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Terreno Issues Q2 Activity Update, Portfolio Occupancy Down

Zacks Equity Research

Terreno Realty Corporation TRNO recently announced its second-quarter 2019 operating, investment and capital market activity.

In sync with its strategy of acquiring industrial properties at strategic locations, the company purchased two industrial properties — 1501 Tennessee and 1400 Minnesota — in the second quarter. The properties, spanning nearly 119,000 square feet of space, were purchased for $47.8 million. These facilities, located in the Dogpatch submarket of San Francisco’s Central Waterfront, are well-equipped with amenities and fully leased to nine tenants currently.

Further, year to date through the second quarter of 2019, Terreno Realty has disposed one property, spanning around 90,000 square feet, for around $12.4 million. This transaction generated an unleveraged internal rate of return of around 12.4%. In addition, year-to-date acquisitions stood at $110.9 million.

These transactions have enabled Terreno Realty to own 209 buildings, aggregating nearly 13 million square feet and 17 improved land parcels spanning around 74.7 acres at the end of the June-end quarter. The company also had four properties under redevelopment as of the same date, with a total projected investment of nearly $130 million.

The operating portfolio (excluding four properties under redevelopment) was 97.9% leased as of Jun 30, 2019, lower than the 98.1% lease rate as of Mar 31, 2019. Also, the same-store portfolio of around 12 million square feet was 98.8% leased as of Jun 30, 2019, down from 99% as of Mar 31, 2019.

Occupancy at the company’s properties at the end of the April-June period stood at 97.9%, lower than 98.1% as of Mar 31, 2019.

Additionally, during the quarter under review, Terreno Realty raised $108.7 million by issuing 2,375,270 shares of common stock under its at-the-market equity offering program. Year to date, the company has raised gross proceeds of $191 million by issuing 4,364,071 shares of common stock.

Encouragingly, over the past three months, shares of Terreno Realty have outperformed the industry. While its shares have gained 14.8%, the industry has rallied 3.7% during this period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amid solid fundamentals of the industrial real estate industry, the company’s strategy to strengthen its position as an industrial landlord bodes well. In fact, amid healthy manufacturing environment and an e-commerce boom, demand for warehouse and logistics real estate is anticipated to be healthy. This is benefiting a number of industrial real estate investment trusts (REIT), including Terreno Realty, Duke Realty DRE, Prologis Inc. PLD and Liberty Property Trust LPT.

However, recovery in the industrial market has continued for long, and a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to higher supply and lesser scope for rent and occupancy growth. This apart, any protectionist trade policies will have an adverse impact on economic growth, as well as the company’s business over the long term.

Terreno Realty currently carries a Zacks Rank #4 (Sell).

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