Cold storage warehouse operator Americold Realty Trust (NYSE: COLD) announced Thursday after the market closed another large acquisition as well as a few expansion projects.
The news was part of the Atlanta-based real estate investment trust’s third-quarter earnings report, which was in line with analysts’ expectations of core funds from operations (FFO) of 28 cents per share. The result was a penny higher year-over-year and 2 cents higher on an adjusted basis.
Americold geography continues to expand
Americold announced that it has acquired Hall’s Warehouse Corp. for $480 million. The South Plainfield, New Jersey-based portfolio includes eight facilities, five of which are owned, all within 30 miles of the Port of Newark. The Northern New Jersey facilities, which are 95% occupied, comprise 58 million cubic feet and 200,000 pallet positions of cold storage space. Hall’s also provides transportation services to its warehouse customers.
The deal is immediately accretive, with a net entry net operating income (NOI) yield, rents expressed as a percentage of gross purchase price, of 6.3%.
Americold also announced two expansion projects: a build-to-suit expansion in Russellville, Arkansas, for Conagra Brands (NYSE: CAG) and the expansion of an existing facility in Calgary, Ontario. The Conagra facility will provide approximately 13 million cubic feet, 42,000 pallet positions, at a total cost of $84 million. Construction will begin later this year with a completion date of year-end 2022.
The Calgary facility was previously acquired when Americold purchased Nova Cold Logistics earlier this year. The expansion adds 2 million cubic feet and 7,000 pallet positions at a cost of $11 million. The project is expected to be completed by the end of 2021.
Americold plans to use proceeds from an equity offering that was announced alongside its $1.74 billion acquisition of the world’s fourth-largest temperature-controlled facility operator, Agro Merchants Group, to fund the deals. The stock offering was recently upsized to include 31.9 million shares, plus a 15% overallotment. The debt component of all of these transactions will be funded by debt private placements, including a 750 million-euro (U.S. $877 million) private placement.
Third-quarter results and outlook
Total revenue increased 7% year-over-year to $498 million primarily due to recent acquisitions and completed development projects. Throughput pallets moved slightly lower in the quarter with rent and storage revenue per pallet increasing 2%. NOI contribution was up 12% to $135 million, with contribution margin improving 130 basis points to 27.2%.
The company narrowed its guidance range for 2020. Adjusted FFO is expected to be in a range of $1.26 to $1.29 per share compared to the prior guide of $1.24 to $1.30.
Management said they expect food consumption to be very similar through the holidays even though the gatherings will be smaller. Currently, seasonal demand for holiday foods is occurring at a pace similar to previous years.
Americold ended the quarter with $1.2 billion in total liquidity and total debt of $2 billion, $1.8 billion of which is tied to real estate. Inclusive of the private placement and acquisitions, total debt is currently $2.7 billion. Net debt to pro forma core earnings before interest, taxes, depreciation and amortization (EBITDA) is 4.5x, up from 4.1x at the end of the second quarter.
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