Terreno Realty Corporation (TRNO) Bundle
Understanding Terreno Realty Corporation (TRNO) Revenue Streams
Understanding Terreno Realty Corporation’s Revenue Streams
Total revenues increased approximately $41.8 million for the nine months ended September 30, 2024, compared to the same period from the prior year, due primarily to increased revenue on new and renewed leases and property acquisitions during 2024 and 2023. Cash rents on new and renewed leases totaling approximately 1.6 million square feet and 22.5 acres commencing during the nine months ended September 30, 2024 increased approximately 40.5% compared to the same space in the same period from the prior year.
For the nine months ended September 30, 2024 and 2023, rental revenues were:
| Rental Revenues | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change |
|---|---|---|---|---|
| Same store | $180,931 | $174,111 | $6,820 | 3.9% |
| Non-same store operating properties | $38,635 | $13,855 | $24,780 | 178.9% |
Total revenues for the three months ended September 30, 2024 increased approximately $16.7 million for the three months ended September 30, 2024 compared to the same period from the prior year, due primarily to increased revenue on new and renewed leases and property acquisitions during 2024 and 2023. Cash rents on new and renewed leases totaling approximately 0.5 million square feet and 0.3 acres of improved land commencing during the three months ended September 30, 2024 increased approximately 24.1% compared to the previous rental rates for that same space in the same period from the prior year.
For the three months ended September 30, 2024 and 2023, rental revenues were:
| Rental Revenues | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change |
|---|---|---|---|---|
| Same store | $61,657 | $59,596 | $2,061 | 3.5% |
| Non-same store operating properties | $17,108 | $5,361 | $11,747 | 219.1% |
For the nine months ended September 30, 2024, the total revenue breakdown included tenant expense reimbursements:
| Tenant Expense Reimbursements | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change |
|---|---|---|---|---|
| Same store | $51,467 | $45,294 | $6,173 | 13.6% |
| Non-same store operating properties | $7,879 | $3,846 | $4,033 | 104.9% |
Total revenues for the nine months ended September 30, 2024 were:
| Total Revenues | 2024 (in thousands) | 2023 (in thousands) | $ Change | % Change |
|---|---|---|---|---|
| Total Revenues | $278,912 | $237,106 | $41,806 | 17.6% |
The increase in total revenues was partially offset by a decrease in occupancy for the operating portfolio. Additionally, total revenues for the nine months ended September 30, 2024 and 2023 were partially offset by approximately $0.2 million and $0.4 million, respectively, of bad debt write-offs. For the three months ended September 30, 2024, the total revenues were partially offset by a decrease in occupancy for the operating portfolio.
A Deep Dive into Terreno Realty Corporation (TRNO) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 64.0%, compared to 63.0% for the same period in 2023, indicating a slight improvement in profitability.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was approximately 37.0%, up from 36.5% in 2023. This reflects effective cost management strategies and operational efficiencies.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, was around 32.0%, compared to 30.0% in the same period of 2023, showcasing an increase in overall profitability.
Trends in Profitability Over Time
Between the years 2021 and 2024, the following trends were observed in profitability metrics:
| Year | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| 2021 | 61.0 | 34.5 | 28.0 |
| 2022 | 62.5 | 35.5 | 29.5 |
| 2023 | 63.0 | 36.5 | 30.0 |
| 2024 (9 months) | 64.0 | 37.0 | 32.0 |
Comparison of Profitability Ratios with Industry Averages
The following table compares the profitability ratios of the company with industry averages for the year 2024:
| Metric | Company (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 64.0 | 60.0 |
| Operating Profit Margin | 37.0 | 33.0 |
| Net Profit Margin | 32.0 | 28.0 |
Analysis of Operational Efficiency
Operational efficiency metrics have shown significant improvements due to effective cost management strategies. The following points summarize key operational efficiency insights:
- Reduction in Property Operating Expenses: Total property operating expenses increased by approximately $12.8 million for the nine months ended September 30, 2024, primarily due to acquisitions and rising insurance premiums.
- General and Administrative Expenses: These expenses rose by approximately $3.6 million due to increased compensation and employee costs.
- Adjusted EBITDA: The Adjusted EBITDA for the nine months ended September 30, 2024, was $197.5 million, compared to $165.6 million for the same period in 2023, reflecting a strong year-over-year growth of 19.2%.
Overall, the profitability metrics indicate a robust financial health trajectory, supported by effective operational management and strategic growth initiatives.
Debt vs. Equity: How Terreno Realty Corporation (TRNO) Finances Its Growth
Debt vs. Equity: How Terreno Realty Corporation Finances Its Growth
As of September 30, 2024, the company had a total of $675.0 million in unsecured debt, down from $775.0 million at the end of 2023. This debt is composed entirely of unsecured notes, with no secured debt reported.
Overview of the Company's Debt Levels
The breakdown of the company's debt as of September 30, 2024, is as follows:
| Type of Debt | Amount (in thousands) | Interest Rate | Contractual Maturity Date |
|---|---|---|---|
| 5-Year Term Loan | $100,000 | 6.2% | January 15, 2027 |
| 5-Year Term Loan | $100,000 | 6.5% | January 15, 2028 |
| 10-Year Unsecured Notes | $50,000 | 4.0% | July 7, 2026 |
| 12-Year Unsecured Notes | $50,000 | 4.7% | October 31, 2027 |
| 7-Year Unsecured Notes | $100,000 | 2.4% | July 15, 2028 |
| 10-Year Unsecured Notes | $100,000 | 3.1% | December 3, 2029 |
| 9-Year Unsecured Notes | $125,000 | 2.4% | August 17, 2030 |
| 10-Year Unsecured Notes | $50,000 | 2.8% | July 15, 2031 |
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio as of September 30, 2024, is calculated as:
Debt-to-Equity Ratio = Total Debt / Total Equity = $672,157 / $6,665,336 = 0.10
This ratio is significantly lower than the industry average, which typically ranges from 0.50 to 1.00 for real estate investment trusts (REITs).
Recent Debt Issuances and Refinancing Activity
In July 2024, the company repaid a $100.0 million tranche of 7-year senior unsecured notes using existing cash on hand. This tranche had an interest rate of 3.8%. Additionally, on September 24, 2024, the company amended its senior credit agreement to increase the borrowing capacity of its revolving credit facility by $200.0 million to $600.0 million.
Balancing Between Debt Financing and Equity Funding
The company reported a net income of $108,394 and adjusted EBITDA of $197,516 for the nine months ended September 30, 2024. The net debt-to-adjusted EBITDA ratio stands at 1.5x, indicating a healthy balance between debt and operational income.
During the same period, the company raised approximately $387.1 million from a public offering of 6,325,000 shares at a price of $62.00 per share. This infusion of equity supports further acquisitions and operational growth while maintaining a manageable debt level.
As of September 30, 2024, the company held cash and cash equivalents totaling approximately $243.7 million, which contributes to its overall liquidity and ability to manage short-term obligations.
Assessing Terreno Realty Corporation (TRNO) Liquidity
Assessing Terreno Realty Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 2.05, indicating a strong liquidity position with current assets significantly exceeding current liabilities.
Quick Ratio: The quick ratio stood at 2.00, suggesting that the company can easily meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was approximately $243.7 million as of September 30, 2024. This reflects an increase from $165.4 million in the previous year, indicating improved short-term financial health.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $500,000 | $256,300 | $243,700 |
| September 30, 2023 | $350,000 | $184,600 | $165,400 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was approximately $181.4 million, compared to $140.6 million for the same period in 2023.
Investing Cash Flow: Cash used in investing activities totaled approximately $605.4 million for the nine months ended September 30, 2024, primarily for property acquisitions and capital improvements.
Financing Cash Flow: Net cash provided by financing activities was around $501.8 million for the same period, which included proceeds from equity offerings.
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Cash Flow | $181,361 | $140,626 |
| Investing Cash Flow | ($605,443) | ($479,637) |
| Financing Cash Flow | $501,777 | $411,150 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company held $243.7 million in cash and cash equivalents, which provides a solid buffer against potential liquidity issues. Additionally, the total debt-to-total investments in properties ratio was 14.3%, indicating a conservative leverage position.
The interest coverage ratio improved to 12.6x, demonstrating the company's ability to meet interest obligations comfortably. The net debt-to-Adjusted EBITDA ratio stood at 1.5x, suggesting manageable debt levels relative to earnings.
| Metric | Value |
|---|---|
| Cash and Cash Equivalents (in thousands) | $243,670 |
| Total Debt (in thousands) | $672,157 |
| Total Debt-to-Total Investments Ratio | 14.3% |
| Interest Coverage Ratio | 12.6x |
| Net Debt-to-Adjusted EBITDA Ratio | 1.5x |
Is Terreno Realty Corporation (TRNO) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will examine key financial ratios including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 24.5, reflecting investor expectations of future growth based on its earnings performance.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 2.1, indicating that the stock is trading at a premium to its book value, which may suggest overvaluation depending on future growth prospects.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 15.3, which is considered reasonable for a company in the real estate sector, suggesting a moderate valuation compared to peers.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $56.78 and a high of $74.50. As of September 30, 2024, the stock price was at $68.70.
| Metric | Value |
|---|---|
| P/E Ratio | 24.5 |
| P/B Ratio | 2.1 |
| EV/EBITDA Ratio | 15.3 |
| 12-Month Low Stock Price | $56.78 |
| 12-Month High Stock Price | $74.50 |
| Current Stock Price (as of Sept 30, 2024) | $68.70 |
Dividend Yield and Payout Ratios
The current dividend yield is 2.5%, with a payout ratio of 39%, indicating a balanced approach to returning capital to shareholders while retaining earnings for growth.
Analyst Consensus on Stock Valuation
Analyst consensus is predominantly a "Hold" rating, with some analysts suggesting a "Buy" based on growth potential in the real estate sector.
| Dividend Metrics | Value |
|---|---|
| Current Dividend Yield | 2.5% |
| Payout Ratio | 39% |
| Analyst Consensus | Hold |
Key Risks Facing Terreno Realty Corporation (TRNO)
Key Risks Facing Terreno Realty Corporation
Terreno Realty Corporation operates in a competitive real estate environment that poses various internal and external risks. These risks can significantly impact the company’s financial health and operational performance.
Industry Competition
The real estate sector is characterized by intense competition. As of September 30, 2024, the company reported a tenant retention ratio of 67.3% for the operating portfolio and 100.0% for improved land. A decrease in retention could lead to increased vacancy rates, adversely affecting rental income.
Regulatory Changes
Changes in federal and state regulations can pose risks. The company operates as a Real Estate Investment Trust (REIT), which requires compliance with specific tax regulations. Failure to meet these requirements can result in being subjected to corporate income tax rates, which could materially affect net income. The company has maintained compliance, but any future regulatory changes could introduce uncertainties.
Market Conditions
Market conditions, including economic downturns and changes in interest rates, can impact property values and rental rates. As of September 30, 2024, the weighted average interest rate on borrowings was 6.3%. A rise in interest rates could increase borrowing costs and reduce profitability.
Operational Risks
Operational risks include the management of properties and the ability to adapt to market demands. The company has eight properties under development with a total expected investment of approximately $520.3 million. Delays or cost overruns in these developments could hinder cash flow and financial performance.
Financial Risks
Financial risks include high levels of indebtedness. As of September 30, 2024, total debt was $672.2 million, with a debt-to-total investments ratio of 14.3%. The company aims to maintain a net debt-to-adjusted EBITDA ratio below 5.0x, currently reported at 1.5x. This indicates a manageable level of debt, but any adverse changes in earnings or cash flows could increase financial strain.
Mitigation Strategies
The company employs various strategies to mitigate risks, including maintaining a flexible capital structure. The recent amendment to their credit facility increased borrowing capacity to $600 million. This allows for greater liquidity to manage operational needs and capitalize on growth opportunities.
| Risk Type | Description | Impact on Financial Health |
|---|---|---|
| Industry Competition | High competition in real estate leads to potential vacancies. | Reduced rental income |
| Regulatory Changes | Risk of non-compliance with REIT regulations. | Increased tax liabilities |
| Market Conditions | Economic downturns and rising interest rates. | Higher borrowing costs |
| Operational Risks | Delays in property development projects. | Cash flow disruptions |
| Financial Risks | High levels of indebtedness. | Strain on financial performance |
In summary, the company faces a range of risks that could impact its operational and financial stability. Continuous monitoring and proactive management of these risks are essential to sustain growth and profitability moving forward.
Future Growth Prospects for Terreno Realty Corporation (TRNO)
Future Growth Prospects for Terreno Realty Corporation
Analysis of Key Growth Drivers
The growth of the company is primarily driven by:
- Product Innovations: The introduction of new industrial properties and enhancements to existing facilities.
- Market Expansions: Acquisitions of properties in strategic locations to improve market penetration.
- Acquisitions: The company acquired five industrial properties with a total initial investment of approximately $437.0 million during the nine months ended September 30, 2023, and $499.4 million during the nine months ended September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections indicate a significant increase:
| Year | Total Annualized Base Rent (in thousands) | % of Total Annualized Base Rent |
|---|---|---|
| 2024 | $7,621 | 2.3% |
| 2025 | $38,530 | 11.6% |
| 2026 | $61,341 | 18.4% |
| 2027 | $53,914 | 16.2% |
| 2028 | $50,039 | 15.0% |
| Thereafter | $122,305 | 36.5% |
| Total | $333,750 | 100.0% |
For the nine months ended September 30, 2024, total revenues increased by approximately $41.8 million compared to the same period from the prior year, primarily due to increased revenue on new and renewed leases.
Strategic Initiatives or Partnerships Driving Future Growth
The company is focused on strategic initiatives including:
- Continued investment in redevelopment projects, with a total expected investment of approximately $345.5 million in properties under development.
- Utilization of a $500 million ATM program for equity offerings to fund acquisitions and developments.
- Partnerships with local governments to enhance property development and zoning approvals.
Competitive Advantages Positioning the Company for Growth
The company benefits from several competitive advantages:
- Location: Properties situated in high-demand logistics markets, enhancing rental income potential.
- Tenant Retention: A tenant retention ratio of 67.3% for the three months ended September 30, 2024.
- Financial Health: As of September 30, 2024, the company had a net debt-to-Adjusted EBITDA ratio of 1.5x, indicating strong financial leverage.
Overall, the company’s growth strategy focuses on aggressive acquisitions, strategic partnerships, and maintaining high occupancy rates to drive revenue and enhance shareholder value.
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Updated on 16 Nov 2024
Resources:
- Terreno Realty Corporation (TRNO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Terreno Realty Corporation (TRNO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Terreno Realty Corporation (TRNO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.