Terreno Realty : Q4 2019 Update

Terreno Realty Corporation

Q4 2019 Update

February 6, 2020

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are forward-looking statements and, in some cases, can be identified by the use of the words "anticipate," "believe," "estimate," "expect," "intend," "may," "might," "plan," "project," "result," "should," "will," "seek," "target," "see," "likely," "position," "opportunity," "outlook," "potential," "enthusiastic," "future," and similar expressions. 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 caution investors that forward-looking statements are based on management's beliefs and on assumptions made by, and information currently available to, management. Factors that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: (i) our ability to identify and acquire industrial properties on terms favorable to us; (ii) general volatility of the capital markets and the market price of our stock; (iii) adverse economic or real estate conditions or developments in the industrial real estate sector and/or in the markets in which we acquire properties; (iv) our dependence on key personnel and our reliance on third parties to property manage the majority of our industrial properties; (v) our dependence upon tenants; (vi) our ability to comply with the laws, rules and regulations applicable to companies, and in particular, public companies; (vii) our ability to manage our growth effectively; (viii) tenant bankruptcies and defaults on or non-renewal of leases by tenants; (ix) decreased rental rates or increased vacancy rates; (x) increased interest rates and operating costs; (xi) declining real estate valuations and impairment charges; (xii) our expected leverage, our failure to obtain necessary outside financing, and future debt obligations; (xiii) our ability to make distributions to our stockholders; (xiv) our failure to successfully hedge against interest rate increases; (xv) our failure to successfully operate acquired properties; (xvi) our failure to maintain our status as a real estate investment trust ("REIT") and possible adverse changes to tax laws; (xvii) uninsured or underinsured losses relating to our properties; (xviii) environmental uncertainties and risks related to natural disasters; (xix) financial market fluctuations; and (xx) changes in real estate and zoning laws and increases in real property tax rates. Other factors that could materially affect results can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, including those set forth under the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's preliminary prospectus supplement relating to the offering under the section titled "Risk Factors", and in our other public filings.

We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise. 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.

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Investment Strategy

Unique and Highly Selective		Focus on Functional Assets
Market Approach		in Infill Locations

• Acquire, own and operate industrial real estate in six major coastal U.S. markets. Exclusively.
• • Mix of core and value-add investments
  • No greenfield development
  • No complex joint ventures
• Superior market fundamentals, including lower vacancy and higher rent growth
• • Strong demand generators (high population densities, near high volume distribution points)
  • Physical and regulatory constraints to new supply
  • • Shrinking supply in certain submarkets

• Broad product opportunity set (1)
• • Warehouse / distribution (81.5%)
  • Flex (including light industrial and R&D) (7.2%)
  • Transshipment (5.5%)
  • Improved land (5.8%) (2)
• Functional and flexible assets
• • Cater to sub-market tenant demands, including last-mile distribution
  • Generally suitable for multiple tenants
  • Adjacent to transportation infrastructure
• Multiple value creation opportunities
• • Emphasis on discount to replacement cost provides margin of safety
  • Opportunity for higher and better use over time

1. Reflects Terreno portfolio composition based on annualized base rent as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
2. Includes 19 improved land parcels totaling approximately 77.6 acres that are 92.0% leased at December 31, 2019. Such land is used for truck,

• trailer and container storage and/or car parking and may be redeveloped to higher and better use.

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Recent Highlights

Financial Highlights

• Net Income available to common stockholders of $0.22 per diluted share for the quarter ended December 31, 2019 compared to $0.22 per diluted share for the quarter ended September 30, 2019 and $0.38 for the quarter ended December 31, 2018. Net Income available to common stockholders of $0.85 per diluted share for the twelve months ended December 31, 2019 compared to $1.09 per diluted share for the twelve months ended December 31, 2018.
• Funds From Operations (FFO)(1) of $0.35 per diluted share for the quarter ended December 31, 2019 compared to $0.36 per diluted share for the quarter ended September 30, 2019 and $0.33 for the quarter ended December 31, 2018. Funds From Operations of $1.38 per diluted share for the twelve months ended December 31, 2019 compared to $1.30 per diluted share for the twelve months ended December 31, 2018.

Operating Highlights

• Cash-basisSame Store NOI(1) for the three months ended December 31, 2019 increased approximately 5.5% as compared to the same period in 2018 due to increased revenue on new and renewed leases(2). Cash-basis Same Store NOI for the twelve months ended December 31, 2019 increase approximately 9.2% as compared to the same period in 2018.
• Cash rents on new and renewed leases commencing during the three and twelve months ended December 31, 2019 increased approximately 15.3% and 17.3% on approximately 0.5 million and 2.4 million square feet, respectively.
• Total portfolio, excluding four properties under redevelopment and 19 improved land parcels, was 96.8% leased as of December 31, 2019 as compared to 97.2% at September 30, 2019 and 98.4% at December 31, 2018.
• The same store portfolio of approximately 11.8 million square feet, representing approximately 88.6% of our total square feet, was 98.4% leased at December 31, 2019 as compared to 99.0% at September 30, 2019 and 99.1% at December 31, 2018.

1. This is a non-GAAP financial measure, please see our Reporting Definitions for further explanation.
2. Approximately $0.4 million (138bps) of the increase in cash-basis same store NOI for the three months ended December 31, 2019 was related to properties that were acquired vacant or with near term expirations.

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Recent Highlights

Investment Highlights

	Q4 2019 Acquisitions	$21.6 million
		$273.6 million
	2019 Acquisitions
	Acquisitions Under Contract (1)(2)	$30.0 million

• For the year ended 2019, sold four properties for approximately $48.9 million generating an unleveraged internal rate of return of 8.6% (total GAAP gain of approximately $9.4 million).

	Q4 2019 Dispositions	$22.5 million
	Dispositions Under LOI (1)(2)	$54.0 million

Capital Markets Activities

• Issued approximately 0.2 million shares of common stock under the ATM program during the three months ended December 31, 2019 with a weighted average offering price of $56.61, receiving gross proceeds of approximately $13.7 million. For the year ended 2019, issued 6.1 million shares of common stock with a weighted average price of $45.85 for gross proceeds of $278.1 million.
• Closed on $100 million of senior unsecured notes with a ten-year term that bear interest at a fixed annual rate of 3.14% and used the proceeds to repay a $50 million term loan and, subsequent to December 31, 2019, repaid a mortgage loan of $32.7 million with a 2020 maturity.

	(1)	As of February 6, 2020.
5	(2)	There is no assurance that we will acquire or dispose properties under contract or letter of intent because the proposed acquisitions and dispositions are subject to the
	completion of satisfactory due diligence and various closing conditions and, in the case of properties under letter of intent, purchase and sale agreements.

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Current Portfolio Overview

Occupancy (1)

Six Major Coastal U.S. Markets(2)

Portfolio

Same Store

Seattle 11.5%

Northern New Jersey /

New York City

30.9%

San Francisco Bay Area

16.9%Washington, D.C.

13.8%

Los Angeles

16.5%

Miami 10.4%

Key Metrics(3)

Square Feet	13.3 million	Average Acquisition Size	$13.4 million
Number of Buildings	220	Weighted Average	82.4%
Occupancy at Acquisition
19 Improved Land Parcels	77.6 acres; 92.0% leased	Square Feet Under	505,000
Redevelopment

1. Portfolio and Same Store occupancy based on 13.3 million and 11.8 million square feet, respectively, as of December 31, 2019, and excludes 19 improved land parcels consisting of 77.6 acres and four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
2. Based on annualized base rent by market including 13.3 million square feet and 19 improved land parcels consisting of 77.6 acres as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet.
3. Properties owned as of December 31, 2019. Excludes four properties under redevelopment that upon completion will contain approximately 0.5 million square feet. Average acquisition size and weighted average occupancy at acquisition exclude 19 properties sold with an aggregate 2.6 million square feet.

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Terreno's Submarket Focus

Highly Focused Submarket Strategy

• 30% of portfolio located in shrinking supply submarkets (1)
• • Characterized by shrinking industrial supply. Offers opportunities to convert existing buildings into higher and better use over time. Urban infill.
• 56% of portfolio in no net new supply submarkets (1)
• • Characterized by older existing industrial product. Offers opportunities to redevelop existing buildings into new, modern industrial buildings. Infill.
• 14% of portfolio in new supply submarkets (1)
• • Characterized by industrial buildings that will remain in their current state for the foreseeable future with previously undeveloped land available for industrial development. Greenfield.

Percentage Decrease in Industrial Supply Since 2000 (2) In Select Submarkets

		SF Decrease		Decrease Since		Annual SF
Submarket		(Millions of SF)		2000		Decrease
Washington, D.C.		2.2		21.2%		1.1%
South San Francisco	2.7	14.6%	0.8%
Seattle SODO	1.7	7.1%	0.4%
Brooklyn/Queens	10.9	6.1%	0.3%
LAX Airport	1.1	6.1%	0.3%

1. As of December 31, 2019. Reflects Terreno's portfolio composition based on geography and purchase price, includes properties under redevelopment, and improved land parcels. Refer to Appendix for submarket classifications.
2. Data provided by Costar. As a comparison, industrial supply has increased 19% nationally and 113% in the Inland Empire since 2000.

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Shrinking Supply: South San Francisco

20% Decrease in Supply Since 1997

Demolished Industrial Inventory Approved for Redevelopment Terreno Properties (6 buildings, 223,000 SF)

Percentage Inventory Decrease and

Rental Rate Increase Since 1997

	5%															140%
				Inventory Change		Rental Rate Change
	0%														120%
Change														100%	Change
-5%															80%
%	-10%														60%	%
															RateRent
Inventory														40%
	-15%															20%
	-20%														0%
														-20%
	-25%															-40%
	'97	'99	'01	'03	'05	'07	'09	'11	'13	'15	'17	'19

Source: CoStar

• South San Francisco zoning limits freight forwarding contributing to higher and better use conversions.
• Industrial buildings are being demolished and replaced by life science, creative office, manufacturing, and multifamily.

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Submarket Focus: Infill

Terreno portfolio located within highest density population areas as compared to other industrial REITs

17,500

Population Density Per Square Mile

15,000

12,500

10,000

7,500

5,000

2,500

-

TRNO REXR PLD EGP	FR DRE MNR COLD STAG
		5-mile radius			10-mile radius

Represents average population density weighted by square feet and ranked by 5-mile radius.

Prologis (NYSE: PLD) average population density data as of 2018; PLD no longer discloses property level information.

Source: S&P Global Market Intelligence, Terreno Realty Corporation.

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Selected Recent Acquisitions

5200 East Marginal Way South

Seattle, WA November 18, 2019

• Purchase Price: $2.9 million
• Estimated Stabilized Cap Rate: 5.6%
• Size: One improved land parcel of 0.9 acres
• Occupancy: Acquired vacant
• Location: Immediately adjacent to Terreno Realty Corporation's property at 53 South Dawson in Seattle's Port and SoDo District

46 Whelan Road

East Rutherford, NJ December 16, 2019

• Purchase Price: $12.0 million
• Estimated Stabilized Cap Rate: 5.0%
• Size: One industrial building containing approximately 50,000 square feet on 3.5 acres
• Occupancy: 100% leased to one tenant on a short-term basis through April, 2020.
• Location: Less than two miles west of the Meadowlands Sports Complex and Exit 16W of the New Jersey Turnpike

917 Valley Ave NW

Puyallup, WA December 20, 2019

• Purchase Price: $6.7 million
• Estimated Stabilized Cap Rate: 5.4%
• Size: One industrial building containing approximately 41,000 square feet on 2.3 acres
• Occupancy: 100% leased to two tenants
• Location: Less than four miles from the Port of Tacoma

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Selected Examples of Value Creation

• Since Terreno's 2010 IPO, approximately two-thirds of our acquisitions have been value-add investments. Terreno has successfully stabilized 74 value-add investments to date. Terreno has sold approximately 10% of its acquisitions for an unleveraged IRR of 12.7%.

Strategy

Redevelopment and Leasing

Examples

• 56-8549th Street, Queens: Acquired with a short-term lease in February 2019. Completed standard make-ready work including office renovation, lighting upgrades, interior and exterior painting, sealcoat and restripe of parking, and upgraded fencing. Executed a new 7-year lease with a leading e-commerce firm commencing in November 2019 with an estimated stabilized cap rate of 5.3%.
• 1775 NW 70th, Miami: Acquired with a short-term lease in October 2017. $1.5 million redevelopment included removal of 15,000 SF of second story office and refurbishment of remaining 9,000 SF of office. New 5-year lease commenced in February 2019 generating an estimated stabilized return on cost of 5.5% on $10.0 million of total investment.

Below Market	 Dawson, Seattle: Acquired in July 2017 for an estimated 2.8% stabilized cap rate with 19
months remaining on below-market lease. Executed five-year renewal with tenant in March
Rents
2019 increasing rent 119% over expiring rate and increasing stabilized cap rate to 6.0%.

• California Avenue, Corona: Terreno acquired the 90,000 SF building in June 2014 for $7.8

million. Terreno sold the property 100% leased on March 13, 2019 for approximately $12.4

Value Realized million, exiting the Inland Empire, and recognized a GAAP gain of approximately $4.5 million and generated an unleveraged internal rate of return of 12.4%.

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Value Creation - Redevelopment and Leasing

 Property: 56-85 49th Street

 Location: Maspeth, Queens, NY

 Size: One building, 19,000 SF on 2.0 acres

 Acquisition Price: $24.0 million in February 2019

 Initial Occupancy: 100% occupied on a short-term basis

 Leasing: Completed make-ready work and executed a 7-year lease with a leading e-commerce company expected to commence in November 2019 with an estimated stabilized cap rate of 5.3%.

Value Creation - Executed 7-year lease with leading e-commerce company with estimated stabilized cap rate of 5.3%

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Value Creation - Below Market Rents

SoDo Seattle: Approximately Three Miles South of Downtown Seattle

 Property: 5300 Denver Avenue

 Size: One building, 30,000 SF on 1.5 acres

 Acquisition Price: $4.7 million in May 2016

 Rent Change on Rollover: Acquired with three years remaining on existing lease term. Negotiated an early termination with the existing tenant and immediately signed a seven-year lease with a replacement tenant at 78% higher rents and no downtime.

 Property: 53 Dawson

 Size: One building, 13,000 SF on 1.4 acres

 Acquisition Price: $4.0 million in July 2017

 Rent Change on Rollover: Acquired with 19 months remaining on below-market lease. Executed five-year renewal with tenant in March 2019 increasing rent 119% over expiring rate.

Value Creation -

Denver: New rents 78% higher increasing est. stabilized cap rate from 5.5% to 9.4%

Dawson: New rents 119% higher increasing est. stabilized cap rate from 2.8% to 6.0%

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Market Leading Corporate Structure

Management Alignment

• Executive Team's long-term incentive compensation fully aligned with stockholders
• • Performance shares tied to three-year total stockholder return exceeding the MSCI U.S. REIT Index and FTSE Nareit Equity Industrial Index
  • No annual cash bonus plan for CEO and President with their long-term compensation paid solely in stock
• No stock options, SARs, dividend equivalent units or UPREIT units
• Significant senior management and board investment in common shares (approximately 2.4% of outstanding shares valued at $95 million)
• • $11 million invested by management in public offerings and open market purchases

Corporate Governance

• Majority independent directors with diverse expertise serving annual terms; no classification of Board without shareholder approval ("MUTA opt- out")
• Adopted a majority voting standard in non- contested director elections
• Opted out of three Maryland anti-takeover provisions (no opt in without stockholder approval)
• Ownership limits designed to protect REIT status and not for the purpose of serving as an anti- takeover device
• No stockholder rights plan unless approved in advance by stockholders or if adopted, subject to termination if not ratified by stockholders within 12 months

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Key Takeaways

• Focused strategy
• • Six major coastal US markets, exclusively
  • Flexible and functional assets in infill locations
• Acquisition opportunities across our target markets at discounts to replacement cost
• • Ability to convert value-add investments into stabilized assets and realize value
  • Urban infill locations provide higher and better use opportunities over time
• Strong balance sheet including an investment grade credit rating
• Demonstrated value creation with 19 properties sold for an aggregate sales price of approximately $291.3 million earning a 12.7% unleveraged IRR
• 12.0% dividend CAGR since initiating dividend in 2011
• 13.7% compounded annual total shareholder return since 2010 IPO
• Aligned management team and market leading corporate governance

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Appendix

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SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Appendix: Statements Of Operations

CONSOLIDATED STATEMENTS OF OPERATIONS					For the Three M onths Ended December 31,							For the Year Ended December 31,
					2019						2018								2019						2018
REVENUES
Rental revenues and tenant expense reimbursements	$	45,015			$	39,413	$	171,022			$	151,657
Total revenues					45,015					39,413							171,022					151,657
COSTS AND EXPENSES
Property operating expenses					11,808					10,296							44,201					39,988
Depreciation and amortization					11,847					10,250							44,015					40,816
General and administrative (1)					6,072					6,371							23,924					21,503
Acquisition costs					(3)					(5)							45					124
Total costs and expenses					29,724					26,912							112,185					102,431
OTHER INCOME (EXPENSE)
Interest and other income					644					1,341							3,815					3,664
Interest expense, including amortization					(4,069)					(4,494)							(16,338)					(18,211)
Loss on extinguishment of debt					(189)					-							(189)					-
Gain on sales of real estate investments					3,144					13,624							9,391					28,610
Total other income and expenses					(470)					10,471							(3,321)					14,063
Net income					14,821					22,972							55,516					63,289
Allocation to participating securities					(94)					(145)							(351)					(401)
Net income available to common stockholders	$	14,727			$	22,827	$	55,165			$	62,888
EARNINGS PER COMMON SHARE - BASIC AND DILUTED:
Net income available to common stockholders - basic, net of redemption of
preferred stock and preferred stock dividends	$	0.22			$	0.38	$	0.86			$	1.09
preferred stock and preferred stock dividends
$	0.22			$	0.38		$	0.85			$	1.09
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING					66,706,245					59,689,965							64,428,406					57,486,399
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
				67,000,815					59,689,965							64,722,976					57,486,399
					For the Three M onths Ended December 31,							For the Year Ended December 31,
					2019						2018								2019						2018
Performance share aw ard expense	$				1,847				$	2,737		$				8,035				$	7,063

1. Includes non-cash compensation associated with the Company's Performance Share awards. For Performance Share awards granted prior to January 1, 2019, the Company estimates the fair value of the Performance Share awards using a Monte Carlo simulation model on the date of grant and at each reporting period, which may vary substantially from period to period based upon our relative share price performance. The Performance Share awards 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. For Performance Share awards granted after January 1, 2019, the Company estimates the fair value using a Monte Carlo simulation model on the date of grant and recognizes the expense over the performance period.

17 Compensation expense related to all Performance Share awards outstanding is detailed above.

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Appendix: Net Income, FFO and Adjusted FFO

		For the Three Months Ended December 31,				For the Year Ended December 31,
NET INCOME, FFO AND ADJUSTED FFO(1)		2019				2018				2019			2018
Total revenues	$	45,015	$	39,413	$	171,022	$	151,657
Property operating expenses		(11,808)				(10,296)				(44,201)			(39,988)
Depreciation and amortization		(11,847)				(10,250)				(44,015)			(40,816)
General and administrative (2)		(6,072)				(6,371)				(23,924)			(21,503)
Acquisition costs		3				5				(45)			(124)
Interest and other income		644				1,341				3,815			3,664
Interest expense, including amortization		(4,069)				(4,494)				(16,338)			(18,211)
Loss on extinguishment of debt		(189)				-				(189)			-
Gain on sales of real estate investments		3,144				13,624				9,391			28,610
Net income	$	14,821		$	22,972		$	55,516		$	63,289
Allocation to participating securities		(94)				(145)				(351)			(401)
Net income available to common stockholders	$	14,727		$	22,827		$	55,165		$	62,888
Net income available to common stockholders per common share - basic	$	0.23	$	0.38	$	0.86	$	1.09
Net income available to common stockholders per common share - diluted	$	0.22	$	0.38	$	0.85	$	1.09
Adjustments to arrive at Funds from Operations:
Gain on sales of real estate investments		(3,144)				(13,624)				(9,391)			(28,610)
Depreciation and amortization related to real estate		11,821				10,223				43,907			40,703
Allocation to participating securities		(150)				(123)				(565)			(478)
Funds from Operations (1)	$	23,348	$	19,448	$	89,467	$	74,904
Funds from operations per common share - basic	$	0.35	$	0.33	$	1.39	$	1.30
Funds from operations per common share - diluted	$	0.35	$	0.33	$	1.38	$	1.30
Adjustments to arrive at Adjusted Funds From Operations:
Acquisition costs		(3)				(5)				45			124
Stock-based compensation		2,492				3,248				10,644			9,270
Straight-line rents		(298)				(522)				(2,597)			(3,459)
Amortization of lease intangibles		(1,527)				(1,016)				(4,682)			(3,694)
Total capital expenditures		(17,999)				(18,391)				(61,835)			(41,841)
Capital expenditures related to stabilization (3)		10,832				13,619				42,511			27,445
Adjusted Funds from Operations	$	16,845	$	16,381		$	73,553		$	62,749
Common stock dividends paid	$	18,093	$	14,186	$	63,565	$	51,445
Weighted average basic common shares		66,706,245				59,689,965				64,428,406			57,486,399
Weighted average diluted common shares		67,000,815				59,689,965				64,722,976			57,486,399

1. See Reporting Definitions for further explanation.
2. Includes non-cash compensation associated with the Company's Performance Share awards. For Performance Share awards granted prior to January 1, 2019, the Company estimates the fair value of the Performance Share awards using a Monte Carlo simulation model on the date of grant and at each reporting period, which may vary substantially from period to period based upon our relative share price performance. The Performance Share awards 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. For Performance Share Awards granted after January 1, 2019, the Company estimates the fair value using a Monte Carlo simulation model on the date of grant and recognizes the expense over the performance period. Compensation expense related to all Performance Share awards outstanding was as follows:

		For the Three M onths Ended December 31,			For the Year Ended December 31,
18		2019				2018			2019			2018
Performance share aw ard expense	$	1,847	$	2,737	$	8,035	$	7,063

1. Capital expenditures related to stabilization includes costs incurred related to leasing acquired vacancy and redevelopment projects.

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Appendix: Supplemental Components of NAV

		For the Three	Q4 2019 ACQUISITIONS
COMPONENTS OF NET OPERATING INCOME(1)		Months Ended						Purchase		Estimated
	December 31, 2019
Total revenues	$	45,015							Price		Stabilized		Leased % at
	Property Name		Date			(in thousands)		Cap Rate		Acquisition
Less straight-line rents		(298)
		East Marginal		Seattle, WA	$	2,850	5.6%	0%
Less amortization of lease intangibles		(1,527)
		Whelan		East Rutherford, NJ	$	12,000	5.0%	100%
Less property operating expenses		(11,808)
		917 Valley		Puyallup, WA		$	6,725		5.4%		100%
Net operating income	$	31,382
	Total/Weighted Average			$	21,575	5.2%	87%

CONTRACTUAL RENT ABATEMENTS	$	333
LEASE TERMINATION INCOME	$	132
CASH NOI FROM DISPOSED PROPERTIES	$	302
CASH NOI FROM REDEVELOPMENTS	$	36
BALANCE SHEET ITEMS
Other assets and liabilities
Cash and cash equivalents	$	110,082
Restricted cash			2,657
Construction in progress (2)			101,253
Senior secured loan (3)			15,915
Other assets, net			33,952
Less straight-line rents			(23,678)
Security deposits			(14,149)
Dividends payable			(18,158)
Performance share awards payable			(11,633)
Accounts payable and other liabilities			(27,699)
Total other assets and liabilities		$	168,542
DEBT AND PREFERRED STOCK
Credit facility	$	-
Term loans payable (3)			(100,000)
Senior unsecured notes (3)			(350,000)
Mortgage loans payable (3)			(44,348)
Total debt		$	(494,348)
Total shares outstanding			67,252,787

SUMMARY MARKET INFORMATION (Investments in Real Estate) (2)

					Occupancy						Annualized
			Rentable		Percentage as of		Annualized		Base Rent Per
			Square		December 31,		Base Rent			Occupied
Market			Feet		2019			(000's)		Square Foot
Los Angeles	2,523,969	97.7%	$	21,398	$	8.67
Northern New Jersey/New York City	3,552,681	98.6%			36,540			10.43
San Francisco Bay Area	2,028,909	91.1%			22,822			12.34
Seattle	1,776,954	99.1%			15,587			8.85
Miami	1,563,326	97.1%			13,656			8.99
Washington, D.C.	1,874,378	96.1%			18,006			9.99
Total/Weighted Average			13,320,217		96.8%		$	128,009		$	9.92

SUMMARY MARKET INFORMATION (Improved Land)

								Occupancy			Annualized
								Percentage as of
			Number of					December 31,			Base Rent
Market			Parcels			Acreage		2019				(000's)
Los Angeles	5	10.1	47.8%	$	1,007
Northern New Jersey/New York City	9	48.7	100.0%				5,480
San Francisco Bay Area	1	1.3	100.0%				195
Seattle	1	0.9	0%				0
Miami	2	3.2	100.0%				389
Washington, D.C.	1	13.4	100.0%				764
Total/Weighted Average			19			77.6		92.0%			$	7,835

1. See Reporting Definitions for further explanation.
2. The Company had four properties under redevelopment as of December 31, 2019 that upon completion will contain approximately 0.5 million square feet with a total expected investment of approximately $120.4 million, including redevelopment costs of approximately $52.4 million.

19 (3) Excludes deferred financing costs and loan fees.

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Appendix: Same Store Results

							For the Three Months												For the Year Ended
SAME STORE GROWTH (1)						Ended December 31,		$ Change			% Change					December 31,				$ Change				% Change
			2019				2018								2019					2018
Net income		$	14,821	$	22,972			$	(8,151)		(35.5)%		$	55,516		$	63,289		$	(7,773)	(12.3)%
Depreciation and amortization							11,847				10,250				1,597		15.6%					44,015					40,816					3,199	7.8%
General and administrative							6,072				6,371				(299)		(4.7)%					23,924					21,503					2,421	11.3%
Acquisition costs							(3)			(5)				2		(40.0)%					45					124					(79)	(63.7)%
Total other income and expenses							470				(10,471)				10,941				n/a					3,321					(14,063)				17,384				n/a
Net operating income							33,207				29,117				4,090		14.0%					126,821					111,669					15,152	13.6%
Less non-same store NOI							(5,506)			(2,563)				(2,943)		114.8%					(16,331)				(8,164)				(8,167)		100.0%
Same store NOI			$	27,701			$	26,554			$	1,147			4.3%			$	110,490			$	103,505			$	6,985		6.7%
Less straight-line rents and amortization of lease intangibles		(664)			(928)				264		(28.4)%					(3,851)				(5,823)				1,972		(33.9)%
Cash-basis same store NOI			$	27,037			$	25,626			$	1,411			5.5%			$	106,639			$	97,682			$	8,957		9.2%
HISTORICAL SAME STORE RESULTS (1) (2)	Full Year		Full Year			Full Year		Full Year			Full Year			Full Year				Full Year			Full Year
		2012		2013			2014		2015					2016				2017					2018					2019
Same store square feet	2,235,500	3,091,365	4,792,329	6,312,641	8,627,109		10,159,084				10,421,965		11,795,386
Occupancy %	93.0%	96.8%			97.1%	94.4%	99.0%	97.5%				99.1%					98.4%
Cash-basis same store NOI growth %	11.9%	18.1%			12.9%	3.1%	8.6%	16.5%				9.1%					9.2%
Average cash-basis same store growth since IPO:									12.1%

1. Same Store NOI is computed as rental revenues, including tenant expense reimbursements, less property operating expenses on a same store basis. The same store pool includes all properties that were owned as of December 31, 2019 and since January 1, 2018 and excludes properties that were disposed of, or held for sale to a third party or were under redevelopment. See Reporting Definitions for further explanation.
2. Historical Same Store Results include cash-basis same store NOI growth %'s as reported in the Company's Form 10-Q and 10-K's. Previously reported cash-basis same store NOI growth has not been adjusted for properties that were subsequently disposed of or are held for sale to a third party.
3. Included in cash-basis same store NOI was termination income of $0.2 million and $5,000 for the three months ended December 31, 2019 and 2018, respectively.

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Appendix: Redevelopments and Dispositions

REDEVELOPMENTS

			Total Expected						Amount		Estimated		Estimated Post-		Estimated	% Pre-leased
			Investment (in			Amount Spent to			Remaining to		Stabilized Return		Development		Stabilization	December 31,
Property Name			thousands) (1)			Date			Spend		on Cost(2)		Square Feet		Quarter	2019
Sodo Row - North	$	17,000	$	10,067	$	6,933	5.4%	50,706		Q2 2021	-
Sodo Row - South			53,446			44,726			8,720	5.7%	184,014		Q2 2021	28%
6th Avenue South			15,511			14,976			535	5.1%	50,270		Q2 2020	-
Kent 192			34,410			31,484			2,926		5.5%		219,910		Q4 2020	-
Total/Weighted Average		$	120,367		$	101,253		$	19,114		5.5%		504,900			10.2%

HISTORICAL DISPOSITIONS
Property	Market	Acquisition Date	Disposition Date	Acquisition Price		Disposition Price		Unleveraged IRR
Rialto		Los Angeles	September 2010	November 2012	$	12,110	$	16,962	20.9%
Maltese	New Jersey/New York	September 2010	December 2013		16,500			19,000	11.8%
Warm Springs	San Francisco	March 2010	June 2015		7,264			13,400	15.1%
Sweitzer	Washington, D.C.	October 2012	November 2015		6,950			11,200	21.5%
Fortune Qume	San Francisco	March 2010	February 2016		5,550			8,200	11.3%
Global Plaza	Washington, D.C.	March 2012	March 2016		6,100			8,200	13.2%
39th Street	Miami	August 2011	September 2016		4,400			6,097	12.1%
Whittier	Los Angeles	June 2012	April 2017		16,100			25,300	14.5%
Bollman	Washington, D.C.	June 2011	August 2017		7,500			12,000	12.4%
Route 100	Washington, D.C.	June 2013	August 2017		16,650			28,500	15.7%
8441 Dorsey	Washington, D.C.	March 2011	December 2017		5,800			11,500	11.9%
Hampton	Washington, D.C.	May 2014	February 2018		18,050			20,250	6.9%
10th Avenue	Miami	December 2010	June 2018		9,000			24,300	11.5%
26th Street (office)	Miami	September 2012	November 2018		3,150			4,325	14.4%
Miller Ave	Los Angeles	December 2014	November 2018		22,899			33,217	14.5%
California Ave	Los Angeles	June 2014	March 2019		7,815			12,410	12.4%
10100 NW 25th Str Miami	January 2011	August 2019		9,875			14,000	7.2%
8215 Dorsey	Washington, D.C.	November 2009	October 2019		6,000			7,470	7.5%
9020 Junction	Washington, D.C.	November 2010	December 2019		13,800			15,000	7.6%
				Total	$	195,513		$	291,331		12.7%

1. Total expected investment for the property includes 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.
2. Estimated stabilized return on cost is calculated as annualized cash basis net operating income for the property stabilized to market occupancy (generally 95%) divided by the total expected investment for the property.

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Appendix: Capitalization

									Senior				Mortgage
Maturity		Credit Facility			Term Loans			Unsecured				Loans Payable				Total Debt
2020		$	-		$	-		$	-		$	33,077		$	33,077
2021			-			-			-				11,271				11,271
2022			-			100,000			50,000				-				150,000
2023			-			-			-				-				-
2024			-			-			100,000				-				100,000
Thereafter		-			-			200,000				-				200,000
Total Debt		-			100,000			350,000				44,348				494,348
Deferred financing costs, net		-			(417)			(2,326)				(30)				(2,773)
Total Debt, net	$	-		$	99,583		$	347,674		$	44,318		$	491,575
Weighted Average Interest Rate		n/a			3.0%			3.8%				4.1%				3.7%
																	As of
												As of December				December 31,
													31, 2019				2018
Total Debt, net										$	491,575		$	462,097
Common Stock
Shares Outstanding													67,252,787				61,013,711
Market Price									$	54.14	$	35.17
Total Equity												3,641,066				2,145,852
Total Market Capitalization									$	4,132,641	$	2,607,949
Total Debt-to-Total Investments in Properties												22.8%				25.2%
Total Debt-to-Total Investments in Properties and Senior Secured Loan												22.7%				24.5%
Total Debt-to-Total Market Capitalization												11.9%				17.8%
Floating Rate Debt as a % of Total Debt (1)												20.3%				36.4%
Unhedged Floating Rate Debt as a % of Total Debt (2)												0.0%				4.1%
Mortgage Loans Payable as a % of Total Debt												9.0%				9.9%
Mortgage Loans Payable as a % of Total Investments in Properties												2.1%				2.5%
Adjusted EBITDA (3)									$	117,356	$	103,100
Interest Coverage												7.2	x	5.7	x
Fixed Charge Coverage												6.0	x	5.0	x
Total Debt-to-Adjusted EBITDA (3)												4.1	x	4.2	x
Weighted Average Maturity of Total Debt (years)												5.1				4.6

1. Floating rate debt includes our existing $100.0 million of variable-rate term loan borrowings, $100 million of which are subject to LIBOR interest

22 rate caps of 4.0%.

1. Excludes $100.0 million of variable-rate term loan borrowings with LIBOR interest rate caps of 4.0%.
2. See Reporting Definitions for further explanation.

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Appendix: Submarket Focus

	M a rke t	Shrinking Supply (1)	No Ne t Ne w Supply (2)		Ne w Supply (3)
Los Ange le s	LAX	South Bay		Inland Empire W est
			W est of 405	Commerce/Vernon	Inland Empire East
			Hawthorne	Mid-Counties
			Downtown LA	San Fernando Valley
				Orange County
Ne w York City/Northe rn	Brooklyn/Queens	Meadowlands	Exit 8A
Ne w Je rsey	Secaucus	Newark/Elizabeth	Exit 10 / I 287
			Bayonne	Fairfield
			Jersey City	Exit 12
			Teterboro	JFK
				Kearny
Sa n Fra ncisco Ba y Are a	Silicon Valley	East Bay	Livermore
			South SF			Richmond
			Dogpatch/Mission Bay		Fremont
Mia m i	Central Dade	Airport/Doral	Medley
				Hialeah	Airport North
						North Dade
						Miami Lakes
Se a ttle	South Seattle	Kent		Auburn
			Tukwila	SeaTac	Sumner
				Renton	Fife
						Pullayup
W a shington D.C.	D.C.	Corridor	Dulles
			Inside the D.C. Beltway	Close in PG County
				Close in NOVA
Pe rce nta ge of Te rre no's
Portfolio (4)	30%	56%	14%

1. Shrinking Supply: Characterized by shrinking industrial supply. Offers opportunities to convert existing buildings into higher and better use over time. Super infill.
2. No Net New Supply: Characterized by older existing industrial product. Offers opportunities to redevelop existing buildings into new, modern industrial buildings. Infill.
3. New Supply: Characterized by industrial buildings that will remain in their current state for the foreseeable future with previously undeveloped land available for industrial development. Greenfield.

23 (4) As of December 31, 2019. Reflects Terreno portfolio composition based on geography and purchase price, includes four properties under redevelopment and improved land parcels. Completed redevelopments are included at total investment.

SACRAMENTO2013Investor PresentationTerreno Realty Roadshow Presentation (July 10, 2013) v7.pptx

Appendix: Management and Board of Directors

Blake Baird	 Co-founded Terreno Realty Corporation in 2007
	Former President and Director of AMB Property Corporation (NYSE: AMB)
Chairman and CEO
	Director of Matson, Inc. (NYSE: MATX) until April 2020, and Sunstone Hotel Investors, Inc. (NYSE: SHO)
Mike Coke	 Co-founded Terreno Realty Corporation in 2007
	Former Chief Financial Officer and Executive Vice President of AMB
President
	Director of Digital Realty Trust, Inc. (NYSE: DLR)
Andy Burke	 Joined Terreno Realty Corporation in 2008
	Former Vice President, Investment Officer of Perseus Realty Partners
EVP
	Former Transaction Officer at AMB
Jaime Cannon	 Joined Terreno Realty Corporation in 2010
	Former Vice President, Treasury at AMB
EVP and CFO
	Former Audit Manager at PriceWaterhouseCoopers LLP
John Meyer		Joined Terreno Realty Corporation in 2010
EVP		Former Senior Vice President, Director of Transactions, Southwest Region for AMB
Lee Carlson		Principal of NNC Apartment Ventures, LLC
Audit Chair		Former Executive Vice President, Chief Operating Officer, Chief Financial Officer and Board Member of BRE Properties (NYSE: BRE)
David Lee		Former founder and portfolio manager of T. Rowe Price Real Estate Fund
Director		Former founder and portfolio manager of T. Rowe Price Global Real Estate Fund
Gabriela Parcella	 Managing Partner of Merlone Geier Partners and President of Merlone Geier Management, LLC
	Independent Trustee of Dodge & Cox Funds mutual fund Board of Trustees
Nominating & Corporate Governance Chair
	Former Chairman, President, and Chief Executive Officer of Mellon Capital
Doug Pasquale	 Former President, Chief Executive Officer and Chairman of Nationwide Health Properties (formerly NYSE: NHP)
	Chairman of Sunstone Hotel Investors, Inc. (NYSE: SHO)
Lead Director
	Director of Alexander & Baldwin (NYSE: ALEX) and DineEquity, Inc. (NYSE: DIN)
Dennis Polk		President, Chief Executive Officer and Director of SYNNEX Corporation (NYSE: SNX)
Compensation Chair		Former Senior Vice President and Chief Financial Officer of Savoir Technology Group
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Appendix: Reporting Definitions

Adjusted EBITDA: 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 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.

The following table reflects the calculation of Adjusted EBITDA reconciled from net income for the three and twelve months ended December 31, 2019 and 2018 (dollars in thousands):

		Fo r t he Three M o nt hs								Fo r t he Y ear Ended
		Ended D ecemb er 3 1,								D ecember 3 1,
		2 0 19			2 0 18			$ C hang e		% C hange			2 0 19			2 0 18			$ C hange		% C hange
Net income	$	14,821	$	22,972	$	(8,151)	(35.5)%		$	55,516	$	63,289	$	(7,773)	(12.3)%
Gain on sales of real estate investments		(3,144)			(13,624)			10,480	(76.9)%			(9,391)			(28,610)			19,219	(67.2)%
Depreciation and amortization		11,847			10,250			1,597	15.6%			44,015			40,816			3,199	7.8%
Interest expense, including amortization		4,069			4,494			(425)	(9.5)%			16,338			18,211			(1,873)	(10.3)%
Loss on extinguishment of debt		189			-			189		n/a		189			-			189		n/a
Stock-based compensation		2,492			3,248			(756)	(23.3)%			10,644			9,270			1,374	14.8%
Acquisition costs		(3)			(5)			2		(40.0)%			45			124			(79)		(63.7)%
Adjusted EBITDA	$	30,271		$	27,335		$	2,936		10.7%		$	117,356		$	103,100		$	14,256		13.8%

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Appendix: Reporting Definitions

Adjusted Funds from Operations (AFFO): We compute AFFO by adding to or subtracting from FFO (see definition below) (i) acquisition costs (ii) stock-based compensation (iii) straight-line rents, (iii) amortization of above- and below-market lease intangibles and (iv) non-recurring capital expenditures required to stabilize acquired vacancy or renovation projects. We use AFFO as a meaningful supplemental measure of our operating performance because it captures trends in our portfolio operating results when compared year over year. We also believe that AFFO is a widely recognized supplemental measure of the performance of REITs and is used by investors as a basis to assess operating performance in comparison to other REITs. As a result, we believe that the use of AFFO, together with the required GAAP presentations, provide a more complete understanding of our operating performance.

Funds from Operations (FFO): 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 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.

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Appendix: Reporting Definitions

Net Operating Income (NOI): 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. 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 as of December 31, 2019 and since January 1, 2018 and excludes properties that were either disposed of prior to, held for sale to a third party or in redevelopment as of December 31, 2019. As of December 31, 2019, the same store pool consisted of 187 buildings aggregating approximately 11.8 million square feet representing approximately 88.6% of our total square feet owned and ten improved land parcels containing 47.2 acres. 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 property, 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.

Stabilized Cap Rate: We compute estimated stabilized cap rates as annualized cash basis net operating income stabilized to market occupancy (generally 95%) divided by total acquisition cost. Total acquisition cost 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.

27