Terreno Realty Corp
For the period ended Dec 31, 2024. Filed Feb 5, 2025.
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FY2024 · Filed Feb 5, 2025
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Item 2. Properties
As of December 31, 2024, we owned a total of 299 buildings (including one building held for sale) aggregating approximately 19.3 million square feet, 47 improved land parcels consisting of approximately 150.6 acres, six properties under development or redevelopment and approximately 22.4 acres of land entitled for future development. As of December 31, 2024, the buildings and improved land parcels were approximately 97.4% and 95.1% leased, respectively, to 670 customers, the largest of which accounted for approximately 5.5% of our total annualized base rent. The properties are located in New York City/Northern New Jersey, Los Angeles, Miami, San Francisco Bay Area, Seattle, and Washington, D.C. We invest in several types of industrial real estate, including warehouse/distribution buildings, flex buildings (including light industrial and research and development, or R&D), transshipment buildings and improved land parcels. See “Item 1 – Our Investment Strategy – Industrial Facility General Characteristics” in this Annual Report on Form 10-K for a general description of these types of industrial real estate. We target functional buildings in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate. Infill locations are geographic locations surrounded by high concentrations of already developed land and existing buildings. See our “Consolidated Financial Statements, Schedule III-Real Estate Investments and Accumulated Depreciation” in this Annual Report on Form 10-K for a detailed listing of our properties.
The following table summarizes by type our investments in real estate as of December 31, 2024:
| Type | Number of Buildings or Improved Land Parcels | Annualized Base Rent (in thousands) 1 | % of Total |
|---|---|---|---|
| Warehouse/distribution | 263 | $255,722 | 79.7% |
| Flex | 15 | 10,771 | 3.4% |
| Transshipment | 21 | 19,312 | 6.0% |
| Improved land | 47 | 34,891 | 10.9% |
| Total | 346 | $320,696 | 100.0% |
1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2024, multiplied by 12.
The following table summarizes by market our investments in real estate as of December 31, 2024:
| New York City/Northern New Jersey | Los Angeles | Miami | San Francisco Bay Area | Seattle | Washington, D.C. | Total/Weighted Average | |
|---|---|---|---|---|---|---|---|
| Investments in Real Estate | |||||||
| Number of Buildings | 65 | 61 | 44 | 57 | 44 | 28 | 299 |
| Rentable Square Feet | 3,833,186 | 2,811,980 | 4,458,701 | 3,240,494 | 2,731,666 | 2,180,643 | 19,256,670 |
| % of Total | 19.9% | 14.6% | 23.2% | 16.8% | 14.2% | 11.3% | 100.0% |
| Occupancy % as of December 31, 20244 | 97.1% | 98.5% | 95.8% | 99.7% | 97.1% | 97.1% | 97.4% |
| Annualized Base Rent (in thousands) 1 | $75,947 | $40,612 | $51,098 | $51,362 | $36,025 | $30,761 | $285,805 |
| % of Total | 26.5% | 14.2% | 17.9% | 18.0% | 12.6% | 10.8% | 100.0% |
| Annualized Base Rent 1 Per Occupied Square Foot | $20.42 | $14.66 | $11.97 | $15.90 | $13.58 | $14.52 | $15.23 |
| Weighted Average Remaining Lease Term (Years) 2 | 4.1 | 4.9 | 5.7 | 3.1 | 3.2 | 2.6 | 4.1 |
| Investments in Improved Land | |||||||
| Number of Land Parcels | 13 | 15 | 3 | 4 | 10 | 2 | 47 |
| Acres | 62.3 | 30.9 | 9.9 | 14.3 | 25.9 | 7.3 | 150.6 |
| % of Total | 41.4% | 20.5% | 6.6% | 9.5% | 17.2% | 4.8% | 100.0% |
| Occupancy % as of December 31, 2024 | 100.0% | 96.4% | 100.0% | 100.0% | 75.7% | 100.0% | 95.1% |
| Annualized Base Rent (in thousands) 1 | $13,480 | $9,966 | $2,153 | $2,896 | $4,984 | $1,412 | $34,891 |
| % of Total | 38.6% | 28.6% | 6.2% | 8.3% | 14.3% | 4.0% | 100.0% |
| Annualized Base Rent 1 Per Occupied Square Foot | $4.96 | $7.68 | $5.00 | $4.66 | $5.83 | $4.45 | $5.57 |
| Weighted Average Remaining Lease Term (Years) 2 | 3.7 | 2.4 | 8.2 | 5.5 | 3.2 | 8.5 | 4.1 |
| Total Investments in Real Estate and Improved Land | |||||||
| Annualized Base Rent (in thousands) 1 | $89,427 | $50,578 | $53,251 | $54,258 | $41,009 | $32,173 | $320,696 |
| % of Total Annualized Base Rent 1 | 27.9% | 15.8% | 16.6% | 16.9% | 12.8% | 10.0% | 100.0% |
| Gross Book Value (in thousands) 3 | $1,337,642 | $822,049 | $1,081,104 | $842,953 | $617,045 | $428,832 | $5,129,625 |
| % of Total Gross Book Value | 26.1% | 16.0% | 21.1% | 16.4% | 12.0% | 8.4% | 100.0% |
1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2024, multiplied by 12. Annualized base rent for our New York City assets was $38.0 million as of December 31, 2024.
2 Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of December 31, 2024, weighted by the respective square footage.
3 Includes six properties under development or redevelopment that, upon completion, will consist of nine buildings aggregating approximately 0.9 million square feet and approximately 22.4 acres of land entitled for future development.
4 Occupancy decreased from 98.5% at December 31, 2023 to 97.4% at December 31, 2024 due, in part, to approximately 176,000 square feet of acquired vacancy, 42,000 square feet of which have leases that commence in January 2025.
As of December 31, 2024, we owned six properties under development or redevelopment that, upon completion, will consist of nine buildings aggregating approximately 0.9 million square feet and approximately 22.4 acres of land entitled for future development, with a total expected investment of approximately $432.9 million, including redevelopment costs, capitalized interest and other costs.
The following table summarizes our capital expenditures incurred during the three months and years ended December 31, 2024 and 2023 (dollars in thousands):
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Operating Portfolio: | ||||
| Building and tenant improvements | $10,476 | $8,826 | $37,853 | $33,475 |
| Leasing commissions | 3,056 | 2,454 | 12,927 | 11,821 |
| Total1 | $13,532 | $11,280 | $50,780 | $45,296 |
| Properties under development and redevelopment: | ||||
| Development, redevelopment, renovation and expansion | $18,949 | $51,098 | $129,564 | $139,974 |
1 Includes approximately $4.8 million and $3.6 million for the three months ended December 31, 2024 and 2023, respectively, and approximately $15.8 million and $17.4 million for the years ended December 31, 2024 and 2023, respectively, of costs incurred related to leasing acquired vacancy, renovation and expansion projects (stabilization capital).
Our industrial properties are typically subject to leases on a “triple net basis,” in which tenants pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which tenants pay expenses over certain threshold levels. In addition, approximately 97.3% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years. We monitor the liquidity and creditworthiness of our tenants on an ongoing basis by reviewing outstanding accounts receivable balances, and as provided under the respective lease agreements, review the tenant’s financial condition periodically as appropriate. As needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations.
Our top 20 customers based on annualized base rent as of December 31, 2024 are as follows:
| Customer · Leases · RentableSquare Feet · % of TotalRentableSquare Feet · Improved Land Acreage · AnnualizedBase Rent(in thousands) 1 · % of TotalAnnualizedBase Rent 2 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1 | Amazon.com | 6 | 783,880 | 4.1% | 2.8 | $17,673 | 5.5% | ||
| 2 | FedEx Corporation | 6 | 308,889 | 1.6% | 7.7 | 6,677 | 2.1% | ||
| 3 | Imperial Bag & Paper Co LLC | 1 | 505,729 | 2.6% | — | 4,729 | 1.5% | ||
| 4 | United States Government | 8 | 316,796 | 1.6% | — | 4,620 | 1.4% | ||
| 5 | O'Neill Logistics | 2 | 429,692 | 2.2% | — | 4,546 | 1.4% | ||
| 6 | Meta Platforms, Inc. | 2 | 299,775 | 1.6% | — | 4,496 | 1.4% | ||
| 7 | Danaher | 3 | 171,707 | 0.9% | — | 4,201 | 1.3% | ||
| 8 | District of Columbia | 8 | 245,888 | 1.3% | — | 3,692 | 1.2% | ||
| 9 | MD Turbines Inc. | 2 | 284,161 | 1.5% | — | 3,580 | 1.1% | ||
| 10 | International Cargo Terminals Inc. | 1 | 31,601 | 0.2% | — | 3,399 | 1.1% | ||
| 11 | Motivate LLC | 3 | 101,234 | 0.5% | — | 3,070 | 1.0% | ||
| 12 | Sentury Tire USA Inc. | 1 | 161,787 | 0.8% | — | 2,710 | 0.8% | ||
| 13 | Lucid USA, Inc. | 1 | 161,680 | 0.8% | — | 2,676 | 0.8% | ||
| 14 | Northrop Grumman Systems Corporation | 2 | 148,458 | 0.8% | — | 2,489 | 0.8% | ||
| 15 | Port Kearny Security, Inc. | 1 | — | —% | 16.9 | 2,460 | 0.8% | ||
| 16 | Sarcona Management Corporation | 2 | 28,124 | 0.1% | 4.9 | 2,383 | 0.7% | ||
| 17 | Triton Logistics Inc. | 1 | 190,907 | 1.0% | — | 2,349 | 0.7% | ||
| 18 | B&B Granite Block Sales, LLC | 1 | — | —% | 7.2 | 2,246 | 0.7% | ||
| 19 | JAM'N Logistics Inc. | 1 | 110,336 | 0.6% | — | 2,231 | 0.7% | ||
| 20 | Fisica Inc. (previously L3 Harris Applied Technologies, Inc.) | 1 | 170,114 | 0.9% | — | 2,230 | 0.7% | ||
| Total | 53 | 4,450,758 | 23.1% | 39.5 | $82,457 | 25.7% | |||
1 Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of December 31, 2024, multiplied by 12.
2 Total annualized base rent is calculated as contractual monthly base rent per the leases, for all buildings and improved land parcels, excluding any partial or full rent abatements, asof December 31, 2024, multiplied by 12.
As of December 31, 2024, one of our properties with a net book value of approximately $179.1 million was encumbered by a mortgage loan payable with a total contractual principal amount of approximately $72.9 million which bears interest at a contractual fixed interest rate of 3.9% and matures in March 2028. The mortgage was assumed in an acquisition and was recorded at fair value in the amount of $69.2 million using an effective interest rate of 5.6%. The unamortized fair value adjustment as of December 31, 2024 was approximately $3.6 million.
The following tables summarize the anticipated lease expirations for leases in place as of December 31, 2024, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:
| Buildings: | ||||
|---|---|---|---|---|
| Year | Rentable Square Feet | % of Total RentableSquare Feet | Annualized Base Rent(in thousands) 2 | % of Total AnnualizedBase Rent 3 |
| 2025 1 | 2,384,048 | 12.4% | $39,774 | 10.9% |
| 2026 | 3,558,714 | 18.5% | 54,744 | 15.0% |
| 2027 | 2,969,391 | 15.4% | 49,972 | 13.7% |
| 2028 | 2,493,684 | 12.9% | 49,031 | 13.4% |
| 2029 | 2,120,147 | 11.0% | 42,295 | 11.6% |
| Thereafter | 5,235,127 | 27.2% | 90,042 | 24.5% |
| Total | 18,761,111 | 97.4% | $325,858 | 89.1% |
| Improved Land Parcels: | ||||
|---|---|---|---|---|
| Year | Improved Land Acreage | % of Total Improved Land Acreage | Annualized Base Rent(in thousands) 2 | % of Total AnnualizedBase Rent 3 |
| 2025 4 | 20.0 | 13.3% | $5,234 | 1.4% |
| 2026 | 23.7 | 15.7% | 6,766 | 1.8% |
| 2027 | 15.8 | 10.5% | 5,175 | 1.4% |
| 2028 | 21.2 | 14.1% | 5,628 | 1.5% |
| 2029 | 14.2 | 9.4% | 3,366 | 0.9% |
| Thereafter | 48.3 | 32.1% | 13,759 | 3.9% |
| Total | 143.2 | 95.1% | $39,928 | 10.9% |
| Total Buildings and Improved Land Parcels: | ||
|---|---|---|
| Year | Total Annualized Base Rent (in thousands)3 | % of Total Annualized Base Rent 3 |
| 2025 5 | $45,008 | 12.3% |
| 2026 | 61,510 | 16.8% |
| 2027 | 55,147 | 15.1% |
| 2028 | 54,660 | 14.9% |
| 2029 | 45,660 | 12.5% |
| Thereafter | 103,801 | 28.4% |
| Total | $365,786 | 100.0% |
1 Includes leases that expire on or after December 31, 2024 and month-to-month leases totaling approximately 42,876 square feet.
2 Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, asof December 31, 2024, multiplied by 12.
3 Total annualized base rent is calculated as contractual monthly base rent per the leases at expiration, for all buildings and/or improved land parcels, excluding any partial or full rent abatements, asof December 31, 2024, multiplied by 12.
4 Includes leases that expire on or after December 31, 2024 and month-to-month leases totaling approximately 2.4 acres.
5 Includes leases that expire on or after December 31, 2024 and month-to-month leases disclosed in footnotes 1 and 4 of the table.
Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. As of December 31, 2024, leases representing approximately 12.3% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2025. We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2025 expirations will be above the rates currently being paid for the same space. Cash rent changes on new and renewed leases totaling approximately 0.7 million square feet commencing during the three months ended December 31, 2024 were approximately 26.7% higher as compared to the previous rental rates for that same space, and cash rent changes on new and renewed leases totaling approximately 2.3 million square feet and 22.5 acres of improved land commencing during the year ended December 31, 2024 were approximately 36.5% higher as compared to the previous rental rates for that same space. We had a tenant retention ratio for the operating portfolio of 82.4% and 61.6%, respectively, for the three months and year ended December 31, 2024. We had a tenant retention ratio for the improved land portfolio of 0% and 54.7%, respectively, for the three months and year ended December 31, 2024. We define tenant retention ratio as the square footage or acreage of all leases commenced during the period that are rented by existing tenants divided by the square footage or acreage of all expiring leases during the reporting period. The square footage or acreage of tenants that default or buy-out prior to expiration of their lease and short-term leases of less than one year are not included in the calculation.
Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our properties will be re-leased at all or at rental rates equal to or above the current average rental rates. Further, re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and re-leased/renewed rental rates for particular properties within a market may not be consistent with rental rates across our portfolio within a particular market, in each case due to a number of factors, including local real estate conditions, local supply and demand for industrial space, the condition of the property, the impact of leasing incentives, including free rent and tenant improvements, and whether the property, or space within the property, has been redeveloped.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.