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Terreno Realty (TRNO) Issues Q1 Operations & Investment Update

Terreno Realty Corporation TRNO recently issued an update on first-quarter operating, investment and capital activities.

As of the first-quarter 2021 end, the company’s portfolio included 228 buildings, spanning 13.7 million square feet, and 25 improved land parcels spanning 92.5 acres. It also had two properties under redevelopment.

Operational Update

As of Mar 31, 2021, the company’s operating portfolio, exclusive of two properties under redevelopment, was 96.1% leased. This marks a contraction of 170 basis points (bps) sequentially and mainly reflects acquired vacancy of 202,000 square feet (approximately 140bps). Similarly, the same-store portfolio (spanning 12.7 million square feet) was 97.4% leased at the end of the quarter, down from the 97.8% witnessed at the prior-quarter end.

However, the company was able to lock in higher rents on new and renewed leases, reflecting resilience in its portfolio. Cash rents on new and renewed leases (commenced during the first quarter) — aggregating 0.3 million square feet — grew 16%, with a tenant retention ratio of 82.3%.

Investment Update

The company continued to expand its portfolio on acquisitions during the January-March quarter. It acquired four industrial properties, comprising seven buildings encompassing roughly 529,000 square feet for a total of $110.1 million.

Further, Terreno Realty has $41.5 million of acquisitions under contract as well as $78.4 million of acquisitions under letter of intent.

The company also had two properties under redevelopment — SoDo Row in Seattle, and America’s Gateway 5 in Miami. On completion, these properties will comprise roughly 286,000 square feet, with a total expected investment of $71.5 million.

Capital Markets Activity

During the March-end quarter, Terenno Realty tapped the equity market on the back of its at-the-market equity offering program to raise capital. It specifically issued 706,524 shares of common stock for gross proceeds of $41.1 million.

The company finally exited the quarter with a cash balance of around $29 million and no balance outstanding on its $250-MILLION revolving credit facility. Encouragingly, it has no debt maturities in 2021.

Conclusion

Terreno Realty’s efforts to expand and strengthen its portfolio on the back of acquisitions are a strategic fit. It also indicates that the company is financially sound to execute such deals.

Markedly, there has been a significant increase in e-commerce’s share of total retail sales, spurring demand for warehouse and distribution spaces. Apart from the fast adoption of e-commerce, the industrial real estate space is anticipated to gain traction over the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption. This, in turn, will likely keep supporting industrial landlords like Terreno Realty, Prologis PLD, Duke Realty Corp. DRE and Rexford Industrial Realty, Inc. REXR to enjoy a favorable market environment.

Nonetheless, with the industrial asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power.

Terreno Realty currently carries a Zacks Rank #3 (Hold). In the past month, the company’s shares have gained 7.4%, outperforming its industry's rally of 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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