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Terreno Realty (TRNO) Sees High Occupancy, Rent Growth in Q3
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Terreno Realty Corporation (TRNO - Free Report) witnessed a rise in quarter-end occupancy and an increase in cash rents on new and renewed leases in the third quarter. These reflect solid demand for the company’s properties.
In its recently issued operating update, TRNO noted that for its operating portfolio, the occupancy reached 98.4% as of Sep 30, 2022, marking an expansion of 50 basis points (bps) from the prior quarter-end and 40 bps from the year-ago quarter-end. Moreover, its same-store portfolio was 98.9% leased on Sep 30, 2022.
Terreno Realty 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 third quarter) aggregating 0.7 million square feet and 5.1 acres of improved land grew 65.9%. The tenant retention ratio for the operating portfolio was 76.2% and 53.3% for the improved land portfolio.
Terreno Realty continued to expand its portfolio through acquisitions in the July-September quarter. During the said period, TRNO shelled out a total of $65.9 million as the purchase price for the acquisition of four properties comprising four improved land parcels of around 12.2 acres.
It has around $37.7 million of acquisitions under contract and $65.1 million of acquisitions under letters of intent. From the beginning of the year through Oct 6, 2022, Terreno Realty acquired 16 properties comprising 14 buildings, containing roughly 766,000 square feet, and 10 improved land parcels of around 32.9 acres for a total purchase price of $355.4 million.
As of Sep 30, 2022, Terreno Realty’s portfolio included 252 buildings spanning 15.4 million square feet and 46 improved land parcels encompassing 159.9 acres. It also had two properties under redevelopment.
On the capital market activity front, in the third quarter, Terreno Realty issued a new $100 million five-year unsecured term loan. The company has no remaining debt maturities in 2022 or 2023. In the said period, TRNO issued 444,512 shares of the common stock, with a weighted average offering price of $64.97 per share, reaping gross proceeds of $28.9 million under its at-the-market equity offering program.
Conclusion
Terreno Realty’s efforts to expand and strengthen its portfolio with acquisitions are a strategic fit. These also indicate that the company is financially sound to execute such deals.
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, 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 keep supporting industrial landlords like Terreno Realty, Prologis (PLD - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) to enjoy a favorable market environment.
However, with the industrial asset category being attractive presently, there is a development boom in several markets. This high supply is likely to fuel competition and curb pricing power. This might affect the growth tempo of Terreno Realty, Prologis and Rexford Industrial Realty to some extent.
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 High Occupancy, Rent Growth in Q3
Terreno Realty Corporation (TRNO - Free Report) witnessed a rise in quarter-end occupancy and an increase in cash rents on new and renewed leases in the third quarter. These reflect solid demand for the company’s properties.
In its recently issued operating update, TRNO noted that for its operating portfolio, the occupancy reached 98.4% as of Sep 30, 2022, marking an expansion of 50 basis points (bps) from the prior quarter-end and 40 bps from the year-ago quarter-end. Moreover, its same-store portfolio was 98.9% leased on Sep 30, 2022.
Terreno Realty 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 third quarter) aggregating 0.7 million square feet and 5.1 acres of improved land grew 65.9%. The tenant retention ratio for the operating portfolio was 76.2% and 53.3% for the improved land portfolio.
Terreno Realty continued to expand its portfolio through acquisitions in the July-September quarter. During the said period, TRNO shelled out a total of $65.9 million as the purchase price for the acquisition of four properties comprising four improved land parcels of around 12.2 acres.
It has around $37.7 million of acquisitions under contract and $65.1 million of acquisitions under letters of intent. From the beginning of the year through Oct 6, 2022, Terreno Realty acquired 16 properties comprising 14 buildings, containing roughly 766,000 square feet, and 10 improved land parcels of around 32.9 acres for a total purchase price of $355.4 million.
As of Sep 30, 2022, Terreno Realty’s portfolio included 252 buildings spanning 15.4 million square feet and 46 improved land parcels encompassing 159.9 acres. It also had two properties under redevelopment.
On the capital market activity front, in the third quarter, Terreno Realty issued a new $100 million five-year unsecured term loan. The company has no remaining debt maturities in 2022 or 2023. In the said period, TRNO issued 444,512 shares of the common stock, with a weighted average offering price of $64.97 per share, reaping gross proceeds of $28.9 million under its at-the-market equity offering program.
Conclusion
Terreno Realty’s efforts to expand and strengthen its portfolio with acquisitions are a strategic fit. These also indicate that the company is financially sound to execute such deals.
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, 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 keep supporting industrial landlords like Terreno Realty, Prologis (PLD - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) to enjoy a favorable market environment.
However, with the industrial asset category being attractive presently, there is a development boom in several markets. This high supply is likely to fuel competition and curb pricing power. This might affect the growth tempo of Terreno Realty, Prologis and Rexford Industrial Realty to some extent.
Shares of Zacks Rank #2 (Buy) Terreno Realty have declined 7.1% over the past three months, narrower than the industry’s fall of 12.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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.