Temperature-controlled warehouse operator Americold Realty Trust COLD reported results slightly better than analyst expectations in the second quarter of 2019 and said that refrigerated warehouse supply and demand dynamics remain favorable.
The Atlanta-based real estate investment trust (REIT) reported an 11 percent increase in revenue to $439 million with adjusted funds from operations (AFFO) increasing 46 percent year-over-year to $58.1 million, or $0.31 per share on a fully diluted basis, which was $0.01 better than the consensus estimate.
FFO is a financial metric frequently used to evaluate and compare the continuous financial operations of REITs as it excludes gains or losses from real estate transactions as well as depreciation and amortization of assets.
"Due to the strength of our core operations, the second quarter was quite strong as Global Warehouse same store revenue grew 3.4 percent and same store segment NOI [net operating income] grew by 6.2 percent, both on a constant currency basis," said Americold Realty Trust's President and Chief Executive Officer Fred Boehler.
Excluding the impact of acquisitions and currency fluctuations in attempts to better analyze the company's legacy business growth on a year-over-year basis, rent and storage revenue increased 2 percent and warehouse services revenue grew by 4.5 percent. Physical occupancy percentage declined 250 basis points to 72.5 percent with storage revenue per physical occupied pallet increasing 6.4 percent to $55.16 on a same store, constant currency basis.
Key Performance Indicators – Americold
The total revenue increase of 11 percent includes recent acquisitions, specifically two deals that closed in the second quarter, which contributed $40 million during the period. "Our team completed $1.3 billion of acquisitions during the second quarter, consisting of Cloverleaf Cold Storage and Lanier Cold Storage, and made rapid progress on the realization of synergies as we integrate all 24 facilities into our portfolio," said Boehler.
The larger of the two transactions in the period, Cloverleaf Cold Storage, was acquired from Cloverleaf and an investor group led by The Blackstone Group BX for $1.25 billion. The Sioux City, Iowa-based operation consists of 22 facilities with 132 million cubic feet of temperature-controlled warehouse space in the central and southeast U.S.
Americold reiterated its global warehouse revenue guidance calling for a 2 to 4 percent increase on a same store, constant currency basis with NOI growth 100 to 200 basis points higher than the associated revenue. Additionally, the AFFO payout ratio was lowered by 200 basis points to a range of 65 percent to 68 percent. REITs are required to distribute at least 90 percent of taxable income to shareholders in order to meet REIT qualifications.
"As we look ahead, the supply and demand dynamics within our industry remain consistent and favorable to Americold. As demonstrated this quarter, we believe we can continue to leverage our scale and our Americold Operating System to enhance the value of each facility we acquire. Similarly, we expect to use our platform to take advantage of burgeoning opportunities within the market, including partnering with our customers as they pursue omni-channel distribution models," said Boehler.
Americold Realty Trust's real estate portfolio includes 178 temperature-controlled facilities with more than one billion refrigerated cubic feet of storage in the United States, Australia, New Zealand, Canada and Argentina. The company's acquisition pipeline represents more than $1 billion in real estate opportunities.
The company sees its lowest occupancy rates and warehouse revenues in the months of May and June. Sequential increases are seen as the year progresses when annual harvests occur and pre-holiday inventories build, peaking in October or November.
Shares of COLD began trading publicly on the New York Stock Exchange in January 2018.
COLD Stock Chart – Seeking Alpha
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