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Terreno Realty (TRNO) Sees Rent Growth in Q1, Occupancy Declines
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Terreno Realty Corporation (TRNO - Free Report) recently provided an update on its operating, investment and capital market activity for the first quarter of 2024. The preliminary results highlight solid growth in cash rents, though occupancy levels declined because of vacancy at some of its properties. Nevertheless, accretive acquisitions and developments are likely to support its growth in the upcoming period.
Operational Update
TRNO’s operating portfolio was 96.2% leased to 572 tenants as of Mar 31, 2024. This marked a decline from 98.5% as of Dec 31, 2023 and 98.1% as of Mar 31, 2023. The decline was mainly due to 123,000 square feet of vacancy at its 620 Division property in Elizabeth, NJ, 69,000 square feet of vacancy at its West Avenue 140th property in San Leandro, CA, and 40,000 square feet of acquired vacancy, of which 16,000 square feet was later leased with a May 2024 commencement date.
For the company’s improved land portfolio of 45 parcels spanning 152.4 acres, the leased rate was 94.6% as of Mar 31, 2024 compared to 94.6% and 98.9% recorded as of Dec 31, 2023 and Mar 31, 2023, respectively.
However, TRNO was able to lock in higher rents on new and renewed leases during the quarter. The cash rents on new and renewed leases climbed 47.2%. The tenant retention ratio was 54.7% for the operating portfolio and 82.5% for the improved land portfolio.
Investment Update
Terreno Realty, which is focused on expanding its assets 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, continued with its strategic buyouts during the first quarter. It purchased two properties comprising two buildings, encompassing 40,000 square feet for $18.5 million.
TRNO also has around $448.8 million of acquisitions under contract. As of Mar 31, 2024, Terreno Realty’s portfolio included 258 buildings spanning 15.8 million square feet and 45 improved land parcels encompassing 152.4 acres.
On the disposition front, the REIT sold one property in Seattle, WA, comprising a 25,000-square-foot industrial distribution building on 1.5 acres for $11.0 million. It had acquired the property in May 2016 for $4.7 million, and the investment yielded an unleveraged internal rate of return of 16.5%.
During the quarter, TRNO commenced two developments with a total expected investment of $79.1 million and started redevelopment of one existing property with an expected additional investment of $67.8 million.
Encouragingly, as of Mar 31, 2024, Terreno Realty had 10 properties under development or redevelopment. Post completion, these will comprise 11 buildings encompassing 1.6 million square feet, which are around 58% pre-leased and a 2.8-acre improved land parcel. The total expected investment for these projects is approximately $483.6 million. Additionally, TRNO owned 45.5 acres of land entitled for future development of four buildings aggregating 0.8 million square feet.
Capital Market Activity
In the first quarter, Terenno Realty tapped the equity market with its at-the-market (ATM) equity offering program to raise capital. It completed an offering of 6.325 million shares of common stock for gross proceeds of $392.2 million. The company also issued 2,353,278 shares of common stock under ATM for gross proceeds of $150.6 million.
On the balance sheet front, as of Mar 31, 2024, the company had no borrowings outstanding under its $400 million revolving credit facility. It has a single $100 million senior unsecured note maturing in 2024 and none maturing in 2025.
Conclusion
With a solid operating platform, robust balance sheet position and strategic expansion moves, TRNO seems well-positioned to capitalize on long-term growth opportunities amid favorable industry fundamentals.
Nonetheless, the rising supply of industrial real estate, stabilizing e-commerce sales growth, persistent macroeconomic uncertainty and a high interest rate environment pose key concerns for the company.
Terreno Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have risen 13.7% in the past six months compared with the industry’s growth of 11%.
The Zacks Consensus Estimate for HST’s 2024 FFO per share is pegged at $1.97, which suggests year-over-year growth of 2.6%.
The Zacks Consensus Estimate for IRM’s 2024 FFO per share stands at $4.42, which indicates an increase of 7.3% from the year-ago quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Terreno Realty (TRNO) Sees Rent Growth in Q1, Occupancy Declines
Terreno Realty Corporation (TRNO - Free Report) recently provided an update on its operating, investment and capital market activity for the first quarter of 2024. The preliminary results highlight solid growth in cash rents, though occupancy levels declined because of vacancy at some of its properties. Nevertheless, accretive acquisitions and developments are likely to support its growth in the upcoming period.
Operational Update
TRNO’s operating portfolio was 96.2% leased to 572 tenants as of Mar 31, 2024. This marked a decline from 98.5% as of Dec 31, 2023 and 98.1% as of Mar 31, 2023. The decline was mainly due to 123,000 square feet of vacancy at its 620 Division property in Elizabeth, NJ, 69,000 square feet of vacancy at its West Avenue 140th property in San Leandro, CA, and 40,000 square feet of acquired vacancy, of which 16,000 square feet was later leased with a May 2024 commencement date.
For the company’s improved land portfolio of 45 parcels spanning 152.4 acres, the leased rate was 94.6% as of Mar 31, 2024 compared to 94.6% and 98.9% recorded as of Dec 31, 2023 and Mar 31, 2023, respectively.
However, TRNO was able to lock in higher rents on new and renewed leases during the quarter. The cash rents on new and renewed leases climbed 47.2%. The tenant retention ratio was 54.7% for the operating portfolio and 82.5% for the improved land portfolio.
Investment Update
Terreno Realty, which is focused on expanding its assets 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, continued with its strategic buyouts during the first quarter. It purchased two properties comprising two buildings, encompassing 40,000 square feet for $18.5 million.
TRNO also has around $448.8 million of acquisitions under contract. As of Mar 31, 2024, Terreno Realty’s portfolio included 258 buildings spanning 15.8 million square feet and 45 improved land parcels encompassing 152.4 acres.
On the disposition front, the REIT sold one property in Seattle, WA, comprising a 25,000-square-foot industrial distribution building on 1.5 acres for $11.0 million. It had acquired the property in May 2016 for $4.7 million, and the investment yielded an unleveraged internal rate of return of 16.5%.
During the quarter, TRNO commenced two developments with a total expected investment of $79.1 million and started redevelopment of one existing property with an expected additional investment of $67.8 million.
Encouragingly, as of Mar 31, 2024, Terreno Realty had 10 properties under development or redevelopment. Post completion, these will comprise 11 buildings encompassing 1.6 million square feet, which are around 58% pre-leased and a 2.8-acre improved land parcel. The total expected investment for these projects is approximately $483.6 million. Additionally, TRNO owned 45.5 acres of land entitled for future development of four buildings aggregating 0.8 million square feet.
Capital Market Activity
In the first quarter, Terenno Realty tapped the equity market with its at-the-market (ATM) equity offering program to raise capital. It completed an offering of 6.325 million shares of common stock for gross proceeds of $392.2 million. The company also issued 2,353,278 shares of common stock under ATM for gross proceeds of $150.6 million.
On the balance sheet front, as of Mar 31, 2024, the company had no borrowings outstanding under its $400 million revolving credit facility. It has a single $100 million senior unsecured note maturing in 2024 and none maturing in 2025.
Conclusion
With a solid operating platform, robust balance sheet position and strategic expansion moves, TRNO seems well-positioned to capitalize on long-term growth opportunities amid favorable industry fundamentals.
Nonetheless, the rising supply of industrial real estate, stabilizing e-commerce sales growth, persistent macroeconomic uncertainty and a high interest rate environment pose key concerns for the company.
Terreno Realty currently carries a Zacks Rank #3 (Hold). The company’s shares have risen 13.7% in the past six months compared with the industry’s growth of 11%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Host Hotels & Resorts (HST - Free Report) and Iron Mountain (IRM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HST’s 2024 FFO per share is pegged at $1.97, which suggests year-over-year growth of 2.6%.
The Zacks Consensus Estimate for IRM’s 2024 FFO per share stands at $4.42, which indicates an increase of 7.3% from the year-ago quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.