Terreno Realty Corporation Announces Quarterly Operating, Investment and Capital Markets Activity

Rhea-AI Summary

Terreno Realty (TRNO) reported a 96.2% quarter-end occupancy, a 47.2% increase in cash rents, and $18.5 million in acquisitions for the first quarter of 2024. They commenced two developments and completed a stock offering for gross proceeds of $392.2 million.

Positive

• Strong quarter-end occupancy rate of 96.2%
• Significant increase of 47.2% in cash rents on new and renewed leases
• $18.5 million worth of acquisitions completed
• Commencement of two developments with expected investments totaling $79.1 million
• Completion of a stock offering with gross proceeds of $392.2 million

Negative

• None.

Insights

Market Research Analyst

An observed decline in occupancy rates from 98.5% to 96.2% could signal a softening in demand for industrial real estate within Terreno's portfolio, potentially impacting rental income. However, the substantial 47.2% increase in cash rents on new and renewed leases may offset this impact, suggesting strong pricing power or a shift towards higher-quality tenants. The tenant retention ratio, particularly in the improved land portfolio (82.5%), indicates a stable tenant base, which is essential for predictable cash flows.

The completion of the equity offering and ATM issuance, totaling over $540 million in gross proceeds, strengthens the company's capital position. This capital infusion is earmarked for acquisitions and development projects, which could drive future growth. It's important to monitor how effectively this capital is deployed and the returns generated from these investments.

Real Estate Investment Analyst

The reported estimated stabilized cap rates for both acquired and developed properties hover around 5.7% to 5.8%, which are in line with current market conditions for industrial assets in prime locations. These rates are indicative of the potential return on investment and are critical for evaluating the profitability of the acquisitions and developments. The 16.5% IRR on the sale of the Seattle property is notably high, reflecting successful asset management and timing of the sale.

With $448.8 million of acquisitions under contract, the company's growth trajectory seems aggressive. However, the caveat that these acquisitions are subject to due diligence highlights the uncertainty that not all deals may close. The substantial pre-leasing percentage (58%) of development properties suggests effective pre-construction marketing strategies and demand for the company's properties.

Financial Analyst

The absence of debt maturing in 2025 and no outstanding borrowings under the credit facility as of March 31, 2024, reflects a conservative debt profile which is favorable for financial stability. The strategic use of equity financing over debt amidst a potentially rising interest rate environment could be a prudent move to manage the cost of capital and avoid refinancing risks.

The company's capital allocation towards acquisitions and developments must be scrutinized against the backdrop of the current economic climate. Investors should consider the alignment of these investments with long-term industrial real estate trends, such as e-commerce growth, which could sustain demand for distribution centers. The balance between maintaining occupancy rates and achieving rent growth will be critical in assessing the company's performance.

• 96.2% quarter-end occupancy compared to prior quarter of 98.5% and prior year of 98.1%

• 96.2% quarter-end same-store occupancy compared to prior quarter of 98.4% and prior year of 98.3%

• 47.2% increase in cash rents on new and renewed leases and tenant retention ratio of 54.7%

• $18.5 million of acquisitions; $448.8 million under contract

• Commenced two developments with total expected investment of $79.1 million; commenced redevelopment of one existing property with expected additional investment of $67.8 million

• Completed an offering of 6,325,000 shares of common stock for gross proceeds of $392.2 million

• Issued 2,353,278 shares of common stock under ATM for gross proceeds of $150.6 million

BELLEVUE, Wash.--(BUSINESS WIRE)-- Terreno Realty Corporation (NYSE:TRNO), an acquirer, owner and operator of industrial real estate in six major coastal U.S. markets, announced today its operating, investment and capital markets activity for the first quarter of 2024.

Operating

As of March 31, 2024, Terreno Realty Corporation owned 258 buildings aggregating approximately 15.8 million square feet and 45 improved land parcels consisting of approximately 152.4 acres:

• The operating portfolio was 96.2% leased at March 31, 2024 to 572 tenants as compared to 98.5% at December 31, 2023 and 98.1% at March 31, 2023. Occupancy at March 31, 2024 declined primarily due to 123,000 square feet of vacancy (approximately 80bps) at our 620 Division property in Elizabeth, New Jersey, 69,000 square feet of vacancy (approximately 40bps) at our West Avenue 140^th property in San Leandro, California, and 40,000 square feet of acquired vacancy (approximately 30bps) of which 16,000 square feet was subsequently leased with a May 2024 commencement date;

• The same-store portfolio of approximately 14.7 million square feet was 96.2% leased at March 31, 2024 as compared to 98.4% at December 31, 2023 and 98.3% at March 31, 2023;

• The improved land portfolio of 45 parcels totaling approximately 152.4 acres was 94.6% leased at March 31, 2024 as compared to 94.6% at December 31, 2023 and 98.9% at March 31, 2023;

• Cash rents on new and renewed leases totaling approximately 0.7 million square feet and 3.3 acres of improved land commencing during the first quarter increased approximately 47.2% with a tenant retention ratio of 54.7% for the operating portfolio and 82.5% for the improved land portfolio; and

• Terreno Realty Corporation pre-leased 100% of Countyline Corporate Park Phase IV Building 39 in Hialeah, Florida. The ten-year lease is an expansion with an existing tenant who provides turbine engine disassembly, repair, logistics and storage devices, and will commence upon completion of tenant improvements expected in July 2024. Currently under construction, Building 39 of Terreno Realty Corporation’s Countyline Corporate Park is a 178,000 square foot 36-foot clear height rear-load industrial distribution building on 10.9 acres with 58 dock-high and two grade-level loading positions and parking for 156 cars. The building is expected to achieve LEED certification with a total expected investment of $43.8 million and estimated stabilized cap rate of 5.8%.

Investment

During the first quarter of 2024, Terreno Realty Corporation acquired two properties consisting of two buildings aggregating approximately 40,000 square feet for an aggregate purchase price of approximately $18.5 million. The first quarter investment activity was as follows:

• 13045 SE 32^nd Street: One industrial distribution building containing approximately 16,000 square feet on 1.8 acres located in Bellevue, Washington, adjacent to the intersection of I-90 and I-405. The property provides three dock-high and two grade-level loading positions and parking for 22 cars. The property was acquired vacant for a purchase price of approximately $6.5 million and an estimated stabilized cap rate of 5.8%. The property was subsequently leased with a May 2024 commencement date; and

• 181 Lombardy Street: One industrial distribution building containing approximately 24,000 square feet on 0.7 acres located in East Williamsburg, Brooklyn, New York, adjacent to the Brooklyn-Queens Expressway. The property provides one dock-high and one grade-level loading position and parking for 10 cars. The property was acquired vacant for a purchase price of approximately $12.0 million and an estimated stabilized cap rate of 5.7%.

During the first quarter of 2024, Terreno Realty Corporation sold one property in Seattle, Washington consisting of a 25,000 square foot industrial distribution building on 1.5 acres for a sale price of approximately $11.0 million. The property was acquired by Terreno Realty Corporation in May 2016 for approximately $4.7 million. The unleveraged internal rate of return generated by the investment was 16.5%.

During the first quarter of 2024, Terreno Realty Corporation commenced development of two properties at Countyline Corporate Park Phase IV in Hialeah, Florida that, upon completion, will consist of two industrial distribution buildings aggregating approximately 322,000 square feet, with a total expected investment of approximately $79.1 million. Additionally, we commenced the redevelopment of one existing property in Gardena, California that, upon completion, will consist of three industrial distribution buildings aggregating approximately 228,000 square feet, with an expected additional investment of $67.8 million.

As of March 31, 2024, Terreno Realty Corporation had ten properties under development or redevelopment that, upon completion, will consist of eleven buildings aggregating approximately 1.6 million square feet which are approximately 58% pre-leased and one approximately 2.8-acre improved land parcel, with a total expected investment of approximately $483.6 million. Additionally, we owned approximately 45.5 acres of land entitled for future development of four buildings aggregating approximately 0.8 million square feet.

Terreno Realty Corporation has approximately $448.8 million of acquisitions under contract. There is no assurance that Terreno Realty Corporation will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and closing conditions.

Capital Markets

During the first quarter of 2024, Terreno Realty Corporation completed an offering of 6,325,000 shares of its common stock at a price to the public of $62.00 per share, receiving gross proceeds of $392.2 million. The Company intends to use the net proceeds from the offering for future acquisitions, funding of development and redevelopment properties, and for other general corporate purposes.

In addition, Terreno Realty Corporation issued 2,353,278 shares of common stock with a weighted average offering price of $64.00 per share under the Company’s at-the-market equity offering program, receiving gross proceeds of $150.6 million. Terreno Realty Corporation did not repurchase any shares of common stock pursuant to the Company’s share repurchase authorization.

As of March 31, 2024, there were no borrowings outstanding under Terreno Realty Corporation’s $400 million revolving credit facility. Terreno Realty Corporation has one $100 million senior unsecured note maturing in 2024 and no debt maturing in 2025.

Additional information is available on the Company’s website at www.terreno.com. Terreno Realty Corporation expects to file its quarterly report on Form 10-Q for the quarter ended March 31, 2024 on or about May 8, 2024.

Terreno Realty Corporation acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. We caution investors that forward-looking statements are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”, “seek”, “target”, “see”, “likely”, “position”, “opportunity”, “outlook”, “potential”, “future” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates, and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2023 and our other public filings. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240408008020/en/

Terreno Realty Corporation

Jaime Cannon, 415-655-4580

Source: Terreno Realty Corporation

FAQ

What was Terreno Realty 's (TRNO) quarter-end occupancy for the first quarter of 2024?

Terreno Realty reported a quarter-end occupancy of 96.2% for the first quarter of 2024.

How much was the increase in cash rents on new and renewed leases in the first quarter of 2024 for Terreno Realty (TRNO)?

There was a significant increase of 47.2% in cash rents on new and renewed leases for Terreno Realty in the first quarter of 2024.

What was the total amount of acquisitions completed by Terreno Realty (TRNO) in the first quarter of 2024?

Terreno Realty completed acquisitions totaling $18.5 million in the first quarter of 2024.

How many developments did Terreno Realty (TRNO) commence in the first quarter of 2024?

Terreno Realty commenced two developments in the first quarter of 2024.

What were the gross proceeds from the stock offering completed by Terreno Realty (TRNO) in the first quarter of 2024?

Terreno Realty completed a stock offering with gross proceeds of $392.2 million in the first quarter of 2024.