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

Rhea-AI Summary

Terreno Realty (NYSE: TRNO) reported its Q2 2024 operating, investment, and capital markets activity.

Key highlights include: 96.0% portfolio occupancy, a slight dip from 96.2% in Q1 2024 and 97.8% in Q2 2023. Cash rents on new and renewed leases increased by 45.9%, with a year-to-date rise of 46.5%. The company acquired properties worth $448.8 million and began developing a $42.1 million project. They also stabilized two buildings totaling 692,000 sq. ft. at Countyline Corporate Park.

Year-to-date, Terreno Realty acquired properties valued at $467.3 million and issued 8.68 million shares at an average price of $62.54, generating $542.8 million in proceeds. No shares were repurchased, and there were no outstanding borrowings on their $400 million credit facility.

Positive

• 45.9% increase in cash rents on new and renewed leases.
• Acquisitions worth $448.8 million in Q2 2024.
• Year-to-date acquisitions totaling $467.3 million.
• Development of a $42.1 million property commenced.
• Stabilized two buildings totaling 692,000 sq. ft. at Countyline Corporate Park.
• Issued 8.68 million shares, raising $542.8 million.

Negative

• Occupancy declined to 96.0% from 96.2% in Q1 2024 and 97.8% in Q2 2023.
• Same-store portfolio occupancy down to 96.0% from 98.1% in Q2 2023.

Insights

Financial Analyst

Terreno Realty Corporation reported nuanced performance metrics for the second quarter of 2024, underscoring the dynamic nature of the industrial real estate market. Occupancy rates saw a slight decline to 96.0% from 96.2% in the previous quarter and 97.8% a year ago, primarily due to the acquisition of vacant properties. This minor reduction in occupancy indicates a strategic acquisition approach, potentially targeting properties with value-add opportunities.

A notable highlight is the 45.9% increase in cash rents on new and renewed leases, suggesting strong rent growth potential in their portfolio. This increase is impressive and significantly outpaces inflation, reflecting Terreno's ability to capitalize on market demand for industrial spaces.

On the investment front, the acquisition of $448.8 million in properties during the quarter is substantial. The properties acquired come with varied occupancy rates and different stabilized cap rates, indicating a balanced mix of immediate income and future growth potential. The development pipeline, particularly the Countyline Corporate Park projects, points towards continued expansion and scaling of their portfolio, which will potentially enhance future revenue streams.

In the capital markets space, the absence of new share issuances in the quarter, coupled with strong liquidity positions (evident from no outstanding borrowings on their $400 million revolving credit facility), showcases disciplined financial management. The retirement of a $100 million senior unsecured note with cash on hand speaks to a strong balance sheet and prudent debt management.

For retail investors, the combination of robust rent growth, strategic acquisitions and solid financial health presents a positive long-term outlook. Nevertheless, they should keep an eye on occupancy trends and the successful execution of the development pipeline.

Market Research Analyst

Terreno Realty's performance in the industrial real estate sector offers valuable insights into broader market trends. The high occupancy rates of 96%, while slightly declining, still reflect a strong demand for industrial spaces. This is consistent with macroeconomic trends where e-commerce growth and supply chain restructuring are driving demand for logistics and warehousing spaces.

The significant increase in cash rents (45.9%) on new and renewed leases is indicative of the strong pricing power in core coastal markets. These markets—New York, Los Angeles and Miami among others—are seen as high barrier-to-entry markets, where demand continues to exceed supply.

The company's investment in development projects, like the Countyline Corporate Park, aligns with the trend of upgrading and expanding industrial facilities to meet modern logistical needs, including higher clear heights and advanced loading facilities. The push towards LEED certification also reflects an increasing emphasis on sustainability, which is becoming a critical factor for tenants and investors alike.

Another noteworthy point is the tenant diversity within their portfolio, with over 600 tenants spread across various sectors. This diversification minimizes reliance on any single tenant or industry, reducing risk. Investors should see this as a stabilizing factor, providing a buffer against sector-specific downturns.

Retail investors should consider how Terreno's strategic positioning in top coastal markets and commitment to modern, sustainable facilities can drive long-term value. However, they should be mindful of macroeconomic pressures that could affect tenant demand and rental rates.

• 96.0% quarter-end occupancy compared to prior quarter of 96.2% and prior year of 97.8%
• 96.0% quarter-end same-store occupancy compared to prior quarter of 96.2% and prior year of 98.1%
• 45.9% increase in cash rents on new and renewed leases; 46.5% increase year-to-date
• $448.8 million of acquisitions; $467.3 million year-to-date
• Commenced development of one property with total expected investment of $42.1 million
• Stabilized two buildings containing 692,000 square feet at Countyline Corporate Park

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 second quarter of 2024.

Operating

As of June 30, 2024, Terreno Realty Corporation owned 292 buildings aggregating approximately 18.1 million square feet and 45 improved land parcels consisting of approximately 152.4 acres:

• The operating portfolio was 96.0% leased at June 30, 2024 to 668 tenants as compared to 96.2% at March 31, 2024 and 97.8% at June 30, 2023. Occupancy declined during the second quarter primarily due to 99,000 square feet of acquired vacancy (approximately 60bps);
• The same-store portfolio of approximately 14.7 million square feet was 96.0% leased at June 30, 2024 as compared to 96.2% at March 31, 2024 and 98.1% at June 30, 2023;
• The improved land portfolio of 45 parcels totaling approximately 152.4 acres was 98.1% leased at June 30, 2024 as compared to 94.6% at March 31, 2024 and 96.3% at June 30, 2023;
• Cash rents on new and renewed leases totaling approximately 0.5 million square feet and 18.9 acres of improved land commencing during the second quarter increased approximately 45.9% with a tenant retention ratio of 56.4% for the operating portfolio and 61.2% for the improved land portfolio. Cash rents on new and renewed leases totaling approximately 1.2 million square feet and 22.2 acres of improved land commencing during the six months ended June 30, 2024 increased approximately 46.5% with a tenant retention ratio of 56.6% for the operating portfolio and 65.7% for the improved land portfolio;
• Executed a lease for 5.5 acres of improved land in Newark, New Jersey with an automobile exporter. The lease commenced in May 2024 and will expire January 2028; and
• Executed an early lease renewal and expansion in Fremont, California with an Advanced Air Mobility provider. The renewal lease of 30,000 square feet, which was to expire in February 2025, will now expire August 2029. The expansion lease of 41,000 square feet commenced in June 2024 and will expire August 2029.

Investment

During the second quarter of 2024, Terreno Realty Corporation acquired one industrial property consisting of four buildings containing approximately 357,000 square feet and a multi-market portfolio of industrial properties consisting of 28 buildings containing approximately 1.2 million square feet for an aggregate purchase price of approximately $448.8 million. The second quarter investment activity was as follows:

• 6584-6674 Fleet Drive: Four industrial distribution buildings containing approximately 357,000 square feet on 19.1 acres located in Alexandria, Virginia, approximately two miles from the intersection of I-95/395 and I-495 (Capital Beltway). The property provides 67 dock-high and 38 grade-level loading positions and parking for 580 cars. The property was acquired 100% leased to 21 tenants, with all leases expiring by 2031, for a purchase price of approximately $84.3 million and an estimated stabilized cap rate of 5.3%; and
• Multi-market portfolio of industrial properties: 28 buildings containing approximately 1.2 million square located in New York City, Northern New Jersey, San Francisco Bay Area, and Los Angeles. The portfolio was acquired 91.6% leased to 70 tenants for a purchase price of approximately $364.5 million. The in-place cap rate is 4.3%, the estimated stabilized cap rate is 5.0% and the estimated stabilized cap rate adjusting to today’s market rents is 5.8%.

Year-to-date, Terreno Realty Corporation has acquired three properties consisting of six buildings containing approximately 397,000 square feet and a multi-market portfolio of industrial properties consisting of 28 buildings containing approximately 1.2 million square feet for an aggregate purchase price of approximately $467.3 million.

During the second quarter of 2024, Terreno Realty Corporation commenced development of Countyline Corporate Park Phase IV Building 31 in Hialeah, Florida that, upon completion, will consist of one industrial distribution building containing approximately 162,000 square feet, with a total expected investment of approximately $42.1 million. Building 31 has been 100% pre-leased to a national tire distributor commencing with building completion, expected to be in the fourth quarter of 2024, and expiring May 2032.

Year-to-date, Terreno Realty Corporation has commenced development of three properties that, upon completion, will consist of three industrial distribution buildings aggregating approximately 484,000 square feet, with a total expected investment of approximately $121.2 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 $64.0 million.

During the second quarter of 2024, Terreno Realty Corporation completed the development and stabilization of Countyline Corporate Park Phase IV Building 38 in Hialeah, Florida. The building is 100% leased to a North American distributor of foodservice packaging, commercial cleaning supplies, janitorial equipment and industrial packaging. Building 38 is a 506,000 square foot 36-foot clear height cross-dock industrial distribution building on 27.6 acres with 105 dock-high and four grade-level loading positions and parking for 360 cars. The building is expected to achieve LEED certification, the total expected investment is $88.5 million and the estimated stabilized cap rate is 5.0%.

During the second quarter of 2024, Terreno Realty Corporation completed the development and stabilization of Countyline Corporate Park Phase IV Building 40 in Hialeah, Florida. The building, which was previously expected to stabilize in the fourth quarter of 2024, is 100% leased to four tenants. Building 40 is a 186,000 square foot 36-foot clear height industrial distribution building on 9.1 acres with 60 dock-high and two grade-level loading positions and parking for 159 cars. The building is expected to achieve LEED certification, the total expected investment is $43.8 million and the estimated stabilized cap rate is 6.3%.

As of June 30, 2024, Terreno Realty Corporation had nine properties under development or redevelopment that, upon completion, will consist of ten buildings aggregating approximately 1.1 million square feet which are approximately 41% pre-leased and one approximately 2.8-acre improved land parcel, with a total expected investment of approximately $389.3 million. Additionally, we owned approximately 35.4 acres of land entitled for future development of three buildings aggregating approximately 0.7 million square feet.

Terreno Realty Corporation has approximately $7.7 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 second quarter of 2024, Terreno Realty Corporation did not issue any shares of common stock under the Company’s at-the-market equity offering program. Year-to-date through June 30, 2024, Terreno Realty Corporation has 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. Combined with the March 2024 public offering of 6,325,000 shares of common stock, Terreno Realty Corporation has issued 8,678,278 shares of common stock at a weighted average offering price of $62.54 per share, receiving aggregate gross proceeds of $542.8 million. Terreno Realty Corporation did not repurchase any shares of common stock pursuant to the Company’s share repurchase authorization.

As of June 30, 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 July 2024 which will be retired utilizing cash on hand 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 June 30, 2024 on or about August 7, 2024.

Terreno Realty Corporation acquires, owns and operates industrial real estate in six major coastal U.S. markets: Northern New Jersey/New York City; Los Angeles; Miami; San Francisco Bay Area; Seattle 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/20240709921408/en/

Terreno Realty Corporation

Jaime Cannon, 415-655-4580

Source: Terreno Realty Corporation

FAQ

What was Terreno Realty 's occupancy rate in Q2 2024?

The occupancy rate was 96.0% in Q2 2024.

How much did cash rents increase on new and renewed leases for TRNO in Q2 2024?

Cash rents increased by 45.9% on new and renewed leases in Q2 2024.

What were Terreno Realty 's total acquisitions in Q2 2024?

Terreno Realty acquired properties worth $448.8 million in Q2 2024.

What is the total value of TRNO's year-to-date acquisitions in 2024?

The total value of year-to-date acquisitions in 2024 is $467.3 million.

How much did Terreno Realty raise through its share issuance in 2024?

Terreno Realty raised $542.8 million through share issuance in 2024.

What is the size of the new development project TRNO commenced in Q2 2024?

The new development project is a $42.1 million investment.