Terreno Realty Corporation (TRNO - Snapshot Report), a real estate investment trust (REIT), has recently acquired an industrial property in Commerce, California, for approximately $52.4 million. The acquisition is part of the long-term strategy of the company to abstain 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.
The 5-building acquired property spanning 545,000 square feet of space is presently 79% leased to 14 tenants. The property is strategically located in close proximity to the interstate highways, and consequently offers unmatched distribution space to the lessee with easy access to transportation facilities.
The estimated stabilized cap rate of the asset is 6.0%. 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 in which 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 distribution of goods. In addition, available land in these markets is scarce, 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 #3 Rank translating into a short-term Hold rating. However, we have an Outperform recommendation and a Zacks #1 Rank (short-term Strong Buy rating) for Winthrop Realty Trust (FUR - Snapshot Report), one of the peers of Terreno Realty.