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

Rhea-AI Summary

Terreno Realty (NYSE:TRNO) reported strong Q4 2024 performance with quarter-end occupancy reaching 97.4%, up from 97.0% in Q3. The company achieved a significant 26.7% increase in cash rents on new and renewed leases during Q4, and a 36.5% increase for the full year 2024.

Notable Q4 activities include $409.6 million in acquisitions of four industrial properties totaling 857,000 square feet, and the sale of three properties for $63.4 million. For the full year 2024, acquisitions totaled $884.5 million. The company commenced one new development project with an expected investment of $55.9 million and completed three development projects with a total investment of $86.0 million.

The company's portfolio now includes 299 buildings totaling 19.3 million square feet and 47 improved land parcels across six major coastal U.S. markets. Same-store occupancy improved to 98.3% from 97.3% in Q3.

Positive

• Quarter-end occupancy increased to 97.4% from 97.0% in previous quarter
• 26.7% increase in cash rents on new/renewed leases in Q4; 36.5% for full year
• Significant acquisition activity: $409.6M in Q4, $884.5M for full year
• Strong property sales with 15.3% unleveraged internal rate of return for 2024
• High tenant retention ratio of 82.4% in Q4

Negative

• Year-over-year occupancy declined from 98.5% to 97.4%
• Improved land portfolio occupancy decreased to 95.1% from 98.1% in Q3

Insights

Real Estate Investment Analyst

The quarterly update reveals robust operational performance and strategic growth for Terreno Realty. The 26.7% increase in cash rents on new and renewed leases during Q4, culminating in a 36.5% increase for the full year, demonstrates exceptional pricing power in their coastal markets. The deployment of $1.1 billion in capital throughout 2024, including $884.5 million in acquisitions, shows aggressive but calculated expansion in prime industrial locations.

The portfolio metrics are particularly strong, with occupancy improving to 97.4% and same-store occupancy at 98.3%. The strategic disposition of assets generated impressive unleveraged IRRs ranging from 13.4% to 18.8%, validating their market timing and location selection strategy. The development pipeline with $315.8 million in expected investment demonstrates forward-looking growth potential in key markets.

Market Research Analyst

The industrial real estate sector fundamentals remain exceptionally strong in coastal markets, as evidenced by Terreno's ability to push rents significantly higher. The strategic focus on six major coastal markets positions them well to capitalize on e-commerce growth and supply chain modernization trends. The 82% tenant retention ratio in Q4 indicates strong tenant satisfaction despite substantial rent increases.

The acquisition of prime assets like the 280 Richards Street property in Brooklyn with riparian access and the Doral Air Logistics property near Miami International Airport shows strategic positioning in irreplaceable locations. The development pipeline's 48% pre-lease rate and focus on LEED certification aligns with modern tenant demands for sustainable, high-quality industrial space.

Financial Analyst

The balance sheet management is prudent with only $82 million drawn on their $600 million revolving credit facility. The successful equity raises through ATM and public offering, totaling $747.2 million at a weighted average price of $64.11 per share, demonstrates strong market confidence. The assumption of a $72.9 million fixed-rate loan at 3.85% for the Brooklyn acquisition is particularly advantageous in the current rate environment.

The stabilized cap rates on new acquisitions ranging from 4.5% to 5.7% reflect the premium quality of their portfolio, though they may seem compressed, the substantial mark-to-market opportunity in the lease portfolio provides significant organic growth potential.

• 97.4% quarter-end occupancy compared to prior quarter of 97.0% and prior year of 98.5%

• 98.3% quarter-end same-store occupancy compared to prior quarter of 97.3% and prior year of 98.5%

• 26.7% increase in cash rents on new and renewed leases; 36.5% increase for the full year

• $1.1 billion of capital deployment in 2024

• $409.6 million of acquisitions; full year acquisitions of $884.5 million

• Sold three properties for $63.4 million; for the full year sold four properties for $74.4 million

• Commenced the development of one property with a total expected investment of $55.9 million; during 2024 commenced development of five properties with a total expected investment of $241.1 million

• Completed the development and stabilization of three properties with a total expected investment of $86.0 million; during 2024 completed the development and stabilization of six properties with a total expected investment of $262.1 million

• Issued no shares of common stock under ATM during the fourth quarter

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 2024.

Operating

As of December 31, 2024, Terreno Realty Corporation owned 299 buildings aggregating approximately 19.3 million square feet and 47 improved land parcels consisting of approximately 150.6 acres leased to 670 customers:

• The operating portfolio was 97.4% leased at December 31, 2024 as compared to 97.0% at September 30, 2024 and 98.5% at December 31, 2023. Occupancy at December 31, 2024 included 176,000 square feet of acquired vacancy (approximately 90bps) of which 42,000 square feet is pre-leased with a January 2025 commencement date;

• The same-store portfolio of approximately 14.5 million square feet was 98.3% leased at December 31, 2024 as compared to 97.3% at September 30, 2024 and 98.5% at December 31, 2023;

• The improved land portfolio of 47 parcels totaling approximately 150.6 acres was 95.1% leased at December 31, 2024 as compared to 98.1% at September 30, 2024 and 94.6% at December 31, 2023;

• Cash rents on new and renewed leases totaling approximately 0.7 million square feet commencing during the fourth quarter increased approximately 26.7% with a tenant retention ratio of 82.4% for the operating portfolio. Cash rents on new and renewed leases totaling approximately 2.3 million square feet and 22.5 acres of improved land commencing during the year ended December 31, 2024 increased approximately 36.5% with a tenant retention ratio of 61.6% for the operating portfolio and 54.7% for the improved land portfolio;

• Executed an early lease renewal for 50,000 square feet in Jamaica Queens, New York with a manufacturer of pre-cooked meals. The lease, which was to expire in September 2026, will now expire September 2036;

• Executed a lease for 82,000 square feet in Avenel, New Jersey with a leading national wholesale tire distributor. The lease commenced on December 31, 2024 and will expire January 2030; and

• Pre-leased 50% of Countyline Corporate Park Phase IV Building 32 in Hialeah, Florida.

Investment

During the fourth quarter of 2024, Terreno Realty Corporation acquired four industrial properties consisting of six buildings containing approximately 857,000 square feet for an aggregate purchase price of approximately $409.6 million. The fourth quarter investment activity was as follows:

• 48-29 31st Place: One industrial distribution building containing approximately 17,000 square feet on 0.4 acres located in Long Island City Queens, New York, adjacent to I-495 (Queens Midtown/Long Island Expressway) approximately one mile from the Queens Midtown Tunnel. The property provides one dock-high, one van-level and one grade-level loading positions and parking for seven cars. The property was acquired vacant for a purchase price of approximately $7.6 million and an estimated stabilized cap rate of 5.7%;

• 280 Richards Street: One 36-foot clear height industrial distribution building containing approximately 312,000 leasable square feet on 16.0 acres located in Red Hook, Brooklyn, New York. The property has riparian access and provides five dock-high and five grade-level loading positions and parking for 349 cars, including 179 rooftop parking positions. The property was acquired 100% leased to a leading e-commerce firm for a purchase price of approximately $156.3 million and an estimated stabilized cap rate of 4.8%. The purchase price includes the assumption of an approximately $72.9 million 3.85% interest-only loan which matures in March 2028;

• Terreno Doral Air Logistics at 7725-7785 NW 41st Street: Three 36-foot clear height rear-load industrial distribution buildings containing approximately 495,000 square feet on 23.4 acres located in Doral, Florida, immediately adjacent to the Palmetto Expressway and approximately one mile from the MIA Cargo Viaduct and two miles from the Dolphin Expressway and Miami International Airport. The property provides 110 dock-high and six grade-level loading positions and parking for 528 cars (including 11 EV charging positions). The property was acquired 76% leased to six tenants for a purchase price of approximately $195.6 million and an estimated stabilized cap rate of 4.6%; and

• 49-15 Maspeth Avenue: One industrial transshipment building containing approximately 33,000 square feet on 2.6 acres located in Maspeth Queens, New York, less than one mile from the intersection of I-278 (Brooklyn-Queens Expressway) and I-495 (Queens Midtown/Long Island Expressway). The property provides 40 dock-high and four grade-level loading positions, 50 additional trailer positions and parking for 31 cars. The property was acquired 100% leased to a plumbing, heating, HVAC and industrial products distributor for a purchase price of approximately $50.1 million and an estimated stabilized cap rate of 4.5%.

In 2024, Terreno Realty Corporation acquired eight properties consisting of 13 buildings containing approximately 1.3 million 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 $884.5 million.

During the fourth quarter of 2024, Terreno Realty Corporation sold three properties consisting of three buildings containing approximately 112,000 square feet and one improved land parcel of approximately 5.7 acres for an aggregate sale price of approximately $63.4 million:

• Two industrial flex buildings containing 37,000 square feet on 3.9 acres in Union City, California for a sale price of approximately $13.0 million. The property was acquired by Terreno Realty Corporation in December 2014 for approximately $5.1 million. The unleveraged internal rate of return generated by the investment was 18.8%;

• One 75,000 square foot industrial distribution building on 2.8 acres in Doral, Florida for a sale price of approximately $20.6 million. The property was acquired by Terreno Realty Corporation in July 2012 for approximately $4.2 million. The unleveraged internal rate of return generated by the investment was 13.4%; and

• One 5.7-acre improved land parcel in Newark, New Jersey for a sale price of approximately $29.8 million. The property was acquired by Terreno Realty Corporation in June 2017 for approximately $8.8 million. The unleveraged internal rate of return generated by the investment was 14.9%.

For the full year 2024, Terreno Realty Corporation sold four properties consisting of four buildings containing approximately 137,000 square feet and one improved land parcel of approximately 5.7 acres for an aggregate sale price of approximately $74.4 million generating an unleveraged internal rate of return of approximately 15.3%.

During the fourth quarter of 2024, Terreno Realty Corporation commenced development of Countyline Corporate Park Phase IV Building 34 in Hialeah, Florida. Upon completion, which is expected to occur in the third quarter of 2025, Countyline Building 34 will consist of one approximately 220,000 square foot industrial distribution building, with a total expected investment of $55.9 million and an estimated stabilized cap rate of 5.7%. The building is expected to achieve LEED certification and is 70% pre-leased. The lease will commence upon completion of the building and tenant improvements and will expire in February 2033.

In 2024, Terreno Realty Corporation commenced development or redevelopment of five properties that, upon completion, will consist of eight industrial distribution buildings aggregating approximately 0.9 million square feet, with a total expected investment of approximately $241.1 million.

During the fourth quarter of 2024, Terreno Realty Corporation completed the development or redevelopment and stabilization of three properties:

• Terreno 147th Street in Hawthorne, California. The property is 100% leased to an atomic energy company. The property, formerly an improved land parcel, is a 31,000 square foot industrial distribution building on 1.3 acres with four dock-high and one grade-level loading positions and parking for 35 cars, including four electric car charging positions. The building is expected to achieve LEED certification, the total expected investment is $15.6 million and the estimated stabilized cap rate is 5.6%;

• Countyline Corporate Park Phase IV Building 31 in Hialeah, Florida. The building is 100% leased to one tenant. Building 31 is a 162,000 square foot 36-foot clear height rear-load industrial distribution building on 10.0 acres with 53 dock-high and two grade-level loading positions and parking for 140 cars. The building is expected to achieve LEED certification, the total expected investment is $42.1 million and the estimated stabilized cap rate is 6.0%; and

• 14805 S. Maple Avenue in Rancho Dominguez, California. The property is 100% leased on a short-term basis to a trucking and transloading provider for 18 months. The redeveloped property, a 2.8-acre improved land parcel on the site of a former 51,000 square-foot building, is adjacent to two Terreno Realty Corporation improved land parcels on S. Maple Avenue. The total expected investment is $28.3 million and the estimated stabilized cap rate is 2.3%.

In 2024, Terreno Realty Corporation completed the development or redevelopment and stabilization of six properties consisting of five industrial distribution buildings aggregating approximately 1.1 million square feet and one approximately 2.8-acre improved land parcel, with a total expected investment of $262.1 million.

As of December 31, 2024, Terreno Realty Corporation had six properties under development or redevelopment that, upon completion, will consist of nine buildings aggregating approximately 0.9 million square feet which are approximately 48% pre-leased, with a total expected investment of approximately $315.8 million. Additionally, we owned approximately 22.4 acres of land entitled for future development of two buildings aggregating approximately 433,000 square feet.

Terreno Realty Corporation has no acquisitions under contract or letters of intent.

Capital Markets

During the fourth quarter of 2024, Terreno Realty Corporation did not issue any shares of common stock under the Company’s at-the-market equity offering program. For the full year 2024, Terreno Realty Corporation issued 5,329,544 shares of common stock with a weighted average offering price of $66.62 per share under the Company’s at-the-market equity offering program, receiving gross proceeds of $355.1 million. Combined with the March 2024 public offering of 6,325,000 shares of common stock, Terreno Realty Corporation issued 11,654,544 shares of common stock at a weighted average offering price of $64.11 per share, receiving aggregate gross proceeds of $747.2 million. Terreno Realty Corporation did not repurchase any shares of common stock pursuant to the Company’s share repurchase authorization.

In connection with the acquisition of 280 Richards Street, Terreno Realty Corporation assumed a $72.9 million 3.85% interest-only mortgage which matures in March 2028. As of December 31, 2024, the balance outstanding on Terreno Realty Corporation’s $600 million revolving credit facility was approximately $82 million. Terreno Realty Corporation has 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 annual report on Form 10-K for the year ended December 31, 2024 on or about February 5, 2025.

Terreno Realty Corporation acquires, owns and operates industrial real estate in six major coastal U.S. markets: New York City/Northern New Jersey; 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/20250107698486/en/

Terreno Realty Corporation

Jaime Cannon, 415-655-4580

Source: Terreno Realty Corporation

FAQ

What was TRNO's occupancy rate in Q4 2024?

Terreno Realty 's occupancy rate was 97.4% at the end of Q4 2024, up from 97.0% in Q3 2024 but down from 98.5% in Q4 2023.

How much did TRNO's cash rents increase in 2024?

Cash rents on new and renewed leases increased by 36.5% for the full year 2024, with Q4 showing a 26.7% increase.

What was TRNO's total acquisition value in Q4 2024?

TRNO acquired four industrial properties for approximately $409.6 million in Q4 2024, totaling 857,000 square feet.

How many properties did TRNO sell in Q4 2024 and for how much?

TRNO sold three properties in Q4 2024 for approximately $63.4 million, consisting of three buildings and one improved land parcel.

What was TRNO's development activity in 2024?

In 2024, TRNO commenced development of five properties with a total expected investment of $241.1 million and completed six development projects with a total investment of $262.1 million.