Partner's Capital Partner's Capital

12 Months Ended

Dec. 31, 2018

Redeemable Preferred Shares

Series A Cumulative Non-Voting Preferred Shares

In January 2009, the Company issued 125 Series A Cumulative Non-Voting Preferred Shares of beneficial interest, par value $0.01 per share (Series A Preferred Shares) for proceeds of $0.1 million. The Series A Preferred Shares may be redeemed by the Company at any time by notice for a price, payable in cash, equal to 100% of each share’s liquidation value of $1,000, plus all accrued and unpaid dividends, plus, if applicable, a redemption premium. The Company may redeem the Series A Preferred Shares without payment of a redemption premium. Holders of the Series A Preferred Shares are entitled to receive dividends semiannually at a per annum rate equal to 12.5% of the liquidation value.

In 2018, in connection with the IPO, all outstanding Series A Preferred Shares were redeemed resulting in a cash payment of approximately $0.1 million, including accrued and unpaid dividends.

Series B Cumulative Convertible Voting Preferred Shares

During 2010, the Company’s Board of Trustees approved a series of agreements and documents that effected the conversion of 375,000 authorized and unissued preferred shares of the Company into 375,000 Series B Cumulative Convertible Voting Preferred Shares of beneficial interest, par value $0.01 per share (Series B Preferred Shares), and simultaneously authorized the sale and issuance of the 375,000 Series B Preferred Shares. On December 15, 2010, the Company issued 375,000 of the Series B Preferred Shares for proceeds of $368.5 million. Of this amount, 325,000 Series B Preferred Shares were issued to affiliates of the Goldman Sachs Group (Goldman) and 50,000 Series B Preferred Shares were issued to an affiliate of CMHI. As discussed in Note 3, affiliates of CHMI are also the majority partner in the Company’s Joint Venture.

The Series B Preferred Shares contain certain conversion features, the terms of which are dependent upon the nature of the conversion event. At each holder’s option, the Series B Preferred Shares may be converted into a number of the Company’s common shares of beneficial interest (common shares), the conversion rate being based upon a variable price index, as defined. As of December 31, 2017, each Series B Preferred Share was convertible at the holder’s option into approximately 88 of the Company’s common shares. If all holders of the Series B Preferred Shares had elected to convert all of their shares in this manner on December 31, 2017, approximately 33,240,000 common shares of the Company would have been issued for the 375,000 Series B Preferred Shares. The Series B Preferred Shares contain certain preemptive rights, anti-dilution provisions, and protections in the event of a recapitalization. The Series B Preferred Shares have the equivalent voting rights as the common shares. The Series B Preferred Shares are senior to any junior securities, and upon a qualifying liquidation event, as defined, each holder of the Series B Preferred Shares would receive the greater of $1,000 cash per share, plus all accrued and unpaid dividends, or the payment that would be paid in connection with such liquidation event in respect of the number of common shares into which such Series B Preferred Shares could be converted.

Holders of the Series B Preferred Shares were entitled to a 5.0% annual fixed cash dividend (Fixed Dividend) based on the liquidation preference of $1,000 per share plus all accrued and unpaid dividends. Additionally, the holders of the Series B Preferred Shares are entitled to participate in dividends paid to holders of the Company’s common shares by receiving a dividend in an amount and in a kind equal to and equivalent to what the holder would have received had such holder held the number of common shares for such common share dividend into which the Series B Preferred Share could be converted on the record date (Participating Dividend). Beginning in 2011, and each year thereafter, if Participating Dividends paid annually to the holders of the Series B Preferred Share do not equal or exceed 2.5% of the $1,000 per share liquidation preference, then holders are entitled to a dividend for the shortfall. Dividends are only payable when declared by the Company’s Board of Trustees, but accrued and unpaid dividends are cumulative and payable upon any conversion or redemption event, as defined, for the Series B Preferred Shares. There were no accrued or unpaid Fixed Dividends to the holders of the Series B Preferred Shares as of December 31, 2017.

In connection with the IPO, Goldman and CMHI converted their Series B Preferred Shares into 28,808,224 and 4,432,034 common shares of the Company, respectively, after taking into account a cash payment of approximately $1.8 million of accrued and unpaid dividends. Goldman sold 5,163,716 common shares of the Company soon after the conversion of the Series B Preferred Shares.

Series C Convertible Voting Preferred Shares

Contemporaneously with the authorization of the conversion and issuance of the Series B Preferred Shares by the Board of Trustees discussed above, the Board of Trustees also authorized the conversion of an additional 375,000 authorized and unissued preferred shares into 375,000 Series C Convertible Voting Preferred Shares (Series C Preferred Shares). As discussed above, the Series C Preferred Shares are potentially issuable to the holders of the Series B Preferred Shares upon conversion in connection with a non-qualifying IPO. As of December 31, 2017, no Series C Preferred Shares were issued or outstanding. The IPO met the definition of a qualifying IPO and, therefore, the Series C Preferred Shares are no longer issuable after December 31, 2017.

Dividends and Distributions

In order to comply with the REIT requirements of the Internal Revenue Code, the Company is generally required to make common share distributions (other than capital gain distributions) to its shareholders at least equal to 90% of its REIT taxable income, as defined in the Code, computed without regard to the dividends paid deduction and net capital gains. The Company’s common share dividend policy is to distribute a percentage of cash flow to ensure distribution requirements of the IRS are met while allowing the Company to retain cash to meet other needs, such as principal amortization, capital improvements and other investment activities.

Common share dividends are characterized for U.S. federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable income return of capital, or a combination of the four. Common share dividends that exceed current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the shareholder’s basis in the common share. To the extent that a dividend exceeds both current and accumulated earnings and profits and the shareholder’s basis in the common share, it will generally be treated as a gain from the sale or exchange of that shareholder’s common share. At the beginning of each year, we notify our shareholders of the taxability of the common share dividends paid during the preceding year. The payment of common share dividends is dependent upon our financial condition, operating results, and REIT distribution requirements and may be adjusted at the discretion of the Company’s Board of Trustees.

The following tables summarize dividends declared and distributions paid to the holders of common shares and Series B Preferred Shares in 2018, 2017 and 2016:



2018
Month Declared/Paid	Dividend Per Share		Distributions Declared				Distributions Paid
			Common Shares		Series B Preferred Shares		Common Shares			Series B Preferred Shares
(In thousands, except per share amounts)
January ^(a)	$	0.0186	$	1,291	$	619	$	1,291		$	619
March/April	0.1396		20,145		—		20,145
March ^(c)							(79		)	—		Dividend equivalents accrued on unvested restricted stock units to be paid when the awards vest.
March/April							20			—		Dividend equivalents paid on unvested restricted stock units that are not expected to vest (recognized as additional compensation).
June/July	0.1875		27,250		—		27,246			—
June ^(d)							(114		)	—		Dividend equivalents accrued on unvested restricted stock units to be paid when the awards vest.
June/July							28			—		Dividend equivalents paid on unvested restricted stock units that are not expected to vest (recognized as additional compensation).
September/October	0.1875		28,072		—		28,072
October^(e)					—		(114		)	—		Dividend equivalents accrued on unvested restricted stock units to be paid when the awards vest.
September/October					—		28			—		Dividend equivalents paid on unvested restricted stock units that are not expected to vest (recognized as additional compensation).
December/January (2019)	$	0.1875	28,218		—		—			—
			$	104,976			$	76,523

Series B Preferred Shares - Fixed Dividend
January ^(a)					1,198					1,198
Total distributions paid to holders of Series B Preferred Shares ^(b)					$	1,817				$	1,817


(a)	Stub period dividend paid to shareholders of record prior to the IPO.


(b)	Last participating and fixed dividend paid to holders of Series B Preferred Shares in connection with the conversion to common shares on the IPO date.


(c)	Declared in March and included in the $20.1 million declared.


(d)	Declared in June and included in the $27.3 million declared.


(e)	Declared in September and included in the $28.1 million declared.



2017
Month Declared	Dividend Per Share		Distributions Paid					Month Paid
			Common Shares		Series B Preferred Shares
(In thousands, except per share amounts)
March	$	0.073	$	5,053	$	2,421		April
June	0.073		5,054		2,422			July
September	0.073		5,053		2,421			October
December	$	0.073	5,054		2,422			December
			$	20,214	9,686		^(a)

Series B Preferred Shares - Fixed Dividend					18,750		^(b)
Total distributions paid to holders of Series B Preferred Shares					$	28,436


(a)	Participating dividend.


(b)	Paid in equal quarterly amounts along with the participating dividend.



2016
Month Declared	Dividend Per Share		Distributions Paid					Month Paid
			Common Shares		Series B Preferred Shares
(In thousands, except per share amounts)
March	$	0.073	$	5,053	$	2,421		April
June	0.073		5,054		2,422			July
September	0.073		5,053		2,421			October
December	$	0.073	5,054		2,422			December
			$	20,214	9,686		^(a)

Series B Preferred Shares - Fixed Dividend					18,750		^(b)
Total distributions paid to holders of Series B Preferred Shares					$	28,436


(a)	Participating dividend.


(b)	Paid in equal quarterly amounts along with the participating dividend.

The dividends declared and paid to holders of Series A Preferred Shares were $0.001 million, $0.016 million and $0.016 million for the years ended December 31, 2018, 2017 and 2016, respectively.

For income tax purposes, distributions to preferred and common shareholders are characterized as ordinary income, capital gains, or as a return of shareholder invested capital. The composition of the Company’s distributions per common share and per preferred share is as follows:



Common Shares	2018		2017		2016
Ordinary income	66	%	85	%	100	%
Capital gains	0	%	0	%	0	%
Return of capital	34	%	15	%	0	%
	100	%	100	%	100	%



Preferred Shares	2018		2017		2016
Ordinary income	100	%	100	%	100	%
Capital gains	0	%	0	%	0	%
Return of capital	0	%	0	%	0	%
	100	%	100	%	100	%

Partners' Capital

Allocations of Net Income and Net Losses to Partners

The operating partnership’s net income will generally be allocated to Americold Realty Trust (the general partner) and the operating partnership’s limited partner, Americold Realty Operations Inc., in accordance with the respective percentage interests in the units issued by the operating partnership. Net loss will generally be allocated to the general partner and the operating partnership’s limited partners in accordance with the respective common percentage interests in the operating partnership until the limited partner’s capital is reduced to zero and any remaining net loss would be allocated to the general partner. However, in some cases, losses may be disproportionately allocated to partners who have guaranteed our debt. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code, and the associated Treasury Regulations.

Distributions

All distributions on our units are at the discretion of Americold Realty Trusts' board of trustees. We have declared and paid the following distributions to the Parent for the years ended December 31, 2018, 2017 and 2016 (in thousands):



2018
Month Declared/Paid	Distributions Declared		Distributions Paid
(In thousands)
January ^(a)	$	3,242	$	3,242
January ^(e)	5,750		5,750
March/April	20,145		20,165
March ^(b)			(79		)
June/July	27,250		27,274
June ^(c)			(114		)
September ^(e)	2,455		2,455
September/October	28,072		28,100
October^(d)			(114		)
December/January	28,218		—
	$	115,132	$	86,679


(a)	Stub period distribution paid to Parent immediately prior to the IPO.


(b)	Distribution equivalents declared in March and included in the $20.1 million, accrued on unvested restricted stock units to be paid when the awards vest.


(c)	Distribution equivalents declared in June and included in the $27.3 million, accrued on unvested restricted stock units to be paid when the awards vest.


(d)	Distribution equivalents declared in September and included in the $28.1 million, accrued on unvested restricted stock units to be paid when the awards vest.


(e)	Distribution was paid to Parent for payment of underwriters' costs in conjunction with the offering completed in the respective quarter, and for conversion of Series A Preferred shares in connection with the IPO.



2017
Month Declared/Paid	Distributions Paid
(In thousands)
March/April	$	12,161
June/July	12,171
September/October	12,162
December	12,172
	$	48,666



2016
Month Declared/Paid	Distributions Paid
(In thousands)
March/April	$	12,161
June/July	12,171
September/October	12,162
December	12,172
	$	48,666

Warrants

On December 10, 2009, the Company issued to affiliates of Yucaipa warrants to purchase 18,574,619 additional common shares at an exercise price of $9.81 per share (Warrants), which were exercisable at any time at the option of Yucaipa through December 10, 2016. In 2015, Yucaipa contributed the Warrants to YF ART Holdings L.P.

On December 7, 2016, the Company amended the agreement granting the Warrants to YF ART Holdings L.P. to extend the expiration date from December 10, 2016 to March 10, 2017. As a result of this modification, the Company calculated the change in the estimated fair value of the Warrants before and after the extension date, and concluded that the change in the expiration date increased the estimated fair value of the Warrants by $3.9 million, which the Company recognized as a charge to stock-based compensation expense for the year ended December 31, 2016.

On March 10, 2017, YF ART Holdings L.P. did not exercise its option to purchase additional common shares under the Warrants, and the Company amended the Warrants agreement several times during 2017, and ultimately extended the Warrants expiration date to January 31, 2018. The Company calculated the change in the estimated fair value of the Warrants before and after each extension date in 2017, and concluded that the change in the expiration date, in each case, did not increase the estimated fair value of the Warrants. Therefore, the Company did not recognize any charges associated with the Warrants during the year ended December 31, 2017.

As discussed in Note 1, in connection with the IPO the Warrants were exercised in full on a cashless basis resulting in the issuance of 6,426,818 common shares.