Terreno Realty Buys NJ Asset

Terreno Realty Corporation (TRNO - Snapshot Report), a real estate investment trust (REIT), has recently acquired an industrial property in Elizabeth, New Jersey, for approximately $10.4 million. The acquisition is part of the long-term strategy of the company to desist from pursuing ground-up development or land investments, and instead own functional and flexible buildings in infill locations that can be modified to accommodate single and multiple tenants at discounts to replacement cost.

Post-acquisition, approximately 20% of the building was leased back to the seller, while the remaining 80% was leased to an unnamed third party according to the terms of the purchase agreement. Consequently, the acquired property spanning 150,000 square feet of space is presently 100% leased. The estimated stabilized cap rate of the asset is 7.4%.

Total acquisition cost of the property included the initial purchase price, the effects of marking assumed debt to market, due diligence and closing costs, estimated near-term capital expenditures and leasing costs necessary to achieve stabilization.

San-Francisco-based Terreno Realty owns and operates industrial real estate properties primarily in six major coastal markets of the 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.

Each of the locations where Terreno Realty has a significant presence is characterized by a well-established transportation network – seaports, airports, highways and railways that are essential for the swift movement of goods. In addition, availability of land in these markets is not in abundance, resulting in steep barriers for the development of new and competing properties.

We have a ‘Neutral’ rating on Terreno Realty, which presently has a Zacks #4 Rank translating into a short-term ‘Sell’ rating and indicates that the stock is expected to perform well below the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank (short-term ‘Hold’) for Winthrop Realty Trust (FUR - Snapshot Report), one of the peers of Terreno Realty.

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Read the full analyst report on FUR