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Americold Concludes Buyout of Two Facilities for $107.5M

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Americold Realty Trust COLD has shelled out $107.5 million for the acquisition of two cold storage facilities as part of its efforts to boost presence in the Florida and Texas markets. The company funded the buyouts with cash on hand.

Notably, in Tampa, FL, the company purchased a 3.2-million cubic foot cold storage facility for $25 million. This acquisition seems a strategic fit with its location complementing the company’s two existing Florida facilities, namely Plant City and Bartow, thereby offering additional capacity nearby the major Tampa market.

By 2023 end, the company expects to achieve stabilized yields of 9-10% through an improving commercialization and customer mix as well as cost savings resulting from the Americold Operating System.

In the Dallas-Fort Worth, TX market, the company closed the previously announced acquisition of AM-C Warehouses aggregating 13.8 million cubic feet for $82.5 million. This facility comprises an 8.6-million cubic foot owned facility in Mansfield with roughly 27,000 pallet positions and a 5.2-million cubic foot leased facility in Grand Prairie with around 18,000 pallet positions.

The company expects total investment worth $85 million including $82.5 million purchase price and $2.5 million of initial capital expenditures for this facility. While the investment indicates a net entry net operating income yield of 7.4%, the company anticipates stabilizing it at 8-10% by 2023 end.

The company also extended the settlement date on its outstanding September 2018 equity forward contract to March 2022 from September 2020. This forward sale agreement comprises 6 million shares.

Americold’s strategically-located high-quality facilities serve as an indispensable component of food infrastructure from “farm to fork", thereby connecting food producers, processors, distributors and retailers to consumers. The company is likely to witness steady demand for these properties. Particularly, a consistent surge in population and consumption along with transition in consumer preferences toward healthy, perishable food items will likely lead to healthy demand for temperature-controlled infrastructure.

Also, the company is anticipated to enjoy a significant competitive edge with its strong infrastructure, aided by superior IT and operating platforms. Moreover, retail customers are navigating the evolving competitive landscape by enhancing and integrating their e-commerce offerings. The e-commerce boom is creating teeming opportunities for Americold.

In fact, amid a thriving e-commerce space and supply-chain strategy transformations, demand for the overall industrial real estate has been solid. In light of the coronavirus pandemic, warehouse operations became all the more essential with increased e-commerce customers. In the long term, apart from the fast adoption of e-commerce, the logistics real estate is expected to gain traction from prospective higher inventory levels.

This will open up avenues for other industrial REITs too like Duke Realty Corp. DRE, Prologis PLD and Rexford Industrial Realty, Inc. REXR. However, the COVID-19 adversity on the economy will likely thwart demand for space in the near term. Rent relief and deferrals are added woes.

Americold currently carries a Zacks Rank #3 (Hold). Shares of the company have rallied 9.4% so far in the year against the 5.5% decline of its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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