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Terreno Updates Q4 Operating, Investment & Capital Activity

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Terreno Realty Corporation TRNO recently provided an update outlining the company’s operating, investment and capital markets activity for the December-end quarter and full-year 2019.

As of Dec 31, 2019, this industrial REIT owned 220 buildings spanning roughly 13.3 million square feet of space and 19 improved land parcels consisting of nearly 77.6 acres. Further, it had four properties under redevelopment that will offer 505,000 square feet of space on completion.

While the rising e-commerce penetration and growing need for same-day delivery options have supercharged the recovery in the industrial market, supply growth has been relentless for the past years. In fact, a whole lot of new buildings are slated to be completed and made available in the market in the near term, leading to higher supply and lesser scope for rent and occupancy growth.

This seems to have adversely impacted Terreno Realty’s operating activity during the September-December quarter. In fact, the company’s operating portfolio, excluding four properties under redevelopment, was 96.8% leased as of Dec 31, 2019, lower than the 98.4% lease as of Dec 31, 2018. Moreover, occupancy for the fourth quarter at its portfolio declined year over year to 96.8% compared with the prior-year’s 98.4%.

The company’s same-store portfolio, spanning 11.8 million square feet of space, also witnessed slower leasing activity and a decline in occupancy compared with the prior year. Specifically, this portfolio was 98.4% leased as of Dec 31, 2019, compared with 99.1% as of Dec 31, 2018. Further, portfolio occupancy at the fourth-quarter end shrunk 70 basis points year on year to 98.4%.

Nonetheless, the company witnessed strong leasing momentum at its improved land portfolio that was 92% leased on Dec 31, 2019, compared with 76.5% as of Dec 31, 2018. Further, cash rents on new and renewed leases increased around 15.3% and 17.3%, in the fourth quarter and full-year 2019, respectively.

Continuing its acquisition spree, the company shelled $21.3 million for the buyout of three industrial properties during fourth-quarter 2019. This consisted of two buildings, spanning around 91,000 square feet and a 0.9-acre improved land parcel.

In fact, the company was active on the acquisition front throughout the year, purchasing 13 industrial properties and four improved land parcels, for an aggregate price of nearly $273.6 million.

Additionally, the company prudently shed four properties for $48.9 million in 2019. Of these, two buildings were sold in fourth-quarter 2019.

Other than property sale, the company raised capital by tapping the debt and equity markets. During the October-December period, Terreno Realty issued 241,875 shares of common stock under its at-the-market equity offering program for gross proceeds of $13.7 million. For 2019, Terreno Realty issued 6,064,576 shares for gross proceeds of $278.1 million.

Additionally, during the quarter, it closed on the private placement of senior unsecured notes worth $100 million. The proceeds were used to repay a $50-million term loan, scheduled to mature in 2021 and a $32-million mortgage loan with a maturity of 2020.

While industry fundamentals are likely to have affected the company’s operating metrics during the fourth quarter, it has made diligent efforts to enhance its portfolio on the back of acquisitions and disposition. Such timely executions will likely drive its long-term growth.  

Over the past three months, shares of this Zacks Rank #2 (Buy) company have rallied 3.7%, as against the industry's decline of 1.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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