Lineage Logistics, the Washington (state)-based food warehouser that has grown to become the world’s largest temperature-controlled industrial REIT supporting the global food supply chain, has announced a $1.6 billion fundraise that includes a full slate of North American institutional investors, notably Canada’s Oxford Properties.
From a single fridge
Lineage owns and operates over 1.9 billion cubic feet and 56 million square feet of temperature-controlled capacity across more than 320 facilities in 13 countries in North America, South America, Europe, Asia, Australia and New Zealand.
Since its humble beginnings in 2008 out of a single refrigerated facility in Seattle, Lineage has grown to dominate around 8% of the total global cold storage market, 70% more than its nearest competitor.
Its appetite for growth continues unabated. This year to date, Lineage has announced 16 acquisitions and executed on 15 new expansions and greenfield facilities. It also continues to develop several advanced, fully automated warehouses, designed around the need for flexible storage capacity with minimal environmental impact amid the strain that the covid-19 pandemic has imposed on the global food supply chain.
A big deal for Oxford
Canada’s Oxford Properties Group, a commercial real estate investor/developer that is wholly owned by Ontario municipal workers pension fund OMERS, announced on Wednesday that it has invested $360 million as part of the Lineage capital raise. The deal marks Oxford’s first ever investment in cold storage logistics, as the company moves to diversify its real estate holdings.
“Our investment into Lineage is part of our strategy to capitalize on the increasing demand for infrastructure that serves the digital economy,” said Oxford’s Head of North America Investments, Kevin Egan, “The cold storage sector has highly favorable tailwinds, via a combination of population growth, a growing consumer preference for fresh food and the continued adoption of e-commerce in the grocery sector, which has accelerated due to the current pandemic.”
Per Oxford, the value of the cold storage market is expected to reach $275 billion by 2024, a compound annualized growth rate of 13%. Whereas logistics investments represented just 4% of Oxford’s portfolio in 2018, today the firm is within sight of its target allocation of one-third of its total assets to logistics real estate.
In July of this year, Oxford made a follow-on investment of close to $500 million in ESR, an Asia-Pacific-based logistics real estate platform with $26.5 billion in total AUM. The deal made Oxford ESR’s largest institutional shareholder, after becoming the cornerstone investor in ESR’s November 2019 Hong Kong IPO.
“We believe we are in the early stages of what will be a multi-year or even decades long transformation of the supply chain for preserving, protecting and optimizing the distribution of food around the world,” said Thomas Bohjalian, Head of U.S. Real Estate and Senior Portfolio Manager at Cohen & Steers, which invested $100 million in Lineage Logistics on behalf of its mutual funds.
“The need for next-generation, efficient and technology driven cold storage will create opportunities for companies with superior technological and operational capabilities. Our investment is based on our view that these trends and attributes offer superior long-term growth potential and presents an attractive investment for our investors,” he said.
CenterSquare Investment Management, the Philadelphia-area active real assets manager with $11 billion in institutional and private assets under management, also participated with an $80 million investment. In a statement, CenterSquare CEO/CIO Todd Briddell lauded Lineage’s business strategy of bringing “accretive expansion, relentless customer focus, and technology” to temperature-controlled logistics, a sub-sector already benefiting from significant tailwinds.
“It is a formula for success, and we are looking forward to being a strategic partner on behalf of our clients,” Briddell said.
The Lineage Logistics deal marks the latest of a number of a high-profile, international private equity investments in cold storage logistics this year. In August, Blackstone invested $275 million to fund life sciences cold storage provider Cryoport’s second acquisition of the month.