Lineage, the world's largest cold storage provider by capacity, seeks to strengthen its financial position by launching an initial public offering of a new real estate investment trust and capture demand from food sellers.
If completed, it would be only the second U.S. REIT IPO in more than two years. Lineage, based in Novi, Michigan, filed to sell shares of its common stock with the U.S. Securities and Exchange Commission. While the timing, number of shares offered and price range are still being set, the REIT said it intends to use net proceeds from the sale to repay $2.4 billion of borrowings.
Food storage drives demand for refrigerated warehouses, giving the property type some resilience to economic fluctuations. The surge in online grocery sales since the COVID-19 outbreak in 2020 has fueled growth, prompting grocers and restaurants to expand storage capacity for perishables.
“A rapid rise in online grocery sales has spurred demand for temperature-controlled storage facilities,” Alan Pontius, national director of Marcus & Millichap’s office and industrial division, said in a statement in May. “Heightened demand for online delivery and pickup options for food has grocers, restaurant food service providers, and mass market retailers expanding their operational footprints and increasing their capacities for perishable item storage.”
Despite rising interest rates since mid-2022, cold storage capitalization rates haven't significantly declined because of sustained rent growth, according to Marcus & Millichap. The brokerage reported that cold storage acquisitions remained 50 basis points lower in yield compared to 2018, indicating the sector's stability. As a result, cold storage investments are a strategic hedge against inflation, with asking rents and owner revenue projected to rise in the long term.
Lineage has the most extensive global temperature-controlled warehouse network, according to the Global Cold Chain Alliance, an international association representing all major industries engaged in temperature-controlled warehousing. With over 480 facilities totaling 3 billion cubic feet of capacity across North America, Europe, and Asia-Pacific, it dominates the industry.
Cold Storage Acquisitions
Lineage’s most recent U.S. expansion occurred last October when it bought eight facilities totaling 1.1 million square feet from Burris Logistics.
For the year ended March 31, Lineage generated $5.3 billion in revenue and $1.8 billion in net operating income. However, the filing shows a net loss of $162.8 million.
The global cold storage landscape is fragmented with a few key players, including Lineage at the forefront. The Global Cold Chain Alliance reports that the top 10 companies control roughly 6 billion cubic feet of cold storage space, representing just under a quarter of global capacity. Lineage and Americold Realty Trust, the industry giants, hold a combined 17.5% market share globally, with Lineage leading North America at 32.9% and Americold approximately 19.3%.
Americold, which is based in Atlanta, completed a $735 initial public offering as a REIT in January 2018.
The Lineage REIT intends to list its common stock on the Nasdaq Global Select Market under the ticker symbol "LINE."
The last publicly listed REIT IPO was American Healthcare REIT, which raised $733 million in the first quarter of this year, according to NAREIT, a national trade association representing REITs. Prior to that, Angel Oak Mortgage raised $137 million in June 2021.