General

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

General

The Company

Americold Realty Trust, Inc. together with all of its consolidated subsidiaries (ART, Americold, the Company, us or we), is a real estate investment trust (REIT) organized under Maryland law. The Company is the world’s largest publicly traded REIT focused on the ownership, operation and development of temperature-controlled warehouses. The Company is organized as a self-administered and self-managed REIT with proven operating, acquisition and development experience.

On May 25, 2022, the Company completed its conversion from a Maryland real estate investment trust to a Maryland corporation, pursuant to the Articles of Conversion, as approved by the stockholders at its annual shareholder meeting on May 17, 2022. Each issued and outstanding share of beneficial interest in Americold Realty Trust was converted into one share of Common Stock in Americold Realty Trust, Inc. As a result of this conversion, several references in this Form 10-Q have been updated accordingly. Despite this conversion, the Company continues to operate as a REIT for U.S. federal income tax purposes.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) for interim financial information, and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements do not include all disclosures associated with the Company’s consolidated annual financial statements included in its 2021 Annual Report on Form 10-K as filed with the SEC, and, accordingly, should be read in conjunction with the referenced annual report. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries where the Company exerts control. Investments in which the Company does not have control, and is not considered to be the primary beneficiary of a Variable Interest Entity (VIE), but where the Company exercises significant influence over the operating and financial policies of the investee, are accounted for using the equity method of accounting. Intercompany balances and transactions have been eliminated. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

The following disclosure regarding certain of our significant accounting policies should be read in conjunction with Note 2 to the consolidated financial statements included in our 2021 Annual Report on Form 10-K as filed with the SEC, which provides additional information with regard to the accounting policies set forth herein and other significant accounting policies.

Formation of Latin America Joint Venture

On May 31, 2022, we formed a joint venture, Americold LATAM Holdings Ltd (the “LATAM JV”), with Cold LATAM Limited (our “JV partner”), in an effort to help us grow our business and market presence in the Latin America region, excluding Brazil. Our JV partner committed to invest approximately $209.0 million in exchange for 85% of the total equity interests, and we contributed our Chilean business upon formation of the joint venture and retained the remaining 15% equity interests in the joint venture. Our JV partner’s contribution commitment includes an initial contribution of $8 million at closing and the remainder as a contribution receivable to the LATAM JV. The JV partner must complete its remaining contribution payments over the next four-year period through December 31, 2025 and in doing so, it retains its 85% equity ownership during this period. As a result of this transaction, we recognized a loss of approximately $4.1 million within “Other, net” on the Condensed Consolidated Statement of Operations (net of accumulated foreign currency translation loss related to the Chilean business) upon the deconsolidation of this entity and subsequent recognition of our subsidiary’s 15% equity investment in the LATAM JV at its estimated fair value of $37.0 million within “Investments in partially owned entities” on the Condensed Consolidated Balance Sheet. The fair value of the Company’s retained equity investment is based on Level 3 measurements within the fair value hierarchy based on the cash paid and contribution receivable committed to by our JV partner for their 85% interest, as well as fair value measurement performed in December 2020 when the Chilean business was acquired. Under the terms of the JV agreement, the Company has a call right that enables it to purchase all remaining issued and outstanding shares of the LATAM JV starting in 2026 through 2028, as calculated in accordance with the JV agreement. Upon expiration of the Company’s call option, if unexercised, the JV partner has a call right that requires the Company to sell all of its interest in the LATAM JV by December 31, 2028, with the exercise price based upon the same calculation as the Company’s call option in accordance with the LATAM JV agreement.

Extinguishment of New Market Tax Credit (“NMTC”) Arrangement

During the second quarter of 2022, we recognized a gain of $3.4 million within “Other, net” on the Condensed Consolidated Statement of operations upon extinguishment of New Markets Tax Credit (“NMTC”) agreements which were dissolved immediately following the conclusion of the seven-year compliance period during which the tax credits were recognized. The NMTC deferred contribution liability was previously recorded within “Accounts payable and accrued expenses” on the Condensed Consolidated Balance Sheets. For a more detailed description of the NMTC arrangement, refer to Note 17 of the consolidated financial statements in the Company’s 2021 Annual Report on Form 10-K as filed with the SEC.

Impairment of Indefinite and Long-Lived Assets

For the nine months ended September 30, 2022, the Company recorded impairment charges totaling $6.6 million, which included a ‘Goodwill’ impairment charge of $3.2 million related to the Third-party managed segment as we are strategically shifting our focus to our core warehouse portfolio, and terminating and winding down business with one of the largest customers in the Third-party managed segment. Additionally, we recognized an impairment charge of ‘Assets under construction’ of $2.2 million associated with a development project which management determined it would no longer pursue and ‘buildings and improvements’ of $1.2 million in Warehouse segment assets which we reduced the carrying value of in anticipation of the exit of certain leased facilities. The impact of our strategic shift related to our Third-party managed segment will not impact our segment disclosures, as we will continue to serve our other existing customers in this segment. During the nine months ended September 30, 2021, the Company recorded impairment charges totaling $3.3 million, which included an impairment charge of $1.7 million related to costs associated with development projects that management determined it would no longer pursue and a charge of $1.6 million for certain software costs that were determined no longer usable.

Significant Risks and Uncertainties

The COVID-19 pandemic has caused, and is likely to continue to cause severe economic, market and other disruptions worldwide, which could lead to future material impairments of our assets, increases in our allowance for credit losses and changes in judgments in determining the fair value of our assets. Conditions in the bank lending, capital and other financial markets may deteriorate, and our access to capital and other sources of funding may become constrained or more costly, which could materially and adversely affect the availability and terms of future borrowings, renewals, re-financings and other capital raises.

The Company is closely monitoring the impact of the ongoing COVID-19 pandemic and any variants on all aspects of its business in all geographies, including how it will impact its customers and business partners. The three and nine months ended September 30, 2022 and the year ended December 31, 2021 were negatively impacted by COVID-19 related disruptions and other macro-economic conditions in (i) the food supply chain; (ii) our customers’ production of goods; (iii) the labor market impacting availability and cost; and (iv) the impact of inflation on the cost to provide our services. Despite the current headwinds, we expect that end-consumer demand for food will remain consistent over the long-term with historic levels. However, current end-consumer demand coupled with food production and transportation challenges throughout the pandemic has driven down holdings in our facilities. As a result, occupancy and throughput volume continue at lower than historical levels experienced prior to COVID-19. We expect this to continue until our customers are able to ramp production back up to pre-pandemic levels for an extended period of time and rebuild inventory in the supply chain.

The unprecedented labor environment continues to be challenging for many companies, including our food manufacturing customers. Labor availability continues to be the primary constraint on food production, along with the continuing spread of COVID-19 and related variants, which also impacts the labor market.

Our business has also been impacted due to inflation during the second half of 2021 and during the three and nine months ended September 30, 2022. We believe we are positioned to address continued inflationary pressure as it arises; however, many of our contracts require that we experience sustained cost increases for an extended period of time ranging up to 60 days before we are able to initiate rate increases or seek remedies under our contracts. As a result of the significant impact of inflation on the cost of providing our storage, services and transportation to customers, during the second half of 2021 we initiated out-of-cycle rate increases in our customer contracts (many of which contain provisions for inflationary price escalators), and expect to continue to monitor further inflation and implement pricing increases as needed. We can give no assurance that we will be able to offset the entire impact of inflation or future inflationary cost increases through increased storage or service charges or by operational efficiencies.

Additionally, global supply chains have been volatile following the invasion of Ukraine by Russia which has resulted in sanctions against Russia from the U.S. and a number of European countries. While we do not expect our global operations and specifically our European operations to be directly impacted by this event currently, changes could occur that could impact our operations.