Terreno Realty Corporation TRNO recently announced the acquisition of an industrial property in Seattle, WA. The company has shelled out $2.9 million for this acquisition, which comes as part of its concerted efforts to bank on robust fundamentals of the industrial real estate sector through purchase of potential properties in core markets.
Comprising a 0.9-acre improved land parcel, this buyout at 5200 East Marginal Way South is just next to the company’s property at 53 South Dawson. Moreover, being adjacent to Seattle’s Port and SoDo District, the property has solid scope for future growth. Presently, the property is vacant and its stabilized cap rate has been estimated at 5.6%, which highlights the property’s decent earning potential.
Since the beginning of the year through third-quarter 2019, Terreno Realty has acquired 10 industrial properties, comprising 15 buildings spanning around 608,000 square feet, and three improved land parcels of about 21.7 acres, for a total price of $252 million. Meanwhile, the company sold two properties spanning nearly 197,000 square feet for $26.4 million, generating an unleveraged internal rate of return of about 9.8%.
Moreover, Terreno recently sold an industrial property in Jessup, MD, for $ 7.5 million. The company had acquired this property for around $6 million in November 2013, and the estimated unleveraged internal rate of return generated by the investment was about 7.5%.
Terreno is focused on an acquisition-driven growth strategy. It targets functional buildings at in-fill locations, which enjoy high-population densities and are located near high volume-distribution points. Amid these, Terreno’s efforts to shed non-core properties will enhance its portfolio and provide capital for strategic acquisitions.
Through such efforts, the company is well poised to fortify its portfolio in six major port cities — Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. — which display solid demographic trends and witness healthy demand for industrial real estates.
The e-commerce boom, resilient consumer sentiment, low unemployment level and rising wages are playing key roles in maintaining the industrial and logistics sector’s healthy performance. Companies are making immense efforts to improve supply-chain efficiencies, spurring demand for logistics infrastructure and efficient distribution networks.
This is opening up ample opportunities for Terreno Realty and other industrial REITs, like Duke Realty Corp. DRE, Prologis PLD and Rexford Industrial Realty, Inc. REXR to prosper. Nevertheless, rising supply and protectionist trade policies have the capability to mar the companies’ growth tempo to some extent.
Currently, Terreno Realty carries a Zacks Rank #3 (Hold). Its shares have gained 24.8% compared with the industry’s rise of 4.7%, over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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