Terreno Realty Corporation
Q4 2019 Update
February 6, 2020
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are forward-looking statements and, in some cases, can be identified by the use of the words "anticipate," "believe," "estimate," "expect," "intend," "may," "might," "plan," "project," "result," "should," "will," "seek," "target," "see," "likely," "position," "opportunity," "outlook," "potential," "enthusiastic," "future," and similar expressions. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected.
We caution investors that forward-looking statements are based on management's beliefs and on assumptions made by, and information currently available to, management. Factors that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: (i) our ability to identify and acquire industrial properties on terms favorable to us; (ii) general volatility of the capital markets and the market price of our stock; (iii) adverse economic or real estate conditions or developments in the industrial real estate sector and/or in the markets in which we acquire properties; (iv) our dependence on key personnel and our reliance on third parties to property manage the majority of our industrial properties; (v) our dependence upon tenants; (vi) our ability to comply with the laws, rules and regulations applicable to companies, and in particular, public companies; (vii) our ability to manage our growth effectively; (viii) tenant bankruptcies and defaults on or non-renewal of leases by tenants; (ix) decreased rental rates or increased vacancy rates; (x) increased interest rates and operating costs; (xi) declining real estate valuations and impairment charges; (xii) our expected leverage, our failure to obtain necessary outside financing, and future debt obligations; (xiii) our ability to make distributions to our stockholders; (xiv) our failure to successfully hedge against interest rate increases; (xv) our failure to successfully operate acquired properties; (xvi) our failure to maintain our status as a real estate investment trust ("REIT") and possible adverse changes to tax laws; (xvii) uninsured or underinsured losses relating to our properties; (xviii) environmental uncertainties and risks related to natural disasters; (xix) financial market fluctuations; and (xx) changes in real estate and zoning laws and increases in real property tax rates. Other factors that could materially affect results can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, including those set forth under the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's preliminary prospectus supplement relating to the offering under the section titled "Risk Factors", and in our other public filings.
We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Investment Strategy
Unique and Highly Selective | Focus on Functional Assets | |
Market Approach | in Infill Locations | |
- Acquire, own and operate industrial real estate in six major coastal U.S. markets. Exclusively.
- Mix of core and value-add investments
- No greenfield development
- No complex joint ventures
- Superior market fundamentals, including lower vacancy and higher rent growth
- Strong demand generators (high population densities, near high volume distribution points)
- Physical and regulatory constraints to new supply
- Shrinking supply in certain submarkets
- Broad product opportunity set (1)
- Warehouse / distribution (81.5%)
- Flex (including light industrial and R&D) (7.2%)
- Transshipment (5.5%)
- Improved land (5.8%) (2)
- Functional and flexible assets
- Cater to sub-market tenant demands, including last-mile distribution
- Generally suitable for multiple tenants
- Adjacent to transportation infrastructure
- Multiple value creation opportunities
- Emphasis on discount to replacement cost provides margin of safety
- Opportunity for higher and better use over time
- Reflects Terreno portfolio composition based on annualized base rent as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
- Includes 19 improved land parcels totaling approximately 77.6 acres that are 92.0% leased at December 31, 2019. Such land is used for truck,
- trailer and container storage and/or car parking and may be redeveloped to higher and better use.
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Recent Highlights
Financial Highlights
- Net Income available to common stockholders of $0.22 per diluted share for the quarter ended December 31, 2019 compared to $0.22 per diluted share for the quarter ended September 30, 2019 and $0.38 for the quarter ended December 31, 2018. Net Income available to common stockholders of $0.85 per diluted share for the twelve months ended December 31, 2019 compared to $1.09 per diluted share for the twelve months ended December 31, 2018.
- Funds From Operations (FFO)(1) of $0.35 per diluted share for the quarter ended December 31, 2019 compared to $0.36 per diluted share for the quarter ended September 30, 2019 and $0.33 for the quarter ended December 31, 2018. Funds From Operations of $1.38 per diluted share for the twelve months ended December 31, 2019 compared to $1.30 per diluted share for the twelve months ended December 31, 2018.
Operating Highlights
- Cash-basisSame Store NOI(1) for the three months ended December 31, 2019 increased approximately 5.5% as compared to the same period in 2018 due to increased revenue on new and renewed leases(2). Cash-basis Same Store NOI for the twelve months ended December 31, 2019 increase approximately 9.2% as compared to the same period in 2018.
- Cash rents on new and renewed leases commencing during the three and twelve months ended December 31, 2019 increased approximately 15.3% and 17.3% on approximately 0.5 million and 2.4 million square feet, respectively.
- Total portfolio, excluding four properties under redevelopment and 19 improved land parcels, was 96.8% leased as of December 31, 2019 as compared to 97.2% at September 30, 2019 and 98.4% at December 31, 2018.
- The same store portfolio of approximately 11.8 million square feet, representing approximately 88.6% of our total square feet, was 98.4% leased at December 31, 2019 as compared to 99.0% at September 30, 2019 and 99.1% at December 31, 2018.
- This is a non-GAAP financial measure, please see our Reporting Definitions for further explanation.
- Approximately $0.4 million (138bps) of the increase in cash-basis same store NOI for the three months ended December 31, 2019 was related to properties that were acquired vacant or with near term expirations.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Recent Highlights
Investment Highlights
Q4 2019 Acquisitions | $21.6 million | |
$273.6 million | ||
2019 Acquisitions | ||
Acquisitions Under Contract (1)(2) | $30.0 million | |
- For the year ended 2019, sold four properties for approximately $48.9 million generating an unleveraged internal rate of return of 8.6% (total GAAP gain of approximately $9.4 million).
Q4 2019 Dispositions | $22.5 million | |
Dispositions Under LOI (1)(2) | $54.0 million | |
Capital Markets Activities
- Issued approximately 0.2 million shares of common stock under the ATM program during the three months ended December 31, 2019 with a weighted average offering price of $56.61, receiving gross proceeds of approximately $13.7 million. For the year ended 2019, issued 6.1 million shares of common stock with a weighted average price of $45.85 for gross proceeds of $278.1 million.
- Closed on $100 million of senior unsecured notes with a ten-year term that bear interest at a fixed annual rate of 3.14% and used the proceeds to repay a $50 million term loan and, subsequent to December 31, 2019, repaid a mortgage loan of $32.7 million with a 2020 maturity.
(1) | As of February 6, 2020. | |
5 | (2) | There is no assurance that we will acquire or dispose properties under contract or letter of intent because the proposed acquisitions and dispositions are subject to the |
completion of satisfactory due diligence and various closing conditions and, in the case of properties under letter of intent, purchase and sale agreements. |
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Current Portfolio Overview
Occupancy (1) | Six Major Coastal U.S. Markets(2) |
Portfolio | Same Store |
Seattle 11.5%
Northern New Jersey /
New York City
30.9%
San Francisco Bay Area
16.9%Washington, D.C.
13.8%
Los Angeles
16.5%
Miami 10.4%
Key Metrics(3)
Square Feet | 13.3 million | Average Acquisition Size | $13.4 million |
Number of Buildings | 220 | Weighted Average | 82.4% |
Occupancy at Acquisition | |||
19 Improved Land Parcels | 77.6 acres; 92.0% leased | Square Feet Under | 505,000 |
Redevelopment | |||
- Portfolio and Same Store occupancy based on 13.3 million and 11.8 million square feet, respectively, as of December 31, 2019, and excludes 19 improved land parcels consisting of 77.6 acres and four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
- Based on annualized base rent by market including 13.3 million square feet and 19 improved land parcels consisting of 77.6 acres as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
- Properties owned as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet. Average acquisition size and weighted average occupancy at acquisition exclude 19 properties sold with an aggregate 2.6 million square feet.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Terreno's Submarket Focus
Highly Focused Submarket Strategy
- 30% of portfolio located in shrinking supply submarkets (1)
- Characterized by shrinking industrial supply. Offers opportunities to convert existing buildings into higher and better use over time. Urban infill.
- 56% of portfolio in no net new supply submarkets (1)
- Characterized by older existing industrial product. Offers opportunities to redevelop existing buildings into new, modern industrial buildings. Infill.
- 14% of portfolio in new supply submarkets (1)
- Characterized by industrial buildings that will remain in their current state for the foreseeable future with previously undeveloped land available for industrial development. Greenfield.
Percentage Decrease in Industrial Supply Since 2000 (2) In Select Submarkets
SF Decrease | Decrease Since | Annual SF | ||||
Submarket | (Millions of SF) | 2000 | Decrease | |||
Washington, D.C. | 2.2 | 21.2% | 1.1% | |||
South San Francisco | 2.7 | 14.6% | 0.8% | |||
Seattle SODO | 1.7 | 7.1% | 0.4% | |||
Brooklyn/Queens | 10.9 | 6.1% | 0.3% | |||
LAX Airport | 1.1 | 6.1% | 0.3% |
- As of December 31, 2019. Reflects Terreno's portfolio composition based on geography and purchase price, includes properties under redevelopment, and improved land parcels. Refer to Appendix for submarket classifications.
- Data provided by Costar. As a comparison, industrial supply has increased 19% nationally and 113% in the Inland Empire since 2000.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Shrinking Supply: South San Francisco
20% Decrease in Supply Since 1997
Demolished Industrial Inventory Approved for Redevelopment Terreno Properties (6 buildings, 223,000 SF)
Percentage Inventory Decrease and
Rental Rate Increase Since 1997
5% | 140% | ||||||||||||||||
Inventory Change | Rental Rate Change | ||||||||||||||||
0% | 120% | ||||||||||||||||
Change | 100% | Change | |||||||||||||||
-5% | 80% | ||||||||||||||||
% | -10% | 60% | % | ||||||||||||||
RateRent | |||||||||||||||||
Inventory | 40% | ||||||||||||||||
-15% | 20% | ||||||||||||||||
-20% | 0% | ||||||||||||||||
-20% | |||||||||||||||||
-25% | -40% | ||||||||||||||||
'97 | '99 | '01 | '03 | '05 | '07 | '09 | '11 | '13 | '15 | '17 | '19 | ||||||
Source: CoStar
- South San Francisco zoning limits freight forwarding contributing to higher and better use conversions.
- Industrial buildings are being demolished and replaced by life science, creative office, manufacturing, and multifamily.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Submarket Focus: Infill
Terreno portfolio located within highest density population areas as compared to other industrial REITs
17,500
Population Density Per Square Mile
15,000
12,500
10,000
7,500
5,000
2,500
-
TRNO REXR PLD EGP | FR DRE MNR COLD STAG | ||||
5-mile radius | 10-mile radius | ||||
Represents average population density weighted by square feet and ranked by 5-mile radius.
Prologis (NYSE: PLD) average population density data as of 2018; PLD no longer discloses property level information.
Source: S&P Global Market Intelligence, Terreno Realty Corporation.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Selected Recent Acquisitions
5200 East Marginal Way South
Seattle, WA November 18, 2019
- Purchase Price: $2.9 million
- Estimated Stabilized Cap Rate: 5.6%
- Size: One improved land parcel of 0.9 acres
- Occupancy: Acquired vacant
- Location: Immediately adjacent to Terreno Realty Corporation's property at 53 South Dawson in Seattle's Port and SoDo District
46 Whelan Road
East Rutherford, NJ December 16, 2019
- Purchase Price: $12.0 million
- Estimated Stabilized Cap Rate: 5.0%
- Size: One industrial building containing approximately 50,000 square feet on 3.5 acres
- Occupancy: 100% leased to one tenant on a short-term basis through April, 2020.
- Location: Less than two miles west of the Meadowlands Sports Complex and Exit 16W of the New Jersey Turnpike
917 Valley Ave NW
Puyallup, WA December 20, 2019
- Purchase Price: $6.7 million
- Estimated Stabilized Cap Rate: 5.4%
- Size: One industrial building containing approximately 41,000 square feet on 2.3 acres
- Occupancy: 100% leased to two tenants
- Location: Less than four miles from the Port of Tacoma
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Selected Examples of Value Creation
- Since Terreno's 2010 IPO, approximately two-thirds of our acquisitions have been value-add investments. Terreno has successfully stabilized 74 value-add investments to date. Terreno has sold approximately 10% of its acquisitions for an unleveraged IRR of 12.7%.
Strategy
Redevelopment and Leasing
Examples
- 56-8549th Street, Queens: Acquired with a short-term lease in February 2019. Completed standard make-ready work including office renovation, lighting upgrades, interior and exterior painting, sealcoat and restripe of parking, and upgraded fencing. Executed a new 7-year lease with a leading e-commerce firm commencing in November 2019 with an estimated stabilized cap rate of 5.3%.
- 1775 NW 70th, Miami: Acquired with a short-term lease in October 2017. $1.5 million redevelopment included removal of 15,000 SF of second story office and refurbishment of remaining 9,000 SF of office. New 5-year lease commenced in February 2019 generating an estimated stabilized return on cost of 5.5% on $10.0 million of total investment.
Below Market | Dawson, Seattle: Acquired in July 2017 for an estimated 2.8% stabilized cap rate with 19 |
months remaining on below-market lease. Executed five-year renewal with tenant in March | |
Rents | |
2019 increasing rent 119% over expiring rate and increasing stabilized cap rate to 6.0%. | |
- California Avenue, Corona: Terreno acquired the 90,000 SF building in June 2014 for $7.8
million. Terreno sold the property 100% leased on March 13, 2019 for approximately $12.4
Value Realized million, exiting the Inland Empire, and recognized a GAAP gain of approximately $4.5 million and generated an unleveraged internal rate of return of 12.4%.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Value Creation - Redevelopment and Leasing
Property: 56-85 49th Street
Location: Maspeth, Queens, NY
Size: One building, 19,000 SF on 2.0 acres
Acquisition Price: $24.0 million in February 2019
Initial Occupancy: 100% occupied on a short-term basis
Leasing: Completed make-ready work and executed a 7-year lease with a leading e-commerce company expected to commence in November 2019 with an estimated stabilized cap rate of 5.3%.
Value Creation - Executed 7-year lease with leading e-commerce company with estimated stabilized cap rate of 5.3%
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Value Creation - Below Market Rents
SoDo Seattle: Approximately Three Miles South of Downtown Seattle
Property: 5300 Denver Avenue
Size: One building, 30,000 SF on 1.5 acres
Acquisition Price: $4.7 million in May 2016
Rent Change on Rollover: Acquired with three years remaining on existing lease term. Negotiated an early termination with the existing tenant and immediately signed a seven-year lease with a replacement tenant at 78% higher rents and no downtime.
Property: 53 Dawson
Size: One building, 13,000 SF on 1.4 acres
Acquisition Price: $4.0 million in July 2017
Rent Change on Rollover: Acquired with 19 months remaining on below-market lease. Executed five-year renewal with tenant in March 2019 increasing rent 119% over expiring rate.
Value Creation -
Denver: New rents 78% higher increasing est. stabilized cap rate from 5.5% to 9.4%
Dawson: New rents 119% higher increasing est. stabilized cap rate from 2.8% to 6.0%
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Market Leading Corporate Structure
Management Alignment
- Executive Team's long-term incentive compensation fully aligned with stockholders
- Performance shares tied to three-year total stockholder return exceeding the MSCI U.S. REIT Index and FTSE Nareit Equity Industrial Index
- No annual cash bonus plan for CEO and President with their long-term compensation paid solely in stock
- No stock options, SARs, dividend equivalent units or UPREIT units
- Significant senior management and board investment in common shares (approximately 2.4% of outstanding shares valued at $95 million)
- $11 million invested by management in public offerings and open market purchases
Corporate Governance
- Majority independent directors with diverse expertise serving annual terms; no classification of Board without shareholder approval ("MUTA opt- out")
- Adopted a majority voting standard in non- contested director elections
- Opted out of three Maryland anti-takeover provisions (no opt in without stockholder approval)
- Ownership limits designed to protect REIT status and not for the purpose of serving as an anti- takeover device
- No stockholder rights plan unless approved in advance by stockholders or if adopted, subject to termination if not ratified by stockholders within 12 months
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Key Takeaways
- Focused strategy
- Six major coastal US markets, exclusively
- Flexible and functional assets in infill locations
- Acquisition opportunities across our target markets at discounts to replacement cost
- Ability to convert value-add investments into stabilized assets and realize value
- Urban infill locations provide higher and better use opportunities over time
- Strong balance sheet including an investment grade credit rating
- Demonstrated value creation with 19 properties sold for an aggregate sales price of approximately $291.3 million earning a 12.7% unleveraged IRR
- 12.0% dividend CAGR since initiating dividend in 2011
- 13.7% compounded annual total shareholder return since 2010 IPO
- Aligned management team and market leading corporate governance
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Statements Of Operations
CONSOLIDATED STATEMENTS OF OPERATIONS | For the Three M onths Ended December 31, | For the Year Ended December 31, | |||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||
REVENUES | |||||||||||||||||||||||||
Rental revenues and tenant expense reimbursements | $ | 45,015 | $ | 39,413 | $ | 171,022 | $ | 151,657 | |||||||||||||||||
Total revenues | 45,015 | 39,413 | 171,022 | 151,657 | |||||||||||||||||||||
COSTS AND EXPENSES | |||||||||||||||||||||||||
Property operating expenses | 11,808 | 10,296 | 44,201 | 39,988 | |||||||||||||||||||||
Depreciation and amortization | 11,847 | 10,250 | 44,015 | 40,816 | |||||||||||||||||||||
General and administrative (1) | 6,072 | 6,371 | 23,924 | 21,503 | |||||||||||||||||||||
Acquisition costs | (3) | (5) | 45 | 124 | |||||||||||||||||||||
Total costs and expenses | 29,724 | 26,912 | 112,185 | 102,431 | |||||||||||||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||||||||||||
Interest and other income | 644 | 1,341 | 3,815 | 3,664 | |||||||||||||||||||||
Interest expense, including amortization | (4,069) | (4,494) | (16,338) | (18,211) | |||||||||||||||||||||
Loss on extinguishment of debt | (189) | - | (189) | - | |||||||||||||||||||||
Gain on sales of real estate investments | 3,144 | 13,624 | 9,391 | 28,610 | |||||||||||||||||||||
Total other income and expenses | (470) | 10,471 | (3,321) | 14,063 | |||||||||||||||||||||
Net income | 14,821 | 22,972 | 55,516 | 63,289 | |||||||||||||||||||||
Allocation to participating securities | (94) | (145) | (351) | (401) | |||||||||||||||||||||
Net income available to common stockholders | $ | 14,727 | $ | 22,827 | $ | 55,165 | $ | 62,888 | |||||||||||||||||
EARNINGS PER COMMON SHARE - BASIC AND DILUTED: | |||||||||||||||||||||||||
Net income available to common stockholders - basic, net of redemption of | |||||||||||||||||||||||||
preferred stock and preferred stock dividends | $ | 0.22 | $ | 0.38 | $ | 0.86 | $ | 1.09 | |||||||||||||||||
preferred stock and preferred stock dividends | |||||||||||||||||||||||||
$ | 0.22 | $ | 0.38 | $ | 0.85 | $ | 1.09 | ||||||||||||||||||
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | 66,706,245 | 59,689,965 | 64,428,406 | 57,486,399 | |||||||||||||||||||||
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||||||||||||||||||||
67,000,815 | 59,689,965 | 64,722,976 | 57,486,399 | ||||||||||||||||||||||
For the Three M onths Ended December 31, | For the Year Ended December 31, | ||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||
Performance share aw ard expense | $ | 1,847 | $ | 2,737 | $ | 8,035 | $ | 7,063 |
- Includes non-cash compensation associated with the Company's Performance Share awards. For Performance Share awards granted prior to January 1, 2019, the Company estimates the fair value of the Performance Share awards using a Monte Carlo simulation model on the date of grant and at each reporting period, which may vary substantially from period to period based upon our relative share price performance. The Performance Share awards are recognized as compensation expense over the
requisite performance period based on the fair value of the Performance Share awards at the balance sheet date. For Performance Share awards granted after January 1, 2019, the Company estimates the fair value using a Monte Carlo simulation model on the date of grant and recognizes the expense over the performance period.
17 Compensation expense related to all Performance Share awards outstanding is detailed above.
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Net Income, FFO and Adjusted FFO
For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||||||||
NET INCOME, FFO AND ADJUSTED FFO(1) | 2019 | 2018 | 2019 | 2018 | |||||||||
Total revenues | $ | 45,015 | $ | 39,413 | $ | 171,022 | $ | 151,657 | |||||
Property operating expenses | (11,808) | (10,296) | (44,201) | (39,988) | |||||||||
Depreciation and amortization | (11,847) | (10,250) | (44,015) | (40,816) | |||||||||
General and administrative (2) | (6,072) | (6,371) | (23,924) | (21,503) | |||||||||
Acquisition costs | 3 | 5 | (45) | (124) | |||||||||
Interest and other income | 644 | 1,341 | 3,815 | 3,664 | |||||||||
Interest expense, including amortization | (4,069) | (4,494) | (16,338) | (18,211) | |||||||||
Loss on extinguishment of debt | (189) | - | (189) | - | |||||||||
Gain on sales of real estate investments | 3,144 | 13,624 | 9,391 | 28,610 | |||||||||
Net income | $ | 14,821 | $ | 22,972 | $ | 55,516 | $ | 63,289 | |||||
Allocation to participating securities | (94) | (145) | (351) | (401) | |||||||||
Net income available to common stockholders | $ | 14,727 | $ | 22,827 | $ | 55,165 | $ | 62,888 | |||||
Net income available to common stockholders per common share - basic | $ | 0.23 | $ | 0.38 | $ | 0.86 | $ | 1.09 | |||||
Net income available to common stockholders per common share - diluted | $ | 0.22 | $ | 0.38 | $ | 0.85 | $ | 1.09 | |||||
Adjustments to arrive at Funds from Operations: | |||||||||||||
Gain on sales of real estate investments | (3,144) | (13,624) | (9,391) | (28,610) | |||||||||
Depreciation and amortization related to real estate | 11,821 | 10,223 | 43,907 | 40,703 | |||||||||
Allocation to participating securities | (150) | (123) | (565) | (478) | |||||||||
Funds from Operations (1) | $ | 23,348 | $ | 19,448 | $ | 89,467 | $ | 74,904 | |||||
Funds from operations per common share - basic | $ | 0.35 | $ | 0.33 | $ | 1.39 | $ | 1.30 | |||||
Funds from operations per common share - diluted | $ | 0.35 | $ | 0.33 | $ | 1.38 | $ | 1.30 | |||||
Adjustments to arrive at Adjusted Funds From Operations: | |||||||||||||
Acquisition costs | (3) | (5) | 45 | 124 | |||||||||
Stock-based compensation | 2,492 | 3,248 | 10,644 | 9,270 | |||||||||
Straight-line rents | (298) | (522) | (2,597) | (3,459) | |||||||||
Amortization of lease intangibles | (1,527) | (1,016) | (4,682) | (3,694) | |||||||||
Total capital expenditures | (17,999) | (18,391) | (61,835) | (41,841) | |||||||||
Capital expenditures related to stabilization (3) | 10,832 | 13,619 | 42,511 | 27,445 | |||||||||
Adjusted Funds from Operations | $ | 16,845 | $ | 16,381 | $ | 73,553 | $ | 62,749 | |||||
Common stock dividends paid | $ | 18,093 | $ | 14,186 | $ | 63,565 | $ | 51,445 | |||||
Weighted average basic common shares | 66,706,245 | 59,689,965 | 64,428,406 | 57,486,399 | |||||||||
Weighted average diluted common shares | 67,000,815 | 59,689,965 | 64,722,976 | 57,486,399 |
- See Reporting Definitions for further explanation.
- Includes non-cash compensation associated with the Company's Performance Share awards. For Performance Share awards granted prior to January 1, 2019, the Company estimates the fair value of the Performance Share awards using a Monte Carlo simulation model on the date of grant and at each reporting period, which may vary substantially from period to period based upon our relative share price performance. The Performance Share awards are recognized as compensation expense over the requisite performance period based on the fair value of the Performance Share awards at the balance sheet date. For Performance Share Awards granted after January 1, 2019, the Company estimates the fair value using a Monte Carlo simulation model on the date of grant and recognizes the expense over the performance period. Compensation expense related to all Performance Share awards outstanding was as follows:
For the Three M onths Ended December 31, | For the Year Ended December 31, | |||||||||||
18 | 2019 | 2018 | 2019 | 2018 | ||||||||
Performance share aw ard expense | $ | 1,847 | $ | 2,737 | $ | 8,035 | $ | 7,063 |
- Capital expenditures related to stabilization includes costs incurred related to leasing acquired vacancy and redevelopment projects.
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Appendix: Supplemental Components of NAV
For the Three | Q4 2019 ACQUISITIONS | ||||||||||||
COMPONENTS OF NET OPERATING INCOME(1) | Months Ended | Purchase | Estimated | ||||||||||
December 31, 2019 | |||||||||||||
Total revenues | $ | 45,015 | Price | Stabilized | Leased % at | ||||||||
Property Name | Date | (in thousands) | Cap Rate | Acquisition | |||||||||
Less straight-line rents | (298) | ||||||||||||
East Marginal | Seattle, WA | $ | 2,850 | 5.6% | 0% | ||||||||
Less amortization of lease intangibles | (1,527) | ||||||||||||
Whelan | East Rutherford, NJ | $ | 12,000 | 5.0% | 100% | ||||||||
Less property operating expenses | (11,808) | ||||||||||||
917 Valley | Puyallup, WA | $ | 6,725 | 5.4% | 100% | ||||||||
Net operating income | $ | 31,382 | |||||||||||
Total/Weighted Average | $ | 21,575 | 5.2% | 87% | |||||||||
CONTRACTUAL RENT ABATEMENTS | $ | 333 | |
LEASE TERMINATION INCOME | $ | 132 | |
CASH NOI FROM DISPOSED PROPERTIES | $ | 302 | |
CASH NOI FROM REDEVELOPMENTS | $ | 36 | |
BALANCE SHEET ITEMS | |||
Other assets and liabilities | |||
Cash and cash equivalents | $ | 110,082 | |
Restricted cash | 2,657 | ||
Construction in progress (2) | 101,253 | ||
Senior secured loan (3) | 15,915 | ||
Other assets, net | 33,952 | ||
Less straight-line rents | (23,678) | ||
Security deposits | (14,149) | ||
Dividends payable | (18,158) | ||
Performance share awards payable | (11,633) | ||
Accounts payable and other liabilities | (27,699) | ||
Total other assets and liabilities | $ | 168,542 | |
DEBT AND PREFERRED STOCK | |||
Credit facility | $ | - | |
Term loans payable (3) | (100,000) | ||
Senior unsecured notes (3) | (350,000) | ||
Mortgage loans payable (3) | (44,348) | ||
Total debt | $ | (494,348) | |
Total shares outstanding | 67,252,787 |
SUMMARY MARKET INFORMATION (Investments in Real Estate) (2)
Occupancy | Annualized | ||||||||||
Rentable | Percentage as of | Annualized | Base Rent Per | ||||||||
Square | December 31, | Base Rent | Occupied | ||||||||
Market | Feet | 2019 | (000's) | Square Foot | |||||||
Los Angeles | 2,523,969 | 97.7% | $ | 21,398 | $ | 8.67 | |||||
Northern New Jersey/New York City | 3,552,681 | 98.6% | 36,540 | 10.43 | |||||||
San Francisco Bay Area | 2,028,909 | 91.1% | 22,822 | 12.34 | |||||||
Seattle | 1,776,954 | 99.1% | 15,587 | 8.85 | |||||||
Miami | 1,563,326 | 97.1% | 13,656 | 8.99 | |||||||
Washington, D.C. | 1,874,378 | 96.1% | 18,006 | 9.99 | |||||||
Total/Weighted Average | 13,320,217 | 96.8% | $ | 128,009 | $ | 9.92 |
SUMMARY MARKET INFORMATION (Improved Land)
Occupancy | Annualized | |||||||||||
Percentage as of | ||||||||||||
Number of | December 31, | Base Rent | ||||||||||
Market | Parcels | Acreage | 2019 | (000's) | ||||||||
Los Angeles | 5 | 10.1 | 47.8% | $ | 1,007 | |||||||
Northern New Jersey/New York City | 9 | 48.7 | 100.0% | 5,480 | ||||||||
San Francisco Bay Area | 1 | 1.3 | 100.0% | 195 | ||||||||
Seattle | 1 | 0.9 | 0% | 0 | ||||||||
Miami | 2 | 3.2 | 100.0% | 389 | ||||||||
Washington, D.C. | 1 | 13.4 | 100.0% | 764 | ||||||||
Total/Weighted Average | 19 | 77.6 | 92.0% | $ | 7,835 |
- See Reporting Definitions for further explanation.
- The Company had four properties under redevelopment as of December 31, 2019 that upon completion will contain approximately 0.5 million square feet with a total expected investment of approximately $120.4 million, including redevelopment costs of approximately $52.4 million.
19 (3) Excludes deferred financing costs and loan fees.
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Same Store Results
For the Three Months | For the Year Ended | ||||||||||||||||||||||||||||||||||||||
SAME STORE GROWTH (1) | Ended December 31, | $ Change | % Change | December 31, | $ Change | % Change | |||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||
Net income | $ | 14,821 | $ | 22,972 | $ | (8,151) | (35.5)% | $ | 55,516 | $ | 63,289 | $ | (7,773) | (12.3)% | |||||||||||||||||||||||||
Depreciation and amortization | 11,847 | 10,250 | 1,597 | 15.6% | 44,015 | 40,816 | 3,199 | 7.8% | |||||||||||||||||||||||||||||||
General and administrative | 6,072 | 6,371 | (299) | (4.7)% | 23,924 | 21,503 | 2,421 | 11.3% | |||||||||||||||||||||||||||||||
Acquisition costs | (3) | (5) | 2 | (40.0)% | 45 | 124 | (79) | (63.7)% | |||||||||||||||||||||||||||||||
Total other income and expenses | 470 | (10,471) | 10,941 | n/a | 3,321 | (14,063) | 17,384 | n/a | |||||||||||||||||||||||||||||||
Net operating income | 33,207 | 29,117 | 4,090 | 14.0% | 126,821 | 111,669 | 15,152 | 13.6% | |||||||||||||||||||||||||||||||
Less non-same store NOI | (5,506) | (2,563) | (2,943) | 114.8% | (16,331) | (8,164) | (8,167) | 100.0% | |||||||||||||||||||||||||||||||
Same store NOI | $ | 27,701 | $ | 26,554 | $ | 1,147 | 4.3% | $ | 110,490 | $ | 103,505 | $ | 6,985 | 6.7% | |||||||||||||||||||||||||
Less straight-line rents and amortization of lease intangibles | (664) | (928) | 264 | (28.4)% | (3,851) | (5,823) | 1,972 | (33.9)% | |||||||||||||||||||||||||||||||
Cash-basis same store NOI | $ | 27,037 | $ | 25,626 | $ | 1,411 | 5.5% | $ | 106,639 | $ | 97,682 | $ | 8,957 | 9.2% | |||||||||||||||||||||||||
HISTORICAL SAME STORE RESULTS (1) (2) | Full Year | Full Year | Full Year | Full Year | Full Year | Full Year | Full Year | Full Year | |||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||||||||||||||||
Same store square feet | 2,235,500 | 3,091,365 | 4,792,329 | 6,312,641 | 8,627,109 | 10,159,084 | 10,421,965 | 11,795,386 | |||||||||||||||||||||||||||||||
Occupancy % | 93.0% | 96.8% | 97.1% | 94.4% | 99.0% | 97.5% | 99.1% | 98.4% | |||||||||||||||||||||||||||||||
Cash-basis same store NOI growth % | 11.9% | 18.1% | 12.9% | 3.1% | 8.6% | 16.5% | 9.1% | 9.2% | |||||||||||||||||||||||||||||||
Average cash-basis same store growth since IPO: | 12.1% |
- Same Store NOI is computed as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis. The same store pool includes all properties that were owned as of December 31, 2019 and since January 1, 2018 and excludes properties that were disposed of, or held for sale to a third party or were under redevelopment. See Reporting Definitions for further explanation.
- Historical Same Store Results include cash-basis same store NOI growth %'s as reported in the Company's Form 10-Q and 10-K's. Previously reported cash-basis same store NOI growth has not been adjusted for properties that were subsequently disposed of or are held for sale to a third party.
- Included in cash-basis same store NOI was termination income of $0.2 million and $5,000 for the three months ended December 31, 2019 and 2018, respectively.
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Appendix: Redevelopments and Dispositions
REDEVELOPMENTS
Total Expected | Amount | Estimated | Estimated Post- | Estimated | % Pre-leased | |||||||||||
Investment (in | Amount Spent to | Remaining to | Stabilized Return | Development | Stabilization | December 31, | ||||||||||
Property Name | thousands) (1) | Date | Spend | on Cost(2) | Square Feet | Quarter | 2019 | |||||||||
Sodo Row - North | $ | 17,000 | $ | 10,067 | $ | 6,933 | 5.4% | 50,706 | Q2 2021 | - | ||||||
Sodo Row - South | 53,446 | 44,726 | 8,720 | 5.7% | 184,014 | Q2 2021 | 28% | |||||||||
6th Avenue South | 15,511 | 14,976 | 535 | 5.1% | 50,270 | Q2 2020 | - | |||||||||
Kent 192 | 34,410 | 31,484 | 2,926 | 5.5% | 219,910 | Q4 2020 | - | |||||||||
Total/Weighted Average | $ | 120,367 | $ | 101,253 | $ | 19,114 | 5.5% | 504,900 | 10.2% |
HISTORICAL DISPOSITIONS | |||||||||||
Property | Market | Acquisition Date | Disposition Date | Acquisition Price | Disposition Price | Unleveraged IRR | |||||
Rialto | Los Angeles | September 2010 | November 2012 | $ | 12,110 | $ | 16,962 | 20.9% | |||
Maltese | New Jersey/New York | September 2010 | December 2013 | 16,500 | 19,000 | 11.8% | |||||
Warm Springs | San Francisco | March 2010 | June 2015 | 7,264 | 13,400 | 15.1% | |||||
Sweitzer | Washington, D.C. | October 2012 | November 2015 | 6,950 | 11,200 | 21.5% | |||||
Fortune Qume | San Francisco | March 2010 | February 2016 | 5,550 | 8,200 | 11.3% | |||||
Global Plaza | Washington, D.C. | March 2012 | March 2016 | 6,100 | 8,200 | 13.2% | |||||
39th Street | Miami | August 2011 | September 2016 | 4,400 | 6,097 | 12.1% | |||||
Whittier | Los Angeles | June 2012 | April 2017 | 16,100 | 25,300 | 14.5% | |||||
Bollman | Washington, D.C. | June 2011 | August 2017 | 7,500 | 12,000 | 12.4% | |||||
Route 100 | Washington, D.C. | June 2013 | August 2017 | 16,650 | 28,500 | 15.7% | |||||
8441 Dorsey | Washington, D.C. | March 2011 | December 2017 | 5,800 | 11,500 | 11.9% | |||||
Hampton | Washington, D.C. | May 2014 | February 2018 | 18,050 | 20,250 | 6.9% | |||||
10th Avenue | Miami | December 2010 | June 2018 | 9,000 | 24,300 | 11.5% | |||||
26th Street (office) | Miami | September 2012 | November 2018 | 3,150 | 4,325 | 14.4% | |||||
Miller Ave | Los Angeles | December 2014 | November 2018 | 22,899 | 33,217 | 14.5% | |||||
California Ave | Los Angeles | June 2014 | March 2019 | 7,815 | 12,410 | 12.4% | |||||
10100 NW 25th Str Miami | January 2011 | August 2019 | 9,875 | 14,000 | 7.2% | ||||||
8215 Dorsey | Washington, D.C. | November 2009 | October 2019 | 6,000 | 7,470 | 7.5% | |||||
9020 Junction | Washington, D.C. | November 2010 | December 2019 | 13,800 | 15,000 | 7.6% | |||||
Total | $ | 195,513 | $ | 291,331 | 12.7% |
- Total expected investment for the property includes the initial purchase price, buyer's due diligence and closing costs, estimated near-term redevelopment expenditures, capitalized interest and leasing costs necessary to achieve stabilization.
- Estimated stabilized return on cost is calculated as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total expected investment for the property.
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Appendix: Capitalization
Senior | Mortgage | |||||||||||||||||
Maturity | Credit Facility | Term Loans | Unsecured | Loans Payable | Total Debt | |||||||||||||
2020 | $ | - | $ | - | $ | - | $ | 33,077 | $ | 33,077 | ||||||||
2021 | - | - | - | 11,271 | 11,271 | |||||||||||||
2022 | - | 100,000 | 50,000 | - | 150,000 | |||||||||||||
2023 | - | - | - | - | - | |||||||||||||
2024 | - | - | 100,000 | - | 100,000 | |||||||||||||
Thereafter | - | - | 200,000 | - | 200,000 | |||||||||||||
Total Debt | - | 100,000 | 350,000 | 44,348 | 494,348 | |||||||||||||
Deferred financing costs, net | - | (417) | (2,326) | (30) | (2,773) | |||||||||||||
Total Debt, net | $ | - | $ | 99,583 | $ | 347,674 | $ | 44,318 | $ | 491,575 | ||||||||
Weighted Average Interest Rate | n/a | 3.0% | 3.8% | 4.1% | 3.7% | |||||||||||||
As of | ||||||||||||||||||
As of December | December 31, | |||||||||||||||||
31, 2019 | 2018 | |||||||||||||||||
Total Debt, net | $ | 491,575 | $ | 462,097 | ||||||||||||||
Common Stock | ||||||||||||||||||
Shares Outstanding | 67,252,787 | 61,013,711 | ||||||||||||||||
Market Price | $ | 54.14 | $ | 35.17 | ||||||||||||||
Total Equity | 3,641,066 | 2,145,852 | ||||||||||||||||
Total Market Capitalization | $ | 4,132,641 | $ | 2,607,949 | ||||||||||||||
Total Debt-to-Total Investments in Properties | 22.8% | 25.2% | ||||||||||||||||
Total Debt-to-Total Investments in Properties and Senior Secured Loan | 22.7% | 24.5% | ||||||||||||||||
Total Debt-to-Total Market Capitalization | 11.9% | 17.8% | ||||||||||||||||
Floating Rate Debt as a % of Total Debt (1) | 20.3% | 36.4% | ||||||||||||||||
Unhedged Floating Rate Debt as a % of Total Debt (2) | 0.0% | 4.1% | ||||||||||||||||
Mortgage Loans Payable as a % of Total Debt | 9.0% | 9.9% | ||||||||||||||||
Mortgage Loans Payable as a % of Total Investments in Properties | 2.1% | 2.5% | ||||||||||||||||
Adjusted EBITDA (3) | $ | 117,356 | $ | 103,100 | ||||||||||||||
Interest Coverage | 7.2 | x | 5.7 | x | ||||||||||||||
Fixed Charge Coverage | 6.0 | x | 5.0 | x | ||||||||||||||
Total Debt-to-Adjusted EBITDA (3) | 4.1 | x | 4.2 | x | ||||||||||||||
Weighted Average Maturity of Total Debt (years) | 5.1 | 4.6 |
- Floating rate debt includes our existing $100.0 million of variable-rate term loan borrowings, $100 million of which are subject to LIBOR interest
22 rate caps of 4.0%.
- Excludes $100.0 million of variable-rate term loan borrowings with LIBOR interest rate caps of 4.0%.
- See Reporting Definitions for further explanation.
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Submarket Focus
M a rke t | Shrinking Supply (1) | No Ne t Ne w Supply (2) | Ne w Supply (3) | ||||
Los Ange le s | LAX | South Bay | Inland Empire W est | ||||
W est of 405 | Commerce/Vernon | Inland Empire East | |||||
Hawthorne | Mid-Counties | ||||||
Downtown LA | San Fernando Valley | ||||||
Orange County | |||||||
Ne w York City/Northe rn | Brooklyn/Queens | Meadowlands | Exit 8A | ||||
Ne w Je rsey | Secaucus | Newark/Elizabeth | Exit 10 / I 287 | ||||
Bayonne | Fairfield | ||||||
Jersey City | Exit 12 | ||||||
Teterboro | JFK | ||||||
Kearny | |||||||
Sa n Fra ncisco Ba y Are a | Silicon Valley | East Bay | Livermore | ||||
South SF | Richmond | ||||||
Dogpatch/Mission Bay | Fremont | ||||||
Mia m i | Central Dade | Airport/Doral | Medley | ||||
Hialeah | Airport North | ||||||
North Dade | |||||||
Miami Lakes | |||||||
Se a ttle | South Seattle | Kent | Auburn | ||||
Tukwila | SeaTac | Sumner | |||||
Renton | Fife | ||||||
Pullayup | |||||||
W a shington D.C. | D.C. | Corridor | Dulles | ||||
Inside the D.C. Beltway | Close in PG County | ||||||
Close in NOVA | |||||||
Pe rce nta ge of Te rre no's | |||||||
Portfolio (4) | 30% | 56% | 14% |
- Shrinking Supply: Characterized by shrinking industrial supply. Offers opportunities to convert existing buildings into higher and better use over time. Super infill.
- No Net New Supply: Characterized by older existing industrial product. Offers opportunities to redevelop existing buildings into new, modern industrial buildings. Infill.
- New Supply: Characterized by industrial buildings that will remain in their current state for the foreseeable future with previously undeveloped land available for industrial development. Greenfield.
23 (4) As of December 31, 2019. Reflects Terreno portfolio composition based on geography and purchase price, includes four properties under redevelopment and improved land parcels. Completed redevelopments are included at total investment.
SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Management and Board of Directors
Blake Baird | Co-founded Terreno Realty Corporation in 2007 | |
| Former President and Director of AMB Property Corporation (NYSE: AMB) | |
Chairman and CEO | ||
| Director of Matson, Inc. (NYSE: MATX) until April 2020, and Sunstone Hotel Investors, Inc. (NYSE: SHO) | |
Mike Coke | Co-founded Terreno Realty Corporation in 2007 | |
| Former Chief Financial Officer and Executive Vice President of AMB | |
President | ||
| Director of Digital Realty Trust, Inc. (NYSE: DLR) | |
Andy Burke | Joined Terreno Realty Corporation in 2008 | |
| Former Vice President, Investment Officer of Perseus Realty Partners | |
EVP | ||
| Former Transaction Officer at AMB | |
Jaime Cannon | Joined Terreno Realty Corporation in 2010 | |
| Former Vice President, Treasury at AMB | |
EVP and CFO | ||
| Former Audit Manager at PriceWaterhouseCoopers LLP | |
John Meyer | | Joined Terreno Realty Corporation in 2010 |
EVP | | Former Senior Vice President, Director of Transactions, Southwest Region for AMB |
Lee Carlson | | Principal of NNC Apartment Ventures, LLC |
Audit Chair | | Former Executive Vice President, Chief Operating Officer, Chief Financial Officer and Board Member of BRE Properties (NYSE: BRE) |
David Lee | | Former founder and portfolio manager of T. Rowe Price Real Estate Fund |
Director | | Former founder and portfolio manager of T. Rowe Price Global Real Estate Fund |
Gabriela Parcella | Managing Partner of Merlone Geier Partners and President of Merlone Geier Management, LLC | |
| Independent Trustee of Dodge & Cox Funds mutual fund Board of Trustees | |
Nominating & Corporate Governance Chair | ||
| Former Chairman, President, and Chief Executive Officer of Mellon Capital | |
Doug Pasquale | Former President, Chief Executive Officer and Chairman of Nationwide Health Properties (formerly NYSE: NHP) | |
| Chairman of Sunstone Hotel Investors, Inc. (NYSE: SHO) | |
Lead Director | ||
| Director of Alexander & Baldwin (NYSE: ALEX) and DineEquity, Inc. (NYSE: DIN) | |
Dennis Polk | | President, Chief Executive Officer and Director of SYNNEX Corporation (NYSE: SNX) |
Compensation Chair | | Former Senior Vice President and Chief Financial Officer of Savoir Technology Group |
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Reporting Definitions
Adjusted EBITDA: We compute Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, gain on sales of real estate investments, acquisition costs and stock-based compensation. We believe that presenting Adjusted EBITDA provides useful information to investors regarding our operating performance because it is a measure of our operations on an unleveraged basis before the effects of tax, gain (loss) on sales of real estate investments, non-cash depreciation and amortization expense, acquisition costs and stock-based compensation. By excluding interest expense, Adjusted EBITDA allows investors to measure our operating performance independent of our capital structure and indebtedness and, therefore, allows for more meaningful comparison of our operating performance between quarters as well as annual periods and for the comparison of our operating performance to that of other companies, both in the real estate industry and in other industries. As we are currently in a growth phase, acquisition costs are excluded from Adjusted EBITDA to allow for the comparison of our operating performance to that of stabilized companies.
The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three and twelve months ended December 31, 2019 and 2018 (dollars in thousands):
Fo r t he Three M o nt hs | Fo r t he Y ear Ended | ||||||||||||||||||||
Ended D ecemb er 3 1, | D ecember 3 1, | ||||||||||||||||||||
2 0 19 | 2 0 18 | $ C hang e | % C hange | 2 0 19 | 2 0 18 | $ C hange | % C hange | ||||||||||||||
Net income | $ | 14,821 | $ | 22,972 | $ | (8,151) | (35.5)% | $ | 55,516 | $ | 63,289 | $ | (7,773) | (12.3)% | |||||||
Gain on sales of real estate investments | (3,144) | (13,624) | 10,480 | (76.9)% | (9,391) | (28,610) | 19,219 | (67.2)% | |||||||||||||
Depreciation and amortization | 11,847 | 10,250 | 1,597 | 15.6% | 44,015 | 40,816 | 3,199 | 7.8% | |||||||||||||
Interest expense, including amortization | 4,069 | 4,494 | (425) | (9.5)% | 16,338 | 18,211 | (1,873) | (10.3)% | |||||||||||||
Loss on extinguishment of debt | 189 | - | 189 | n/a | 189 | - | 189 | n/a | |||||||||||||
Stock-based compensation | 2,492 | 3,248 | (756) | (23.3)% | 10,644 | 9,270 | 1,374 | 14.8% | |||||||||||||
Acquisition costs | (3) | (5) | 2 | (40.0)% | 45 | 124 | (79) | (63.7)% | |||||||||||||
Adjusted EBITDA | $ | 30,271 | $ | 27,335 | $ | 2,936 | 10.7% | $ | 117,356 | $ | 103,100 | $ | 14,256 | 13.8% |
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Appendix: Reporting Definitions
Adjusted Funds from Operations (AFFO): We compute AFFO by adding to or subtracting from FFO (see definition below) (i) acquisition costs (ii) stock-based compensation (iii) straight-line rents, (iii) amortization of above- and below-market lease intangibles and (iv) non-recurring capital expenditures required to stabilize acquired vacancy or renovation projects. We use AFFO as a meaningful supplemental measure of our operating performance because it captures trends in our portfolio operating results when compared year over year. We also believe that AFFO is a widely recognized supplemental measure of the performance of REITs and is used by investors as a basis to assess operating performance in comparison to other REITs. As a result, we believe that the use of AFFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance.
Funds from Operations (FFO): We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"), which defines FFO as net income (loss) (determined in accordance with GAAP), excluding gains (losses) from sales of property and impairment write-downs of depreciable real estate, plus depreciation and amortization on real estate assets and after adjustments for unconsolidated partnerships and joint ventures (which are calculated to reflect FFO on the same basis). We believe that presenting FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets.
We believe that FFO is a meaningful supplemental measure of our operating performance because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, we believe that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance.
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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx
Appendix: Reporting Definitions
Net Operating Income (NOI): We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses. We compute same store NOI as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis. NOI excludes depreciation, amortization, general and administrative expenses, acquisition costs and interest expense. We compute cash-basis same store NOI as same store NOI excluding straight-line rents and amortization of lease intangibles. The same store pool includes all properties that were owned as of December 31, 2019 and since January 1, 2018 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2019. As of December 31, 2019, the same store pool consisted of 187 buildings aggregating approximately 11.8 million square feet representing approximately 88.6% of our total square feet owned and ten improved land parcels containing 47.2 acres. We believe that presenting NOI, same store NOI and cash-basis same store NOI provides useful information to investors regarding the operating performance of our properties because NOI excludes certain items that are not considered to be controllable in connection with the management of the property, such as depreciation, amortization, general and administrative expenses, acquisition costs and interest expense. By presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period.
Stabilized Cap Rate: We compute estimated stabilized cap rates as annualized cash basis net operating income stabilized to market occupancy (generally 95%) divided by 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.
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Terreno Realty Corporation published this content on 06 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 February 2020 21:12:03 UTC