Related Entering Cold Storage Sector With $1B Play

What’s cooler than being cool? In the eyes of Related, it’s ice cold storage.

Stephen Ross’ firm is investing $1 billion into the cold storage sector, the Wall Street Journal reported. The business, which will be run by Related Fund Management, will be called RealCold.

Related plans to develop a network of cold storage distribution facilities. It will break ground on the first two locations in Lockhart, Texas and Lakeland, Florida later this year. The facilities will span more than 300,000 square feet each, able to stock food at temperatures from minus 20 degrees to 55 degrees Fahrenheit.

The first two facilities are expected to take two years to construct. They will each cost roughly $150 million and, while Related has some space commitments from food companies, some of the space is being built on spec. Related aims to have more than 10 facilities in six markets by the end of 2025.

The budding cold storage sector is riding changes in the supply chain and consumer interest in local food options. Firms like Related are increasingly banking on demand for cold storage facilities remaining strong through high and low economic cycles, unlike other corners of commercial real estate roiled by the rise of remote work and e-commerce.

“You can’t store food on the internet,” Related Fund Management managing director Michael Winston told the Journal.

It’s not an easy business to crack. Cold storage facilities cost two-to-four times more than regular industrial facilities to develop per square foot, according to Cohen & Steers analyst Harrison Klein.

Additionally, logistics and supply chains can wreak havoc on the sector: cold storage inventory dropped as much as 7 percent during the pandemic.

With big risk comes the potential of big reward for Related. Leading cold storage provider Americold Realty Trust saw its shares jump 26 percent in the past 12 months, outpacing the gains made by the equity real estate investment trust and the S&P 500 index, according to Green Street.

— Holden Walter-Warner