Americold Realty Trust, Inc. (NYSE: COLD) says two recently established partnerships are key to creating a more integrated and efficient global food supply chain and will generate extensive opportunities for the REIT to pursue external growth in the years ahead.
Americold’s collaboration with Canadian Pacific Kansas City (CPKC) to co-locate Americold warehouse facilities on the CPKC rail network, alongside its development of a global cold chain logistics platform starting in Dubai in conjunction with DP World, are expected to generate between $500 million and $1 billion in development opportunities for the REIT in coming years.
The CPKC and DP World partnerships represent a new growth avenue for Americold, adding a more holistic supply chain solution-driven growth strategy to their existing customer-centric growth strategy. “This is about building up global infrastructure through ports and rail lines and then developing services on that infrastructure that customers want, and then marketing those services,” says George Chappelle, CEO of Americold.
“One of the big things that we’re trying to help solve is how you maintain cold chain integrity globally across every node in the supply chain,” adds Robert Chambers, president, Americas, at Americold.
Both partnerships had been in the works for several years and came together at relatively the same time by chance, Chappelle says. He notes that Americold is a strong partner for both DP World and CPKC because it designs, builds, owns, and operates its facilities, differentiating it from other players in the sector. “It’s our suite of services, our balance sheet, our global perspective, and our desire to continue to grow externally that sets us apart.”
Port Partnership
Chambers notes that DP World is the world’s third largest port terminal operator, managing more than 80 ports globally. Under the December 2023 agreement, Americold and DP World will work together to identify opportunities where cold chain infrastructure does not exist in ports that DP World operates today. Americold will have the right of first refusal to develop that port infrastructure.
“The value proposition for DP World is that the more volume they can handle through the port, the more terminal operating fees they get. For Americold, we get a facility and our traditional storage, handling and value-added service fees associated with the volumes that come through that facility,” Chambers says. The customer, meanwhile, gets a much more efficient and reliable supply chain solution, given that almost all imported fresh or frozen food into Dubai today is air freighted in at great expense, he points out.
Through its joint venture with RSA Cold Chain, Americold will build a state-of-the-art cold storage facility with 40,000 pallet positions in the Jebel Ali Free Zone (Jafza) in the Port of Jebel Ali in Dubai.
Chambers says that Americold will be able to go to all the large food manufacturers that want to potentially enter a new geography that’s either logistically or financially inaccessible today and provide them with a new solution. “Because our customer base tends to be the big blue chip food manufacturing customers, it’s very compelling to them. It’s a win-win, which is pretty rare in business,” he adds.
As for how fast the partnership between Americold and DP World could grow, Chambers says the REIT would be “thrilled” if it had a facility at 10 DP World ports five years from now.
Chappelle notes that another strength of the relationship is that it doesn’t change Americold’s underwriting process in any way. If the business case doesn’t pencil, Americold won’t build the property. “We’ve lost none of the flexibility in terms of underwriting and deciding what projects we take on or not, but we’ve gained all of the capability of having a knowledgeable partner everywhere we go who’s in the same mode as us in terms of objectives,” he says.
Benefits of Rail
A similar underwriting agreement is in place for the Americold/CPKC partnership, formed in June 2023.
One of the key triggers of the CPKC partnership, Chambers explains, was the merger of CP and KC Southern in April 2023 that created the only contiguous rail line to connect all of North America. “It was a very fortuitous merger,” he says.
Once the merger was completed, Americold began to accelerate conversations around a potential partnership “because we recognize that rail is a great way to transport frozen and chilled product,” Chambers says.
This April, Americold officially broke ground on a $127 million cold storage facility in Kansas City, which is expected to be completed in about a year. Longer term, the partnership envisions Americold building five or six temperature-controlled facilities across CPKC’s network of 30 intermodal rail yards.
