Terreno Realty Corporation (TRNO), a real estate investment trust (REIT), has recently acquired two properties spanning 138,000 square feet of industrial space in Miami, Florida, for approximately $12.1 million. In concurrence with the transaction, Terreno Realty assumed a $6.2 million mortgage loan scheduled to mature in March 2014 with a fixed annual interest rate of 5.84%.
The acquisition is part of the long-term strategy of the company to abstain from pursuing ground-up development or land investments, and instead own functional and flexible buildings in infill locations that can be modified to accommodate single and multiple tenants at discounts to replacement cost.
The acquired properties are presently 100% leased to a single tenant. The industrial buildings are strategically located in Miami’s Airport West submarket, in close proximity to the west cargo area of the Miami International Airport. Consequently, the properties bring on board unmatched distribution space for the company.
The estimated stabilized cap rate of the asset is 7.4%. Total acquisition cost of the property included the initial purchase price, the effects of marking assumed debt to market, due diligence and closing costs, estimated near-term capital expenditures, and leasing costs necessary to achieve stabilization.
San Francisco-based Terreno Realty owns and operates industrial real estate properties primarily in six major coastal markets of the U.S. These include the high barrier-to-entry markets of Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington D.C./Baltimore.
Each of the locations in which Terreno Realty has a significant presence is characterized by a well-established transportation network – seaports, airports, highways and railways that are essential for the swift distribution of goods. In addition, available land in these markets is scarce, resulting in steep barriers for the development of new and competing properties.
We have a Neutral rating on Terreno Realty, which presently has a Zacks #3 Rank translating into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for DCT Industrial Trust Inc. (DCT), one of the competitors of Terreno Realty.
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