Lineage Logistics Sells $700M Minority Stake To PE Funds

SAN FRANCISCO–Lineage Logistics, a provider of temperature-controlled transportation and storage services sponsored by Bay Grove Capital, has sold a minority stake worth $700 million, to a handful of private equity investors, according to news reports including Bloomberg. 

These funds included Stonepeak Partners LP, D1 Capital Partners as well as some existing backers, according to comments Lineage CEO Greg Lehmkuhl and co-founder Kevin Marchetti made to Bloomberg.

Proceeds from the sale will be used to cash out existing investors as well as invest in the company’s continuing growth. In the longer term, the company is reportedly exploring a REIT conversion, Bloomberg said, citing an anonymous source.

A Fast-Growing Company

Lineage Logistics bills itself as the fastest-growing company in this space. It has made a number of acquisitions including last week’s purchase of Castle & Cooke Cold Storage, a third-party warehousing logistics company headquartered in Colton, CA, from Castle & Cooke. With this acquisition, Lineage increased its footprint to 12 million square feet and 240 million cubic feet of capacity. This acquisition also meant that it is now the third largest refrigerated warehouse company in North America, the company said, citing data from the International Association of Refrigerated Warehouses.

Cold Storage Fundamentals

One driver behind this growth is the subsector’s own fundamentals, which are enjoying significant tailwinds.

According to a recent CBRE report, e-commerce is poised to disrupt  this category in the industrial warehouse space. While online grocery sales represented only $19 billion or about 3% of total grocery sales in 2017, they’re expected to reach $100 billion (13%) by 2024, according to FMI/Nielsen. Depending on the property type used to fulfill online grocery sales, up to 35 million square feet of cold storage for food distribution could be shifted from retail to industrial properties, CBRE calculates.

As for current capacity, CBRE said that the US currently has approximately 3.6 billion cubic feet of food-commodity cold storage capacity covering 180 million square feet of industrial space, and 2 billion cubic feet of similar capacity covering 300 million square feet of retail space.

“The U.S. market for warehouses and distribution centers has been on a multiyear run, but there still are segments in the relatively early stages of their growth, like cold storage,” said David Egan, CBRE Global Head of Industrial & Logistics Research, in the report. “As e-commerce expands further into the grocery business, the resulting growth of the food supply chain and demand for new, climate-controlled warehouse space could very well be the new opportunity that investors and developers have been seeking.”