BG Capital, FreezPak Team on $3B Cold-Storage Expansion

Philadelphia-based BG Capital and NJ-based FreezPak Logistics are partnering to build up to $3B worth of new cold-storage industrial space in port-centric markets across the US.

Under the terms of the strategic partnership, BG Capital will build more than 200M cubic feet of cold-storage warehouses and FreezPak will take long-term triple-net leases for the new cold chain facilities.

The partnership is developing an $85M cold storage warehouse in Philadelphia’s Port Richmond neighborhood to be leased by FreezPak. The 170K SF facility, which will have a building height of 75 feet, is expected to break ground this month on a 7-acre site on E. Alleghany Avenue.

The partners also will be building facilities in Houston and Jacksonville. According to reports, BG Capital has completed 18 cold-storage distribution facilities and has more than $300M in projects under development.

FreezPak, owned by Carteret, NJ-based Saoud Industries, has been in the food industry since 1961. The company has an estimated 18M cubic feet of storage space in its portfolio, including four warehouses in New Jersey.

“The speculative cold storage market does not meet the needs for automation and advanced material handling equipment. This joint venture will accelerate our growth and enable us to offer our clients cold storage around the country,” said Mike Saoud, FreezPak’s CEO, in a statement.

According to a report in the Jacksonville Daily Record, the partnership between BG Capital and FreezPak is developing a $116M, 272K SF cold-storage warehouse on a 20.5-acre site on Somers Road in North Jacksonville. The site is in proximity to the JaxPort Talleyrand and Dames Point marine terminals in Jacksonville.

The newspaper said a city Office of Economic Development project summary indicates that FreezPak has applied for a $3M property tax rebate for its investment in the distribution facility, to be known as Jacksonville Cold Storage, through a local incentive known as a Recapture Enhance Value Grant.

The grant is based on 50% of the increase in real and personal property taxes generated at the project site for five years, up to $3M. The grant program requires a capital investment of at least $100M and the creation of at least 80 jobs by 22026.

The joint venture bought the property on July 15 for about $11M from InLight Real Estate Partners of Ponte Vedra Beach, FL.

There was 3.3M SF of speculative cold storage development under construction in the US in Q2 2022, which is ten times more than the pre-pandemic pipeline, which totaled only 300K SF in 2019, according to a report from CBRE.

CBRE is projecting that demand for cold storage, which has been turbocharged during the pandemic by e-commerce sales of groceries, particularly frozen foods, will continue to be lifted by e-commerce as the online share of grocery sales grows to a projected 21.5% by 2025 from the 13% it notched at the end of 2021, GlobeSt.com reported.

“With increased demand for perishables, cold storage capacity has been strained by transportation backlogs, inflation and labor shortages exacerbated by the pandemic. This has led to declining stock levels of primary food commodities,” CBRE said.

According to the USDA, the rolling four-quarter average of total US stock levels of primary food commodities has dropped from a pre-pandemic level of nearly 30B lbs. to approximately 26.6B. Meanwhile, in 2021, US imports of perishable food products increased by 27%.