

 
85,913

Balance Sheet Data (End of Period):
 
 
 
 
 
 
 
 
 
Real Estate, Before Accumulated Depreciation
$
3,293,968

 
$
3,183,369

 
$
3,119,547

 
$
3,121,448

 
$
2,992,096

Total Assets
2,728,766

 
2,592,708

 
2,608,111

 
2,619,445

 
2,677,287

Indebtedness
1,442,411

 
1,349,846

 
1,296,806

 
1,335,766

 
1,479,483

Total Partners' Capital
1,125,850

 
1,101,590

 
1,181,817

 
1,156,257

 
1,083,215

Cash Flow Data:
 
 
 
 
 
 
 
 
 
Cash Flow From Operating Activities
$
162,286

 
$
137,918

 
$
126,410

 
$
136,611

 
$
88,135

Cash Flow From Investing Activities
(197,074
)
 
(69,724
)
 
(61,926
)
 
(42,235
)
 
(3,779
)
Cash Flow From Financing Activities
29,304

 
(66,253
)
 
(61,800
)
 
(99,567
)
 
(100,083
)


26



Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this Form 10-K titled "Forward-Looking Statements" and "Selected Financial Data" and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.
Business Overview
The Company is a self-administered and fully integrated real estate company which owns, manages, acquires, sells, develops and redevelops industrial real estate. The Company is a Maryland corporation organized on August 10, 1993 and a real estate investment trust as defined in the Code.
We believe our financial condition and results of operations are, primarily, a function of our performance in four key areas: leasing of industrial properties, acquisition and development of additional industrial properties, disposition of industrial properties and access to external capital.
We generate revenue primarily from rental income and tenant recoveries from operating leases of our industrial properties. Such revenue is offset by certain property specific operating expenses, such as real estate taxes, repairs and maintenance, property management, utilities and insurance expenses, along with certain other costs and expenses, such as depreciation and amortization costs and general and administrative and interest expenses. Our revenue growth is dependent, in part, on our ability to: (i) increase rental income, through increasing either or both occupancy rates and rental rates at our properties; (ii) maximize tenant recoveries; and (iii) minimize operating and certain other expenses. Revenues generated from rental income and tenant recoveries are a significant source of funds, in addition to income generated from gains/losses on the sale of our properties (as discussed below), for our liquidity. The leasing of property, in general, and occupancy rates, rental rates, operating expenses and certain non-operating expenses, in particular, are impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond our control. The leasing of property also entails various risks, including the risk of tenant default. If we were unable to maintain or increase occupancy rates and rental rates at our properties or to maintain tenant recoveries and operating and certain other expenses consistent with historical levels and proportions, our revenue would decline. Further, if a significant number of our tenants were unable to pay rent (including tenant recoveries) or if we were unable to rent our properties on favorable terms, our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units would be adversely affected.
Our revenue growth is also dependent, in part, on our ability to acquire existing, and develop new industrial properties on favorable terms. We seek to identify opportunities to acquire existing industrial properties on favorable terms, and, when conditions permit, also seek to acquire and develop new industrial properties on favorable terms. Existing properties, as they are acquired, and acquired and developed properties, as they are leased, generate revenue from rental income, tenant recoveries and fees, income from which, as discussed above, is a source of funds for our distributions to our stockholders and Unitholders. The acquisition and development of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond our control. The acquisition and development of properties also entails various risks, including the risk that our investments may not perform as expected. For example, acquired existing and acquired and developed new properties may not sustain and/or achieve anticipated occupancy and rental rate levels. With respect to acquired and developed new properties, we may not be able to complete construction on schedule or within budget, resulting in increased debt service expense and construction costs and delays in leasing the properties. Also, we face significant competition for attractive acquisition and development opportunities from other well-capitalized real estate investors, including publicly-traded REITs and private investors. Further, as discussed below, we may not be able to finance the acquisition and development opportunities we identify. If we were unable to acquire and develop sufficient additional properties on favorable terms, or if such investments did not perform as expected, our revenue growth would be limited and our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units would be adversely affected.
We also generate income from the sale of our properties (including existing buildings, buildings which we have developed or re-developed on a merchant basis and land). The gain/loss on, and fees from, the sale of such properties are included in our income and can be a significant source of funds, in addition to revenues generated from rental income and tenant recoveries. Proceeds from sales are being used to repay outstanding debt and, market conditions permitting, may be used to fund the acquisition of existing, and the acquisition and development of new, industrial properties. The sale of properties is impacted, variously, by property specific, market specific, general economic and other conditions, many of which are beyond our control. The sale of properties also entails various risks, including competition from other sellers and the availability of attractive financing for potential buyers of our properties. Further, our ability to sell properties is limited by safe harbor rules applying to REITs under the Code which relate to the number of properties that may be disposed of in a year, their tax bases

27



and the cost of improvements made to the properties, along with other tests which enable a REIT to avoid punitive taxation on the sale of assets. If we are unable to sell properties on favorable terms, our income growth would be limited and our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected.
We utilize a portion of the net sales proceeds from property sales, borrowings under our Unsecured Credit Facility and proceeds from the issuance, when and as warranted, of additional debt and equity securities to refinance debt and finance future acquisitions and developments. Access to external capital on favorable terms plays a key role in our financial condition and results of operations, as it impacts our cost of capital and our ability and cost to refinance existing indebtedness as it matures and to fund acquisitions and developments. Our ability to access external capital on favorable terms is dependent on various factors, including general market conditions, interest rates, credit ratings on our debt, the market’s perception of our growth potential, our current and potential future earnings and cash distributions and the market price of the Company's common stock. If we were unable to access external capital on favorable terms, our financial condition, results of operations, cash flow and ability to make distributions to our stockholders and Unitholders, the market price of the Company's common stock and the market value of the Units could be adversely affected.
Summary of Significant Transactions During 2015
During 2015, we completed the following significant transactions and financing activities:
We acquired eight industrial properties comprising approximately 1.9 million square feet of GLA and several land parcels for an aggregate purchase price of approximately $169.2 million, excluding costs incurred in conjunction with the acquisitions.
We placed in-service six developments totaling approximately 1.8 million square feet of GLA at a total cost of approximately $109.2 million.
We sold 66 industrial properties comprising approximately 3.8 million square feet of GLA and several land parcels for total gross sales proceeds of approximately $158.4 million.
We amended our existing $625.0 million revolving credit agreement, extending the maturity to March, 2019 (with an option to extend an additional one year at our election). The interest rate on our Unsecured Credit Facility is currently LIBOR plus 115 basis points subject to a pricing grid for changes in our leverage ratio or credit ratings. The weighted average interest rate at December 31, 2015, is 1.57%.
We entered into a seven-year, $260.0 million unsecured loan (the "2015 Unsecured Term Loan") with a syndicate of financial institutions. The interest rate is currently LIBOR plus 160 basis points subject to a pricing grid for changes in our leverage ratio or credit ratings. We also entered into interest rate protection agreements to effectively convert the variable rate to a fixed rate, providing a weighted average effective rate of 3.39% as of December 31, 2015.
We paid an annual cash dividend of $0.51 per common share or Unit, an increase of 24% from 2014.

28



Results of Operations
Comparison of Year Ended December 31, 2015 to Year Ended December 31, 2014
The Company's net income was $76.7 million and $51.0 million for the years ended December 31, 2015 and 2014, respectively. The Operating Partnership's net income was $76.8 million and $51.3 million for the years ended December 31, 2015 and 2014, respectively.
The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2015 and 2014. Same store properties are properties owned prior to January 1, 2014 and held as an in-service property through December 31, 2015 and developments and redevelopments that were placed in service prior to January 1, 2014 or were substantially completed for the 12 months prior to January 1, 2014. Properties which are at least 75% occupied at acquisition are placed in service. Acquisitions that are less than 75% occupied at the date of acquisition, developments and redevelopments are placed in service as they reach the earlier of a) stabilized occupancy (generally defined as 90% occupied), or b) one year subsequent to acquisition or development/redevelopment construction completion. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2013 and held as an operating property through December 31, 2015. Sold properties are properties that were sold subsequent to December 31, 2013. (Re)Developments include developments and redevelopments that were not: a) substantially complete 12 months prior to January 1, 2014; or b) stabilized prior to January 1, 2014. Other revenues are derived from operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, fees earned from our Joint Ventures and other miscellaneous revenues. Other expenses are derived from the operations of properties not placed in service under one of the categories discussed above, operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.
During the period between January 1, 2014 and December 31, 2015, one industrial property previously classified within same store, comprising approximately 0.2 million square feet, was reclassified and is included in the Other classification as of December 31, 2015. This property was taken out of service during the fourth quarter of 2015. We intend to demolish the existing industrial property and construct a new industrial property, at which time the property will be reclassified from Other to the (Re) Developments classification. The newly constructed property will return to the same store classification following a complete calendar year of in service classification.
Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition, development and sale of properties. Our future revenues and expenses may vary materially from historical rates.
For the years ended December 31, 2015 and 2014, the average occupancy rates of our same store properties were 94.2% and 93.2%, respectively.

29



 
2015
 
2014
 
$ Change
 
% Change
 
($ in 000’s)
REVENUES
 
 
 
 
 
 
 
Same Store Properties
$
324,165

 
$
318,420

 
$
5,745

 
1.8
 %
Acquired Properties
8,828

 
2,896

 
5,932

 
204.8
 %
Sold Properties
13,751

 
24,203

 
(10,452
)
 
(43.2
)%
(Re) Developments
14,124

 
2,131

 
11,993

 
562.8
 %
Other
4,894

 
3,956

 
938

 
23.7
 %
 
$
365,762

 
$
351,606

 
$
14,156

 
4.0
 %
Discontinued Operations

 
(7,007
)
 
7,007

 
(100.0
)%
Total Revenues
$
365,762

 
$
344,599

 
$
21,163

 
6.1
 %
Revenues from same store properties increased $5.7 million primarily due to an increase in occupancy as well as as an increase in rental rates during the year ended December 31, 2015 as compared to December 31, 2014, partially offset by a decrease in restoration fees. Revenues from acquired properties increased $5.9 million due to the 16 industrial properties acquired subsequent to December 31, 2013 totaling approximately 3.0 million square feet of GLA. Revenues from sold properties decreased $10.5 million due to the 95 industrial properties sold subsequent to December 31, 2013 totaling approximately 5.8 million square feet of GLA. Revenues from (re)developments increased $12.0 million due to an increase in occupancy. Other revenues increased $0.9 million primarily due to an increase in occupancy related to a property acquired in 2013 that was placed in service during 2014.
 
2015
 
2014
 
$ Change
 
% Change
 
($ in 000’s)
PROPERTY EXPENSES
 
 
 
 
 
 
 
Same Store Properties
$
92,244

 
$
93,205

 
$
(961
)
 
(1.0
)%
Acquired Properties
2,494

 
869

 
1,625

 
187.0
 %
Sold Properties
6,245

 
10,905

 
(4,660
)
 
(42.7
)%
(Re) Developments
3,521

 
1,934

 
1,587

 
82.1
 %
Other
10,124

 
10,370

 
(246
)
 
(2.4
)%
 
$
114,628

 
$
117,283

 
$
(2,655
)
 
(2.3
)%
Discontinued Operations

 
(2,784
)
 
2,784

 
(100.0
)%
Total Property Expenses
$
114,628

 
$
114,499

 
$
129

 
0.1
 %
Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties decreased $1.0 million primarily due to lower snow removal costs incurred during the year ended December 31, 2015 as compared to the year ended December 31, 2014 due to the harsh 2014 winter. Property expenses from acquired properties increased $1.6 million due to properties acquired subsequent to December 31, 2013. Property expenses from sold properties decreased $4.7 million due to properties sold subsequent to December 31, 2013. Property expenses from (re)developments increased $1.6 million primarily due to an increase in real estate tax expense related to the substantial completion of developments. Other expenses remained relatively unchanged.
General and administrative expense for the Company increased by $1.9 million, or 8.3% and increased for the Operating Partnership by $2.1 million, or 9.0%, primarily due to an increase in employee compensation and incentive compensation.
For the years ended December 31, 2015 and 2014, we recognized $1.4 million and $1.0 million, respectively, of expense related to costs associated with acquiring industrial properties from third parties.
The impairment charge for the year ended December 31, 2015 of $0.6 million is due to marketing certain properties for sale and our assessment of the likelihood of a potential sale transaction.

30



 
2015
 
2014
 
$ Change
 
% Change
 
($ in 000’s)
DEPRECIATION AND OTHER AMORTIZATION
 
 
 
 
 
 
 
Same Store Properties
$
98,107

 
$
100,758

 
$
(2,651
)
 
(2.6
)%
Acquired Properties
5,567

 
1,723

 
3,844

 
223.1
 %
Sold Properties
3,993

 
8,257

 
(4,264
)
 
(51.6
)%
(Re) Developments
4,008

 
1,843

 
2,165

 
117.5
 %
Corporate Furniture, Fixtures and Equipment and Other
2,139

 
1,704

 
435

 
25.5
 %
 
$
113,814

 
$
114,285

 
$
(471
)
 
(0.4
)%
Discontinued Operations

 
(2,388
)
 
2,388

 
(100.0
)%
Total Depreciation and Other Amortization
$
113,814

 
$
111,897

 
$
1,917

 
1.7
 %
Depreciation and other amortization from same store properties decreased $2.7 million primarily due to accelerated depreciation and amortization taken during the year ended December 31, 2014 attributable to certain tenants who terminated their lease early. Depreciation and other amortization from acquired properties increased $3.8 million due to properties acquired subsequent to December 31, 2013. Depreciation and other amortization from sold properties decreased $4.3 million due to properties sold subsequent to December 31, 2013. Depreciation and other amortization from (re)developments increased $2.2 million primarily due to an increase in developments that were placed in service. Depreciation from corporate furniture, fixtures and equipment and other increased $0.4 million primarily due to additional furniture, fixtures and equipment asset purchases as well as an increase related to additional leasing costs incurred for a property that was placed in service during 2014.
For the year ended December 31, 2015, we recognized $48.9 million of gain on sale of real estate related to the sale of 66 industrial properties comprising approximately 3.8 million square feet of GLA and several land parcels. For the year ended December 31, 2014, we recognized $0.1 million of loss on sale of real estate related to the sale of land parcels that did not meet the criteria for inclusion in discontinued operations.
Interest income decreased $2.0 million, or 97.1%, primarily due to the receipt of prepayment fees of $0.7 million related to notes receivable that were paid off early during the year ended December 31, 2014 and a decrease in the weighted average note receivable balance outstanding for the year ended December 31, 2015 as compared to the year ended December 31, 2014.
Interest expense decreased $4.8 million, or 6.6%, primarily due to a decrease in the weighted average interest rate for the year ended December 31, 2015 (4.99%) as compared to the year ended December 31, 2014 (5.33%) and an increase in capitalized interest of $1.0 million for the year ended December 31, 2015 as compared to the year ended December 31, 2014 due to an increase in development activities, offset by an increase in the weighted average debt balance outstanding for the year ended December 31, 2015 ($1,399.9 million) as compared to the year ended December 31, 2014 ($1,380.6 million).
Amortization of deferred financing costs remained relatively unchanged.
In August 2014, we entered into three interest rate protection agreements in order to maintain our flexibility to pursue an offering of unsecured debt. During the year ended December 31, 2015, we settled the interest rate protection agreements and reclassified the fair market value loss recorded in other comprehensive income relating to the three interest rate protection agreements to earnings as a result of determining the forecasted offering of unsecured debt was no longer probable to occur within the time period stated in the respective hedge designation memos. For the year ended December 31, 2015, we recorded $11.5 million in mark-to-market and settlement loss on the three interest rate protection agreements.
For the year ended December 31, 2014, we recognized a loss from retirement of debt of $0.7 million due to the early payoff of certain mortgage loans.
Equity in income of joint ventures decreased $3.4 million during the year ended December 31, 2015 as compared to the year ended December 31, 2014 primarily due to a decrease in our pro rata share of gain and earn outs from the sales of industrial properties from the 2003 Net Lease Joint Venture.
The income tax provision is not significant.

31



As discussed in Note 2 to the Consolidated Financial Statements, we adopted the new accounting standard relating to discontinued operations on January 1, 2015. There were no sales of industrial properties during the year ended December 31, 2015 that met the criteria to be classified as discontinued operations. The industrial properties sold prior to January 1, 2015 that met the criteria to be classified as discontinued operations continue to be presented as discontinued operations in the Consolidated Statements of Operations. The following table summarizes certain information regarding the industrial properties included in discontinued operations for the year ended December 31, 2014.
 
2014
 
($ in 000’s)
Total Revenues
$
7,007

Property Expenses
(2,784
)
Depreciation and Amortization
(2,388
)
Gain on Sale of Real Estate
25,988

Income from Discontinued Operations
$
27,823

Income from discontinued operations for the year ended December 31, 2014 reflects the results of operations and gain on sale of real estate relating to 29 industrial properties that were sold during the year ended December 31, 2014.
Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013
The Company's net income was $51.0 million and $41.4 million for the years ended December 31, 2014 and 2013, respectively. The Operating Partnership's net income was $51.3 million and $41.5 million for the years ended December 31, 2014 and 2013, respectively.
The tables below summarize our revenues, property expenses and depreciation and other amortization by various categories for the years ended December 31, 2014 and 2013. Same store properties are properties owned prior to January 1, 2013 and held as an in-service property through December 31, 2014 and developments and redevelopments that were placed in service prior to January 1, 2013 or were substantially completed for the 12 months prior to January 1, 2013. Properties which are at least 75% occupied at acquisition are placed in service. Acquisitions that are less than 75% occupied at the date of acquisition, developments and redevelopments are placed in service as they reach the earlier of a) stabilized occupancy (generally defined as 90% occupied), or b) one year subsequent to acquisition or development/redevelopment construction completion. Properties are moved from the same store classification to the redevelopment classification when capital expenditures for a project are estimated to exceed 25% of the undepreciated gross book value of the property. Acquired properties are properties that were acquired subsequent to December 31, 2012 and held as an operating property through December 31, 2014. Sold properties are properties that were sold subsequent to December 31, 2012. (Re)Developments include developments and redevelopments that were not: a) substantially complete 12 months prior to January 1, 2013; or b) stabilized prior to January 1, 2013. Other revenues are derived from operations of properties not placed in service under one of the categories discussed above, the operations of our maintenance company, fees earned from our Joint Ventures and other miscellaneous revenues. Other expenses are derived from the operations of properties not placed in service under one of the categories discussed above, operations of our maintenance company, vacant land expenses and other miscellaneous regional expenses.
Our future financial condition and results of operations, including rental revenues, may be impacted by the future acquisition and sale of properties. Our future revenues and expenses may vary materially from historical rates.
For the years ended December 31, 2014 and 2013, the average occupancy rates of our same store properties were 92.5% and 90.9%, respectively.

32



 
2014
 
2013
 
$ Change
 
% Change
 
($ in 000’s)
REVENUES
 
 
 
 
 
 
 
Same Store Properties
$
331,594

 
$
315,118

 
$
16,476

 
5.2
 %
Acquired Properties
6,894

 
453

 
6,441

 
1,421.9
 %
Sold Properties
7,007

 
20,727

 
(13,720
)
 
(66.2
)%
(Re) Developments
3,966

 
1,163

 
2,803

 
241.0
 %
Other
2,145

 
1,720

 
425

 
24.7
 %
 
$
351,606

 
$
339,181

 
$
12,425

 
3.7
 %
Discontinued Operations
(7,007
)
 
(20,727
)
 
13,720

 
(66.2
)%
Total Revenues
$
344,599

 
$
318,454

 
$
26,145

 
8.2
 %
Revenues from same store properties increased $16.5 million primarily due to an increase in occupancy, an increase in tenant recoveries and a one-time restoration fee recognized in 2014, partially offset by an increase in the straight-line rent reserve for doubtful accounts. Revenues from acquired properties increased $6.4 million due to the 10 industrial properties acquired subsequent to December 31, 2012 totaling approximately 2.2 million square feet of GLA. Revenues from sold properties decreased $13.7 million due to the 96 industrial properties sold subsequent to December 31, 2012 totaling approximately 5.0 million square feet of GLA. Revenues from (re)developments increased $2.8 million due to an increase in occupancy. Other revenues increased $0.4 million primarily due to an increase in maintenance company revenues.
 
2014
 
2013
 
$ Change
 
% Change
 
($ in 000’s)
PROPERTY EXPENSES
 
 
 
 
 
 
 
Same Store Properties
$
100,468

 
$
93,542

 
$
6,926

 
7.4
 %
Acquired Properties
2,647

 
454

 
2,193

 
483.0
 %
Sold Properties
2,784

 
8,126

 
(5,342
)
 
(65.7
)%
(Re) Developments
2,414

 
501

 
1,913

 
381.8
 %
Other
8,970

 
9,217

 
(247
)
 
(2.7
)%
 
$
117,283

 
$
111,840

 
$
5,443

 
4.9
 %
Discontinued Operations
(2,784
)
 
(8,126
)
 
5,342

 
(65.7
)%
Total Property Expenses
$
114,499

 
$
103,714

 
$
10,785

 
10.4
 %
Property expenses include real estate taxes, repairs and maintenance, property management, utilities, insurance and other property related expenses. Property expenses from same store properties increased $6.9 million primarily due to higher snow removal costs incurred during the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to the harsh 2014 winter, an increase in real estate tax expense and an increase in bad debt expense. Property expenses from acquired properties increased $2.2 million due to properties acquired subsequent to December 31, 2012. Property expenses from sold properties decreased $5.3 million due to properties sold subsequent to December 31, 2012. Property expenses from (re)developments increased $1.9 million primarily due to an increase in real estate tax expense related to the substantial completion of developments. Other expenses remained relatively unchanged.
General and administrative expense for both the Company and the Operating Partnership remained relatively unchanged.
For the years ended December 31, 2014 and 2013, we recognized $1.0 million and $0.3 million, respectively, of expense related to costs associated with acquiring industrial properties from third parties.

33



 
2014
 
2013
 
$ Change
 
% Change
 
($ in 000’s)
DEPRECIATION AND OTHER AMORTIZATION
 
 
 
 
 
 
 
Same Store Properties
$
104,120

 
$
104,676

 
$
(556
)
 
(0.5
)%
Acquired Properties
4,642

 
871

 
3,771

 
433.0
 %
Sold Properties
2,388

 
7,727

 
(5,339
)
 
(69.1
)%
(Re) Developments
2,399

 
567

 
1,832

 
323.1
 %
Corporate Furniture, Fixtures and Equipment and Other
736

 
837

 
(101
)
 
(12.1
)%
 
$
114,285

 
$
114,678

 
$
(393
)
 
(0.3
)%
Discontinued Operations
(2,388
)
 
(7,727
)
 
5,339

 
(69.1
)%
Total Depreciation and Other Amortization
$
111,897

 
$
106,951

 
$
4,946

 
4.6
 %
Depreciation and other amortization from same store properties remained relatively unchanged. Depreciation and other amortization from acquired properties increased $3.8 million due to properties acquired subsequent to December 31, 2012. Depreciation and other amortization from sold properties decreased $5.3 million due to properties sold subsequent to December 31, 2012. Depreciation and other amortization from (re)developments increased $1.8 million primarily due to an increase in developments that were placed in service. Depreciation from corporate furniture, fixtures and equipment and other remained relatively unchanged.
The $0.1 million loss and $1.1 million gain on sale of real estate for the years ended December 31, 2014 and 2013, respectively, resulted from the sale of land parcels that did not meet the criteria for inclusion in discontinued operations.
Interest income decreased $0.2 million, or 10.4%, primarily due to a decrease in the weighted average note receivable balance outstanding for the year ended December 31, 2014 as compared to the year ended December 31, 2013 partially offset by the receipt of prepayment fees of $0.7 million related to note receivables that were paid off early during the year ended December 31, 2014.
Interest expense decreased $1.4 million, or 1.9%, primarily due to a decrease in the weighted average interest rate for the year ended December 31, 2014 (5.33%) as compared to the year ended December 31, 2013 (5.77%), partially offset by an increase in the weighted average debt balance outstanding for the year ended December 31, 2014 ($1,380.6 million) as compared to the year ended December 31, 2013 ($1,338.5 million) and a decrease in capitalized interest of $2.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013 due to a decrease in development activities.
Amortization of deferred financing costs remained relatively unchanged.
In October 2008, we entered into an interest rate protection agreement to mitigate our exposure to floating interest rates related to the coupon reset of one of our series of preferred stock. During the year ended December 31, 2013, we recorded $0.1 million in mark-to-market net gain associated with this interest rate protection agreement, which matured on October 1, 2013.
For the year ended December 31, 2014, we recognized a loss from retirement of debt of $0.7 million due to the early payoff of certain mortgage loans. For the year ended December 31, 2013, we recognized a loss from retirement of debt of $6.6 million due to the partial repurchase of certain series of our senior unsecured notes, the early payoff of certain mortgage loans and the write-off of certain unamortized loan fees associated with the amendment of our revolving line of credit.
Equity in income of joint ventures increased $3.4 million during the year ended December 31, 2014 as compared to the year ended December 31, 2013 primarily due to an increase in our pro rata share of gain and earn outs from the sales of industrial properties from the 2003 Net Lease Joint Venture.
The income tax provision is not significant.

34



The following table summarizes certain information regarding the industrial properties included in discontinued operations for the years ended December 31, 2014 and 2013.
 
2014
 
2013
 
($ in 000’s)
Total Revenues
$
7,007

 
$
20,727

Property Expenses
(2,784
)
 
(8,126
)
Impairment of Real Estate

 
(2,652
)
Depreciation and Amortization
(2,388
)
 
(7,727
)
Gain on Sale of Real Estate
25,988

 
34,344