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Terreno Realty Corp - Quarter Report: 2023 March (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
Form 10-Q
_________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 001-34603
_________________________
Terreno Realty Corporation
(Exact Name of Registrant as Specified in Its Charter)
_________________________
Maryland27-1262675
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
10500 NE 8th Street, Suite 1910 Bellevue, WA
98004
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (415) 655-4580

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareTRNONew York Stock Exchange
_________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒ 
The registrant had 83,258,109 shares of its common stock, $0.01 par value per share, outstanding as of May 1, 2023.

Terreno Realty Corporation
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1A.
Item 2.
Item 3.

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of Terreno Realty Corporation
Terreno Realty Corporation
Consolidated Balance Sheets
(in thousands – except share and per share data)
March 31, 2023December 31, 2022
 (unaudited) 
ASSETS
Investments in real estate
Land$1,930,385 $1,850,860 
Buildings and improvements1,491,374 1,372,473 
Construction in progress248,146 51,896 
Intangible assets139,814 123,545 
Total investments in properties3,809,719 3,398,774 
Accumulated depreciation and amortization(337,317)(323,631)
Net investments in properties3,472,402 3,075,143 
Properties held for sale, net12,312 — 
Net investments in real estate3,484,714 3,075,143 
Cash and cash equivalents11,054 26,393 
Restricted cash2,605 1,690 
Other assets, net79,996 61,215 
Total assets$3,578,369 $3,164,441 
LIABILITIES AND EQUITY
Liabilities
Credit facility$— $— 
Term loans payable, net198,968 198,993 
Senior unsecured notes, net571,973 571,825 
Security deposits29,791 27,454 
Intangible liabilities, net92,535 55,873 
Dividends payable33,209 30,753 
Accounts payable and other liabilities52,021 49,692 
Total liabilities978,497 934,590 
Commitments and contingencies (Note 11)
Equity
Stockholders’ equity
Common stock: $0.01 par value, 400,000,000 shares authorized, and 82,609,838 and 76,463,482 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively.
827 765 
Additional paid-in capital
2,552,660 2,167,276 
Common stock held in deferred compensation plan, 512,459 and 417,665 shares at March 31, 2023 and December 31, 2022, respectively.
(32,009)(26,462)
Retained earnings78,394 88,272 
Total stockholders’ equity2,599,872 2,229,851 
Total liabilities and equity$3,578,369 $3,164,441 
The accompanying condensed notes are an integral part of these consolidated financial statements.
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Terreno Realty Corporation
Consolidated Statements of Operations
(in thousands – except share and per share data)
(Unaudited)
For the Three Months Ended March 31,
 20232022
REVENUES
Rental revenues and tenant expense reimbursements$74,651 $64,035 
Total revenues74,651 64,035 
COSTS AND EXPENSES
Property operating expenses18,381 16,876 
Depreciation and amortization18,159 14,982 
General and administrative9,320 7,527 
Acquisition costs and other48 28 
Total costs and expenses45,908 39,413 
OTHER INCOME (EXPENSE)
Interest and other income1,963 121 
Interest expense, including amortization(7,375)(5,081)
Total other income (expense) (5,412)(4,960)
Net income23,331 19,662 
Allocation to participating securities(105)(81)
Net income available to common stockholders$23,226 $19,581 
EARNINGS PER COMMON SHARE - BASIC AND DILUTED:
Net income available to common stockholders - basic$0.29 $0.26 
Net income available to common stockholders - diluted$0.29 $0.26 
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING79,895,886 75,199,529 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING80,344,742 75,284,498 
The accompanying condensed notes are an integral part of these consolidated financial statements.
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Terreno Realty Corporation
Consolidated Statements of Equity
(in thousands – except share data)
(Unaudited)

Three months ended March 31, 2023:
 Common StockAdditional
Paid-
in Capital
Common Shares Held in Deferred Compensation PlanDeferred Compensation Plan Retained (Deficit)
Earnings
 
Number of
Shares
AmountTotal
Balance as of December 31, 202276,463,482 $765 $2,167,276 417,665 $(26,462)$88,272 $2,229,851 
Net income— — — — — 23,331 23,331 
Issuance of common stock, net of issuance costs of $943
6,197,825 62 377,426 — — — 377,488 
Forfeiture of common stock related to employee awards(6,434)— — — — — — 
Common shares acquired related to employee awards(9,745)— (627)— — — (627)
Issuance of restricted stock59,504 — — — — — — 
Stock-based compensation— — 3,038 — — — 3,038 
Common stock dividends ($0.40 per share)
— — — — — (33,209)(33,209)
Deposits to deferred compensation plan(94,794)— 5,547 94,794 (5,547)— — 
Balance as of March 31, 202382,609,838 $827 $2,552,660 512,459 $(32,009)$78,394 $2,599,872 
Three months ended March 31, 2022:
 Common StockAdditional
Paid-
in Capital
Common Shares Held in Deferred Compensation PlanDeferred Compensation PlanRetained (Deficit)
Earnings
 
Number of
Shares
AmountTotal
Balance as of December 31, 202175,068,575 $752 $2,069,604 275,727 $(15,197)$2,804 $2,057,963 
Net income— — — — — 19,662 19,662 
Issuance of common stock, net of issuance costs of $—
147,285 — — — — — — 
Forfeiture of common stock related to employee awards(1,206)— — — — — — 
Common shares acquired related to employee awards(6,348)— (493)— — — (493)
Issuance of restricted stock41,255 — — — — — — 
Stock-based compensation— — 2,829 — — — 2,829 
Common stock dividends ($0.34 per share)
— — — — — (25,680)(25,680)
Deposits to deferred compensation plan(147,285)— 11,535 147,285 (11,535)— — 
Balance as of March 31, 202275,102,276 $752 $2,083,475 423,012 $(26,732)$(3,214)$2,054,281 
The accompanying condensed notes are an integral part of these consolidated financial statements.
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Terreno Realty Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 For the Three Months Ended March 31,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$23,331 $19,662 
Adjustments to reconcile net income to net cash provided by operating activities
Straight-line rents(2,173)(2,313)
Amortization of lease intangibles(3,541)(3,111)
Depreciation and amortization18,159 14,982 
Deferred financing cost amortization383 305 
Stock-based compensation3,038 2,829 
Changes in assets and liabilities
Other assets(3,998)(2,838)
Accounts payable and other liabilities3,602 (1,483)
Net cash provided by operating activities38,801 28,033 
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions(364,600)(68,052)
Additions to construction in progress(8,904)(10,155)
Additions to buildings, improvements and leasing costs(13,862)(18,630)
Net cash used in investing activities(387,366)(96,837)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock366,499 — 
Issuance costs on issuance of common stock(978)— 
Repurchase of common stock related to employee awards(627)(493)
Borrowings on credit facility29,000 — 
Payments on credit facility(29,000)— 
Payment of deferred financing costs— (362)
Dividends paid to common stockholders(30,753)(25,618)
Net cash provided by (used in) financing activities334,141 (26,473)
Net decrease in cash and cash equivalents and restricted cash(14,424)(95,277)
Cash and cash equivalents and restricted cash at beginning of period
28,083 204,801 
Cash and cash equivalents and restricted cash at end of period
$13,659 $109,524 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized interest$8,381 $7,176 
Supplemental disclosures of non-cash transactions
Accounts payable related to capital improvements17,219 18,794 
Non-cash issuance of common stock to the deferred compensation plan(5,547)(11,535)
Reconciliation of cash paid for property acquisitions
Acquisition of properties$406,730 $70,295 
Assumption of other assets and liabilities(42,130)(2,243)
Net cash paid for property acquisitions$364,600 $68,052 
The accompanying condensed notes are an integral part of these consolidated financial statements.
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Terreno Realty Corporation
Condensed Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization
Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, the “Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. All square feet, acres, occupancy and number of properties disclosed in these condensed notes to the consolidated financial statements are unaudited. As of March 31, 2023, the Company owned 257 buildings (including one building held for sale) aggregating approximately 15.9 million square feet, 46 improved land parcels consisting of approximately 161.4 acres and four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel.
The Company is an internally managed Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2010.
Note 2. Significant Accounting Policies
Basis of Presentation. The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In management’s opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The interim consolidated financial statements include all of the Company’s accounts and its subsidiaries and all intercompany balances and transactions have been eliminated in consolidation. The financial statements should be read in conjunction with the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and the notes thereto, which was filed with the Securities and Exchange Commission on February 8, 2023.
Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Capitalization of Costs. The Company capitalizes costs directly related to the redevelopment, renovation and expansion of its investment in real estate. Costs associated with such projects are capitalized as incurred. If the project is abandoned, these costs are expensed during the period in which the redevelopment, renovation or expansion project is abandoned. Costs considered for capitalization include, but are not limited to, construction costs, interest, real estate taxes and insurance, if appropriate. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress. In the event that the activities to ready the asset for its intended use are suspended, the capitalization period will cease until such activities are resumed. Costs incurred for maintaining and repairing properties, which do not extend their useful lives, are expensed as incurred.
Interest is capitalized based on actual capital expenditures from the period when redevelopment, renovation or expansion commences until the asset is ready for its intended use, at the weighted average borrowing rate during the period.
Investments in Real Estate. Investments in real estate, including tenant improvements, leasehold improvements and leasing costs, are stated at cost, less accumulated depreciation, unless circumstances indicate that the cost cannot be recovered, in which case, an adjustment to the carrying value of the property is made to reduce it to its estimated fair value. The Company also reviews the impact of above and below-market leases, in-place leases and lease origination costs for acquisitions and records an intangible asset or liability accordingly.
Impairment. Carrying values for financial reporting purposes are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Examples of such events or changes in circumstances may include classifying an asset to be held for sale, changing the intended hold period or when an asset remains vacant significantly longer than expected. The intended use of an asset either held for sale or held for use can significantly impact how impairment is measured. If an asset is intended to be held for the long-term, the recoverability is based on the undiscounted future cash flows. If the asset carrying value is not supported on an undiscounted
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future cash flow basis, then the asset carrying value is measured against the lower of cost or the present value of expected cash flows over the expected hold period. An impairment charge to earnings is recognized for the excess of the asset’s carrying value over the lower of cost or the present values of expected cash flows over the expected hold period. If an asset is intended to be sold, impairment is determined using the estimated fair value less costs to sell. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions, among other things, regarding current and future economic and market conditions and the availability of capital. The Company determines the estimated fair values based on its assumptions regarding rental rates, lease-up and holding periods, as well as sales prices. When available, current market information is used to determine capitalization and rental growth rates. If available, current comparative sales values may also be used to establish fair value. When market information is not readily available, the inputs are based on the Company’s understanding of market conditions and the experience of the Company’s management team. Actual results could differ significantly from the Company’s estimates. The discount rates used in the fair value estimates represent a rate commensurate with the indicated holding period with a premium layered on for risk. There were no impairment charges recorded to the carrying values of the Company’s properties during the three months ended March 31, 2023 or 2022.
Property Acquisitions. In accordance with Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is not considered a business. To be a business, the set of acquired activities and assets must include inputs and one or more substantive processes that together contribute to the ability to create outputs. The Company has determined that its real estate property acquisitions will generally be accounted for as asset acquisitions under the clarified definition. Upon acquisition of a property the Company estimates the fair value of acquired tangible assets (consisting generally of land, buildings and improvements) and intangible assets and liabilities (consisting generally of the above and below-market leases and the origination value of all in-place leases). The Company determines fair values using Level 3 inputs such as replacement cost, estimated cash flow projections and other valuation techniques and applying appropriate discount and capitalization rates based on available market information. Mortgage loans assumed in connection with acquisitions are recorded at their fair value using current market interest rates for similar debt at the date of acquisition. Acquisition-related costs associated with asset acquisitions are capitalized to individual tangible and intangible assets and liabilities assumed on a relative fair value basis and acquisition-related costs associated with business combinations are expensed as incurred.
The fair value of the tangible assets is determined by valuing the property as if it were vacant. Land values are derived from current comparative sales values, when available, or management’s estimates of the fair value based on market conditions and the experience of the Company’s management team. Building and improvement values are calculated as replacement cost less depreciation, or management’s estimates of the fair value of these assets using discounted cash flow analyses or similar methods. The fair value of the above and below-market leases is based on the present value of the difference between the contractual amounts to be received pursuant to the acquired leases (using a discount rate that reflects the risks associated with the acquired leases) and the Company’s estimate of the market lease rates measured over a period equal to the remaining term of the leases plus the term of any below-market fixed rate renewal options. The above and below-market lease values are amortized to rental revenues over the remaining initial term plus the term of any below-market fixed rate renewal options that are considered bargain renewal options of the respective leases. The total net impact to rental revenues due to the amortization of above and below-market leases was a net increase of approximately $3.5 million and $3.1 million for the three months ended March 31, 2023 and 2022, respectively. The origination value of in-place leases is based on costs to execute similar leases, including commissions and other related costs. The origination value of in-place leases also includes real estate taxes, insurance and an estimate of lost rental revenue at market rates during the estimated time required to lease up the property from vacant to the occupancy level at the date of acquisition. The remaining weighted average lease term related to these intangible assets and liabilities as of March 31, 2023 was 6.5 years. As of March 31, 2023 and December 31, 2022, the Company’s intangible assets and liabilities, including properties held for sale (if any), consisted of the following (dollars in thousands):
 March 31, 2023December 31, 2022
 GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
In-place leases$137,691 $(86,776)$50,915 $119,959 $(83,222)$36,737 
Above-market leases3,586 (3,561)25 3,586 (3,558)28 
Below-market leases(135,844)43,309 (92,535)(95,638)39,765 (55,873)
Total$5,433 $(47,028)$(41,595)$27,907 $(47,015)$(19,108)
Depreciation and Useful Lives of Real Estate and Intangible Assets. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets or liabilities. The following table reflects the standard
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depreciable lives typically used to compute depreciation and amortization. However, such depreciable lives may be different based on the estimated useful life of such assets or liabilities.
DescriptionStandard Depreciable Life
LandNot depreciated
Building40 years
Building Improvements
5-40 years
Tenant ImprovementsShorter of lease term or useful life
Leasing CostsLease term
In-place LeasesLease term
Above/Below-Market LeasesLease term
Held for Sale Assets. The Company considers a property to be held for sale when it meets the criteria established under Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment (See “Note 5 - Held for Sale/Disposed Assets”). Properties held for sale are reported at the lower of the carrying amount or fair value less estimated costs to sell and are not depreciated while they are held for sale.
Cash and Cash Equivalents. Cash and cash equivalents consists of cash held in a major banking institution and other highly liquid short-term investments with original maturities of three months or less. Cash equivalents are generally invested in U.S. government securities, government agency securities or money market accounts.
Restricted Cash. Restricted cash includes cash held in escrow in connection with property acquisitions and reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations.
The following summarizes the reconciliation of cash and cash equivalents and restricted cash as presented in the accompanying consolidated statements of cash flows (dollars in thousands):
For the Three Months Ended March 31,
20232022
Beginning
Cash and cash equivalents at beginning of period
$26,393 $204,404 
Restricted cash1,690 397 
Cash and cash equivalents and restricted cash28,083 204,801 
Ending
Cash and cash equivalents at end of period
11,054 106,278 
Restricted cash2,605 3,246 
Cash and cash equivalents and restricted cash13,659 109,524 
Net decrease in cash and cash equivalents and restricted cash$(14,424)$(95,277)
Revenue Recognition. The Company records rental revenue from operating leases on a straight-line basis over the term of the leases and maintains an allowance for estimated losses that may result from the inability of its tenants to make required payments. If tenants fail to make contractual lease payments that are greater than the Company’s allowance for doubtful accounts, security deposits and letters of credit, then the Company may have to recognize additional doubtful account charges in future periods. The Company monitors the liquidity and creditworthiness of its tenants on an on-going basis by reviewing their financial condition periodically as appropriate. Each period the Company reviews its outstanding accounts receivable, including straight-line rents, for doubtful accounts and provides allowances as needed. The Company also records lease termination fees when a tenant has executed a definitive termination agreement with the Company and the payment of the termination fee is not subject to any conditions that must be met or waived before the fee is due to the Company. If a tenant remains in the leased space following the execution of a definitive termination agreement, the applicable termination will be deferred and recognized over the term of such tenant’s occupancy. Tenant expense reimbursement income includes payments and amounts due from tenants pursuant to their leases for real estate taxes, insurance and other recoverable property operating expenses and is recognized as revenues during the same period the related expenses are incurred.
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As of March 31, 2023 and December 31, 2022, approximately $62.6 million and $48.0 million, respectively, of straight-line rent and accounts receivable, net of allowances of approximately $0.4 million and $0.6 million as of March 31, 2023 and December 31, 2022, respectively, were included as a component of other assets in the accompanying consolidated balance sheets.
Deferred Financing Costs. Costs incurred in connection with financings are capitalized and amortized to interest expense using the effective interest method over the term of the related loan. Deferred financing costs associated with the Company’s revolving credit facility are classified as an asset, as a component of other assets in the accompanying consolidated balance sheets, and deferred financing costs associated with debt liabilities are reported as a direct deduction from the carrying amount of the debt liability in the accompanying consolidated balance sheets. Deferred financing costs related to the revolving credit facility and debt liabilities are carried at cost, net of accumulated amortization in the aggregate of approximately $12.3 million and $11.9 million as of March 31, 2023 and December 31, 2022, respectively.
Income Taxes. The Company elected to be taxed as a REIT under the Code and operates as such beginning with its taxable year ended December 31, 2010. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If it fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT.
ASC 740-10, Income Taxes (“ASC 740-10”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740-10 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year. As of March 31, 2023 and December 31, 2022, the Company did not have any unrecognized tax benefits and does not believe that there will be any material changes in unrecognized tax positions over the next 12 months. The Company’s tax returns are subject to examination by federal, state and local tax jurisdictions, which as of March 31, 2023, include years 2019 to 2022 for federal purposes.
Stock-Based Compensation and Other Long-Term Incentive Compensation. The Company follows the provisions of ASC 718, Compensation-Stock Compensation, to account for its stock-based compensation plan, which requires that the compensation cost relating to stock-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued. The Company’s 2019 Equity Incentive Plan (the “2019 Plan”) provides for the grant of restricted stock awards, performance share awards, unrestricted shares or any combination of the foregoing. Stock-based compensation is recognized as a general and administrative expense in the accompanying consolidated statements of operations and measured at the fair value of the award on the date of grant. The Company estimates the forfeiture rate based on historical experience as well as expected behavior. The amount of the expense may be subject to adjustment in future periods depending on the specific characteristics of the stock-based award.
In addition, the Company has awarded long-term incentive target awards (the “Performance Share awards”) under its Amended and Restated Long-Term Incentive Plan (as amended and restated, the “Amended LTIP”), which the Company amended and restated on January 8, 2019, to its executives that may be payable in shares of the Company’s common stock after the conclusion of each pre-established performance measurement period, which is generally three years. The amount that may be earned is variable depending on the relative total shareholder return of the Company’s common stock as compared to the total shareholder return of the MSCI U.S. REIT Index (RMS) and the FTSE Nareit Equity Industrial Index over the pre-established performance measurement period. Under the Amended LTIP, each participant’s Performance Share award granted will be expressed as a number of shares of common stock and settled in shares of common stock. The grant date fair value of the Performance Share awards will be determined using a Monte Carlo simulation model on the date of grant and recognized on a straight-line basis over the performance period.
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Fair Value of Financial Instruments. ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (See “Note 8 - Fair Value Measurements”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities. ASC 820 requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
Segment Disclosure. ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has determined that it has one reportable segment, with activities related to investing in real estate. The Company’s investments in real estate are geographically diversified and the chief operating decision makers evaluate operating performance on an individual asset level. As each of the Company’s assets has similar economic characteristics, the assets have been aggregated into one reportable segment.
Note 3. Concentration of Credit Risk
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents. The Company may maintain deposits in federally insured financial institutions in excess of federally insured limits. However, the Company’s management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.
As of March 31, 2023, the Company owned 44 buildings aggregating approximately 2.8 million square feet and 13 improved land parcels consisting of approximately 68.0 acres located in Northern New Jersey/New York City, which accounted for a combined percentage of approximately 24.6% of its annualized base rent. Such annualized base rent is based on contractual monthly base rent per the leases, for all buildings and improved land parcels, excluding any partial or full rent abatements as of March 31, 2023, multiplied by 12.
Other real estate companies compete with the Company in its real estate markets. This results in competition for tenants to occupy space. The existence of competing properties could have a material impact on the Company’s ability to lease space and on the level of rent that can be achieved. The Company had no tenant that accounted for greater than 10% of the Company's annualized base rent as of March 31, 2023.
Note 4. Investments in Real Estate
During the three months ended March 31, 2023, the Company acquired three industrial properties with a total initial investment, including acquisition costs, of approximately $406.7 million, of which $245.9 million was recorded to land, $143.0 million to buildings and improvements, and $17.8 million to intangible assets. Additionally, the Company assumed $42.7 million in liabilities.
The Company recorded revenues and net loss for the three months ended March 31, 2023 of approximately $0.3 million and $0.2 million, respectively, related to the 2023 acquisitions.
During the three months ended March 31, 2022, the Company acquired two industrial properties with a total initial investment, including acquisition costs, of approximately $70.3 million, of which $30.0 million was recorded to land, $39.0 million to buildings and improvements, and $1.3 million to intangible assets. Additionally, the Company assumed $2.3 million in liabilities.
The Company recorded revenues and net income for the three months ended March 31, 2022 of approximately $0.1 million and $0.1 million, respectively, related to the 2022 acquisitions.
The above assets and liabilities were recorded at fair value, which uses Level 3 inputs. The properties were acquired from unrelated third parties using existing cash on hand, proceeds from property sales and the issuance of common stock and borrowings on the revolving credit facility.
As of March 31, 2023, the Company had four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel. The following table summarizes certain information with respect to the properties under development or redevelopment as of March 31, 2023:
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Property NameLocation
Total Expected
Investment  (in thousands) 1
Estimated Post-Development Square FeetEstimated Post-Development Acreage
Berryessa
San Jose, CA$25,961 n/a7.2 
Countyline Phase IV
Countyline Building 41 2
Hialeah, FL40,300 191,000n/a
Countyline Building 38 2
Hialeah, FL88,500 506,000n/a
147th Street
Hawthorne, CA18,060 34,000n/a
Paterson Plank III
Carlstadt, NJ35,800 48,000n/a
Total, excluding land for future development208,621 779,0007.2 
Countyline Phase IV
Countyline Phase IV Land 2
Hialeah, FL362,600 1,500,000n/a
Total land for future development362,600 1,500,000n/a
Total$571,221 2,279,0007.2 
1Total expected investment for the properties include 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.
2Collectively, “Countyline Phase IV”, a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings located in Miami’s Countyline Corporate Park (“Countyline”), immediately adjacent to the Company’s seven buildings within Countyline. Countyline Phase IV, a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75, is expected to contain ten LEED-certified industrial distribution buildings at completion.
The Company capitalized interest associated with development, redevelopment, renovation or expansion activities of approximately $0.7 million during both the three months ended March 31, 2023 and 2022.
Note 5. Held for Sale/Disposed Assets
As of March 31, 2023, the Company had entered into an agreement with a third-party purchaser to sell one property located in the Northern New Jersey/New York City market for a sales price of approximately $25.5 million (net book value of approximately $12.3 million). There is no assurance that the Company will sell the property under contract because the proposed disposition is subject to various closing conditions. There were no properties sold during the three months ended March 31, 2023 or 2022.
Note 6. Debt
As of both March 31, 2023 and December 31, 2022, the Company had $775.0 million of unsecured debt and no secured debt. The following table summarizes the components of the Company’s indebtedness as of March 31, 2023 and December 31, 2022 (dollars in thousands):
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March 31, 2023December 31, 2022Margin Above SOFR
Interest Rate 1
Contractual Maturity Date
Unsecured Debt:
Credit Facility$— $— 
1.1% 2
n/a8/20/2025
5-Year Term Loan
100,000 100,000 
1.3% 2
6.0 %1/15/2027
5-Year Term Loan
100,000 100,000 
1.3% 2
6.0 %1/15/2028
$100M 7-Year Unsecured 3
100,000 100,000 n/a3.8 %7/14/2024
$50M 10-Year Unsecured 3
50,000 50,000 n/a4.0 %7/7/2026
$50M 12-Year Unsecured 3
50,000 50,000 n/a4.7 %10/31/2027
$100M 7-Year Unsecured 3
100,000 100,000 n/a2.4 %7/15/2028
$100M 10-Year Unsecured 3
100,000 100,000 n/a3.1 %12/3/2029
$125M 9-Year Unsecured 3
125,000 125,000 n/a2.4 %8/17/2030
$50M 10-Year Unsecured 3
50,000 50,000 n/a2.8 %7/15/2031
Total Unsecured Debt775,000 775,000 
Less: Unamortized premium/discount and debt issuance costs(4,059)(4,182)
Total$770,941 $770,818 
1Reflects the contractual interest rate under the terms of each loan as of March 31, 2023. Excludes the effects of unamortized debt issuance costs and unamortized fair market value premiums, if any.
2The interest rates on these loans are comprised of the Secured Overnight Financing Rate (“SOFR”) plus a SOFR margin. The SOFR margins will range from 1.10% to 1.55% (1.10% as of March 31, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of March 31, 2023) for the term loans, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value and includes a 10 basis points SOFR credit adjustment.
3Collectively, the “Senior Unsecured Notes”.

The Company’s Sixth Amended and Restated Senior Credit Agreement (as amended, the “Amended Facility”) consists of a $400.0 million revolving credit facility that matures in August 2025, a $100.0 million term loan that matures in January 2027 and a $100.0 million term loan that matures in January 2028. As of March 31, 2023 and December 31, 2022, there were no borrowings outstanding on the revolving credit facility and $200.0 million and $100.0 million, respectively, of borrowings outstanding on the term loans.

The aggregate amount of the Amended Facility may be increased by up to an additional $500.0 million to a maximum amount not to exceed $1.1 billion, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. Outstanding borrowings under the Amended Facility are limited to the lesser of (i) the sum of the $400.0 million revolving credit facility, the $100.0 million term loan maturing in January 2027 and the $100.0 million term loan maturing in January 2028, or (ii) 60.0% of the value of the unencumbered properties. Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at the Company’s option, either (i) SOFR plus the applicable SOFR margin or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, 0.50% above the federal funds effective rate, thirty-day SOFR plus the applicable SOFR margin for SOFR rate loans under the Amended Facility plus 1.25%, or 1.25% per annum. The applicable SOFR margin will range from 1.10% to 1.55% (1.10% as of March 31, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of March 31, 2023) for the term loans, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value and includes a 10 basis points SOFR credit adjustment. The Amended Facility requires quarterly payments of an annual facility fee in an amount ranging from 0.15% to 0.30%, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value.
The Amended Facility and the Senior Unsecured Notes are guaranteed by the Company and by substantially all of the current and to-be-formed subsidiaries of the Company that own an unencumbered property. The Amended Facility and the Senior Unsecured Notes are not secured by the Company’s properties or by interests in the subsidiaries that hold such properties. The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which the Company must comply. The Company was in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of March 31, 2023 and December 31, 2022.
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The scheduled principal payments of the Company’s debt as of March 31, 2023 were as follows (dollars in thousands):
Credit
Facility
Term LoanSenior
Unsecured
Notes
Total Debt
2023 (9 months)$$$

$
2024100,000100,000
2025
202650,00050,000
2027100,00050,000150,000
Thereafter100,000375,000475,000
Total debt200,000575,000775,000
Deferred financing costs, net(1,032)(3,027)(4,059)
Total debt, net$$198,968$571,973$770,941
Weighted average interest raten/a6.0 %3.1 %3.9 %
Note 7. Leasing
The following is a schedule of minimum future cash rentals on tenant operating leases in effect as of March 31, 2023. The schedule does not reflect future rental revenues from the renewal or replacement of existing leases and excludes property operating expense reimbursements (dollars in thousands):
2023 (9 months)$172,949 
2024221,382 
2025198,688 
2026166,041 
2027122,299 
Thereafter271,727 
Total$1,153,086 
Note 8. Fair Value Measurements
ASC 820 requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
Financial Instruments Disclosed at Fair Value
As of March 31, 2023 and December 31, 2022, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values because of the short-term nature of these investments or liabilities based on Level 1 inputs. The fair values of the Company’s Senior Unsecured Notes were estimated by calculating the present value of principal and interest payments, based on borrowing rates available to the Company, which are Level 2 inputs, adjusted with a credit spread, as applicable, and assuming the loans are outstanding through maturity. The fair value of the Company’s Amended Facility approximated its carrying value because the variable interest rates approximate market borrowing rates available to the Company, which are Level 2 inputs.
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The following table sets forth the carrying value and the estimated fair value of the Company’s debt as of March 31, 2023 and December 31, 2022 (dollars in thousands):
 Fair Value Measurement Using 
Total Fair ValueQuoted Price in
Active Markets
for Identical
Assets and
Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Carrying Value
Liabilities
Debt at:
March 31, 2023$710,422 $— $710,422 $— $770,941 
December 31, 2022$700,926 $— $700,926 $— $770,818 
Note 9. Stockholders’ Equity
The Company’s authorized capital stock consists of 400,000,000 shares of common stock, $0.01 par value per share, and 100,000,000 shares of preferred stock, $0.01 par value per share. The Company has an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $300.0 million ($120.4 million remaining as of March 31, 2023) in amounts and at times to be determined by the Company from time to time. Actual sales under the $300 Million ATM Program, if any, will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Company’s common stock, determinations by the Company of the appropriate sources of funding for the Company and potential uses of funding available to the Company. During the three months ended March 31, 2023, the Company issued an aggregate of 350,000 shares of common stock at a weighted average offering price of $63.30 per share under the $300 Million ATM Program, resulting in net proceeds of approximately $21.8 million and paying total compensation to the applicable sales agents of approximately $0.3 million. During the three months ended March 31, 2022, the Company did not issue any common stock under the $300 Million ATM Program.
On February 13, 2023, the Company completed a public offering of 5,750,000 shares of common stock at a price per share of $62.50, which included the underwriters’ full exercise of their option to purchase an additional 750,000 shares. The net proceeds of the offering were approximately $355.9 million after deducting the underwriting discount and offering costs of approximately $3.5 million. The Company used the net proceeds for acquisitions, including the three properties acquired during the three months ended March 31, 2023.
The Company has a share repurchase program authorizing the Company to repurchase up to 3,000,000 shares of its outstanding common stock from time to time through December 31, 2024. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. As of March 31, 2023, the Company had not repurchased any shares of common stock pursuant to its share repurchase program.
The Company has a Non-Qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) maintained for the benefit of select employees and members of the Company’s Board of Directors, in which certain of their cash and equity-based compensation may be deposited. Deferred Compensation Plan assets are held in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of bankruptcy or insolvency. The shares held in the Deferred Compensation Plan are classified within stockholders’ equity in a manner similar to the manner in which treasury stock is classified. Subsequent changes in the fair value of the shares are not recognized. During the three months ended March 31, 2023 and 2022, 94,794 and 147,285 shares of common stock, respectively, were deposited into the Deferred Compensation Plan. During the three months ended March 31, 2023 and 2022, there were no shares of common stock withdrawn from the Deferred Compensation Plan.
As of March 31, 2023, there were 1,898,961 shares of common stock authorized for issuance as restricted stock grants, unrestricted stock awards or Performance Share awards under the 2019 Plan, of which 583,694 were remaining and available for issuance. The grant date fair value per share of restricted stock awards issued during the period from February 16, 2010 (commencement of operations) to March 31, 2023 ranged from $14.20 to $78.33. The fair value of the restricted stock that was granted during the three months ended March 31, 2023 was approximately $3.9 million and the vesting period for the restricted stock is typically between one and five years. As of March 31, 2023, the Company had approximately $15.2 million of total unrecognized compensation costs related to restricted stock issuances, which is expected to be recognized over a remaining
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weighted average period of approximately 3.0 years. The Company recognized compensation costs of approximately $1.4 million for both the three months ended March 31, 2023 and 2022 related to the restricted stock issuances.
The following is a summary of the total restricted shares granted to the Company’s executive officers and employees with the related weighted average grant date fair value share prices for the three months ended March 31, 2023:
Restricted Stock Activity:
SharesWeighted Average Grant
Date Fair Value
Non-vested shares outstanding as of December 31, 2022356,632 $59.58 
Granted59,504 64.94 
Forfeited(6,434)67.10 
Vested(31,793)60.87 
Non-vested shares outstanding as of March 31, 2023377,909 $60.19 
The following is a vesting schedule of the total non-vested shares of restricted stock outstanding as of March 31, 2023:
Non-vested Shares Vesting ScheduleNumber of Shares
2023 (9 months)31,372 
2024116,368 
202584,253 
202662,300 
202783,616 
Thereafter— 
Total Non-vested Shares377,909 
Long-Term Incentive Plan:
As of March 31, 2023, there were three open performance measurement periods for the Performance Share awards: January 1, 2021 to December 31, 2023, January 1, 2022 to December 31, 2024, and January 1, 2023 to December 31, 2025. During the three months ended March 31, 2023, the Company issued 97,825 shares of common stock at a price of $58.56 per share related to the Performance Share awards for the performance period from January 1, 2020 to December 31, 2022.
The following table summarizes certain information with respect to the Performance Share awards granted on or after January 1, 2019 and includes the forfeiture of certain of the Performance Share awards during 2022 (dollars in thousands):
Performance Share Period
Fair Value on Date of Grant 1
Expense for the Three Months Ended March 31,
20232022
January 1, 2020 - December 31, 2022$4,882 $— $464 
January 1, 2021 - December 31, 20234,820 402 456 
January 1, 2022 - December 31, 20245,789 482 544 
January 1, 2023 - December 31, 20259,040 753 — 
Total$24,531 $1,637 $1,464 
1     Reflects the fair value on date of grant for all performance shares outstanding at March 31, 2023.
Dividends:
The following table sets forth the cash dividends paid or payable per share during the three months ended March 31, 2023:
For the Three Months EndedSecurityDividend per ShareDeclaration DateRecord DateDate Paid
March 31, 2023Common stock$0.40 February 7, 2023March 31, 2023April 6, 2023
Note 10. Net Income (Loss) Per Share
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Pursuant to ASC 260-10-45, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and are included in the computation of earnings per share pursuant to the two-class method. The two-class method of computing earnings per share allocates earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of common shares outstanding for the period. The Company’s non-vested shares of restricted stock are considered participating securities since these share-based awards contain non-forfeitable rights to dividends irrespective of whether the awards ultimately vest or expire. The Company had no antidilutive securities or dilutive restricted stock awards outstanding for the three months ended March 31, 2023 and 2022.
In accordance with the Company’s policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the net income (loss) per common share is adjusted for earnings distributed through declared dividends (if any) and allocated to all participating securities (weighted average common shares outstanding and unvested restricted shares outstanding) under the two-class method. Under this method, allocations were made to 373,985 and 303,666 of weighted average unvested restricted shares outstanding for the three months ended March 31, 2023 and 2022, respectively.
Performance Share awards which may be payable in shares of the Company’s common stock after the conclusion of each pre-established performance measurement period are included as contingently issuable shares in the calculation of diluted weighted average common shares of stock outstanding assuming the reporting period is the end of the measurement period, and the effect is dilutive. Diluted shares related to the Performance Share awards were 448,856 and 84,969 for the three months ended March 31, 2023 and 2022, respectively.
Note 11. Commitments and Contingencies
Contractual Commitments. As of May 2, 2023, the Company had two outstanding contracts with third-party sellers to acquire two industrial properties for a total purchase price of approximately $62.9 million. There is no assurance that the Company will acquire the properties under contract because the proposed acquisitions are subject to due diligence and various closing conditions.
Note 12. Subsequent Events
On May 1, 2023, the Company sold one industrial property in North Bergen, New Jersey for a total sales price of approximately $25.5 million (net book value of approximately $12.3 million).
On May 2, 2023, the Company’s board of directors declared a cash dividend in the amount of $0.40 per share of its common stock payable on July 14, 2023 to the stockholders of record as of the close of business on June 30, 2023.
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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We caution investors that forward-looking statements are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “project”, “result”, “should”, “will”, “seek”, “target”, “see”, “likely”, “position”, “opportunity”, “outlook”, “potential”, “future” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. 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 expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. 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.
Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
the factors included under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 8, 2023, in this Quarterly Report on Form 10-Q, and in our other public filings;
our ability to identify and acquire industrial properties on terms favorable to us;
general volatility of the capital markets and the market price of our common stock;
adverse economic or real estate conditions or developments in the industrial real estate sector and/or in the markets in which we own properties;
our dependence on key personnel and our reliance on third-party property managers;
our inability to comply with the laws, rules and regulations applicable to companies, and in particular, public companies;
our ability to manage our growth effectively;
tenant bankruptcies and defaults on, or non-renewal of, leases by tenants;
decreased rental rates or increased vacancy rates;
increased interest rates and operating costs;
declining real estate valuations and impairment charges;
our expected leverage, our failure to obtain necessary outside financing, and existing and future debt service obligations;
our ability to make distributions to our stockholders;
our failure to successfully hedge against interest rate increases;
our failure to successfully operate acquired properties;
risks relating to our real estate redevelopment, renovation and expansion strategies and activities (including rising inflation, supply chain disruptions and construction delays);
the impact of COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease on the U.S., regional and global economies and on our business, financial condition and results of operations and that of our tenants;
our failure to qualify or maintain our status as a real estate investment trust (“REIT”), and possible adverse changes to tax laws;
uninsured or underinsured losses and costs relating to our properties or that otherwise result from future litigation;
environmental uncertainties and risks related to natural disasters;
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financial market fluctuations; and
changes in real estate and zoning laws and increases in real property tax rates.
Overview
Terreno Realty Corporation (“Terreno”, and together with its subsidiaries, “we”, “us”, “our”, “our Company”, or “the Company”) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. We invest in several types of industrial real estate, including warehouse/distribution (approximately 75.9% of our total annualized base rent as of March 31, 2023), flex (including light industrial and research and development, or R&D) (approximately 3.9%), transshipment (approximately 6.7%) and improved land (approximately 13.5%). We target functional properties in infill locations that may be shared by multiple tenants and that cater to customer demand within the various submarkets in which we operate. Infill locations are geographic locations surrounded by high concentrations of already developed land and existing buildings. As of March 31, 2023, we owned a total of 257 buildings (including one building held for sale) aggregating approximately 15.9 million square feet, 46 improved land parcels consisting of approximately 161.4 acres and four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel. As of March 31, 2023, our buildings and improved land parcels were approximately 98.1% and 98.9% leased, respectively, to 566 customers, the largest of which accounted for approximately 3.7% of our total annualized base rent. See “Item 1 – Our Investment Strategy – Industrial Facility General Characteristics” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a general description of these types of industrial real estate.
We are an internally managed Maryland corporation and elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with our taxable year ended December 31, 2010.
The following table summarizes by type our investments in real estate as of March 31, 2023:
TypeNumber of Buildings or Improved Land Parcels
Annualized Base Rent (in thousands) 1
% of Total
Warehouse/distribution225$178,488 75.9 %
Flex139,136 3.9 %
Transshipment1915,786 6.7 %
Improved land4631,782 13.5 %
Total303$235,192 100.0 %
1Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
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The following table summarizes by market our investments in real estate as of March 31, 2023:
Los AngelesNorthern New Jersey/New York CitySan Francisco Bay AreaSeattleMiamiWashington, D.C.Total/Weighted Average
Investments in Real Estate
Number of Buildings54 44 56 44 37 22 257 
Rentable Square Feet2,779,646 2,752,675 3,038,922 2,783,148 2,814,302 1,762,043 15,930,736 
% of Total17.4 %17.3 %19.1 %17.5 %17.7 %11.0 %100.0 %
Occupancy % as of March 31, 2023
98.0 %99.0 %96.7 %95.9 %100.0 %99.4 %98.1 %
Annualized Base Rent (in thousands) 1
$33,552 $46,000 $43,222 $32,399 $26,815 $21,422 $203,410 
% of Total16.5 %22.6 %21.2 %15.9 %13.2 %10.6 %100.0 %
Annualized Base Rent 1 Per Occupied Square Foot
$12.32 $16.87 $14.70 $12.14 $9.53 $12.23 $13.02 
Weighted Average Remaining Lease Term (Years) 2
5.6 4.0 3.6 3.8 5.0 3.3 4.3 
Investments in Improved Land
Number of Land Parcels14 13 10 46 
Acres29.8 68.0 7.1 25.9 9.9 20.7 161.4 
% of Total18.5 %42.2 %4.4 %16.0 %6.1 %12.8 %100.0 %
Occupancy % as of March 31, 2023
96.6 %100.0 %100.0 %96.9 %100.0 %100.0 %98.9 %
Annualized Base Rent (in thousands) 1
$9,044 $11,866 $1,496 $5,504 $1,892 $1,980 $31,782 
% of Total28.5 %37.3 %4.7 %17.3 %6.0 %6.2 %100.0 %
Annualized Base Rent Per Occupied Square Foot
$7.22 $4.19 $4.86 $5.26 $4.40 $2.27 $4.69 
Weighted Average Remaining Lease Term (Years) 2
3.8 4.8 2.9 3.8 7.5 6.0 4.7 
Total Investments in Real Estate and Improved Land
Annualized Base Rent (in thousands) 1
$42,596 $57,866 $44,718 $37,903 $28,707 $23,402 $235,192 
% of Total Annualized Base Rent 1
18.1 %24.6 %19.0 %16.1 %12.2 %10.0 %100.0 %
Gross Book Value (in thousands) 3
$682,068 $792,763 $757,503 $604,177 $663,840 $324,211 $3,824,562 
% of Total Gross Book Value17.8 %20.7 %19.8 %15.8 %17.4 %8.5 %100.0 %
1Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
2Weighted average remaining lease term is calculated by summing the remaining lease term of each lease as of March 31, 2023, weighted by the respective square footage.
3Includes four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel, and one property held for sale with an aggregate gross book value of approximately $14.8 million.
As of March 31, 2023, we owned four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel, with a total expected investment of approximately $571.2 million, including redevelopment costs, capitalized interest and other costs.
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The following table summarizes our capital expenditures incurred during the three months ended March 31, 2023 and 2022 (dollars in thousands):
For the Three Months Ended March 31,
20232022
Building improvements$6,404 $9,516 
Tenant improvements610 4,547 
Leasing commissions3,176 4,691 
Development, redevelopment, renovation and expansion11,620 11,951 
Total capital expenditures 1
$21,810 $30,705 
1Includes approximately $17.0 million and $23.5 million for the three months ended March 31, 2023 and 2022, respectively, related to leasing acquired vacancy, redevelopment construction in progress and renovation and expansion projects (stabilization capital) at 20 and 21 properties for the three months ended March 31, 2023 and 2022, respectively.
Our industrial properties are typically subject to leases on a “triple net basis,” in which tenants pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which tenants pay expenses over certain threshold levels. In addition, approximately 94.5% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years. We monitor the liquidity and creditworthiness of our tenants on an ongoing basis by reviewing outstanding accounts receivable balances, and as provided under the respective lease agreements, review the tenant’s financial condition periodically as appropriate. As needed, we hold discussions with the tenant’s management about their business and we conduct site visits of the tenant’s operations.
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Our top 20 customers based on annualized base rent as of March 31, 2023 are as follows:
CustomerLeasesRentable
Square Feet
% of Total
Rentable
Square Feet
Improved Land Acreage
Annualized
Base Rent
(in thousands) 1
% of Total
Annualized
Base Rent 2
1
Amazon.com
5471,8803.0 %2.8 $8,685 3.7 %
2
FedEx Corporation
5242,8891.5 %7.7 5,082 2.2 %
3
Danaher
3171,7071.1 %— 3,960 1.7 %
4
United States Government
8300,7321.9 %— 3,929 1.7 %
5
District of Columbia
8245,8881.6 %— 3,480 1.5 %
6
DirectBuy Home Improvement
1230,8911.4 %— 3,463 1.4 %
7
International Cargo Terminals Inc.
131,6010.2 %— 3,300 1.4 %
8
Meta Platforms, Inc.
1225,6781.4 %— 2,811 1.2 %
9
Lucid USA, Inc.
1161,6801.0 %— 2,522 1.1 %
10
Port Kearny Security, Inc.
1— %16.9 2,280 1.0 %
11
B&B Granite Block Sales, LLC
1— %7.2 2,160 0.9 %
12
O'Neill Logistics
2237,6921.5 %— 2,131 0.9 %
13
Costco-Innovel Solutions LLC
1219,9101.4 %— 1,926 0.8 %
14
Hanjin International America, Inc.
1114,0610.7 %— 1,908 0.8 %
15
XPO Logistics
2180,7171.1 %— 1,877 0.8 %
16
Team Alliance Logistics Inc. DBA A&V Transportation
2— %4.4 1,805 0.8 %
17
L3 Harris Technologies, Inc.
1147,8980.9 %— 1,804 0.7 %
18
The RK Logistics Group, Inc.
1141,2750.9 %— 1,729 0.7 %
19
YRC
261,2520.4 %— 1,662 0.7 %
20
Divergent Technologies, Inc.
272,8080.5 %1.4 1,661 0.7 %
Total493,258,55920.5 %40.4 $58,175 24.7 %
1Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
2Total annualized base rent is calculated as contractual monthly base rent per the leases, for all buildings and improved land parcels, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
The following tables summarize the anticipated lease expirations for leases in place as of March 31, 2023, without giving effect to the exercise of unexercised renewal options or termination rights, if any, at or prior to the scheduled expirations:
Buildings:
YearRentable Square Feet% of Total Rentable
Square Feet
Annualized Base Rent
(in thousands) 2
% of Total Annualized
Base Rent 3
2023 (9 months) 1
1,653,80910.4 %$24,927 9.2 %
20241,803,59511.3 %20,645 7.6 %
20252,229,75114.0 %34,362 12.6 %
20262,631,64516.5 %37,838 13.9 %
20272,434,23015.3 %40,068 14.7 %
Thereafter4,870,48930.6 %76,851 28.3 %
Total15,623,51998.1 %$234,691 86.3 %
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Improved Land Parcels:
YearImproved Land Acreage% of Total Improved Land Acreage
Annualized Base Rent
(in thousands) 2
% of Total Annualized
Base Rent 3
2023 (9 months) 4
18.611.5 %$3,613 1.3 %
202419.412.0 %3,690 1.4 %
202514.99.2 %3,626 1.3 %
202614.99.2 %3,914 1.4 %
202712.27.6 %4,156 1.6 %
Thereafter79.749.4 %18,204 6.7 %
Total159.798.9 %$37,203 13.7 %

Total Buildings and Improved Land Parcels:
Year
Total Annualized Base Rent (in thousands)3
% of Total Annualized Base Rent 3
2023 (9 months) 5
$28,540 10.5 %
202424,335 9.0 %
202537,988 13.9 %
202641,752 15.3 %
202744,224 16.3 %
Thereafter95,055 35.0 %
Total$271,894 100.0 %
1Includes leases that expire on or after March 31, 2023 and month-to-month leases totaling approximately 97,612 square feet.
2Annualized base rent is calculated as contractual monthly base rent per the leases at expiration, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
3Total annualized base rent is calculated as contractual monthly base rent per the leases at expiration, for all buildings and/or improved land parcels, excluding any partial or full rent abatements, as of March 31, 2023, multiplied by 12.
4Includes leases that expire on or after March 31, 2023 and month-to-month leases totaling approximately 2.4 acres.
5Includes leases that expire on or after March 31, 2023 and month-to-month leases disclosed in footnotes 1 and 4 of the table.
Our ability to re-lease or renew expiring space at rental rates equal to or in excess of current rental rates will impact our results of operations. As of March 31, 2023, leases representing approximately 10.5% of the total annualized base rent of our portfolio are scheduled to expire during the year ending December 31, 2023. We currently expect that, on average, the rental rates we are likely to achieve on new (re-leased) or renewed leases for our 2023 expirations will be above the rates currently being paid for the same space. Cash rent changes on new and renewed leases totaling approximately 0.6 million square feet and 5.6 acres of improved land commencing during the three months ended March 31, 2023 were approximately 69.3% higher as compared to the previous rental rates for that same space. We had a tenant retention ratio for the operating portfolio of 54.4% for the three months ended March 31, 2023. We had a tenant retention ratio for the improved land portfolio of 0.0% for the three months ended March 31, 2023. We define tenant retention ratio as the square footage or acreage of all leases commenced during the period that are rented by existing tenants divided by the square footage or acreage of all expiring leases during the reporting period. The square footage or acreage of tenants that default or buy-out prior to expiration of their lease and short-term leases of less than one year are not included in the calculation.
Our past performance may not be indicative of future results, and we cannot assure you that leases will be renewed or that our properties will be re-leased at all or at rental rates equal to or above the current average rental rates. Further, re-leased/renewed rental rates in a particular market may not be consistent with rental rates across our portfolio as a whole and re-leased/renewed rental rates for particular properties within a market may not be consistent with rental rates across our portfolio within a particular market, in each case due to a number of factors, including local real estate conditions, local supply and demand for industrial space, the condition of the property, the impact of leasing incentives, including free rent and tenant improvements, and whether the property, or space within the property, has been redeveloped.
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Recent Developments
Acquisition Activity
During the three months ended March 31, 2023, we acquired three industrial properties for a total purchase price of approximately $382.6 million. The properties were acquired from unrelated third parties using existing cash on hand, net proceeds from the issuance of common stock and debt. The following table sets forth the industrial properties we acquired during the three months ended March 31, 2023:
Property NameLocationAcquisition DateNumber of
Buildings
Square
Feet
Improved Land Acreage
Purchase Price
(in thousands) 1
Stabilized
Cap Rate 2
Countyline Phase IV 3
Hialeah, FLFebruary 23, 2023— — 121.0$173,600 5.7 %
9th StreetLong Island City, NYMarch 6, 202345,000 23,000 5.2 %
MortonNewark, CAMarch 30, 2023603,000 186,000 4.6 %
Total/Weighted Average648,000 121.0$382,600 5.1 %
1Excludes intangible liabilities and mortgage premiums, if any. The total aggregate initial investment was approximately $406.7 million, including $3.4 million in capitalized closing costs and acquisition costs and $40.2 million in assumed intangible liabilities and $19.5 million in other credits related to near term capital expenditures at Countyline Phase IV.
2Stabilized capitalization rates, referred to herein as stabilized cap rates, are calculated, at the time of acquisition, as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property. Total acquisition cost basis for the property 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. We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles. These stabilized cap rates 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, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other public filings.
3Countyline Phase IV is a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings located in Miami’s Countyline Corporate Park (“Countyline”), immediately adjacent to our seven buildings within Countyline. Countyline Phase IV, a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75, is expected to contain ten LEED-certified industrial distribution buildings at completion.
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Development and Redevelopment Activity
As of March 31, 2023, we had four properties under development or redevelopment that, upon completion, will consist of twelve buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel. The following table summarizes certain information with respect to the properties under development or redevelopment as of March 31, 2023:
Property Name
Total Expected
Investment (in thousands) 1
Amount Spent to Date (in thousands)Estimated
Amount
Remaining to
Spend (in thousands)
Estimated
Stabilized Cap
Rate 2
Estimated Post-Development Square FeetEstimated Post-Development AcreageEstimated
Stabilization
Quarter
% Pre-leased March 31, 2023
Berryessa
$25,961 $25,214 $747 4.9 %n/a7.2 Q3 2023— %
Countyline Phase IV
Countyline Building 38 3
88,500 45,035 43,465 5.0 %506,000n/aQ3 2024100.0 %
Countyline Building 41 3
40,300 36,272 4,028 5.0 %191,000n/aQ4 202378.4 %
147th Street
18,060 7,092 10,968 6.1 %34,000n/aQ3 2024— %
Paterson Plank III
35,800 20,624 15,176 4.2 %48,000n/aQ4 2024— %
Total/Weighted Average, excluding land for future development208,621 134,237 74,384 4.9 %779,0007.2 84.2 %
Countyline Phase IV
Countyline Phase IV Land 3
362,600 113,909 248,691 6.0 %1,500,000n/aQ4 2024-Q4 2026— %
Total land for future development362,600 113,909 248,691 6.0 %1,500,000n/a— %
Total/Weighted Average$571,221 $248,146 $323,075 5.6 %2,279,0007.2 28.8 %
1Total expected investment for the properties include 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.
2Estimated stabilized cap rates are calculated as estimated annualized cash basis net operating income for the properties stabilized to market occupancy (generally 95%) divided by the total acquisition cost for the property. We define cash basis net operating income for the property as net operating income excluding straight-line rents and amortization of lease intangibles. These stabilized cap rates 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, including risks related to our ability to meet our estimated forecasts related to stabilized cap rates and those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other public filings.
3Collectively, “Countyline Phase IV”, a 121-acre project entitled for 2.2 million square feet of industrial distribution buildings located in Countyline, immediately adjacent to our seven buildings within Countyline. Countyline Phase IV, a landfill redevelopment adjacent to Florida’s Turnpike and the southern terminus of I-75, is expected to contain ten LEED-certified industrial distribution buildings at completion.
Public Offering
On February 13, 2023, we completed a public offering of 5,750,000 shares of common stock at a price per share of $62.50, which included the underwriters’ full exercise of their option to purchase an additional 750,000 shares. The net proceeds of the offering were approximately $355.9 million after deducting the underwriting discount and offering costs of approximately $3.5 million. We used the net proceeds for acquisitions, including the three properties acquired during the three months ended March 31, 2023.
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ATM Program
We have an at-the-market equity offering program (the “$300 Million ATM Program”) pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million ($120.4 million remaining as of March 31, 2023) in amounts and at times as we determine from time to time. We intend to use the net proceeds from the offering of the shares under the $300 Million ATM Program, if any, for general corporate purposes, which may include future acquisitions, redevelopments and repayment of indebtedness, including borrowings under our revolving credit facility. During the three months ended March 31, 2023, we issued an aggregate of 350,000 shares of common stock at a weighted average offering price of $63.30 per share under the $300 Million ATM Program, resulting in net proceeds of approximately $21.8 million and paying total compensation to the applicable sales agents of approximately $0.3 million.
Share Repurchase Program
We have a share repurchase program authorizing us to repurchase up to 3,000,000 shares of our outstanding common stock from time to time through December 31, 2024. Purchases made pursuant to this program, if any, will be made in either the open market or in privately negotiated transactions as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. As of March 31, 2023, we had not repurchased any shares of our common stock pursuant to our share repurchase program.
Dividend and Distribution Activity
On May 2, 2023, our board of directors declared a cash dividend in the amount of $0.40 per share of our common stock payable on July 14, 2023 to the stockholders of record as of the close of business on June 30, 2023.
Contractual Commitments
As of May 2, 2023, we had two outstanding contracts with third-party sellers to acquire two industrial properties for a total purchase price of $62.9 million, as described under the heading “Material Cash Commitments” in this Quarterly Report on Form 10-Q. There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions.
Inflation
The U.S. economy experienced a significant increase in inflation rates throughout 2022 and 2023. A wide variety of industries and sectors have been, and will continue to be, affected by increasing commodity prices. In recent years, inflation has increased construction costs, including tenant improvements and capital projects, goods and labor, and operating costs. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. In addition, leases with respect to approximately 65.0% of our total rentable square feet and improved land acreage expire within five years which enables us to seek to replace existing leases with new leases at the then-existing market rate.
Financial Condition and Results of Operations
We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties. These revenues include fixed base rents and recoveries of certain property operating expenses that we have incurred and that we pass through to the individual tenants. Approximately 94.5% of our leased space includes fixed rental increases or Consumer Price Index-based rental increases. Lease terms typically range from three to ten years.
Our primary cash expenses consist of our property operating expenses, which include: real estate taxes, repairs and maintenance, management expenses, insurance, utilities, general and administrative expenses, which include compensation costs, office expenses, professional fees and other administrative expenses, acquisition costs, which include third-party costs paid to brokers and consultants, and interest expense, primarily on our revolving credit facility, term loans and senior unsecured notes.
Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions at various times during the course of such periods. The results of operations of any acquired property are included in our financial statements as of the date of its acquisition.
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The analysis of our results below for the three months ended March 31, 2023 and 2022 includes the changes attributable to same store properties. The same store pool for the comparison of the three months ended March 31, 2023 and 2022 includes all properties that were owned and in operation as of March 31, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of March 31, 2023. As of March 31, 2023, the same store pool consisted of 225 buildings aggregating approximately 13.2 million square feet representing approximately 83.1% of our total square feet owned and 37 improved land parcels consisting of approximately 127.1 acres representing approximately 78.7% of our total acreage owned. As of March 31, 2023, the non-same store properties, which we acquired, redeveloped, or sold during 2023 and 2022 or were held for sale or in development or redevelopment as of March 31, 2023, consisted of 32 buildings (including one building held for sale) aggregating approximately 2.7 million square feet, nine improved land parcels consisting of approximately 34.3 acres and four properties under development or redevelopment that, upon completion, will consist of 12 buildings aggregating approximately 2.3 million square feet and one approximately 7.2 acre improved land parcel. As of March 31, 2023 and 2022, our consolidated same store pool occupancy was approximately 98.5% and 97.3%, respectively.
Our future financial condition and results of operations, including rental revenues, straight-line rents and amortization of lease intangibles, may be impacted by the acquisitions of additional properties, and expenses may vary materially from historical results.

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Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022:
 For the Three Months Ended March 31,  
 20232022$ Change% Change
 (Dollars in thousands) 
Rental revenues 1
Same store$51,229 $46,661 $4,568 9.8 %
Non-same store operating properties 2
8,309 3,680 4,629 125.8 %
Total rental revenues59,538 50,341 9,197 18.3 %
Tenant expense reimbursements 1
Same store13,087 12,645 442 3.5 %
Non-same store operating properties 2
2,026 1,049 977 93.1 %
Total tenant expense reimbursements15,113 13,694 1,419 10.4 %
Total revenues74,651 64,035 10,616 16.6 %
Property operating expenses
Same store15,339 15,261 78 0.5 %
Non-same store operating properties 2
3,042 1,615 1,427 88.4 %
Total property operating expenses18,381 16,876 1,505 8.9 %
Net operating income 3
Same store48,977 44,045 4,932 11.2 %
Non-same store operating properties 2
7,293 3,114 4,179 134.2 %
Total net operating income$56,270 $47,159 $9,111 19.3 %
Other costs and expenses
Depreciation and amortization18,159 14,982 3,177 21.2 %
General and administrative9,320 7,527 1,793 23.8 %
Acquisition costs and other48 28 20 71.4 %
Total other costs and expenses27,527 22,537 4,990 22.1 %
Other income (expense)
Interest and other income1,963 121 1,842 1522.3 %
Interest expense, including amortization(7,375)(5,081)(2,294)45.1 %
Total other income (expense)(5,412)(4,960)(452)9.1 %
Net income$23,331 $19,662 $3,669 18.7 %
1Accounting Standards Update (“ASU”) No. 2018-11, Leases (Topic 842), allows us to elect not to separate lease and non-lease rental income. All rental income earned pursuant to tenant leases is reflected as one line, “Rental revenues and tenant expense reimbursements” on our accompanying consolidated statements of operations. We believe that the above presentation of rental revenues and tenant expense reimbursements is not, and is not intended to be, a presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and a reconciliation to total revenue is provided above. We believe this information is frequently used by management, investors, and other interested parties to evaluate our performance. See “Note 2 - Significant Accounting Policies” in our condensed notes to consolidated financial statements for more information regarding our adoption of this standard.
2Includes 2023 and 2022 acquisitions and dispositions, nine improved land parcels, four properties under development or redevelopment and one property held for sale.
3Includes straight-line rents and amortization of lease intangibles. See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of net operating income and same store net operating income from net income and a discussion of why we believe net operating income and same store net operating income are useful supplemental measures of our operating performance.

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Revenues. Total revenues increased approximately $10.6 million for the three months ended March 31, 2023 compared to the same period from the prior year due primarily to increased revenue on new and renewed leases, property acquisitions during 2023 and 2022 and an increase in occupancy rate. Cash rents on new and renewed leases totaling approximately 0.6 million square feet and 5.6 acres of improved land commencing during the three months ended March 31, 2023 increased approximately 69.3% compared to the previous rental rates for that same space. For both the three months ended March 31, 2023 and 2022, approximately $1.8 million was recorded in straight-line rental revenues related to contractual rent abatements given to certain tenants and approximately $0.1 million was recorded in lease termination revenue.
Property operating expenses. Total property operating expenses increased approximately $1.5 million during the three months ended March 31, 2023 compared to the same period from the prior year. The increase in total property operating expenses was primarily due to an increase of approximately $1.4 million attributable to property acquisitions during 2023 and 2022 as well as increases in insurance premiums and real estate taxes related to annual rate increases.
Depreciation and amortization. Depreciation and amortization increased approximately $3.2 million during the three months ended March 31, 2023 compared to the same period from the prior year primarily due to property acquisitions during 2023 and 2022.
General and administrative expenses. General and administrative expenses increased approximately $1.8 million primarily due to increased compensation expenses including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries compared to the same period from the prior year.
Acquisition costs and other. Acquisition costs and other for the three months ended March 31, 2023 remained consistent with the same period in the prior year.
Interest and other income. Interest and other income increased approximately $1.8 million for the three months ended March 31, 2023 compared to the same period from the prior year primarily due to higher interest rates on our cash and cash equivalent balances.
Interest expense, including amortization. Interest expense increased approximately $2.3 million for the three months ended March 31, 2023 compared to the same period from the prior year. This increase was primarily due to borrowing the full amount available under the new $100.0 million unsecured term loan on September 2, 2022 and higher average interest rates on the unsecured term loans and credit facility during the three months ended March 31, 2023.

Liquidity and Capital Resources
The primary objective of our financing strategy is to maintain financial flexibility with a conservative capital structure using retained cash flows, proceeds from dispositions of properties, long-term debt and the issuance of common and perpetual preferred stock to finance our growth. Over the long-term, we intend to:
limit the sum of the outstanding principal amount of our consolidated indebtedness and the liquidation preference of any outstanding perpetual preferred stock to less than 35% of our total enterprise value;
maintain a fixed charge coverage ratio in excess of 2.0x;
maintain a debt-to-adjusted EBITDA ratio below 6.0x;
limit the principal amount of our outstanding floating rate debt to less than 20% of our total consolidated indebtedness; and
have staggered debt maturities that are aligned to our expected average lease term (five to seven years), positioning us to re-price parts of our capital structure as our rental rates change with market conditions.
We intend to preserve a flexible capital structure with a long-term goal to maintain our investment grade rating and be in a position to issue additional unsecured debt and perpetual preferred stock. Fitch Ratings assigned us an issuer rating of BBB with a stable outlook. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. There can be no assurance that we will be able to maintain our current credit rating. Our credit rating can affect the amount and type of capital we can access, as well as the terms of any financings we may obtain. In the event our current credit rating is downgraded, it may become difficult or expensive to obtain additional financing or refinance existing obligations and commitments. We intend to primarily utilize senior unsecured notes, term loans, credit facilities, dispositions of properties, and proceeds from the issuance of common stock and perpetual preferred stock. We may also assume debt in connection with property acquisitions which may have a higher loan-to-value ratio.
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We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our revolving credit facility. We believe that our net cash provided by operations will be adequate to fund operating requirements, pay interest on any borrowings and fund distributions in accordance with the REIT requirements of the federal income tax laws. In the near-term, we intend to fund future investments in properties and property redevelopments with cash on hand, term loans, senior unsecured notes, mortgages, borrowings under our revolving credit facility, perpetual preferred and common stock issuances and, from time to time, property dispositions. We expect to meet our long-term liquidity requirements, including with respect to other investments in industrial properties, property acquisitions, property redevelopments, renovations and expansions and scheduled debt maturities, through borrowings under our revolving credit facility, periodic issuances of common stock, perpetual preferred stock, and long-term unsecured and secured debt, and, from time to time, with proceeds from the disposition of properties. The success of our acquisition strategy may depend, in part, on our ability to obtain and borrow under our revolving credit facility and to access additional capital through issuances of equity and debt securities.
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Equity Sources of Liquidity
On February 13, 2023, we completed a public offering of 5,750,000 shares of common stock at a price per share of $62.50, which included the underwriters’ full exercise of their option to purchase an additional 750,000 shares. The net proceeds of the offering were approximately $355.9 million after deducting the underwriting discount and offering costs of approximately $3.5 million. We used the net proceeds for acquisitions, including the three properties acquired during the three months ended March 31, 2023.
The following sets forth certain information regarding our current at-the-market common stock offering program as of March 31, 2023:
ATM Stock Offering ProgramDate ImplementedMaximum Aggregate Offering Price (in thousands)Aggregate Common Stock Available (in thousands)
 $300 Million ATM ProgramJune 11, 2021$300,000 $120,428 
The table below sets forth the activity under our at-the-market common stock offering programs during the three months ended March 31, 2023:
For the Three Months EndedShares SoldWeighted Average Price Per ShareNet Proceeds
(in thousands)
Sales Commissions
(in thousands)
March 31, 2023350,000 $63.30 $21,834 $321 
Debt Sources of Liquidity
As of March 31, 2023, we had $100.0 million of senior unsecured notes that mature in July 2024, $50.0 million of senior unsecured notes that mature in July 2026, $50.0 million of senior unsecured notes that mature in October 2027, $100.0 million of senior unsecured notes that mature in July 2028, $100.0 million of senior unsecured notes that mature in December 2029, $125.0 million of senior unsecured notes that mature in August 2030, and $50.0 million of senior unsecured notes that mature in July 2031 (collectively, the “Senior Unsecured Notes”).
Our Sixth Amended and Restated Senior Credit Agreement (as amended, the “Amended Facility”) consists of a $400.0 million revolving credit facility that matures in August 2025, a $100.0 million term loan that matures in January 2027 and a $100.0 million term loan that matures in January 2028. As of March 31, 2023 and March 31, 2022, there were no borrowings outstanding on the revolving credit facility and $200.0 million and $100.0 million, respectively, of borrowings outstanding on the term loans.
The aggregate amount of the Amended Facility may be increased by up to an additional $500.0 million to a maximum amount not to exceed $1.1 billion, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. Outstanding borrowings under the Amended Facility are limited to the lesser of (i) the sum of the $400.0 million revolving credit facility, the $100.0 million term loan maturing in January 2027 and the $100.0 million term loan maturing in January 2028, or (ii) 60.0% of the value of the unencumbered properties. Interest on the Amended Facility, including the term loans, is generally to be paid based upon, at our option, either (i) the Secured Overnight Financing Rate (“SOFR”) plus the applicable SOFR margin or (ii) the applicable base rate, which is the greatest of the administrative
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agent’s prime rate, 0.50% above the federal funds effective rate, thirty-day SOFR plus the applicable SOFR margin for SOFR rate loans under the Amended Facility plus 1.25%, or 1.25% per annum. The applicable SOFR margin will range from 1.10% to 1.55% (1.10% as of March 31, 2023) for the revolving credit facility and 1.25% to 1.75% (1.25% as of March 31, 2023) for the term loans, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value and includes a 10 basis points SOFR credit adjustment. The Amended Facility requires quarterly payments of an annual facility fee in an amount ranging from 0.15% to 0.30%, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross asset value.
The Amended Facility and the Senior Unsecured Notes are guaranteed by us and by substantially all of the current and to-be-formed subsidiaries of the borrower that own an unencumbered property. The Amended Facility and the Senior Unsecured Notes are not secured by our properties or by interests in the subsidiaries that hold such properties. The Amended Facility and the Senior Unsecured Notes include a series of financial and other covenants with which we must comply. We were in compliance with the covenants under the Amended Facility and the Senior Unsecured Notes as of March 31, 2023 and 2022.
As of March 31, 2023 and December 31, 2022, we held cash and cash equivalents totaling approximately $11.1 million and $26.4 million, respectively.
The following tables summarize our debt maturities and principal payments as of March 31, 2023 and our market capitalization, capitalization ratios, Adjusted EBITDA, interest coverage, fixed charge coverage and debt ratios as of and for the three months ended March 31, 2023 and 2022 (dollars in thousands, except per share data):
Credit
Facility
Term LoanSenior
Unsecured
Notes
Total Debt
2023 (9 months)$$$$
2024100,000100,000
2025
202650,00050,000
2027100,00050,000150,000
Thereafter100,000375,000475,000
Total Debt200,000575,000775,000
Deferred financing costs, net(1,032)(3,027)(4,059)
Total Debt, net$$198,968$571,973$770,941
Weighted average interest raten/a6.0%3.1%3.9%
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As of March 31, 2023As of March 31, 2022
Total Debt, net$770,941$720,864
Equity
Common Stock
Shares Outstanding 1
83,122,29775,525,288
Market Price 2
$64.60$74.05
Total Equity5,369,7005,592,648
Total Market Capitalization$6,140,641$6,313,512
Total Debt-to-Total Investments in Properties 3
20.2%23.7%
Total Debt-to-Total Market Capitalization 4
12.6%11.4%
Floating Rate Debt as a % of Total Debt 5
25.8%13.8%
Net Income$23,331$19,662
Adjusted EBITDA 6
$51,951$42,582
Interest Coverage 7
7.0 x8.4 x
Fixed Charge Coverage 8
6.5 x7.4 x
Total Debt-to-Adjusted EBITDA 9
3.7 x4.2 x
Weighted Average Maturity of Total Debt (years)5.1 5.7 

1Includes 377,909 and 308,677 shares of unvested restricted stock outstanding as of March 31, 2023 and 2022, respectively. Also includes 512,459 and 423,012 shares held in the Deferred Compensation Plan as of March 31, 2023 and 2022, respectively.
2Closing price of a share of our common stock on the New York Stock Exchange on March 31, 2023 and 2022, respectively, in dollars per share.
3Total debt-to-total investments in properties is calculated as total debt, including premiums and net of deferred financing costs, divided by total investments in properties, including one property held for sale as of March 31, 2023 with a gross book value of approximately $14.8 million.
4Total debt-to-total market capitalization is calculated as total debt, including premiums and net of deferred financing costs, divided by total market capitalization.
5Floating rate debt as a percentage of total debt is calculated as floating rate debt, including premiums and net of deferred financing costs, divided by total debt, including premiums and net of deferred financing costs.
6Earnings before interest, taxes, gains (losses) from sales of property, depreciation and amortization, acquisition costs and stock-based compensation (“Adjusted EBITDA”) for the three months ended March 31, 2023 and 2022, respectively. See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.
7Interest coverage is calculated as Adjusted EBITDA divided by interest expense, including amortization. See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.
8Fixed charge coverage is calculated as Adjusted EBITDA divided by interest expense, including amortization plus capitalized interest. See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.
9Total debt-to-Adjusted EBITDA is calculated as total debt, including premiums and net of deferred financing costs, divided by annualized Adjusted EBITDA. See “Non-GAAP Financial Measures” in this Quarterly Report on Form 10-Q for a definition and reconciliation of Adjusted EBITDA from net income and a discussion of why we believe Adjusted EBITDA is a useful supplemental measure of our operating performance.
The following table sets forth the cash dividends paid or payable per share during the three months ended March 31, 2023:
For the Three
Months Ended
SecurityDividend per
Share
Declaration DateRecord DateDate Paid
March 31, 2023Common stock$0.40 February 7, 2023March 31, 2023April 6, 2023
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Sources and Uses of Cash
Our principal sources of cash are cash from operations, borrowings under loans payable, draws on our Amended Facility, common and preferred stock issuances, proceeds from property dispositions and issuances of unsecured notes. Our principal uses of cash are asset acquisitions, debt service, capital expenditures, operating costs, corporate overhead costs and common stock dividends.
Cash From Operating Activities. Net cash provided by operating activities totaled approximately $38.8 million for the three months ended March 31, 2023 compared to approximately $28.0 million for the three months ended March 31, 2022. This increase in cash provided by operating activities is primarily attributable to additional cash flows generated from the properties acquired during 2023 and 2022 and increased rents on new and renewed leases at our same store properties.
Cash From Investing Activities. Net cash used in investing activities was approximately $387.4 million and $96.8 million for the three months ended March 31, 2023 and 2022, respectively, which consisted primarily of cash paid for property acquisitions of approximately $364.6 million and $68.1 million, respectively, and additions to capital improvements of approximately $22.8 million and $28.8 million, respectively.
Cash From Financing Activities. Net cash provided by financing activities was approximately $334.1 million for the three months ended March 31, 2023, which consisted primarily of approximately $365.5 million in net proceeds from the issuance of common stock, partially offset by approximately $30.8 million in equity dividend payments. Net cash used in financing activities was approximately $26.5 million for the three months ended March 31, 2022, which consisted primarily of approximately $25.6 million in equity dividend payments.
Critical Accounting Policies And Estimates
A summary of our critical accounting policies is set forth in our Annual Report on Form 10-K for the year ended December 31, 2022 and in the condensed notes to consolidated financial statements in this Quarterly Report on Form 10-Q.
Material Cash Commitments
As of May 2, 2023, we had two outstanding contracts with third-party sellers to acquire two industrial properties for a total purchase price of $62.9 million. There is no assurance that we will acquire the properties under contract because the proposed acquisitions are subject to the completion of satisfactory due diligence and various closing conditions.
The following table summarizes our material cash commitments due by period as of March 31, 2023 (dollars in thousands):
Material Cash CommitmentsLess than 1
Year
1-3 Years3-5 YearsMore than 5
Years
Total
Debt$— $100,000 $300,000 $375,000 $775,000 
Debt interest payments18,015 30,405 25,538 19,893 93,851 
Operating lease commitments662 1,384 1,350 723 4,119 
Purchase obligations 1
62,926 — — — 62,926 
Total$81,603 $131,789 $326,888 $395,616 $935,896 
1As of May 2, 2023
Non-GAAP Financial Measures
We use the following non-GAAP financial measures that we believe are useful to investors as key supplemental measures of our operating performance: funds from operations, or FFO, Adjusted EBITDA, net operating income, or NOI, same store NOI and cash-basis same store NOI. FFO, Adjusted EBITDA, NOI, same store NOI and cash-basis same store NOI should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. Further, our computation of FFO, Adjusted EBITDA, NOI, same store NOI and cash-basis same store NOI may not be comparable to FFO, Adjusted EBITDA, NOI, same store NOI and cash-basis same store NOI reported by other companies.
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
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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.
The following table reflects the calculation of FFO reconciled from net income for the three months ended March 31, 2023 and 2022 (dollars in thousands except per share data):
 For the Three Months Ended March 31,  
 20232022$ Change% Change
Net income
$23,331 $19,662 $3,669 18.7 %
Depreciation and amortization18,159 14,982 3,177 21.2 %
Non-real estate depreciation(32)(23)(9)39.1 %
Allocation to participating securities 1
(189)(141)(48)34.0 %
Funds from operations attributable to common stockholders
$41,269 $34,480 $6,789 19.7 %
Basic FFO per common share
$0.52 $0.46 $0.06 13.0 %
Diluted FFO per common share
$0.51 $0.46 $0.05 10.9 %
Weighted average basic common shares
79,895,886 75,199,529 
Weighted average diluted common shares
80,344,742 75,284,498 
1To be consistent with our policies of determining whether instruments granted in share-based payment transactions are participating securities and accounting for earnings per share, the FFO per common share is adjusted for FFO distributed through declared dividends (if any) and allocated to all participating securities (weighted average common shares outstanding and unvested restricted shares outstanding) under the two-class method. Under this method, allocations were made to 373,985 and 303,666 of weighted average unvested restricted shares outstanding for the three months ended March 31, 2023 and 2022, respectively.
FFO increased by approximately $6.8 million for the three months ended March 31, 2023 compared to the same period from the prior year due primarily to property acquisitions during 2022 and 2023 as well as same store NOI growth of approximately $4.9 million for the three months ended March 31, 2023 compared to the same period from the prior year. The FFO increase was partially offset by increased weighted average common shares outstanding, increased interest expense due to higher average interest rates on the unsecured term loans and credit facility and increased general and administrative expenses. The increase in general and administrative expenses was primarily due to increased compensation expenses, including increased restricted stock amortization, LTIP expense and bonus expense, and an increase in the number of employees and salaries for the three months ended March 31, 2023 compared to the same period from the prior year.
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 and other interim periods 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.
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The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three months ended March 31, 2023 and 2022 (dollars in thousands):
 For the Three Months Ended March 31,  
 20232022$ Change% Change
Net income$23,331 $19,662 $3,669 18.7 %
Depreciation and amortization18,159 14,982 3,177 21.2 %
Interest expense, including amortization7,375 5,081 2,294 45.1 %
Stock-based compensation3,038 2,829 209 7.4 %
Acquisition costs and other48 28 20 71.4 %
Adjusted EBITDA$51,951 $42,582 $9,369 22.0 %
We compute NOI as rental revenues, including tenant expense reimbursements, less property operating expenses. We compute same store NOI as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis. NOI excludes depreciation, amortization, general and administrative expenses, acquisition costs and interest expense, including amortization. We compute cash-basis same store NOI as same store NOI excluding straight-line rents and amortization of lease intangibles. The same store pool includes all properties that were owned and in operation as of March 31, 2023 and since January 1, 2022 and excludes properties that were either disposed of prior to, held for sale to a third party or in development or redevelopment as of March 31, 2023. As of March 31, 2023, the same store pool consisted of 225 buildings aggregating approximately 13.2 million square feet representing approximately 83.1% of our total square feet owned and 37 improved land parcels containing approximately 127.1 acres representing approximately 78.7% of our total acreage owned. We believe that presenting NOI, same store NOI and cash-basis same store NOI provides useful information to investors regarding the operating performance of our properties because NOI excludes certain items that are not considered to be controllable in connection with the management of the properties, such as depreciation, amortization, general and administrative expenses, acquisition costs and interest expense. By presenting same store NOI and cash-basis same store NOI, the operating results on a same store basis are directly comparable from period to period.
The following table reflects the calculation of NOI, same store NOI and cash-basis same store NOI reconciled from net income for the three months ended March 31, 2023 and 2022 (dollars in thousands):
 For the Three Months Ended March 31,  
 20232022$ Change% Change
Net income 1
$23,331 $19,662 $3,669 18.7 %
Depreciation and amortization18,159 14,982 3,177 21.2 %
General and administrative9,320 7,527 1,793 23.8 %
Acquisition costs and other48 28 20 71.4 %
Total other income and expenses5,412 4,960 452 9.1 %
Net operating income56,270 47,159 9,111 19.3 %
Less non-same store NOI
(7,293)
2
(3,114)
2
(4,179)134.2 %
Same store NOI
$48,977 $44,045 $4,932 11.2 %
Less straight-line rents and amortization of lease intangibles 3
(2,837)(4,090)1,253 (30.6)%
Cash-basis same store NOI
$46,140 $39,955 $6,185 15.5 %
Less termination fee income(20)(148)128 (86.5)%
Cash-basis same store NOI excluding termination fees $46,120 $39,807 $6,313 15.9 %
1Includes approximately $12,000 and $0.1 million of lease termination income for the three months ended March 31, 2023 and 2022, respectively.
2Includes 2022 and 2023 acquisitions and dispositions, nine improved land parcels, four properties under development or redevelopment and one property held for sale.
3Includes straight-line rents and amortization of lease intangibles for the same store pool only.
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Cash-basis same store NOI increased by approximately $6.2 million for the three months ended March 31, 2023 compared to the same period from the prior year primarily due to increased rental revenue on new and renewed leases and contractual rent increases on pre-existing leases. For the three months ended March 31, 2023 and 2022, total contractual rent abatements of approximately $0.8 million and $1.0 million, respectively, were given to certain tenants in the same-store pool and approximately $19,000 and $0.1 million, respectively, in lease termination income was received from certain tenants in the same store pool. In addition, approximately $0.8 million of the increase in cash-basis same store NOI for the three months ended March 31, 2023 related to properties that were acquired vacant or with near term expirations in 2021.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business strategies, the primary market risk which we are exposed to is interest rate risk. We are exposed to interest rate changes primarily as a result of debt used to maintain liquidity, fund capital expenditures and expand our investment portfolio and operations. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. As described below, some of our outstanding debt bears interest at variable rates, and we expect that some of our future outstanding debt will have variable interest rates. We may use interest rate caps and/or swap agreements to manage our interest rate risks relating to our variable rate debt. We expect to replace variable rate debt on a regular basis with fixed rate, long-term debt to finance our assets and operations.
As of March 31, 2023, we had $200.0 million of borrowings outstanding under our Amended Facility, none of which were subject to interest rate caps. Amounts borrowed under our Amended Facility bear interest at a variable rate based on SOFR plus an applicable SOFR margin. The weighted average interest rate on borrowings outstanding under our Amended Facility was 6.0% as of March 31, 2023. If the SOFR rate were to fluctuate by 0.25%, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows by approximately $0.5 million annually on the total of the outstanding balances on our Amended Facility as of March 31, 2023.
We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023. The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or hedging transactions, but as our contracts indexed to LIBOR are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest or hedging costs that are higher than if LIBOR remained available. Additionally, although SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest or hedging costs for us. It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR. As of March 31, 2023, each of the agreements governing our variable rate debt either have been transitioned to SOFR or provide for the replacement of LIBOR if it becomes unavailable during the term of such agreement.
Item 4.    Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer, President and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and has concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to give reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer, President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1.        Legal Proceedings.
We are not involved in any material litigation nor, to our knowledge, is any material litigation threatened against us.
Item 1A.    Risk Factors.
Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2.        Unregistered Sale of Equity Securities and Use of Proceeds.
(a)Not Applicable.
(b)Not Applicable.
(c)
Period(a) Total Number of Shares of Common Stock Purchased(b) Average Price Paid per Common Share(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plan or Program
January 1, 2023 - January 31, 2023$— N/AN/A
February 1, 2023 - February 28, 20239,74563.38N/AN/A
March 1, 2023 - March 31, 2023— N/AN/A
Total9,745
1
$63.38 N/AN/A
1     Represents shares of common stock surrendered by employees to the Company to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted stock.
Item 3.        Defaults Upon Senior Securities.
None.
Item 4.        Mine Safety Disclosures.
Not Applicable.
Item 5.        Other Information.
None.
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Item 6.    Exhibits
Exhibit
Number
Exhibit Description
31.1*
31.2*
31.3*
32.1**
32.2**
32.3**
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*Inline XBRL Taxonomy Definition Linkbase Document
104*Cover Page Interactive Data File (formatted as inline XBRL and with applicable taxonomy extension information contained in Exhibits 101.*)
________________
*    Filed herewith.
**    Furnished herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Terreno Realty Corporation
May 3, 2023By: /s/ W. Blake Baird
 W. Blake Baird
 Chairman and Chief Executive Officer
May 3, 2023By:/s/ Michael A. Coke
Michael A. Coke
President
May 3, 2023By:/s/ Jaime J. Cannon
Jaime J. Cannon
Chief Financial Officer (Principal Financial Officer)
May 3, 2023By:/s/ Melinda Weston
Melinda Weston
Chief Accounting Officer (Principal Accounting Officer)


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