Americold Realty Trust (NYSE: COLD) is unique in the industrial REIT sector. It's the first and only publicly traded real estate investment trust (REIT) focused on owning temperature-controlled warehouses. These facilities are a crucial bridge to ensure farm products remain fresh as they make their way to our tables.
While it's already a leader in the sector, the REIT continues to gobble up competitors and grow its market share. It recently grabbed a bigger slice of that pie by agreeing to acquire Agro Merchants Group for $1.74 billion. The deal enhances its market position, expands its platform, and should drive long-term earnings growth.
Getting bigger and better in one stroke of the pen
Americold Realty Trust currently controls 183 warehouses with 1.1 billion cubic feet of temperature-controlled space. Most of its assets are in the U.S. -- 161 facilities with 992.6 million cubic feet -- giving it 18% of the domestic market where it's the No. 2 player behind Lineage Logistics and its 25.2% share. The company also owns facilities in Canada, Australia, New Zealand, and Argentina, which combine to give it a 4.4% share of the global market, placing it second behind Lineage's 7% market position.
The company is taking a big step toward overtaking its largest rival by acquiring Agro Merchants Group, which is the No. 4 player in the U.S. and globally at 2.2% of the domestic market and 1.1% of the global pie. Overall, Agro owns 46 facilities with 236 million refrigerated cubic feet in 10 countries. That portfolio will enhance Americold's position in the U.S., Australia, and South America while expanding its platform to Europe, where Agro is the third-largest player.
In addition to enhancing and expanding Americold's portfolio, Agro will provide a modest boost to the REIT's earnings next year and significant long-term benefits. Those include cost-saving initiatives and a growth platform in Europe to capture additional acquisition and development opportunities.
Growing into a global powerhouse
The Agro deal will further solidify Americold's position as the second-largest cold storage operator in both the U.S. and globally while nudging it closer to the industry leader. It also caps what has been an active year for the company as it has completed several deals. Among the noteworthy ones was forming a strategic joint venture in Brazil to own a 15% stake in SuperFrio, a leading temperature-controlled storage operator in that country.
Despite all this growth, the company has lots more running room given the highly fragmented global cold storage market. That leaves it with plenty of potential acquisition opportunities as it can continue gobbling up smaller competitors and completing sale-leaseback transactions with food service companies for their existing facilities to expand its market share both in the U.S. and abroad.
In addition to that, the company sees lots of organic expansion potential. It's currently investing $529 million on four projects (three in the U.S. and one in New Zealand) to add 46.4 million cubic feet of capacity. The company has a large land bank to support additional expansion, which it pegs as a $1 billion+ investment opportunity. In its view, it should be able to start two to three expansion/development projects per year to support the needs of current and future customers at the cost of between $75 million and $200 million annually.
Add those growth drivers to its ability to increase its rates and reduce costs, and this REIT should have plenty of fuel to keep growing its dividend.
A fast-growing food-focused real estate company
Americold Storage continues to gobble up market share in the temperature-controlled warehouse space. That strategy has paid big dividends for its investors as the REIT has produced market-smashing total returns. With plenty of growth opportunities ahead, real estate investors will want to take a closer look at this leader in cold storage.