Terreno Realty Corporation Announces Quarterly Operating, Investment and Capital Markets Activity, and Promotion of John Meyer to Chief Operating Officer

Rhea-AI Summary

Terreno Realty Corporation (TRNO) announced its operating, investment, and capital markets activity for Q4 of 2023. The company reported a 98.5% quarter-end occupancy, a 47.5% increase in cash rents, and $73.2 million of acquisitions. The company also issued 2,610,173 shares of common stock under ATM for gross proceeds of $158.4 million.

Positive

• 98.5% quarter-end occupancy, a 47.5% increase in cash rents on new and renewed leases
• $73.2 million of acquisitions
• Issued 2,610,173 shares of common stock under ATM for gross proceeds of $158.4 million

Negative

• None.

Insights

Market Research Analyst

The recent operational and financial performance of Terreno Realty Corporation demonstrates a robust industrial real estate market, particularly in coastal U.S. regions. The slight decrease in same-store occupancy from 98.7% to 98.5% quarter-over-quarter is negligible, indicating stability in property demand. The substantial 47.5% increase in cash rents on new and renewed leases signifies a strong pricing power for the company, which is likely a result of limited supply and high demand for industrial spaces.

The strategic acquisitions and divestitures, with a focus on high-quality assets in key markets, are indicative of an active portfolio management approach. The reported internal rates of return (IRRs) on sold properties suggest effective capital recycling that enhances shareholder value. The unleveraged IRRs, particularly the 17.5% from the Hanover property, are impressive and exceed typical market averages, which usually range from 8% to 12% for well-performing industrial real estate investments.

Financial Analyst

From a financial perspective, Terreno Realty's capital-raising activities through common stock issuance at a weighted average offering price of $61.86 per share, resulting in $674.4 million in gross proceeds, indicate strong investor confidence and provide the company with substantial liquidity. This capital injection will likely support further acquisitions and developments, positioning the company for growth. The absence of debt maturities in 2025 and no outstanding borrowings under the credit facility as of year-end 2023 reflects a healthy balance sheet with manageable leverage levels, which is favorable for the company's credit profile and financial flexibility.

Investors should note the estimated stabilized cap rates for recent acquisitions, ranging from 5.3% to 6.4%, which are slightly below the industry average for prime industrial assets, suggesting a competitive market with potentially lower yields. However, the cap rate should be assessed in conjunction with other factors such as location, tenant quality and growth prospects within the market.

Real Estate Investment Analyst

Terreno Realty's focus on industrial real estate in major coastal markets aligns with broader trends of e-commerce growth and supply chain reconfiguration, which drive demand for strategically located distribution centers. The company's development and redevelopment initiatives, with a total expected investment of approximately $283.2 million, demonstrate a forward-looking approach to capitalizing on these trends. Pre-leasing rates of approximately 71% for properties under development underscore the strong market appetite.

The promotion of John Meyer to Chief Operating Officer is a strategic move that leverages his experience and may further streamline operations. His background with AMB Property Corporation, now Prologis, a leader in the industrial real estate sector, could bring valuable insights to Terreno's operational strategies, potentially improving efficiency and tenant relations.

• 98.5% quarter-end occupancy compared to prior quarter of 98.3% and prior year of 98.6%
• 98.5% quarter-end same-store occupancy compared to prior quarter of 98.7% and prior year of 98.8%
• 47.5% increase in cash rents on new and renewed leases; 55.5% increase for the full year
• $73.2 million of acquisitions; full year acquisitions of $484.0 million
• Sold three properties for $51.6 million; for the full year sold four properties for $77.0 million
• During 2023 commenced developments and redevelopments with total expected investment of $283.2 million
• Issued 2,610,173 shares of common stock under ATM for gross proceeds of $158.4 million; for the full year issued 5,152,279 shares of common stock under ATM for gross proceeds of $315.1 million
• Combined with the February 2023 public offering of 5.75 million shares, issued 10,902,279 shares of common stock in 2023 for gross proceeds of $674.4 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 fourth quarter of 2023.

Operating

As of December 31, 2023, Terreno Realty Corporation owned 259 buildings aggregating approximately 16.0 million square feet and 45 improved land parcels consisting of approximately 152.4 acres:

• The operating portfolio was 98.5% leased at December 31, 2023 to 580 tenants as compared to 98.3% at September 30, 2023 and 98.6% at December 31, 2022;
• The same-store portfolio of approximately 13.1 million square feet was 98.5% leased at December 31, 2023 as compared to 98.7% at September 30, 2023 and 98.8% at December 31, 2022;
• The improved land portfolio of 45 parcels totaling approximately 152.4 acres was 94.6% leased at December 31, 2023 as compared to 96.3% at September 30, 2023 and 92.5% at December 31, 2022;
• Cash rents on new and renewed leases totaling approximately 0.3 million square feet and 0.0 acres of improved land commencing during the fourth quarter increased approximately 47.5% with a tenant retention ratio of 75.6% for the operating portfolio and 0.0% for the improved land portfolio. Cash rents on new and renewed leases totaling approximately 2.1 million square feet and 11.4 acres of improved land commencing during the year ended December 31, 2023 increased approximately 55.5% with a tenant retention ratio of 57.7% for the operating portfolio and 16.8% for the improved land portfolio; and
• Terreno Realty Corporation completed the development of Countyline Corporate Park Phase IV Building 41 in Hialeah, Florida and leased 100% of the building to an international logistics services provider. Building 41 of Terreno Realty Corporation’s Countyline Corporate Park is a 191,000 square foot 32-foot clear height rear-load industrial distribution building on 10.5 acres with 62 dock-high and two grade-level loading positions and parking for 196 cars. The building is expected to achieve LEED certification, the total expected investment is $41.2 million and the estimated stabilized cap rate is 5.1%.

Investment

During the fourth quarter of 2023, Terreno Realty Corporation acquired two properties consisting of three buildings containing approximately 208,000 square feet for an aggregate purchase price of approximately $73.2 million. The fourth quarter investment activity was as follows:

• 2411 Santa Fe Avenue: One industrial transshipment building containing approximately 67,000 square feet and one industrial flex building containing approximately 45,000 square feet on 6.7 acres located in Redondo Beach, California, west of Interstate 405 between Los Angeles International Airport and the ports of Los Angeles and Long Beach. The property provides 23 dock-high and one grade-level loading positions and parking for 200 cars. The property was acquired 100% leased to two tenants for a purchase price of approximately $45.7 million and an estimated stabilized cap rate of 5.3%; and
• 185 Van Dyke Street: One industrial flex building containing approximately 96,000 square feet on 3.8 acres located in Red Hook, Brooklyn, New York, on the Upper New York Bay waterfront. The property provides two dock-high and ten grade-level loading positions and off-street parking for 26 cars. The property was acquired 66% leased to 19 tenants for a purchase price of approximately $27.5 million and an estimated stabilized cap rate of 6.4%.

In 2023 Terreno Realty Corporation acquired seven properties consisting of nine buildings containing approximately 889,000 square feet, 4.9 acres which will be redeveloped with the construction of an approximately 92,000 square foot industrial distribution building, and a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings for an aggregate purchase price of approximately $484.0 million.

Subsequent to December 31, 2023, Terreno Realty Corporation acquired a property at 13045 SE 32nd Street in Bellevue, Washington. The property consists of one industrial distribution building containing approximately 16,000 square feet on 1.8 acres adjacent to the intersection of I-90 and I-405. The property was acquired vacant for a purchase price of approximately $6.5 million and an estimated stabilized cap rate of 5.8%.

During the fourth quarter of 2023, Terreno Realty Corporation sold three properties consisting of two buildings containing approximately 151,000 square feet and one improved land parcel of approximately 13.4 acres for an aggregate sale price of approximately $51.6 million:

• One property in Hanover, Maryland consisting of a 13.4-acre improved land parcel for a sale price of approximately $18.0 million. The property was acquired by Terreno Realty Corporation in July 2016 for approximately $8.2 million. The unleveraged internal rate of return generated by the investment was 17.5%;
• One property in West Caldwell, New Jersey consisting of a 93,000 square foot industrial distribution building on 8.9 acres for a sale price of approximately $17.8 million. The property was acquired by Terreno Realty Corporation in June 2013 for approximately $6.8 million. The unleveraged internal rate of return generated by the investment was 11.2%; and
• One property in Compton, California consisting of a 58,000 square foot industrial distribution building on 3.0 acres for a sale price of approximately $15.9 million. The property was acquired by Terreno Realty Corporation in July 2017 for approximately $9.4 million. The unleveraged internal rate of return generated by the investment was 13.0%.

For the full year 2023, Terreno Realty Corporation sold four properties consisting of three buildings containing approximately 278,000 square feet and one improved land parcel of approximately 13.4 acres for an aggregate sale price of approximately $77.0 million generating an unleveraged internal rate of return of approximately 13.7%.

During 2023, Terreno Realty Corporation commenced development or redevelopment of six properties that, upon completion, will consist of five buildings aggregating approximately 1.2 million square feet and one approximately 2.8-acre improved land parcel, with a total expected investment of approximately $283.2 million.

As of December 31, 2023, Terreno Realty Corporation had seven properties under development or redevelopment that, upon completion, will consist of six buildings aggregating approximately 1.0 million square feet which are approximately 71% pre-leased and one approximately 2.8-acre improved land parcel, with a total expected investment of approximately $295.2 million. Additionally, we owned approximately 62.7 acres of land entitled for future development of six buildings aggregating approximately 1.1 million square feet.

Terreno Realty Corporation has no acquisitions under contract.

Capital Markets

During the fourth quarter of 2023, Terreno Realty Corporation issued 2,610,000 shares of common stock with a weighted average offering price of $60.71 per share under the Company’s at-the-market equity offering program, receiving gross proceeds of $158.4 million. Year-to-date through December 31, 2023, Terreno Realty Corporation has issued 5,152,279 shares of common stock with a weighted average offering price of $61.15 per share, receiving gross proceeds of $315.1 million under the Company’s at-the-market equity offering program. Combined with the February 2023 public offering of 5.75 million shares of common stock, Terreno Realty Corporation issued 10,902,279 shares of common stock in 2023 at a weighted average offering price of $61.86 per share, receiving aggregate gross proceeds of $674.4 million. Terreno Realty Corporation did not repurchase any shares of common stock pursuant to the Company’s share repurchase authorization.

As of December 31, 2023, 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 none maturing in 2025.

John Meyer Promoted to Chief Operating Officer

Terreno Realty Corporation announced today the promotion of John Meyer to Chief Operating Officer effective January 8, 2024. Mr. Meyer will continue to report to Michael A. Coke, President and W. Blake Baird, Chairman and Chief Executive Officer. Prior to joining Terreno Realty Corporation in 2010, Mr. Meyer was Executive Vice President, Director of Transactions, Southwest Region of North America for AMB Property Corporation (now Prologis, NYSE: PLD). Mr. Meyer holds a BS degree in architecture from the University of Oklahoma.

Additional information is available on the Company’s website at www.terreno.com. Terreno Realty Corporation expects to file its annual report on Form 10-K for the year ended December 31, 2023 on or about February 7, 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,” 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, 2022 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/20240108817694/en/

Terreno Realty Corporation

Jaime Cannon, 415-655-4580

Source: Terreno Realty Corporation

FAQ

How much was the quarter-end occupancy reported by Terreno Realty Corporation in Q4 of 2023?

Terreno Realty Corporation reported a 98.5% quarter-end occupancy in Q4 of 2023.

What was the increase in cash rents on new and renewed leases for Terreno Realty Corporation in Q4 of 2023?

Terreno Realty Corporation reported a 47.5% increase in cash rents on new and renewed leases in Q4 of 2023.

How many shares of common stock did Terreno Realty Corporation issue under ATM for gross proceeds of $158.4 million in Q4 of 2023?

Terreno Realty Corporation issued 2,610,173 shares of common stock under ATM for gross proceeds of $158.4 million in Q4 of 2023.