Investors are increasingly turning to the cold storage sector, which showed surprising resilience through the first few months of the pandemic.
Lineage Logistics, the world’s largest landlord of temperature-controlled storage, pulled in $1.6 billion in a fundraising round that ended last month, according to the Wall Street Journal.
Americold Realty Trust, the only public real estate investment trust specializing in cold storage, saw a 6 percent increase in net operating income in the second quarter.
While the pandemic disrupted the heavily cold storage-dependent restaurant industry, that slowdown was mitigated by a run on supermarket frozen foods. Suppliers repackaged large portions of products meant for restaurants into smaller portions to meet consumer demand.
“The pandemic showed how cold storage is agnostic to the ultimate destination of the food,” said Cohen & Steers analyst Harrison Klein.
Klein’s firm invested $100 million into Lineage Logistics during its recent fundraising round, and has also made a large investment in Americold.
Those that are bullish on the industry contend that demand for space is set to increase because customers like the Kroger supermarkets are investing in their supply chains to reduce home delivery times. The average U.S. cold storage warehouse is 40 years old as well and customers demand newer facilities.
Over the summer, Bridge Development Partners and PGIM Real Estate bought a Hialeah property for what could be South Florida’s first cold storage facility built on spec.
There are downsides to investing in the industry, namely exposure to labor shortages. Covid-19 has spread through some facilities, which require a large number of workers to operate. Revenue growth is also slower than some other property sectors because of the high cost of developing such facilities. [WSJ] — Dennis Lynch