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CHICAGO-Through its operating partnership, First Industrial Realty Trust has begun an offering of $175 million in exchangeable senior unsecured notes due in 2011. The partnership, First Industrial LP, also expects to grant the initial purchasers a 15-day option to purchase up to an additional $25 million in notes to cover over-allotments.

According to SEC rules, the offering is available to qualified institutional buyers, and the locally based REIT guarantees the notes on a senior unsecured basis.

The notes will pay interest semi-annually at a rate of just over 4.6% a year and mature on Sept. 15, 2011. They have an initial exchange rate of approximately 16.6 shares of First Industrial common stock per $1,000 principal amount of the notes. This represents an exchange rate of about $50.93 a share, or a premium of 20% over the share-price of stock on this Sept. 19.

The notes will be exchangeable, prior to the close of business on the second business day preceding the stated maturity date at any time, beginning on July 15, 2011, for cash up to their principal amount and First Industrial’s common shares for the remainder of the exchange value in excess of the principal amount.

Closing of the sale of the notes is expected to occur on this Sept. 25. Net proceeds are estimated at about $171.2 million, or $195.7 million if the initial purchasers exercise the over-allotment option.

First Industrial intends to use some net proceeds to repay, in full, at maturity, the $150-million principal of its 7% senior notes due this Dec. 31. It will also use some proceeds to repay a portion of debt remaining on its current credit facility.

Shares of FR closed at $42.44 on the NYSE on Sept. 19, down 1.5% for the day. The 52-week high of $44.01 a share was reached on Sept. 6 this year, and the 52-week low of $36.23 a share occurred on this May 24.

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