USB, PGGM Team on $700M Cold Storage Expansion

USB Asset Management and the Dutch pension fund PGGM have announced a $700M partnership to construct large, build-to-suit cold storage facilities in major food and transportation centers across the US.

New York-based USB is one of the largest institutional managers of farmland in the US, currently managing more than 280K acres across 16 states involving more than 30 different food crops.

“By bringing together our firm’s expertise in both perishable agriculture and real estate, we believe we are uniquely positioned to execute this cold storage strategy, offering investors access to opportunities early in the replacement cycle of dated facilities,” Matt Johnson, the company’s head of US Real Estate, said in a statement.

PGGM said it is backing the cold storage expansion, which will develop energy-efficient facilities, as part of its sustainable investment strategy. The partners said the cold chain investment initiative also would be backed by an unnamed “group of family offices.”

There are an estimated 900 cold storage warehouses in the US, less than 2% of all industrial space; the average age of existing warehouse freezer facilities is 42 years. Exponential demand during the pandemic for frozen food ordered online quickly exceeded storage capacity.

According to a 2021 USB study, nearly 40% of the overall US food supply is wasted—including about 20% of perishable goods in proximity to farms due to a lack of cold storage capacity.

With most of the existing cold storage inventory upstream in the cold chain, the surge in e-commerce orders of frozen food mobilized third-party logistics players to scramble to acquire last-mile cold storage properties.

The surging demand for new cold storage inventory has generated a building boom this year in the cold chain sector. CoStar estimated that 26 cold storage projects totaling 7M SF were under construction at the end of Q2 2022; nearly half of that pipeline, about 3.3M SF, involve speculative refrigerated space, according to CBRE.

In May, Texas-based Barber Partners and Bain Capital joined forces in a $500M partnership that aims to develop up to 15 Class A cold storage warehouses under the Chill Storage brand. The Chill Storage partnership initially will target markets in the southeast and then expand to a national footprint.

Ground has been broken on the first Chill Storage project, a 302K SF speculative freezer/cooler facility that is rising on a 34-acre site in Denton in the Dallas-Fort Worth Metroplex. The $52M facility will feature 50-foot clearance heights to allow for advanced racking technology and systems.

The industry leaders in cold storage keep getting larger. Novi, Michigan-based Lineage Logistics, the world leader in cold-chain storage, has raised more than $4B during the pandemic to fund a rapid expansion that has grown its overall storage capacity to more than 2.5B cubic feet.

Americold Realty, a REIT that specializes in cold storage, went public in early 2018 and used the funding to fuel a rapid expansion made the REIT the second-largest global player in cold storage, with 250 facilities encompassing about 1.5B refrigerated cubic feet of storage.