Two industrial companies have surpassed expectations in our Q2 US equity REIT ranking. Without further ado, they are First Industrial and Terreno Realty. Please note that Prologis, the largest pure play REIT in the industrial sector, deserves attention from investors based on the company’s strength, tenant diversity, and robustness of their results.
That being said we typically tend to explore additional options by highlighting companies that are outperforming their peers, regardless of size. That is why we featured Terreno Realty’s robust Q3 results last week. Today we will compare their results with First Industrial to answer the question of which company has performed better in Q3.
Terreno Realty is certainly on the lower end of the small capitalization spectrum with a market cap of approximately $1.0 billion. In comparison, First Industrial enjoys a market cap of $2.4 billion, and has a larger footprint with 629 properties containing 64 million square feet in gross leasable area. Terreno owns 141 properties with a total of 11 million square feet.
Regarding location, First Industrial’s top three markets, as calculated by rental income, are Southern California, Pennsylvania, and Chicago representing about 30 percent total. On the other hand, Terreno has a far more concentrated portfolio because they focus on six major coastal markets only. All of the company’s properties have been distributed within those markets, with Northern New Jersey/New York City and Washington, D.C./Baltimore accounting for almost half. Both REITs tend to invest in warehouses.
Both companies have been performing well in different areas due to their size and life stage. For example, Terreno’s year over year growth in revenues has been at an extraordinary level, showing 46 percent in Q2, and 37 percent in Q3 respectively. The company also has a strong FFO per share growth, which is one of the metrics that is closely related to dividend distribution potential. Terreno has been on an acquisition spree recently that is comparable to STAG Industrial’s. They plan to become as large as First Industrial in the mid term.
First Industrial has enjoyed a more tamed approach to their revenue growth rate that falls between 7 and 8 percent in Q2 and Q3 (year over year), but a stronger FFO per share growth rate and increased dividends. The company mainly invests in development along with a few selected acquisitions. Terreno does not engage in ground up development.
To be continued…
Source: First Industrial Realty Trust (NYSE:FR), Terreno Realty Corporation (NYSE:TRNO)
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