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Terreno Updates on Q1 Operating, Investment & Capital Activity

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Zacks Equity Research
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Terreno Realty Corporation TRNO recently provided an update, outlining the company’s operating, investment and capital markets activity for the March-end quarter.

As of Mar 31, 2020, this industrial REIT owned 219 buildings spanning 13.4 million square feet of space and 21 improved land parcels consisting of nearly 82.2 acres. Further, it had four properties under redevelopment that will offer 505,000 square feet of space on completion.

The company’s operating portfolio, excluding four properties under redevelopment, was 97.8% leased to 498 tenants as of Mar 31, 2020, higher than the 96.8% lease as of Dec 31, 2019.

Moreover, its same-store portfolio, spanning 12.5 million square feet of space, witnessed higher occupancy of 98.1% at the end of the first quarter compared with the prior quarter’s 97.9%.

Further, Terreno Realty witnessed strong leasing momentum at its improved land portfolio that was 96.7% leased on Mar 31, 2020, compared with 92% as of Dec 31, 2019, and 86.6% at Mar 31, 2019. Further, cash rents on new and renewed leases, aggregating 0.6 million square feet, commencing in the first quarter increased 21.9% with a tenant retention ratio of 85.7%.

Continuing its acquisition spree, the company shelled $29.7 million in total for the buyout of two industrial properties, comprising one building containing 66,000 square feet and 2.7-acre improved land parcel.

Further, as of Mar 31, 2020, the company had four properties under redevelopment, which upon completion will comprise 505,000 square feet of space, with total expected investment of $111 million.

On the capital front, during the January-March period, Terreno Realty issued 427,027 shares of common stock under its at-the-market equity offering program for gross proceeds of $22.8 million. The company has a cash balance of $70 million. Moreover, it repaid a $32-million mortgage loan and has no further debt maturities in 2020.

Amid e-commerce boom and supply-chain strategy transformations, demand for industrial real estate remains robust. Although the overall impact from the coronavirus pandemic is yet to be seen, warehouse operations have become more essential, with quarantines resulting in more e-commerce customers. This opens up prospects for Terreno Realty and other industrial REITs like Duke Realty Corp. DRE, Prologis PLD and Rexford Industrial Realty, Inc. REXR.

Terreno Realty is focusing on fortifying its portfolio in six major port cities — Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington, DC. This is because these regions are witnessing solid demographic trends and healthy demand for industrial real estates.

However, the adverse impact of the pandemic on the economy will likely mar demand for space in the near term. Currently, the company is working with its tenants who have been compelled to shut to provide them rent deferments, on a case-by-case basis.

Shares of this Zacks Rank #3 (Hold) company have declined 2.9% in the year so far, narrower than its industry's fall of 13.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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