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Terreno Realty (TRNO) Disposes of NJ Property for $17.8M

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Terreno Realty Corporation (TRNO - Free Report) recently concluded the disposition of an industrial property spanning 93,000 square feet on 8.9 acres of land in West Caldwell, NJ, for $17.8 million. The move is part of the company’s financing strategy, through which it aims to maintain financial flexibility to facilitate long-term growth.

The property, which is 100% leased to two tenants, was purchased by Terreno Realty in June 2013 for around $6.8 million. The investment yielded an unleveraged internal rate of return of 11.2%, making it a strategic fit.

Notably, from the beginning of the year through Oct 31, 2023, the company carried out dispositions aggregating $43.4 million.

The demand for industrial real estate space remains buoyant, given the growth in industries and an e-commerce boom. Also, companies’ endeavors to improve supply-chain efficiencies amid the rising demand for logistics infrastructure and efficient distribution networks have aided the need for such spaces. Against this backdrop, the industrial real estate investment trust (REIT) is experiencing solid demand for its properties.

Terreno Realty is making concerted efforts to expand its asset base in the six major coastal U.S. markets — Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington, DC, to capitalize on this favorable industry trend. These markets are characterized by strong demand generators such as high population densities, high volume distribution points and logistics infrastructure, and constrained supply. The company acquired properties worth $484 million from the beginning of the year through Oct 31, 2023.

On the development front, the industrial REIT recently completed the development of a 191,000 square foot, 32-foot clear height rear-load industrial distribution building — Countyline Corporate Park Phase IV Building 41 — in Hialeah, FL.

The property, 100% leased to an international logistics services provider, is situated on 10.5 acres of land with 62 dock-high and two grade-level loading positions. It comes with a parking space to accommodate 196 cars. The total investment for the building, which is expected to achieve LEED certification, is $41.2 million with a stabilized cap rate of 5.1%.

The Countyline Corporate Park Phase IV comprises a 121-acre project of 2.2 million square feet of industrial distribution buildings in Miami’s Countyline Corporate Park with a total investment of $510.3 million. It is situated immediately adjacent to Terreno Realty’s seven fully leased buildings within Countyline (Countyline Corporate Park Phase III).

Upon completion in 2027, Countyline Phase IV is anticipated to have 10 LEED-certified industrial distribution buildings, providing 660 dock-high and 22 grade-level loading positions. It will have parking space for 1,875 cars. Notably, Terreno Realty’s Countyline Corporate Park Phase III and IV will jointly contain 17 industrial distribution buildings encompassing 3.5 million square feet.

TRNO’s solid balance sheet position is likely to support its growth endeavors. As of Sep 30, 2023, it had cash and cash equivalents of $96.2 million and no borrowings outstanding on the $400 million revolving credit facility.

Shares of this Zacks Rank #3 (Hold) company have gained 11.1% in the year-to-date period compared with the industry’s growth of 5.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

Nonetheless, the stabilization of e-commerce sales growth and a high interest rate environment pose concerns.

Stocks to Consider

Some better-ranked stocks from the REIT sector are EastGroup Properties (EGP - Free Report) , Stag Industrial (STAG - Free Report) and Park Hotels & Resorts (PK - Free Report) . While PK sports a Zacks Rank #1 (Strong Buy), EGP and STAG each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past two months to $7.70.

The consensus estimate for Stag Industrial’s ongoing year’s FFO per share has increased 1.3% over the past two months to $2.28.

The consensus mark for Park Hotels & Resorts’ current-year FFO per share has moved marginally northward over the past month to $1.99.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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