Terreno Realty is one of our favorite industrial REITs, which has hit greater and higher high after June’s REIT rally. The stocks that are a part of the industrial sector have advanced an average of 7% in July while also appreciating by more than 33% year to date. This is seen especially in Terreno, which has reached a multiple 37 times AFFO. This is one the highest, if not the highest multiple among the industrial REITs.
Despite Terreno’s minimalistic management reporting of results, we are able to pull up their 10-Q and July presentation. From this, we are able to see that both the REIT and the sector are still performing very well. In the Q2, the same store NOI grew by 3% on a GAAP basis and up to 5% on a cash basis. However, its funds from operations, which are equivalent to earnings for REITs, has decreased on absolute terms and on a share basis.
An increase in G&A expenses that are associated with long-term incentive plans explains a significant portion of the FFO drop. This company advocates for share award incentive for its executives. Over a pre-established performance measurement period, the total shareholder returns of the Company’s common stock are taken and compared to the total shareholder return of key indices. Which means that the June rally helped to boost their incentive compensation.
In summation, the new highs have had it almost impossible to consider this stock as a buying opportunity. But if you have some its shares already, it is a good idea to hold onto them, for a potential sell opportunity. You might consider cash in (like the management just did) if you think the Fed will negatively influence REITs this year. With the high institutional ownership of the stock, it is very unlikely that an investor will be able to make any sharp gains from any sharp dips. The most sensible action to take for this stock is to just sit back and monitor it.
Source: Terreno Realty Corp.(NYSE:TRNO), Fast Graphs
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Disclosure: The author is long FCH, XHR, CLDT, PEB.