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Terreno Buys Industrial Properties

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San Francisco, California-based Terreno Realty Corporation (TRNO), a real estate investment trust (:REIT), has announced the acquisition of three industrial properties in Sunnyvale, California, for approximately $33.7 million. The acquisition is a part of the company’s long-term strategy of abstaining from pursuing ground-up development or land investments, and instead owning functional and flexible buildings in infill locations that can be modified to accommodate single and multiple tenants at discounts to replacement cost.

The multi-tenant properties are 100% leased to two tenants. Of the three acquired buildings, two are R&D properties, spanning 101,000 square feet and are situated at 904 East Caribbean Drive and 1339 Moffett Park Drive, respectively. The properties are leased to Cepheid Inc. (CPHD) and RAE Systems Inc. The third property is a distribution building, spanning 71,000 square feet and is located at 914-918 East Caribbean Drive.

The properties are strategically located and are in close proximity to the interstate highways. Consequently, these properties offer unmatched distribution space to the lessee with easy access to the transportation facilities.

The estimated stabilized cap rate of the asset is 7.1%. The total acquisition cost of the properties included the initial purchase price, estimated near-term capital expenditures and the effects of marking assumed debt to market, due diligence and closing costs, and leasing costs necessary to achieve stabilization.

The Terreno Realty is on an expansion mode. Recently, the company has also acquired two industrial properties in California, spanning 162,000 square feet and 545,000 square feet, respectively.  

Terreno Realty owns and operates industrial real estate properties primarily in six major coastal markets across U.S. These include the high barrier-to-entry markets of Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington D.C./Baltimore.

Terreno Realty will likely release its second quarter 2012 earnings on August 8, 2012. The Zacks Consensus Estimate for second quarter 2012 FFO (fund from operations) is pegged at 16 cents per share. We presently have a long-term Neutral recommendation on the stock. Also, it retains a Zacks #3 Rank (short-term Hold rating). One of its competitors, DCT Industrial Trust Inc. (DCT), holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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