Terreno Realty Corp 10-Q

Item 1A. Risk Factors The following risk factor supplements the risk factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and should be read in conjunction with the other risk factors presented in our Annual Report on Form 10-K for the year December 31, 2019 and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. The outbreak of the novel coronavirus (COVID-19) has caused, and could continue to cause, severe disruptions in the U.S., regional and global economies and could materially and adversely impact our business, financial condition and results of operations and the business, financial condition and results of operations of our tenants. In March 2020, the World Health Organization declared COVID-19 a global pandemic. COVID-19 has caused, and could continue to cause, significant disruptions to the U.S. and global economies and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually and rapidly evolving and, as additional cases of the virus are identified, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and/or mandatory closures of businesses. Certain states and cities, including where our headquarters and our properties are located, have also reacted by instituting quarantines, restrictions on travel, “shelter-in-place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted accurately, including the scope, severity and duration of such pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of COVID-19 on our business and businesses of our tenants. Nevertheless, COVID-19 and actions taken to contain it or mitigate its impact may materially and adversely affect our businesses, financial condition and results of operations and may also have the effect of heightening many of the risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019. Such risks and potential material adverse impacts include: • the complete or partial closure of, or other operational restrictions or other issues at, one or more of our properties resulting from government or tenant action has had, and could continue to have, a material adverse impact on our operations and those of our tenants and third-party property managers; • reduced economic activity impacting the businesses, financial condition and liquidity of our tenants, could cause one or more of our tenants, including certain significant tenants, or one or more of our third-party managers, to be unable to meet their rent payment or other obligations to us in full, or at all, to otherwise seek modifications of such obligations, including rent payment deferrals, or to file for bankruptcy protection; • We continue to work with our customers who have been forced to close or otherwise limit operations or whose businesses have been adversely impacted during the pandemic to, on a case-by-case basis, provide rent deferments. Through November 3, 2020, we have granted rent deferrals to 59 tenants aggregating approximately 2.6% of annualized base rent. No rent abatements were granted. For the 59 rent deferrals granted: ◦ 13 tenants aggregating 0.1% of annualized base rent (5.4% of total deferrals) have completed their rent deferral period and have fully repaid the deferral amounts; ◦ 34 tenants aggregating 2.2% of annualized base rent (82.3% of total deferrals) have not completed their rent deferral repayment period and are fulfilling the terms of their deferral agreements; and ◦ 12 tenants aggregating 0.3% of annualized base rent (12.3% of total deferrals) have defaulted on their rent deferral repayments; • our inability to renew leases, lease vacant space, including vacant space from tenant defaults, or re-lease space as leases expire on favorable terms, or at all, including in the current slowing leasing environment could result in lower rental revenues or cause interruptions or delays in the receipt, or non-receipt, of rental payments; 43 Table of Contents • state, local or industry-initiated efforts, such as a rent freeze for tenants or a suspension of a landlord’s ability to enforce evictions may affect our ability to collect rent or enforce remedies for the failure to pay rent; • a general decline in business activity and demand for real estate transactions, including the reduced activity in the current environment could adversely affect our ability or desire to grow through investments in industrial properties or make strategic dispositions; • severe disruption and instability in the U.S. and global financial markets or deteriorations in credit and financing conditions could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a timely basis; • disruptions in the supply of materials or products or the inability of contractors to perform on a timely basis or at all, including as a result of restrictions on construction activity could cause delays in completing ongoing or future construction or re-development projects; • the potential negative impact of COVID-19 on the health of our personnel, particularly if a significant number of our senior management group or key employees are impacted, could result in a deterioration in our ability to ensure business continuity; • limited access to our facilities, and to, or among, our management, tenants, support staff, third-party property managers and professional advisors could decrease the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, increase our susceptibility to security breaches, or hamper our ability to comply with regulatory obligations and lead to reputational harm and regulatory issues or fines; • any inability for us to effectively manage our portfolio and manage our operations or any inability of our third-party property managers to provide services to us while working remotely during the COVID-19 pandemic and for a time after such pandemic could adversely impact our business; • our potential inability to comply with financial covenants of the Facility and other debt agreements could result in default and potential acceleration of indebtedness and impact our ability to make additional borrowings under the Facility or other borrowings in the future. Except to the extent updated above or previously updated or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Item 2. Unregistered Sale of Equity Securities and Use of Proceeds (a) Not Applicable. (b) Not Applicable. (c) Period (a) Total Number of Shares of Common Stock Purchased (b) Average Price Paid per Common Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plan or Program July 1, 2020 - July 31, 2020 — — N/A N/A August 1, 2020 - August 31, 2020 149,865 60.83 N/A N/A September 1, 2020 - September 30, 2020 — — N/A N/A 149,865 1 $ 60.83 N/A N/A (1) Represents shares of common stock surrendered by employees to the Company to satisfy such employees’ tax withholding obligations in connection with the vesting of restricted stock. Item 3. Defaults Upon Senior Securities None. 44 Table of Contents Item 4. Mine Safety Disclosures Not Applicable.