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Table of Contents

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, 2021
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)
_________________________
Maryland 27-1262675
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
10500 NE 8th Street, Suite 301 Bellevue, WA
 98004
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (415655-4580
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, 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 filer   Accelerated filer 
Non-accelerated filer   Smaller 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 69,562,715 shares of its common stock, $0.01 par value per share, outstanding as of May 3, 2021.



Table of Contents
Terreno Realty Corporation
Table of Contents

1

Table of Contents
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, 2021December 31, 2020
 (Unaudited) 
ASSETS
Investments in real estate
Land$1,199,842 $1,138,233 
Buildings and improvements987,614 942,688 
Construction in progress65,883 61,448 
Intangible assets92,856 88,859 
Total investments in properties2,346,195 2,231,228 
Accumulated depreciation and amortization(248,413)(238,073)
Net investments in properties2,097,782 1,993,155 
Cash and cash equivalents29,377 107,180 
Restricted cash1,028 656 
Other assets, net43,504 38,829 
Total assets$2,171,691 $2,139,820 
LIABILITIES AND EQUITY
Liabilities
Credit facility$ $ 
Term loans payable, net99,844 99,791 
Senior unsecured notes, net348,160 348,063 
Mortgage loans payable, net 11,264 
Security deposits18,009 13,870 
Intangible liabilities, net27,882 24,608 
Dividends payable20,091 19,870 
Performance share awards payable 7,482 
Accounts payable and other liabilities23,988 26,688 
Total liabilities537,974 551,636 
Commitments and contingencies (Note 13)
Equity
Stockholders’ equity
Common stock: $0.01 par value, 400,000,000 shares authorized, and 69,102,008 and 68,376,364 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.
693 686 
Additional paid-in capital
1,645,876 1,589,301 
Common stock held in deferred compensation plan, 270,546 and 139,224 shares at March 31, 2021 and December 31, 2020, respectively
(14,867)(7,546)
Retained earnings2,092 5,926 
Accumulated other comprehensive loss(77)(183)
Total stockholders’ equity1,633,717 1,588,184 
Total liabilities and equity$2,171,691 $2,139,820 
The accompanying condensed notes are an integral part of these consolidated financial statements.
2

Table of Contents
Terreno Realty Corporation
Consolidated Statements of Operations
(in thousands – except share and per share data)
(Unaudited)
For the Three Months Ended March 31,
 20212020
REVENUES
Rental revenues and tenant expense reimbursements$50,691 $45,116 
Total revenues50,691 45,116 
COSTS AND EXPENSES
Property operating expenses13,512 11,908 
Depreciation and amortization11,376 11,100 
General and administrative5,582 5,758 
Acquisition costs55 52 
Total costs and expenses30,525 28,818 
OTHER INCOME (EXPENSE)
Interest and other income236 564 
Interest expense, including amortization(4,145)(4,006)
Total other income (expense)(3,909)(3,442)
Net income16,257 12,856 
Allocation to participating securities(51)(83)
Net income available to common stockholders$16,206 $12,773 
EARNINGS PER COMMON SHARE - BASIC AND DILUTED:
Net income available to common stockholders - basic$0.24 $0.19 
Net income available to common stockholders - diluted$0.24 $0.19 
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING68,603,068 67,062,582 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING68,862,922 67,469,721 
The accompanying condensed notes are an integral part of these consolidated financial statements.
3

Table of Contents
Terreno Realty Corporation
Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)
 For the Three Months Ended March 31,
 20212020
Net income$16,257 $12,856 
Other comprehensive income:
Cash flow hedge adjustment106 73 
Comprehensive income$16,363 $12,929 
The accompanying condensed notes are an integral part of these consolidated financial statements.












































Terreno Realty Corporation
Consolidated Statements of Equity
(in thousands – except share data)
(Unaudited)
Three months ended March 31, 2021:
 Common StockAdditional
Paid-
in Capital
Common Shares Held in Deferred Compensation PlanDeferred Compensation Plan Accumulated
Other Comprehensive
Loss
 
Number of
Shares
AmountRetained
Earnings
Total
Balance as of December 31, 202068,376,364$686 $1,589,301 139,224$(7,546)$5,926 $(183)$1,588,184 
Net income— — — 16,257 — 16,257 
Issuance of common stock, net of issuance costs of $731
837,8467 47,866 — — — 47,873 
Repurchase of common stock related to employee awards(6,534)— (582)— — — (582)
Issuance of restricted stock25,654— — — — — — 
Stock-based compensation— 1,970 — — — 1,970 
Common stock dividends ($0.29 per share)
— — — (20,091)— (20,091)
Deposits to deferred compensation plan(131,322)— 7,321 131,322(7,321)— —  
Other comprehensive income— — — — 106 106 
Balance as of March 31, 202169,102,008$693 $1,645,876 270,546$(14,867)$2,092 $(77)$1,633,717 

Three months ended March 31, 2020:
 Common StockAdditional
Paid-
in Capital
Common Shares Held in Deferred Compensation PlanDeferred Compensation Plan Accumulated
Other Comprehensive
Loss
 
Number of
Shares
AmountRetained
Earnings
Total
Balance as of December 31, 201967,252,787 $673 $1,514,266 — $— $2,621 $(437)$1,517,123 
Net income— — — — — 12,856 — 12,856 
Issuance of common stock, net of issuance costs of $426
562,521 4 29,647 — — — — 29,651 
Repurchase of common stock related to employee awards(4,510)— (240)— — — — (240)
Issuance of restricted stock20,501 — — — — — — — 
Stock-based compensation— — 1,573 — — — — 1,573 
Common stock dividends ($0.27 per share)
— — — — — (18,314)— (18,314)
Deposits to deferred compensation plan(135,494)— 7,346 135,494(7,346)— —  
Other comprehensive income— — — — — — 73 73 
Balance as of March 31, 202067,695,805$677 $1,552,592 135,494 $(7,346)$(2,837)$(364)$1,542,722 

The accompanying condensed notes are an integral part of these consolidated financial statements.
4

Table of Contents
Terreno Realty Corporation
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 For the Three Months Ended March 31,
 20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$16,257 $12,856 
Adjustments to reconcile net income to net cash provided by operating activities
Straight-line rents(1,410)(316)
Amortization of lease intangibles(1,443)(1,389)
Depreciation and amortization11,376 11,100 
Deferred financing cost amortization393 367 
Deferred senior secured loan fee amortization (43)
Stock-based compensation1,970 2,179 
Changes in assets and liabilities
Other assets(3,485)1,705 
Accounts payable and other liabilities2,497 (4,301)
Net cash provided by operating activities26,155 22,158 
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions(104,372)(30,081)
Additions to construction in progress(140)(2,709)
Additions to buildings, improvements and leasing costs(7,867)(8,391)
Repayments on senior secured loan 4,987 
Net cash used in investing activities(112,379)(36,194)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock41,122 22,788 
Issuance costs on issuance of common stock(596)(331)
Repurchase of common stock related to employee awards(582)(240)
Payments on mortgage loan payable(11,271)(32,732)
Payment of deferred financing costs(10) 
Dividends paid to common stockholders(19,870)(18,158)
Net cash provided by (used in) financing activities8,793 (28,673)
Net decrease in cash and cash equivalents and restricted cash(77,431)(42,709)
Cash and cash equivalents and restricted cash at beginning of period107,836 112,739 
Cash and cash equivalents and restricted cash at end of period$30,405 $70,030 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized interest$4,424 $4,970 
Supplemental disclosures of non-cash transactions
     Accounts payable related to capital improvements8,720 9,149 
     Non-cash issuance of common stock to the deferred compensation plan(7,321)(7,346)
     Lease liability arising from recognition of right-of-use asset424 585 
   Reconciliation of cash paid for property acquisitions
     Acquisition of properties$109,882 $30,617 
     Acquisition and assumption of other assets and liabilities(5,510)(536)
Net cash paid for property acquisitions$104,372 $30,081 
The accompanying condensed notes are an integral part of these consolidated financial statements.
5

Table of Contents
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, 2021, the Company owned 228 buildings aggregating approximately 13.7 million square feet, 25 improved land parcels consisting of approximately 92.5 acres and two properties under redevelopment expected to contain approximately 0.3 million square feet upon completion.
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, 2020 and the notes thereto, which was filed with the Securities and Exchange Commission on February 10, 2021.
Use of Estimates. The preparation of the interim 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 future cash flow basis, then the asset carrying value is measured against the lower of cost or the present value of expected cash
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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, 2021 or 2020.
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 $1.4 million for both the three months ended March 31, 2021 and 2020. 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, 2021 is 7.5 years. As of March 31, 2021 and December 31, 2020, the Company’s intangible assets and liabilities, including properties held for sale (if any), consisted of the following (dollars in thousands):
 March 31, 2021December 31, 2020
 GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
In-place leases$89,014 $(66,466)$22,548 $85,026 $(64,668)$20,358 
Above-market leases3,842 (3,717)125 3,833 (3,697)136 
Below-market leases(50,315)22,433 (27,882)(45,798)21,190 (24,608)
Total$42,541 $(47,750)$(5,209)$43,061 $(47,175)$(4,114)
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 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.
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Description  Standard Depreciable Life
Land  Not depreciated
Building  
40 years
Building Improvements  
5-40 years
Tenant Improvements  Shorter of lease term or useful life
Leasing Costs  Lease term
In-place Leases  Lease term
Above/Below-Market Leases  Lease 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,
20212020
Beginning
Cash and cash equivalents at beginning of period$107,180 $110,082 
Restricted cash656 2,657 
Cash and cash equivalents and restricted cash107,836 112,739 
Ending
Cash and cash equivalents at end of period29,377 69,733 
Restricted cash1,028 297 
Cash and cash equivalents and restricted cash30,405 70,030 
Net decrease in cash and cash equivalents and restricted cash$(77,431)$(42,709)
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. Consistent with the Financial Accounting Standards Board staff question-and-answer document released on April 10, 2020, the Company elected to account for lease concessions related to the effects of the novel coronavirus ("COVID-19") as though no lease modification was made in instances where total contractual lease payments over the term of the lease were unchanged. Due to the effects of COVID-19, the future contractual lease payments of certain of the Company's tenants were not probable and as such, approximately
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$0.1 million and $0.5 million of straight-line rent receivables were reversed during the three months ended March 31, 2021 and 2020, respectively.
As of March 31, 2021 and December 31, 2020, approximately $34.3 million and $32.5 million, respectively, of straight-line rent and accounts receivable, net of allowances of approximately $1.3 million and $0.9 million as of March 31, 2021 and December 31, 2020, 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 $9.7 million and $9.4 million as of March 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, 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, 2021 include years 2017 to 2020 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 preestablished 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 on or after January 1, 2019 will be expressed as a number of shares of common stock and settled in shares of common stock. Target awards were previously expressed as a dollar amount and settled in shares of common stock. Commencing with Performance Share awards granted on or after January 1, 2019, the grant date fair value of the Performance Share awards will be determined under current accounting treatment using a Monte Carlo simulation model on the date of grant and recognized on a straight-line basis over the performance period. For Performance Share awards granted prior to January 1, 2019, the Company estimates the
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fair value of the Performance Share awards using a Monte Carlo simulation model on the date of grant and at each reporting period. The Performance Share awards granted prior to January 1, 2019 are recognized as compensation expense over the requisite performance period based on the fair value of the Performance Share awards at the balance sheet date, which varies quarter to quarter based on the Company’s relative share price performance, and are included as a component of performance share awards payable in the accompanying consolidated balance sheets.
Use of Derivative Financial Instruments. ASC 815, Derivatives and Hedging (See “Note 9 – Derivative Financial Instruments”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why the Company uses derivative instruments, (b) how the Company accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect the Company’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments.
The Company records all derivatives on the accompanying consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.
Fair Value of Financial Instruments. ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (See “Note 10 - 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, 2021, the Company owned 63 buildings aggregating approximately 3.6 million square feet and nine land parcels consisting of approximately 48.6 acres located in Northern New Jersey/New York City, which accounted for a combined percentage of approximately 28.3% of its annualized base rent. Such annualized base rent percentages are based on contractual base rent from leases in effect as of March 31, 2021, excluding any partial or full rent abatements.
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, 2021.
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Note 4. Investments in Real Estate
During the three months ended March 31, 2021, the Company acquired four industrial properties with a total initial investment, including acquisition costs, of approximately $109.9 million, of which $63.7 million was recorded to land, $41.8 million to buildings and improvements, and $4.4 million to intangible assets. Additionally, the Company assumed $5.6 million in liabilities.
The Company recorded revenues and net income for the three months ended March 31, 2021 of approximately $0.5 million and $0.3 million, respectively, related to the 2021 acquisitions.
During the three months ended March 31, 2020, the Company acquired two industrial properties with a total aggregate initial investment, including acquisition costs, of approximately $30.6 million, of which $21.9 million was recorded to land, $7.6 million to buildings and improvements, and $1.1 million to intangible assets. Additionally, the Company assumed $0.5 million in liabilities.
The Company recorded revenues and net income for the three months ended March 31, 2020 of approximately $0.1 million and $0.1 million, respectively, related to the 2020 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 issuance of common stock.
As of March 31, 2021, the Company had two properties under redevelopment expected to contain approximately 0.3 million square feet upon completion with a total expected investment of approximately $71.6 million, including redevelopment costs, capitalized interest and other costs of approximately $65.9 million. The Company capitalized interest associated with redevelopment and expansion activities of approximately $0 and $0.7 million, respectively, during the three months ended March 31, 2021 and 2020.
Note 5. Held for Sale/Disposed Assets
The Company considers a property to be held for sale when it meets the criteria established under ASC 360, Property, Plant, and Equipment. 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. As of March 31, 2021, the Company had no properties held for sale. There were no properties sold during the three months ended March 31, 2021 or 2020.
Note 6. Senior Secured Loan
The Company had a Senior Secured Loan outstanding to a borrower that bore interest at a fixed annual interest rate of 8.0% and was fully repaid in May 2020. The Senior Secured Loan was secured by a portfolio of six improved land parcels located primarily in Newark, New Jersey.
Note 7. Debt
As of March 31, 2021, the Company had $50.0 million of senior unsecured notes that mature in September 2022, $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 and $100.0 million of senior unsecured notes that mature in December 2029 (collectively, the “Senior Unsecured Notes”), and a credit facility (the “Facility”), which consists of a $250.0 million unsecured revolving credit facility that matures in October 2022 and a $100.0 million term loan that matures in January 2022. As of both March 31, 2021 and December 31, 2020, there were no borrowings outstanding on the revolving credit facility and $100.0 million of borrowings outstanding on the term loan. As of March 31, 2021 and December 31, 2020, the Company had one interest rate cap to hedge the variable cash flows associated with $50.0 million of its $100.0 million variable-rate term loan. See “Note 9 - Derivative Financial Instruments” for more information regarding the Company’s interest rate cap.
The aggregate amount of the Facility may be increased to a total of up to $600.0 million, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. Outstanding borrowings under the Facility are limited to the lesser of (i) the sum of the $100.0 million term loan and the $250.0 million revolving credit facility, or (ii) 60.0% of the value of the unencumbered properties. Interest on the Facility, including the term loan, is generally to be paid based upon, at the Company’s option, either (i) LIBOR plus the applicable LIBOR 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, or thirty-day
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LIBOR plus the applicable LIBOR margin for LIBOR rate loans under the Facility plus 1.25%. The applicable LIBOR margin will range from 1.05% to 1.50% (1.05% as of March 31, 2021) for the revolving credit facility and 1.20% to 1.70% (1.20% as of March 31, 2021) for the $100.0 million term loan that matures in January 2022, depending on the ratio of the Company’s outstanding consolidated indebtedness to the value of the Company’s consolidated gross asset value. The 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 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 Facility and the Senior Unsecured Notes are unsecured by the Company’s properties or by interests in the subsidiaries that hold such properties. The 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 Facility and the Senior Unsecured Notes as of March 31, 2021 and December 31, 2020.
During the three months ended March 31, 2021, the Company fully repaid its $11.3 million mortgage loan payable. As of December 31, 2020, this mortgage loan payable, net of deferred financing costs, totaled approximately $11.3 million, and bore interest at a weighted average fixed annual rate of 5.5%. The mortgage loan payable was collateralized by one property. As of December 31, 2020, the total gross book value of the property securing the mortgage loan payable was approximately $32.7 million.
The scheduled principal payments of the Company’s debt as of March 31, 2021 were as follows (dollars in thousands):

Credit
Facility
Term LoanSenior
Unsecured
Notes
Total Debt
2021 (9 months)$$$$
2022100,00050,000150,000
2023
2024100,000100,000
2025
Thereafter200,000200,000
Total debt100,000350,000450,000
Deferred financing costs, net(156)(1,840)(1,996)
Total debt, net$$99,844$348,160$448,004
Weighted average interest raten/a1.3 %3.8 %3.3 %

Note 8. Leasing
The following is a schedule of minimum future cash rentals on tenant operating leases in effect as of March 31, 2021. 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):

2021 (9 months)$146,616 
2022136,008 
2023115,244 
202495,542 
202575,089 
Thereafter160,804 
Total$729,303 

Note 9. Derivative Financial Instruments
Risk Management Objective of Using Derivatives
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The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of its known or expected cash payments principally related to its borrowings.
Derivative Instruments
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps involve the receipt of variable amounts from a counterparty at the end of each period in which the interest rate exceeds the agreed fixed price. The Company does not use derivatives for trading or speculative purposes. The Company requires that hedging derivative instruments be highly effective in reducing the risk exposure that they are designated to hedge. As a result, there is no significant ineffectiveness from any of its derivative activities.
The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. For a derivative that is designated and that qualifies as a cash flow hedge, the effective portion of the change in fair value of the derivative is initially recorded in accumulated other comprehensive income (loss) (“AOCI”). Amounts recorded in AOCI are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.
As of March 31, 2021 and December 31, 2020, the Company had one interest rate cap to hedge the variable cash flows associated with $50.0 million of its existing $100.0 million variable-rate term loan. The cap had a notional value of $50.0 million and effectively capped the annual interest rate payable at 4.0% plus 1.20% to 1.70%, depending on leverage, with respect to $50.0 million for the period from December 1, 2014 (effective date) to May 4, 2021. The Company was required to make certain monthly variable rate payments on the term loan, while the applicable counterparty was obligated to make certain monthly floating rate payments based on LIBOR to the Company in the event LIBOR was greater than 4.0%, referencing the same notional amount.
The Company records all derivative instruments on a gross basis in other assets on the accompanying consolidated balance sheets, and accordingly, there are no offsetting amounts that net assets against liabilities. The following table presents a summary of the Company’s derivative instruments designated as hedging instruments (dollars in thousands):
Derivative
Instrument
Effective
Date
Maturity
Date
Interest
Rate
Strike
Fair ValueNotional Amount
March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Assets:
Interest rate cap12/1/20145/4/20214.0 %$ $ $50,000 $50,000 
The effective portion of changes in the fair value of derivatives designated and qualified as cash flow hedges is recorded in AOCI and will be reclassified to interest expense in the period that the hedged forecasted transaction affects earnings on the Company’s variable rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings into interest expense.
The following table presents the effect of the Company’s derivative financial instruments on its accompanying consolidated statements of operations for the three months ended March 31, 2021 and 2020 (dollars in thousands):
For the Three Months Ended March 31,
20212020
Interest rate caps in cash flow hedging relationships:
Amount of gain recognized in AOCI on derivatives (effective portion)$ $ 
Amount of gain reclassified from AOCI into interest expense (effective portion)$106 $73 
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The Company estimates that approximately $0.1 million will be reclassified from AOCI as an increase to interest expense over the next twelve months.
Note 10. Fair Value Measurements
ASC 820 requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).
Recurring Measurements – Interest Rate Contracts
Fair Value of Interest Rate Caps
Currently, the Company uses interest rate cap agreements to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. As of March 31, 2021, the Company applied the provisions of this standard to the valuation of its interest rate caps.
The following sets forth the Company’s financial instruments that are accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (dollars in thousands):
 Fair Value Measurement Using
Total Fair ValueQuoted Price in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Interest rate caps at:
March 31, 2021$ $ $ $ 
December 31, 2020$ $ $ $ 
Financial Instruments Disclosed at Fair Value
As of March 31, 2021 and December 31, 2020, 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 mortgage loans payable and 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 Facility approximated its carrying value because the variable interest rates approximate market borrowing rates available to the Company, which are Level 2 inputs.
The following table sets forth the carrying value and the estimated fair value of the Company’s debt as of March 31, 2021 and December 31, 2020 (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, 2021$458,647 $ $458,647 $ $448,004 
December 31, 2020$481,809 $ $481,809 $ $459,118 

Note 11. Stockholders’ Equity
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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 ($43.0 million remaining as of March 31, 2021) 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, 2021, the Company issued an aggregate of 706,524 shares of common stock at a weighted average offering price of $58.20 per share, under the $300 Million ATM Program, resulting in net proceeds of approximately $40.5 million, and paying total compensation to the applicable sales agents of approximately $0.6 million. During the three months ended March 31, 2020, the Company issued an aggregate of 427,027 of common stock at a weighted average offering price of $53.37 per share, under the $300 Million ATM Program, resulting in net proceeds of approximately $22.5 million and paying total compensation to the applicable sales agents of approximately $0.3 million.
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, 2022. 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, 2021, the Company had not repurchased any shares of stock pursuant to its share repurchase program.
The Company has a Non-Qualified Deferred Compensation Plan (“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, 2021 and 2020, 131,322 and 135,494 shares of common stock, respectively, were deposited into the Deferred Compensation Plan.
As of March 31, 2021, 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 1,084,436 were remaining 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, 2021 ranged from $14.20 to $60.83. The fair value of the restricted stock that was granted during the three months ended March 31, 2021 was approximately $1.5 million. The vesting period for restricted stock is generally three to five years. As of March 31, 2021, the Company had approximately $8.7 million of total unrecognized compensation costs related to restricted stock issuances, which is expected to be recognized over a remaining weighted average period of approximately 3.4 years. The Company recognized compensation costs of approximately $0.6 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively, 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, 2021:
Restricted Stock Activity:
SharesWeighted Average Grant
Date Fair Value
Non-vested shares outstanding as of December 31, 2020203,729 $50.19 
Granted25,654 59.29 
Forfeited  
Vested(13,336)43.04 
Non-vested shares outstanding as of March 31, 2021216,047 $51.71 
The following is a vesting schedule of the total non-vested shares of restricted stock outstanding as of March 31, 2021:
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Non-vested Shares Vesting ScheduleNumber of Shares
2021 (9 months)
202220,857
202345,798
202491,852
202557,540
Thereafter
Total Non-vested Shares216,047
Long-Term Incentive Plan:
As of March 31, 2021, there are three open performance measurement periods for the Performance Share awards: January 1, 2019 to December 31, 2021, January 1, 2020 to December 31, 2022, and January 1, 2021 to December 31, 2023. During the three months ended March 31, 2021, the Company issued 131,322 shares of common stock at a price of $55.75 per share related to the Performance Share awards for the performance period from January 1, 2018 to December 31, 2020. The expense related to the Performance Share awards granted prior to January 1, 2019 varied quarter to quarter based on the Company’s relative share price performance.
The following table summarizes certain information with respect to the Performance Share awards granted prior to January 1, 2019 (dollars in thousands):
Fair Value Performance Share PeriodMaximum Potential PayoutFair Value March 31, 2021Accrual March 31, 2021Expense for the Three Months Ended March 31,
20212020
January 1, 2018 - December 31, 2020$ $ $ $ $606 
Total$ $ $ $ $606 

Under the Amended LTIP, each participant’s Performance Share target award for target awards granted on or after January 1, 2019 will be expressed as a number of shares of common stock and settled in shares of common stock. Target awards were previously expressed as a dollar amount and settled in shares of common stock. Commencing with Performance Share awards granted on or after January 1, 2019, the grant date fair value of the Performance Share awards will be determined under current accounting treatment using a Monte Carlo simulation model on the date of grant and recognized on a straight-line basis over the performance period.
The following table summarizes certain information with respect to the Performance Share awards granted on or after January 1, 2019 (dollars in thousands):
Performance Share PeriodFair Value on Date of GrantExpense for the Three Months Ended March 31,
20212020
January 1, 2019 - December 31, 2021$4,829 $402 $402 
January 1, 2020 - December 31, 20225,572 464 465 
January 1, 2021 - December 31, 20235,469 456  
Total$15,870 $1,322 $867 
Dividends:
The following table sets forth the cash dividends paid or payable per share during the three months ended March 31, 2021:
For the Three Months EndedSecurityDividend per
Share
Declaration DateRecord DateDate Paid
March 31, 2021Common stock$0.29 February 9, 2021March 26, 2021April 9, 2021

Note 12. 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 both the three months ended March 31, 2021 and 2020.
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 211,746 and 434,538 of weighted average unvested restricted shares outstanding for the three months ended March 31, 2021 and 2020, 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 259,854 and 407,139 for the three months ended March 31, 2021 and 2020, respectively.
Note 13. Commitments and Contingencies
Contractual Commitments. As of May 4, 2021, the Company had outstanding contracts with third-party sellers to acquire six industrial properties for a total aggregate anticipated purchase price of approximately $93.9 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 14. Subsequent Events
On April 6, 2021, the Company acquired one property in Miami, Florida for a total purchase price of approximately $5.8 million. The property was acquired from an unrelated third-party using existing cash on hand.
On April 13, 2021, the Company acquired one property in Kent, Washington for a total purchase price of approximately $10.0 million. The property was acquired from an unrelated third-party using existing cash on hand.
On April 22, 2021, the Company acquired one property in San Jose, CA for a total purchase price of approximately $8.0 million. The property was acquired from an unrelated third-party using existing cash on hand.
On May 4, 2021, the Company’s board of directors declared a cash dividend in the amount of $0.29 per share of its common stock payable on July 14, 2021 to the stockholders of record as of the close of business on June 30, 2021.
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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” 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, 2020, which was filed with the Securities and Exchange Commission on February 10, 2021, in this Quarterly Report on Form 10-Q, and in our other public filings, which you should interpret as being heightened as a result of the numerous and ongoing adverse impacts of COVID-19;
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 acquire 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;
the potential discontinuation of London Interbank Offered Rate (“LIBOR”);
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;
the ongoing impact of COVID-19 on the U.S., regional and global economies and the business, financial condition and results of operations of our Company and 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 81.6% of our annualized base rent as of March 31, 2021), flex buildings (including light industrial and research and development, or R&D, approximately 5.0%), transshipment (approximately 5.6%), and improved land parcels (approximately 7.8%). We target functional buildings 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, 2021, we owned a total of 228 buildings aggregating approximately 13.7 million square feet, 25 improved land parcels consisting of approximately 92.5 acres and two properties under redevelopment expected to contain approximately 0.3 million square feet upon completion. As of March 31, 2021, the buildings and improved land parcels were approximately 96.1% and 97.9% leased, respectively, to 519 customers, the largest of which accounted for approximately 5.3% 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, 2020 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, or the Code, commencing with our taxable year ended December 31, 2010.
The following table summarizes by type our investments in real estate as of March 31, 2021:
TypeNumber of Buildings or Improved Land Parcels
Annualized Base Rent (000's) 1
% of Total
Warehouse/distribution201$125,496 81.6 %
Flex107,686 5.0 %
Transshipment178,545 5.6 %
Improved land2512,055 7.8 %
Total/Weighted Average253$153,782 100.0 %
1Annualized base rent is calculated as contractual monthly base rent per the leases, excluding any partial or full rent abatements, as of March 31, 2021, multiplied by 12.
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The following table summarizes by market our investments in real estate as of March 31, 2021:
Los AngelesNorthern New Jersey/New York CitySan Francisco Bay AreaSeattleMiamiWashington, D.C.Total/Weighted Average
Investments in Real Estate
Number of Buildings43 63 44 32 28 18 228 
Rentable Square Feet2,584,648 3,571,409 2,155,510 2,223,143 1,587,649 1,534,625 13,656,984 
% of Total18.9 %26.2 %15.8 %16.3 %11.6 %11.2 %100.0 %
Occupancy % as of March 31, 202198.4 %94.1 %99.9 %98.7 %
86.8% 4
97.4 %96.1 %
Annualized Base Rent
(000’s) 1
$24,223 $37,904 $28,132 $21,314 $13,017 $17,137 $141,727 
% of Total17.2 %26.7 %19.8 %15.0 %9.2 %12.1 %100.0 %
Annualized Base Rent1 Per Occupied Square Foot
$9.52 $11.28 $13.07 $9.72 $9.45 $11.46 $10.80 
Weighted Average Remaining Lease Term (Years) 2
6.5 4.8 3.0 3.8 3.9 3.6 4.5 
Investments in Improved Land
Number of Land Parcels25 
Acres16.4 48.6 5.0 5.9 3.2 13.4 92.5 
% of Total17.7 %52.6 %5.4 %6.3 %3.5 %14.5 %100.0 %
Occupancy % as of March 31, 202188.2 %100.0 %100.0 %100.0 %100.0 %100.0 %97.9 %
Annualized Base Rent
(000’s) 1
$3,279 $5,639 $985 $888 $396 $868 $12,055 
% of Total27.2 %46.7 %8.2 %7.4 %3.3 %7.2 %100.0 %
Annualized Base Rent1 Per Occupied Square Foot
$5.22 $2.71 $4.57 $3.67 $2.87 $1.49 $3.09 
Weighted Average Remaining Lease Term (Years) 2
4.3 4.5 2.2 4.9 2.5 8.8 4.9 
Total Investments in Real Estate
Annualized Base Rent (000’s) 1
$27,502 $43,543 $29,117 $22,202 $13,413 $18,005 $153,782 
Gross Book Value (000’s) 3
$464,532 $663,172