Terreno Realty set to sell $300 million in stock in IPO, plans to buy industrial properties

Terreno Realty set to raise $300M in IPO

NEW YORK — Terreno Realty Corp. is expected to sell $300 million in stock this week, making it the second-biggest initial public offering so far in 2010. The real estate investment trust plans to put that money to use buying troubled industrial properties at a bargain.

The commercial real estate market has been rocked by weak rents, climbing vacancies and landlords saddled with high debt. More than 8,000 U.S. properties, worth $170.6 billion, are in foreclosure, bankruptcy or have restructured loans, according to real estate data tracker Real Capital Analytics.

However, pickings in the industrial sector are scant compared to other property types. Only 630 properties, representing $5.1 billion, are troubled.

“Distress in the industrial sector remains remarkably marginal,” the firm’s January report said. “Distress as a share of market volume is low across all industrial niches and subtypes.”

Still, industrial rents and vacancies are expected to deteriorate again this year as exports suffer from lower consumer demand, said Ryan Severino, an economist with Reis Inc., a real estate data provider.

That could hurt more landlords and force some to sell properties at deep discounts to raise money. With cash on hand and no debt issues, Terreno Realty believes it can scoop up the best assets, according to its original filing with the Securities and Exchange Commission.

Terreno Realty plans to buy warehouses, light manufacturing, research and development properties and shipping facilities in six major coastal U.S. markets: Southern California, San Francisco Bay, Seattle, Northern New Jersey/New York City, Washington, D.C./Baltimore and South Florida. It will target properties in supply constrained markets that can house multiple tenants.

Terreno Realty is not the first company to smell opportunity as commercial properties struggle. Nine REITs filed IPOs last year, according to Greenwich, Conn.-based Renaissance Capital, and Chesapeake Lodging Trust’s offering is on the docket this week. It was postponed in December.

Chesapeake Lodging on Tuesday trimmed its offering and now plans to raise $150 million, selling 7.5 million shares at $20 apiece. It originally planned to sell 12.5 million shares at the same price and raise $250 million.

Terreno Realty will be led by Chairman and CEO Blake Baird and President and Chief Financial Officer Mike Coke, both industry veterans. Previously, Baird served as president of industrial REIT AMB Property Corp. and Coke served as the company’s CFO.

Terreno Realty, incorporated in Maryland and headquartered in San Francisco, plans to sell 15 million shares, priced at $20 each. Goldman Sachs is underwriting the deal. The stock is expected to trade on the New York Stock Exchange under the ticker symbol “TRNO.”

No IPOs have priced so far this year, but six are set for this week. Of those, Terreno would be the second largest after Symetra Financial, an insurance company, which plans to raise about $351 million.