FUR Winthrop Realty Trust New (delisted)

Terreno Realty Corporation (TRNO), a real estate investment trust (REIT), has recently acquired an industrial building each in Carlstadt, New Jersey, and Miami, Florida, for a combined purchase price of $11.7 million. Such continuous acquisition is part of the long-term strategy of the company to take up functional and flexible buildings in infill locations that can be modified to accommodate single and multiple tenants at discounts to replacement cost.

The New Jersey property that spreads over 27,000 square feet of space is presently 100% leased to a single tenant. The estimated stabilized cap rate of the trans-shipment industrial building is 7.1%.

On the other hand, the Florida property that spans across 35,000 square feet of space is presently 100% leased to two tenants. The estimated stabilized cap rate of the asset is 6.2%, which is calculated as annualized cash basis net operating income stabilized to market occupancy (generally 95%) divided by its total acquisition cost.

Total acquisition cost includes the initial purchase price, the effects of marking assumed debt-to-market, buyer’s 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 barriers-to-entry markets of Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington D.C./Baltimore.

Over the years, the company has resisted from pursuing ground-up development or land investments and instead focused on acquiring high-quality assets.

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 #4 Rank translating into a short-term ‘Sell’ rating and indicates that the stock is expected to perform well below the overall U.S. equity market for the next 1–3 months. However, we have an ‘Outperform’ recommendation and a Zacks #1 Rank (short-term ‘Strong Buy’) for Winthrop Realty Trust (FUR), one of the peers of Terreno Realty.

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