S-11/A 1 d577649ds11a.htm S-11/A S-11/A
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As filed with the Securities and Exchange Commission on July 16, 2024

Registration Statement No. 333-280470

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 1 TO

FORM S-11

FOR REGISTRATION

UNDER

THE SECURITIES ACT OF 1933

OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

 

 

Lineage, Inc.

(Exact name of registrant as specified in its governing instruments)

 

 

46500 Humboldt Drive

Novi, Michigan 48377

(800) 678-7271

(Address, including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Natalie Matsler

Chief Legal Officer

46500 Humboldt Drive

Novi, Michigan 48377

(800) 678-7271

(Name, Address, including Zip Code and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

 

Julian T.H. Kleindorfer, Esq.

Lewis W. Kneib, Esq.

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, California 90071-1560

(213) 485-1234

 

Scott C. Chase, Esq.

David H. Roberts, Esq.

Goodwin Procter LLP

100 Northern Avenue

Boston, Massachusetts 02210

(617) 570-1000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act  ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated July 16, 2024

47,000,000 Shares

 

 

LOGO

Common Stock

Lineage, Inc.

 

 

We are offering 47,000,000 shares of our common stock. All of the shares of common stock offered by this prospectus are being sold by us. This is our initial public offering, and no public market currently exists for our common stock. We expect the initial public offering price of our common stock to be between $70.00 and $82.00 per share.

We expect that our common stock will be approved for listing, subject to notice of issuance, on the Nasdaq Global Select Market, under the symbol “LINE.”

We have elected and believe we have qualified to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2020. To assist us in qualifying as a REIT, our charter prohibits, with certain exceptions, the beneficial or constructive ownership by any person of more than 9.8% in value of the aggregate of the outstanding shares of our capital stock or more than 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of our common stock. In addition, our charter contains various other restrictions on the ownership and transfer of our common stock and capital stock. See “Description of Our Capital Stock—Restrictions on Ownership and Transfer” for a description of the ownership and transfer restrictions applicable to our common stock.

After the completion of this offering, affiliates of Bay Grove Capital Group, LLC will continue to own a majority of the voting power of shares of our common stock eligible to vote in the election of our directors. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the Nasdaq Global Select Market. See “Management—Controlled Company Exception” and “Principal Stockholders.”

 

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 55 for factors you should consider before investing in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

    

Per Share

    

Total

 

Initial public offering price

   $        $    

Underwriting discounts(1)

   $        $    

Proceeds, before expenses, to us

   $             $         

 

(1)

We refer you to “Underwriters” beginning on page 371 of this prospectus for additional information regarding underwriting compensation.

At our request, the underwriters have reserved six percent of the shares of common stock to be issued by us and offered by this prospectus for sale, at the initial public offering price, to (i) certain of our directors, officers and employees, (ii) friends and family members of certain of our directors and officers, (iii) individuals associated with certain of our customers, vendors, landlords and service providers and (iv) certain of our legacy investors, former owners of acquired companies and properties and other industry partners. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. See “Underwriters—Directed Share Program” for additional information.

To the extent that the underwriters sell more than 47,000,000 shares of common stock, the underwriters have the option, exercisable within 30 days from the date of this prospectus, to purchase up to an additional 7,050,000 shares from us at the initial public offering price less the underwriting discounts and commissions.

KKR Capital Markets LLC is acting as our Lead financial advisor in connection with this offering. BDT & MSD Partners, Seven Lakes Partners, and Eastdil Secured Advisors, LLC are also acting as financial advisors in connection with this offering.

The underwriters expect to deliver the shares of common stock to purchasers on or about    .

Norges Bank Investment Management, a division of Norges Bank (the “cornerstone investor”), has indicated an interest in purchasing up to an aggregate of $900 million in shares of common stock in this offering at the initial public offering price. The shares of common stock to be purchased by the cornerstone investor will not be subject to a lock-up agreement with the underwriters. Because this indication of interest is not a binding agreement or commitment to purchase, the cornerstone investor may determine to purchase more, less or no shares in this offering or the underwriters may determine to sell more, less or no shares to the cornerstone investor. The underwriters will receive the same underwriting discounts and commissions on any of our shares of common stock purchased by the cornerstone investor as they will from any other shares of common stock sold to the public in this offering.

Joint Bookrunning Managers

 

Morgan Stanley  

Goldman Sachs &

Co. LLC

 

BofA

Securities

  J.P. Morgan   Wells Fargo Securities

 

RBC Capital Markets   Rabo Securities   Scotiabank   UBS Investment Bank  

Capital One Securities

  Truist Securities
Evercore ISI   Baird   KeyBanc Capital Markets   Mizuho   PNC Capital Markets LLC   Deutsche Bank Securities   HSBC   Piper Sandler  

Regions Securities LLC

Co-Managers

 

Blaylock Van, LLC   Cabrera Capital Markets LLC   C.L. King & Associates   Drexel Hamilton  

Guzman & Company

  Loop Capital Markets   Roberts & Ryan   R. Seelaus & Co., LLC

Prospectus dated    , 2024


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Through and including     , 2024 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates which are specified in these documents. Our business, financial condition, liquidity, results of operations and prospects may have changed since those dates.

We use market data and industry forecasts and projections throughout this prospectus and, in particular, in the sections entitled “Prospectus Summary,” “Industry Overview” and “Business and Properties.” We have obtained certain of this information from a market study prepared for us in connection with this offering by CBRE, Inc., or CBRE, a nationally recognized real estate services firm. Such information is included in this prospectus in reliance on CBRE’s authority as an expert on such matters. Any forecasts prepared by CBRE are based on data (including third party data), models and experience of various professionals and are based on various assumptions, all of which are subject to change without notice. See “Experts.” In addition, we have obtained certain market and industry data from publicly available industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable but that the

 

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accuracy and completeness of the information are not guaranteed. Capacity and market share data provided by the Global Cold Chain Alliance, or GCCA, reflects capacity of companies that report to GCCA. North American GCCA data includes GCCA’s estimate of capacity owned and operated by U.S. customers themselves based on data from U.S. Department of Agriculture surveys. Global GCCA data also reflects GCCA’s estimate of capacity of companies that do not report to GCCA. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry, and there is no assurance that any of the projected amounts will be achieved. We have not independently verified this information.

Non-GAAP Financial Measures

In this prospectus, we use certain non-GAAP financial measures as supplemental performance measures of our business, including NOI, segment NOI, FFO, Core FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, net debt, adjusted net debt and adjusted net debt to Adjusted EBITDA. For definitions of these metrics, reconciliations of these metrics to our net loss of $48.0 million and net income of $18.6 million for the three months ended March 31, 2024 and 2023, respectively, and our net loss of $96.2 million, $76.0 million and $176.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes for which management uses such metrics, see “Summary Selected Historical and Pro Forma Condensed Consolidated Financial and Other Data—Non-GAAP Financial Measures.”

Certain Terms Used in This Prospectus

Unless the context otherwise requires, the following terms and phrases are used throughout this prospectus as described below:

 

   

“2024 Plan” means the Amended and Restated Lineage 2024 Incentive Award Plan, as amended from time to time;

 

   

“average economic occupancy” means the average number of physical pallets on hand and any additional pallet positions otherwise contractually committed and paid for by customers for a given period divided by the approximate number of average physical pallet positions in our warehouses for the applicable period;

 

   

“average physical occupancy” means the average number of physical pallets on hand divided by the approximate number of average physical pallet positions in our warehouses for the applicable period;

 

   

“Bay Grove” means Bay Grove Capital Group, LLC, a private owner-operator firm founded by our Co-Founders and Co-Executive Chairmen, Adam Forste and Kevin Marchetti, and, unless the context otherwise requires, its affiliates (excluding BGLH but including our Co-Founders);

 

   

“BentallGreenOak” means BGO Cold Storage Holdings II, LP and, unless the context otherwise requires, its affiliates;

 

   

“BG Cold” means BG Cold, LLC, an affiliate of Bay Grove;

 

   

“BGLH” means BG Lineage Holdings, LLC, an affiliate of Bay Grove;

 

   

“BGLH Restricted Units” means Class B units in BGLH that were issued as compensatory awards and are held by certain of our current and former executive officers, directors and employees;

 

   

“Cash Settlement” refers to the settlement by our legacy investors of their BGLH equity or Legacy OP Units for cash in connection with liquidity that we will have arranged, which settlement for cash will generally be effected pursuant to a sale of shares of our common stock back to us or a sale of OP units to us;

 

   

“CMBS” means commercial mortgage-backed securities;

 

   

“Co-Founders” means our Co-Executive Chairmen, Adam Forste and Kevin Marchetti;

 

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“Core WMS” means Core Warehouse Management Systems;

 

   

“D1 Capital” means D1 Master Holdco II LLC and, unless the context otherwise requires, its affiliates;

 

   

“Delayed Draw Term Loan” means our senior unsecured term loan facility with an aggregate principal balance of approximately $2.4 billion;

 

   

“EBITDA” means earnings before interest, taxes, depreciation and amortization;

 

   

“formation transactions” means the formation transactions described under "Structure and Formation of our Company;”

 

   

“Founders Equity Share” means a share of the profits on, and solely borne by, legacy equity that accrues to BG Cold, and more specifically: (i) with respect to our operating partnership, the sub-unit of each Legacy Class A OP Unit referred to herein as the C-Piece Sub-Unit, which C-Piece Sub-Unit represents a share of the profits contained within each Legacy Class A OP Unit; such share of profits is calculated based on a historical formula applicable solely to our legacy investors and borne solely by the Legacy Class A OP Units (and not any other OP units); and such share of profits belongs to BG Cold; and (ii) with respect to BGLH, the right of the Class C units of BGLH to a share of the profits derived from each BGLH Class A unit; such share of profits is calculated based on a historical formula applicable solely to BGLH investors and borne solely within BGLH; and such share of profits belongs to BG Cold;

 

   

“fully diluted basis” means information is presented assuming all outstanding Legacy OP Units, OP units and OPEUs have been exchanged for shares of common stock on a one-for-one basis and all equity awards to be issued to our management and members of our board of directors in connection with this offering are outstanding (this definition is not the same as the meaning of “fully diluted” under GAAP);

 

   

“GAAP” means generally accepted accounting principles as promulgated by the Financial Accounting Standards Board in the United States of America;

 

   

“ICE4 CMBS loan” means our secured senior mortgage debt that had an original principal amount of $2.35 billion;

 

   

“IT” means information technology;

 

   

“KPI” means key performance indicator;

 

   

“Legacy Class A OP Units” means a class of Legacy OP Units held by our legacy pre-offering investors that bears the Founders Equity Share; each Legacy Class A OP Unit represents the same proportionate share of ownership in our operating partnership as a single OP unit, but each Legacy Class A OP Unit is comprised of two sub-units, the A-Piece Sub-Unit and the C-Piece Sub-Unit, which have different beneficial owners;

 

   

“Legacy Class B OP Units” means a class of Legacy OP Units held by our legacy pre-offering investors (including certain of our current and former officers and employees) that does not bear the Founders Equity Share; each Legacy Class B OP Unit represents the same proportionate share of ownership in our operating partnership as a single OP unit;

 

   

“Legacy OP Units” means units of partnership interest in our operating partnership that represent pre-offering rights of legacy investors in our operating partnership; each Legacy OP Unit represents the same proportionate share of ownership in our operating partnership as a single OP unit; the Legacy OP Units are made up of both Legacy Class A OP Units and Legacy Class B OP Units;

 

   

“LHR” means the “Legacy Holder Representative” appointed by holders of Legacy OP Units to act as their representative pursuant to the partnership agreement of our operating partnership. The initial LHR will be an affiliate of BGLH;

 

   

“Lineage,” “we,” “our,” “us” and “our company” mean Lineage, Inc., a Maryland corporation, together with its consolidated subsidiaries, including our operating partnership;

 

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“Lineage Holdings” means Lineage Logistics Holdings, LLC;

 

   

“Lineage OP” means Lineage OP, LLC, a Delaware limited liability company;

 

   

“LMEP Units” means existing Class C Units in LLH MGMT Profits, LLC and LLH MGMT Profits II, LLC, which units are incentive equity interests held by certain of our current and former officers and employees;

 

   

“LTIP units” means units of our operating partnership intended to constitute “profits interests” within the meaning of the relevant IRS Revenue Procedure guidance;

 

   

“LVCP Awards” means awards granted under the LVCP Plans;

 

   

“LVCP Plans” means, collectively, the following historic incentive plans for certain of our officers and employees: the Lineage Logistics Holdings, LLC 2021 Value Creation Unit Plan, the Amended and Restated Lineage Logistics Holdings, LLC 2015 Value Creation Unit Plan and any other plan under which we or our affiliates have granted awards of “value creation units,” each as amended or supplemented from time to time;

 

   

“maintenance capital expenditures” means capitalized funds used to maintain assets that will result in an extended useful life;

 

   

“minimum storage guarantees” mean contractual provisions in our agreements with customers that provide us with minimum or fixed storage fees for pallet positions, whether or not a minimum number of pallet positions are physically occupied in a particular period;

 

   

“Nasdaq” means the Nasdaq Global Select Market;

 

   

“NOI” means net operating income;

 

   

“OPEUs” means units of our subsidiary, Lineage Holdings, that are intended to be economically equivalent to, and exchangeable into, OP units;

 

   

“OP units” means common units of partnership interest in our operating partnership;

 

   

“our operating partnership” means, prior to its conversion to a Maryland limited partnership in connection with the formation transactions, Lineage OP, LLC, a Delaware limited liability company, and after such conversion, Lineage OP, LP, a Maryland limited partnership, through which we will hold substantially all of our assets and conduct our operations;

 

   

“Oxford” means Oxford Properties Group, OMERS Administration Corporation or any of their respective affiliates;

 

   

“pro forma basis” means information is presented assuming the completion of this offering, the formation transactions and the other adjustments described in our unaudited pro forma condensed consolidated financial statements included elsewhere in this prospectus had occurred on March 31, 2024 for purposes of the unaudited pro forma condensed consolidated balance sheet data and on January 1, 2023 for purposes of the unaudited pro forma condensed consolidated statements of operations;

 

   

“REIT” means real estate investment trust for U.S. federal income tax purposes;

 

   

“Revolving Credit and Term Loan Agreement” means our $4.5 billion revolving credit and term loan agreement;

 

   

“Revolving Credit Facility” means our $3.5 billion senior unsecured revolving credit facility pursuant to the Revolving Credit and Term Loan Agreement;

 

   

“same warehouse” means warehouses that were owned, leased or managed for the entirety of two comparable periods and that have reported at least twelve months of consecutive normalized operations prior to January 1 of the prior calendar year;

 

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“same warehouse NOI” means revenues for the same warehouse population less its cost of operations (excluding any depreciation and amortization, impairment charges and corporate-level general and administrative expenses, corporate-level acquisition, transaction, and other expense, corporate-level restructuring and impairment expense and gain or loss on sale of real estate);

 

   

“Securities Settlement” refers to the settlement by our legacy investors of their BGLH equity for shares of our common stock or their Legacy OP Units for OP units;

 

   

“segment NOI” means segment net operating income, calculated as a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level general and administrative expenses, corporate-level acquisition, transaction, and other expense and corporate-level restructuring and impairment expenses);

 

   

“Senior Unsecured Notes” means, collectively, our Series A Senior Notes, Series B Senior Note, Series C Senior Notes, Series D Senior Notes, Series E Senior Note, Series F Senior Note, Series G Senior Note, Series H Senior Notes and Series I Senior Notes;

 

   

“stockholders agreement” means the stockholders agreement among us, BGLH, D1 Capital, Stonepeak, BentallGreenOak, Adam Forste and Kevin Marchetti that we intend to enter into in connection with this offering and the formation transactions;

 

   

“Stonepeak” means Stonepeak Aspen Holdings LLC and, unless the context otherwise requires, its affiliates;

 

   

“Term Loan” means our $1.0 billion senior unsecured term loan facility pursuant to the Revolving Credit and Term Loan Agreement; and

 

   

“throughput” means the volume of inbound pallets that enter our warehouses plus the volume of outbound pallets that exit our warehouses, divided by two.

 

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LETTER FROM OUR CO-FOUNDERS

Dear Prospective Investors,

In 2008, from a small office on Battery Street in San Francisco, we committed to a simple but ambitious vision: to build a company that we would want to own forever. We were inspired by the type of business we would build, the people we would build it with and the belief we would build it to last. Sixteen years later, Lineage has come a long way in achieving that vision. Preparing for our IPO has allowed us to further distill our thinking—not only as we explain Lineage to you, but also as we define what success looks like for the next fifteen years and beyond.

We are fond of saying that our IPO is the opposite of an exit. It is a new beginning. Now, as we take this important step, we think it would be helpful to share why we are going public. We have been privileged to raise a considerable amount of private capital from some of the highest quality investors in the world. We are humbled by their belief in Lineage and are grateful for their long-term alignment with us. We have no pressure to go public and believe a significant portion of our current investors will want to remain long-term owners of Lineage as a publicly traded company, ourselves included.

Becoming a publicly traded company is a momentous decision and not without certain well-known considerations. However, we strongly believe the public market is the best way to deliver growth at scale by providing us with the advantages of a liquid currency and direct access to a lower cost of capital to further fuel our growth flywheel. Moreover, we believe that if we can remain true to what has made us successful as a private company, we will be even more successful as a publicly traded one.

Many companies and investors talk about building for the long term. What that has meant for us from the beginning, and even more so today, is being focused on one thing: building Lineage into the most dynamic and durable company it can be. This has been our only focus for the last sixteen years and will remain our life’s work going forward. In fact, we believe we are still in the very early innings of a long, successful journey. After many years of making hard, expensive, forward-thinking decisions to build a forever company, establish an irreplaceable network and develop a differentiated technology platform, it is really beginning to get fun.

The business we built. When we were getting our idea off the ground in late 2008, we wanted to build something durable that we could grow. The stability of cold storage and the opportunity to accretively deploy capital in a fragmented and growing industry really appealed to us. Most of all, we were drawn to the quiet complexity of something that seemed so simple from the outside. Acquiring Seafreeze and spending a year in Seattle learning how to make money in the business only reinforced our view that the operating intensity of this business was going to be our greatest moat. It was also clear that with effort, time and capital, we could pull powerful operating levers at a network-wide scale.

We also saw enormous waste in the system—clear opportunities to innovate and make the asset, network, and ecosystem more efficient. It was readily apparent that the industry was not zero-sum but rather additive-sum and that we could simultaneously create customer value, grow shareholder value, and reduce resource consumption by building a better supply chain. Over the last sixteen years, we have invested our capital into our portfolio, as well as big data, automation, data science, and, most importantly, talent. We believe we have created a scaled, tech-enabled company with both tangible and intangible assets that can continue to compound value. We are also confident we can continue to do good while doing well by driving greater sustainability and reducing food waste at a global scale.

The people we built with. It all started with our friendship from our early days in the bullpen at Morgan Stanley. We are fortunate to have grown that into a business partnership that continues to thrive after sixteen very intense years. The trust built from those early experiences, and a shared view that culture really matters, has been at our foundation from the beginning.

 

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We often remind ourselves that culture is extremely difficult to build and very easy to lose. Our personal reputation as founders and the reputation of Lineage is very important to us. We work hard with the leadership team to make Lineage a special, fulfilling, and safe place to work for our team members. We strive to do right by people inside and outside of our company, including investing in our communities and fighting food insecurity. We are committed to being an excellent partner to our customers, our suppliers, our investors, our communities, our advisors, and the companies we acquire. We do what we say we are going to do.

At an even simpler level, it is about working with people you enjoy being around and having fun. Lineage’s esprit de corps is part of our secret sauce. We have been privileged to have so many incredible people join Lineage from diverse backgrounds and through acquired companies to create a whole that is greater than the sum of its parts. We have acquired numerous family-owned companies, and from our early days, we wanted Lineage to feel like a family. Fueled by our purpose—to transform the global food supply chain to eliminate waste and help feed the world—we work at building community every day, especially as our company has grown. For us, it is about getting to know our colleagues and their families and celebrating our wins together. But we also hold each other accountable, remain humble and acknowledge that every day is a day we can learn and do better together.

As founders, we have been “all-in” since day one and have committed to building that ownership mindset throughout the organization. It led us to form our first employee equity ownership plan in 2010 and now inspires us to expand it into a broad-based equity plan as part of our IPO. A deep ownership mentality is a key to how Lineage has become what it is today and will be a crucible of how to keep our strong culture and our drive as a publicly traded company.

Built for the future. For us, long term is an ethos. “Forever” was the defining idea from the beginning and led us to do many things differently than we might otherwise have if our horizon had been shorter. Partly because we started Lineage with a blank sheet as industry outsiders and partly due to the timing of when we started the company, we could shape what we wanted to build and do it in a differentiated way. For any key decision, we always asked ourselves to look into the distant future and imagine that Lineage was the disruptor in a global, mission-critical industry and work backwards from there. Often, the more difficult and more expensive solutions were the ones we believed would better position us for the competitive landscape in the future.

After culture, we focused on portfolio design. Though we did not come from real estate backgrounds, we knew location matters and intentionally bought and built what we believed was the highest quality portfolio of buildings in the markets with the best rent growth potential and lowest cap rates. We often decided to pay a little more or construct at a higher quality because we believed it would provide the best and most sustainable long-term portfolio for our customers. We then invested to maintain those assets at the highest level. We intend to continue this approach as a publicly traded company and seek to deploy our capital into strategically and financially accretive opportunities with an emphasis on compounding long-term shareholder value while driving the highest relative value quotient throughout our network for our customers.

We were also able to take a differentiated strategy towards technology. Acting on our deep conviction that innovation would be the way to modernize this industry and eliminate waste at a global level, we have consistently stayed on the leading (sometimes bleeding) edge of technology. Going directly to cloud technologies early in our journey enabled us to scale the business quickly. It also allowed us to create a large, centralized data asset onto which we could build innovative, proprietary tools. We have invested heavily in our transformational technology (over $725 million since 2019) to enhance customer experience, make our team members more successful and optimize both energy usage and our physical assets while simultaneously reducing waste in the supply chain.

Reflecting on the last sixteen years is motivating. At inception, it was impossible to imagine we could grow from one warehouse with about 340,000 square feet and around 100 team members to a global business with over 480 warehouses, comprising over 84 million square feet, and supported by over 26,000 team members in 19 countries. In hindsight, the strategy was sound, and the timing was good. However, what really made the

 

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difference was the compounding impact of having an aligned organization that strove to make good decisions; worked hard; put our team members, customers and communities first; delivered for our investors; and consistently thought about the long term. If we continue to do that from here, then the best is yet to come.

A key part of our culture is pausing to recognize each other for living our purpose, embodying our values, and acknowledging the little and the big things we do to take the company forward. At a moment like this, it is inspiring to think about how many people have helped Lineage become what it is today. From the customers that store their most important products with us, to our team members who brave the cold and help grow the business, to the families that sold us their businesses, to our existing investors who continue to believe in us, it all comes down to Trust (with a big T). We are thrilled to have the opportunity to earn yours!

Adam Forste & Kevin Marchetti

Founders and Co-Executive Chairmen

 

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PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the section entitled “Risk Factors,” as well as our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. Unless otherwise indicated, the information contained in this prospectus assumes that the shares of common stock to be offered by this prospectus are sold at $76.00 per share, which is the mid-point of the price range set forth on the front cover of this prospectus and that the underwriters’ option to purchase additional shares is not exercised.

Our Purpose

Our purpose is to transform the global food supply chain to eliminate waste and help feed the world.

Built with the vision of creating a more sustainable future, we are a leading mission-critical, temperature-controlled infrastructure provider for the storage, handling and movement of food around the world. It is estimated that approximately one-third of the food produced globally is lost or wasted and 12% is lost due to a lack of refrigeration. We offer solutions to the complexities of the cold chain—the vital network linking food from farm to fork—through our strategically located and scaled network of temperature-controlled warehouses and our technology-enabled platform.

Our Company

We are the world’s largest global temperature-controlled warehouse REIT, with a modern and strategically located network of properties. Our business is competitively positioned to deliver a seamless end-to-end, technology-enabled, customer experience for thousands of customers, each with their own unique requirements in the temperature-controlled supply chain. As of March 31, 2024, we operated an interconnected global temperature-controlled warehouse network, comprising over 84.1 million square feet and 3.0 billion cubic feet of capacity across 482 warehouses predominantly located in densely populated critical-distribution markets, with 312 in North America, 82 in Europe and 88 in Asia-Pacific. We have a well-diversified and stable customer base and currently serve more than 13,000 customers that include household names of the largest food retailers, manufacturers, processors and food service distributors in the industry. For the twelve months ended March 31, 2024, no single customer accounted for more than 3.3% of our revenues. In the twelve months ended March 31, 2024, we generated $5.3 billion of revenue, $162.8 million of net loss, $1.8 billion of NOI and $1.3 billion of Adjusted EBITDA.

We operate our business through two segments:

 

   

Global warehousing, which utilizes our high-quality industrial real estate properties to provide temperature-controlled warehousing storage and services to our customers and represented approximately 86% of our total NOI for the twelve months ended March 31, 2024; and

 

   

Global integrated solutions, which complements warehousing with supply chain services to facilitate the movement of products through the food supply chain to generate cost savings for customers and additional revenue streams for our company and represented approximately 14% of our total NOI for the twelve months ended March 31, 2024.

To augment our leading position in the temperature-controlled warehousing sector, we have invested more than $725 million since the start of 2019 in transformational technology initiatives to deliver enhanced customer value and operational efficiencies, including software development and implementation, establishment of in-house data science, product development and automation teams and selected acquisitions. We believe that we are

 

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an industry leader in technological innovation and that deploying these technologies supports potential strong same warehouse NOI growth and cash flow generation. Key elements of our technology strategy include leveraging both proprietary and what we believe are best-in-class systems to integrate acquisitions and development projects onto common information technology platforms to enable increased operational standardization and productivity; developing and deploying innovative tools to enhance our operations; deploying our in-house data science team to create optimization opportunities; developing patented innovations supporting critical areas of our business; and offering industry-leading automation capabilities. We have been recognized by multiple third parties as a leading industry innovator, including being listed among the CNBC Disruptor 50 in 2021, 2022, 2023 and 2024 and being recognized by Fast Company as one of the 50 Most Innovative Companies of 2019, including being ranked first in the Data Science category.

Our team members are the bedrock of Lineage, and we employ a workforce of over 26,000 team members across 19 countries. We were recognized as a U.S. Best Managed Company by Deloitte and the Wall Street Journal in both 2022 and 2023. We are headquartered in Novi, Michigan, and we were listed as one of Michigan’s Top Workplaces in 2022 by The Detroit Free Press. Our focus on our six core values of safe, trust, respect, innovation, bold and servant leadership drive our company forward every day.

Our Founding Story

Our journey began in late 2008 when Adam Forste and Kevin Marchetti acquired Seafreeze, our first cold storage warehouse in Seattle. The strategy and vision behind this investment was simple—build a company to own forever with durable, growing cash flows and the ability to compound capital efficiently over a long duration.

We have always believed that temperature-controlled warehousing is a sector ripe for long-term investment to build a differentiated and institutional-quality platform. The driving forces of our temperature-controlled warehousing investment thesis at our founding remain true today:

 

   

temperature-controlled warehousing demand is driven by frozen and refrigerated food, and such demand is growing and naturally resilient across macroeconomic cycles;

 

   

temperature-controlled warehousing is asset-rich and operationally complex, both of which serve as the foundations for building a well-capitalized and disruptive industry leader;

 

   

the temperature-controlled warehousing market is fragmented and is likely to benefit from institutional ownership, increased capital investment and large-scale innovation; and

 

   

temperature-controlled warehousing is mission critical to customers and often represents a relatively modest expense compared to their other supply chain costs and a small portion of overall costs of goods sold.

We believe that cold storage is an attractive, growing and durable industry that plays a mission-critical role in the food supply chain. In 2012, after making several acquisitions, we rebranded our company as Lineage and adopted the Lineage shield as our logo. Lineage’s roots run deep, dating as far back as the founding of New Orleans Cold Storage in 1886. Over the last 16 years, we have welcomed some of the most prestigious and well-respected cold chain companies in the world into the Lineage family through 116 acquisitions through March 31, 2024. Most of these companies were family owned and operated, and we have always placed significant value on the legacies of the companies that have become part of the Lineage story. Many of the owners of these companies have become investors in our company, and many of the family members and employees of these companies continue to work with us today. The Lineage name reflects the heritage and pedigree of all these companies while the Lineage shield logo represents our strength and conviction that the whole is greater than the sum of our parts.

 

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Lineage Today

Today, we are an organization that is still deeply rooted in generations of temperature-controlled warehousing expertise while also pushing the cutting edge of technology and innovation in our sector. When we welcome new companies into our organization, we strive to integrate their best practices, insights and accomplishments into our existing processes to drive value for our customers and stockholders.

Since our founding nearly 16 years ago, we have been focused on reducing waste in the food supply chain, which creates customer value, drives Lineage’s profitability and often reduces resource consumption broadly with a positive sustainability benefit. We have built a dynamic culture to support doing good while doing well.

Throughout our history as a private company, we have focused on making decisions based on the long-term interests of our company and its stakeholders. As a public company, we intend to continue taking a long-term approach in our journey to build a more efficient, sustainable and resilient food supply chain—all while taking care of our customers, team members and communities and maximizing stockholder value.

Our Global Warehousing Segment

The backbone of our business is our mission-critical network of sophisticated, modern and strategically-located temperature-controlled warehouses.

As of March 31, 2024, our warehousing portfolio encompassed 463 warehouses featuring distribution, public, production advantaged and managed warehouse operations and contained approximately 81.9 million square feet, 2.9 billion cubic feet and 9.8 million pallet positions, with a cubic-foot weighted average age of 21 years. We also believe we have the largest automated temperature-controlled portfolio with 81 automated facilities, 24 of which are fully automated and 57 of which are semi-automated. The following table provides summary information regarding the warehouses in our portfolio that we owned, leased, or managed as of, or for the twelve months ended, March 31, 2024, as applicable.

 

Region

  Number of
Warehouses
    Cubic feet
(in millions)
    Percent of
total cubic
feet
    Pallet
positions
(in thousands)
    Average
economic
occupancy
    Average
physical
occupancy
    Revenues
(in millions)
    Segment NOI
(in millions)
 

North America

    293       2,057       70.5     6,198       86.6     78.8   $ 2,924     $ 1,191  

Europe

    82       616       21.1     2,599       82.8     79.5     598       201  

Asia-Pacific

    88       244       8.4     1,008       81.8     79.0     346       115  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average/Total(1)

    463       2,917       100.0     9,804       85.1     79.0   $ 3,868     $ 1,507  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Totals may not sum due to rounding. Excludes 19 warehouses in our global integrated solutions segment. We categorize warehouses as part of our global integrated solutions segment if the primary business conducted in those warehouses is within our global integrated solutions segment.

As of March 31, 2024, we owned, operated, leased and managed multiple types of temperature-controlled warehouses across our global network, which we group into four types: distribution, public, production advantaged and managed warehouses.

 

   

Distribution centers are warehouses that typically store products for multiple customers often in or near difficult to duplicate metropolitan, infill or port locations.

 

   

Publicwarehouses are warehouses that typically store products for multiple customers usually outside metropolitan and infill locations.

 

   

Production advantaged warehouses are warehouses adjacent to or near customer production facilities.

 

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Managed warehouses are facilities owned or leased by the customer for which we manage the warehouse operations on their behalf.

 

Warehouse Type

   Cubic Feet
(in millions)
     Pallet
Positions
(in thousands)
     Number of
Warehouses
     NOI
(in millions)(3)
     Percentage of
total NOI(3)
 

Distribution

     2,035        6,666        283      $ 1,150        76.3

Public

     474        1,975        124        180        11.9

Production Advantaged

     291        1,163        41        159        10.6

Managed / Other(1)

     117               15        18        1.2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total(2)

     2,917        9,804        463      $ 1,507        100
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Includes costs associated with land held for development.

(2)

Totals may not sum due to rounding. Excludes 19 warehouses in our global integrated solutions segment. We categorize warehouses as part of our global integrated solutions segment if the primary business conducted in those warehouses is within our global integrated solutions segment.

(3)

For the twelve months ended March 31, 2024.

Our broad network of warehouses is weighted towards high-population density markets and port locations, with a weighted average population density of approximately 3,100 persons per square mile and 241 port facilities across our network. We define a warehouse as a port facility if it is within 30 miles of a port that performs commercial or trade-related activity. These markets feature high value real estate that serve as critical nodes in our customers’ supply chains, which we believe in turn supports high economic occupancy, low volatility in demand, productive NOI generation and strong growth.

 

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The following maps show the locations of our temperature-controlled warehouses around the world as of March 31, 2024.

 

 

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Note: Includes 19 warehouses in our global integrated solutions segment and countries where we only have a presence through our global integrated solutions segment.

(1)

Based on global warehousing segment revenues for the twelve months ended March 31, 2024. Reflects countries in which our local network of temperature-controlled warehouses is the largest, as measured by cubic feet capacity.

 

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Global Map of Assets with Population Density

 

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(1)

U.S. data per U.S. Census Bureau, ArcGis, public filings and SNL.

(2)

Non-U.S. data per NASA Socioeconomic Data and Applications Center (SEDAC) managed by the Center for International Earth Science Information Network (CIESIN), Earth Institute, Columbia University.

We store frozen and perishable food and other products and provide related warehouse services for our customers. Storage revenues relate to the act of storing products for our customers within our warehouses. Storage revenues can be in the form of storage fees we charge customers for utilization of non-exclusive space or a set amount of reserved space in a warehouse, blast freezing fees we charge customers for utilization of specific ultra-cold spaces within a warehouse designed to rapidly reduce product temperature and rent we charge customers for the lease of warehouse space pursuant to a lease agreement. Warehouse services fees relate to handling and other services required to prepare and move customers’ pallets into, out of and around our facilities. As part of our warehouse services, we offer handling, case picking, order assembly and load consolidation, quality control, re-packaging and government-approved inspections, among other services, for which we charge fees. Across our warehouses, we primarily offer frozen storage temperatures and in many facilities we also offer chill temperatures, which are higher than freezing but lower than ambient. We also manage warehouses for customers on a limited basis.

 

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As of March 31, 2024, the cubic-foot weighted average age of our portfolio was approximately 21 years, which we believe is significantly younger than that of the broader temperature-controlled industry. In addition, many of our warehouses may operate in a way that is functionally younger than their age given the substantial investments or refurbishments we have made that do not factor into the age calculation in areas such as maintenance, automation, energy efficiency and sustainability. From 2021 through March 31, 2024, we have invested over $474 million in recurring maintenance capital and integration expenditures we incur when we acquire new warehouses and approximately $366 million in repair and maintenance operating expense across our existing warehouse network because we believe that a more modern and consistently maintained network enhances prospects of winning new customers, retaining existing customers, extending our network’s useful lives and driving more efficient operations, improved profitability and greater cash flow.

Our Global Integrated Solutions Segment

 

 

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Our global integrated solutions segment provides our customers with solutions to move products through the food supply chain. The majority of our customers’ supply chain costs come from the movement of their products between warehouse nodes, rather than from the cost of warehousing. We believe transportation represents on average more than three times the cost of warehousing as part of our customers’ supply chain expense. Our integrated solutions provide value-added benefits to warehousing customers, helping them to reduce transport costs while enabling us to generate additional revenue on the same product stored.

We operate several critical and value-added temperature-controlled business lines within our global integrated solutions segment, including, among others, transportation and refrigerated rail car leasing. Within transportation, which is the largest area within our global integrated solutions segment, our core focus areas are multi-vendor less-than-full-truckload consolidation, drayage services to and from ports, over-the-road trucking and freight forwarding. We also provide foodservice distribution in select markets and e-commerce fulfillment services. For the twelve months ended March 31, 2024, transportation and refrigerated rail car leasing together accounted for approximately 67% of our global integrated solutions segment NOI.

We believe that data-driven visibility into our customers’ warehouse volumes and shipping destinations enables us to provide efficient integrated solutions. These services deepen our customer relationships, allow for an “all services under one roof” experience and promote cross-sale opportunities within our warehouses. As we collaborate with our customers across their supply chains, we seek to reduce waste and redundancy and deliver more cost efficient and sustainable solutions for them. We believe that our comprehensive set of integrated solutions offerings differentiates us from our competitors, positions us well to win new business, strengthens customer retention and enhances the value of our warehousing business.

 

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The following chart summarizes our total NOI generation from Lineage customers who utilize our warehousing business and Lineage customers who exclusively utilize Lineage integrated solutions:

NOI by Customer Type

 

 

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(1)

Estimated based on global warehousing segment NOI for the twelve months ended March 31, 2024 and, as it relates to Lineage’s global integrated solutions segment NOI, the relative revenue contribution from Lineage customers who utilize our warehousing business and Lineage customers who exclusively utilize Lineage integrated solutions.

(2)

Total NOI represents the sum of both the global warehousing segment and global integrated solutions segment.

Market Opportunity

We believe temperature-controlled warehousing and integrated solutions are an essential part of safeguarding the global food supply chain, as they provide perishable food producers, distributors, retailers and foodservice providers access to food-grade storage facilities and supply chain services critical for maintaining food safety, while promoting sustainability from farm to table. IBISWorld projects that U.S. cold storage revenue will grow 3% annually over the next five years to $9.6 billion in 2028. We also believe that the temperature-controlled warehousing market is large, growing and resilient, driven by the durability of food consumption through macro cycles, stock-keeping unit proliferation, global population growth, rising disposable incomes and shifting consumer preferences towards perishable foods. These factors further increase the need for additional temperature-controlled warehousing capacity to meet current and anticipated future market demand. The market remains fragmented, with the top ten temperature-controlled warehousing operators representing only 23.5% of the global public temperature-controlled warehousing cubic feet capacity. Given the fragmented nature of the market, we believe that large, well-capitalized operators like Lineage are often best positioned to meet the growing demand for cold storage, provide value-added integrated solutions to their customers and differentiate themselves through investments in technology.

Generally, steady demand in the food industry has created consistent cold chain demand, which has provided our business with strong cash flows even during periods of broader economic stress. As shown in the figure below, the U.S. temperature-controlled warehousing industry has experienced relatively stable revenue growth, even in periods marked by significant turmoil in the global financial markets, commodity shocks, secular

 

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shifts in consumer habits and preferences, the global COVID-19 pandemic and the ensuing supply chain disruption and periods of significant global inflation.

Resilient Industry Dynamic

 

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(1)

Per IBISWorld report.

(2)

2023 GCCA North America Top 25 List (May 2023).

Our Competitive Strengths

We believe we are the premier technology-enabled temperature-controlled warehousing REIT in the world, as evidenced by the following competitive strengths:

We are the global leader in a fragmented industry with meaningful scale and network benefits.

We are the largest temperature-controlled warehousing company globally, including in some of the world’s largest developed markets such as the United States, Canada, the United Kingdom, Continental Europe, Australia and New Zealand. As measured by cubic feet of storage space, we are approximately twice the size of our next largest competitor globally and are as large as our next nine global competitors combined, as reflected in the charts below.

Estimate of Top 10 Global Temperature-Controlled

Companies’ Cubic Feet Capacity and Market Share

 

 

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Source:

2024 GCCA Global Top 25 List (April 2024), except Lineage figures, which are based on company data as of March 31, 2024, and Americold Realty Trust, Inc. (“Americold”) figures, which are based on public filings of Americold with the U.S. Securities and Exchange Commission (“SEC”) as of March 31, 2024. We present data with respect to Americold, as Americold is our largest competitor for whom data is publicly available. Global market share is based on total global capacity from 2020 GCCA Global Cold Storage Capacity Report (August 2020).

 

(1)

As of March 31, 2024, Lineage owned 9.0% of the investment interests in Emergent Cold LatAm Holdings LLC as well as a right to receive an additional portion of certain profits generated by Emergent Cold LatAm Holdings LLC, which could represent anywhere from zero to 10% of the additional profits generated on invested capital.

Estimate of Top 10 North American Temperature-Controlled

Companies’ Cubic Feet Capacity and Market Share

 

 

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Source:

2024 GCCA North America Top 25 List (April 2024), except Lineage figures, which are based on company data as of March 31, 2024, and Americold figures, which are based on public filings of Americold with the Securities and Exchange Commission, or the SEC, as of March 31, 2024. North America market share based total North American capacity from 2020 GCCA Global Cold Storage Capacity Report (August 2020).

Approximately 97% of our global warehousing segment revenues are from countries in which our local network of temperature-controlled warehouses is the largest, as measured by cubic feet of capacity. The interconnected nature of our global warehouse network aligns with the global nature of many of our customers, allowing us to provide warehousing services to many of them across multiple geographies. On average, our top 25 customers utilize 23 of our facilities per customer, and eight of our top 10 customers use our facilities in multiple countries.

We believe that our network and the economies of scale in our business drive operational leverage and allow us to invest in customer service and technology, which, in turn, attracts more customers. With a larger customer base, we believe that we can leverage our resources more efficiently, supporting strong profitability. Moreover, our growing customer base enables us to gather and analyze vast amounts of data. We believe that this data-driven approach empowers us to continuously refine our operations, improve productivity and lower operating costs, creating a “win-win” scenario for both our customers and Lineage.

We believe that it would be difficult and costly to replace or replicate our network of temperature-controlled facilities given the high and rising value of industrial land, difficulties in obtaining land and zoning entitlements and

 

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approvals and the significant and increasing construction costs of temperature-controlled warehouses. As of March 31, 2024, we owned approximately 80% of our global warehousing portfolio as a percentage of square feet, including ground leases and real estate for which we possess bargain purchase options, and we leased or managed 20% of our global warehousing portfolio as a percentage of square feet.

Our high quality portfolio is located in highly desirable and strategic locations around the world.

Our cubic-foot weighted average facility age is approximately 21 years, which we believe is significantly younger than that of the broader temperature-controlled warehousing industry. Moreover, our portfolio includes 81 fully- and semi-automated warehouses, which we believe is the most of any cold storage provider in the world, making our network the most technologically advanced in our industry. We believe that modern warehouses are more desirable to our customers because of their increased operational efficiency and enhanced ability to meet today’s most sophisticated customer needs.

We have a robust presence in key metropolitan statistical areas, or MSAs, and ports throughout the United States with a larger number of facilities in such locations relative to our largest competitor, which drives a significantly higher weighted average population density of approximately 3,100 persons per square mile.

We have a particularly strong presence in top-tier U.S. markets, including New York/New Jersey, Los Angeles and Southern California, Chicago, Dallas-Fort Worth, Houston, Kansas City, Denver, Philadelphia, Miami, Atlanta, Boston, the Bay Area and Northern California, Seattle and the Pacific Northwest. We consider these U.S. markets to be key geographies, as we believe they have among the highest industrial real estate values and lowest cap rates in our industry.

Our business is highly diversified across geographies, commodities and a high-quality, loyal customer base.

Our business profile is highly diversified, which reduces risks to our cash flows from potential headwinds linked to any one facility, market, commodity, food consumption channel or customer. We have 482 facilities globally, with no facility accounting for more than 1.1% of revenues during the twelve months ended March 31, 2024.

The following charts provide information regarding the temperature-controlled warehouses in our global warehousing segment that we owned, leased or managed in each of the regions in which we operated as of March 31, 2024.

Warehouse Segment Geographic Revenue and NOI Diversification

 

 

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Note: Percentages may not sum to 100% due to rounding.

 

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In addition, our global warehousing segment revenues for the twelve months ended March 31, 2024 were diversified by commodity type as demonstrated by the graph below.

Commodity Type as Percentage of Global Warehousing Segment Revenue

 

 

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Note: Percentages may not sum to 100% due to rounding.

As of March 31, 2024, we served more than 13,000 customers around the world across numerous commodity categories and with complex requirements in the food supply chain. Our customer base was highly diversified, with no customer accounting for more than 3.3% of revenues for the twelve months ended March 31, 2024.

The following chart sets forth the percentage of our total revenues attributable to our top 15 and top 25 customers for the twelve months ended March 31, 2024.

Customers as Percentage of Total Revenue

 

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We target dependable customers with strong credit profiles, as evidenced by the fact that over 60% of the revenue generated from our top 25 customers is from companies with at least one investment grade rating at the parent or subsidiary level from Moody’s, S&P or Fitch. Additionally, 93% of our top 25 customers that are publicly-traded or have a publicly-traded parent company also have at least one investment grade rating.

Our customer base is loyal, with a weighted average customer relationship, including relationships with legacy companies we have acquired, of over 30 years across our current top 25 customers based on revenues for the twelve months ended March 31, 2024. We believe this loyalty is driven by:

 

   

the mission-critical role we play in our customers’ cold chain;

 

   

the expansive and interconnected nature of our warehouse network;

 

   

the locations of our warehouses and the services we offer;

 

   

the comprehensive suite of integrated solutions that we offer to our customers; and

 

   

excellent customer service and innovative technologies.

Our complementary, value-added global integrated solutions segment drives customer value, retention and growth.

In addition to our temperature-controlled warehousing operations, we offer a comprehensive suite of value-added integrated solutions that we believe are highly complementary and valuable to our warehouse customers. These services deepen our customer relationships by providing an “all services under one roof” experience and promoting cross-sell opportunities. Given the majority of our customers’ supply chain costs come from product movement versus storage, this integration provides a value-added benefit to warehousing customers of reducing transport costs while enabling us to generate additional revenue on the same product stored. For the twelve months ended March 31, 2024, we estimate that approximately 93% of our total NOI was generated by our warehouse customers (based on our global warehousing segment NOI and, as it relates to our global integrated solutions segment NOI, the relative revenue contribution from our customers who utilize our warehousing business and our customers who exclusively utilize our integrated solutions).

We believe we can grow our global integrated solutions segment by offering these services to customers who have not yet utilized them, often with minimal incremental capital investments required, and likewise that our integrated solutions offerings can generate customer leads for our global warehousing segment.

Our highly synergistic platform differentiates us from our competitors, supports a strong win rate with new business, enhances customer loyalty and increases the value of our warehousing business.

We believe we are an innovative industry leader driving disruption with differentiated technology.

In a traditionally analog, fragmented and family-owned industry, we believe that our innovation and large-scale deployment of cutting-edge technology provides a comprehensive service offering for our customers that enhances our competitive position relative to our peers, while driving industry-leading growth and margins. Since the start of 2019, we have invested more than $725 million into transformational technology initiatives, which include developing, acquiring and deploying both proprietary operating systems and third-party platforms, an amount we believe is more than any of our industry competitors. In addition, since the start of 2019, we have deployed approximately $380 million to capital and operating expenses in information technology investments. This investment encompasses migrating workloads to the cloud, implementing SaaS-based tools, rolling out next-generation SD-WAN, and upgrading our core human capital and financial ERP software. These initiatives are strategically designed to standardize, integrate, and enhance the technological framework across our enterprise. In addition, our deliberate and forward-thinking focus has allowed us to create what we believe is the largest automated portfolio in the industry with 81 fully-and semi-automated facilities backed by innovative proprietary software and an in-house automation team.

 

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Due to the increasing demand for automated solutions from our customers, the higher construction cost of automated facilities and the complexity of implementing automated solutions, we expect the growth of automation in our warehouse network to be a key differentiator for Lineage over time.

Some key elements of our technology strategy include the following:

 

   

Establishing a highly integrated platform. We use a standardized and disciplined approach to apply our best practices to integrating acquired companies. This has been a core part of our strategy since our inception. As of March 31, 2024, approximately 95% of our global warehousing segment revenue for the twelve months ended March 31, 2024 was integrated on our human capital and financial enterprise resource planning (“ERP”) software. As of March 31, 2024, approximately 69% of our global warehousing segment revenue for the twelve months ended March 31, 2024 flowed through one of our four Core WMS, excluding facilities leased to customers and managed facilities. We are in the process of growing this percentage across our network. From 2019 through March 31, 2024, we converted over 100 facilities to Core WMS, demonstrating our strong conversion record and ability to increase the penetration rate quickly. As of March 31, 2024, all of our global warehousing segment revenue was reporting on metricsOne, a proprietary operating KPI dashboard that provides enhanced visibility into our operational execution, labor, safety and financial performance.

 

   

Providing a superior customer experience to support growth and retention. We have deployed proprietary operating systems and third-party platforms to improve customer experience and retention. We have developed Lineage Link, a proprietary customer visibility platform that empowers customers to actively manage their inventories, orders, shipments and transportation appointment scheduling across our warehouse network, which seeks to drive incremental NOI through increased efficiencies for customers and Lineage. Through March 31, 2024, Lineage Link had been rolled out across approximately 63% of our network as measured by global warehousing segment revenues for the twelve months ended March 31, 2024, and we are in the process of further growing its penetration. We believe these technologies will support customer retention as we improve our responsiveness to our customers’ complex and evolving needs.

 

   

Maximizing yield and productivity to support leading NOI growth. We are in the initial phases of deploying proprietary operating systems and third-party platforms to seek to drive NOI yield, operational productivity and process automation across our warehouse network and thereby drive margin improvement. Our specialized warehouse execution system, LinOS, is engineered to boost our operational efficiency. It employs unique, patented algorithms to optimize task allocation among team members and strategically prioritize tasks within our warehouses. Currently operational in select automated facilities, LinOS shows significant potential for extensive deployment across our conventional warehouse network in the future. In addition, we are implementing a third-party contracting and invoicing platform that automates the processes of quoting, contracting and invoicing, which we believe will lead to more dynamic and standardized implementation of revenue growth initiatives. As of March 31, 2024, this platform had been rolled out across facilities comprising approximately 58% of our network as measured by global warehousing segment revenues for the twelve months ended March 31, 2024, and we are in the process of further growing its penetration. In addition, our productivity and process automation initiatives are supported by our in-house data science team, which is comprised of 50 applied science and product professionals that provide data-driven business intelligence and innovations to maximize operational efficiencies, revenues, profitability, energy efficiency and cash flows. Our innovations have yielded 96 patents issued and 151 patents pending as of March 31, 2024, in such areas as facility design, methods and mechanisms for operating facilities, refrigeration and thermodynamic designs and cold-rated instrumentation.

We have a purpose-driven, experienced and aligned management team and board of directors that believe robust corporate governance is essential to long-term value creation for all stockholders.

Our experienced management team and board of directors have proven backgrounds both inside and outside the temperature-controlled warehousing industry. Since founding Lineage with a single asset in 2008, our

 

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Co-Founders and Co-Executive Chairmen have developed a strong operating and capital deployment track record while displaying a commitment to building a durable business. The average tenure of members of our senior management is over eight years. Our management team is led by our Chief Executive Officer, Greg Lehmkuhl, who joined our company in 2015.

Finally, as evidence of the confidence in our company, our current equity holders represent some of the strongest and most sophisticated institutional investors globally. We have raised more than $9.0 billion of equity capital since inception and more than $8.5 billion since the start of 2018 from these investors over multiple capital raises (in each case, including equity issued to sellers in connection with our acquisitions and reinvestment by our Co-Founders).

We have a strong and flexible balance sheet and we have demonstrated access to debt and equity capital to support growth.

As of March 31, 2024, after giving effect to the repayment of debt with net proceeds of this offering, our balance sheet will be significantly de-levered, 69% of our debt will be unsecured and 77% of our debt will be fixed or interest rate hedged and our total liquidity, including cash on hand and available revolver capacity, will be $2.0 billion, supporting our external growth strategy. We will have also increased our unencumbered asset pool to over $16.3 billion on a pro forma basis as of March 31, 2024, which we believe will provide us with the ability to upsize our facilities while maintaining future flexibility once we become a public company. We intend to preserve a flexible capital structure with an investment grade profile. We believe that our balance sheet flexibility and strength will allow us to continue expanding our business and pursue new growth opportunities.

We operate with the purpose to transform the global food supply chain to eliminate waste and help feed the world.

As we strive to play a key role in shaping the global food chain, we recognize our responsibility to help create a more sustainable, equitable future. Accordingly, we work to strategically integrate sustainability initiatives into the way we do business, working to act in alignment with our core values to guide our policies.

To help tackle food insecurity, we established the Lineage Foundation for Good as a non-profit charity to serve the communities in which we operate. In response to COVID-19, we launched our “Share a Meal” Campaign with Feeding America, supporting the organization’s temperature-controlled supply chain needs with our assets. Since 2020, we have donated the equivalent of over 176 million meals, including through our “Share a Meal” Campaign and in partnership with customers donating surplus product, team members donating food to local food banks and grants issued to help build capacity at food banks around the globe. As a result of these and other initiatives, we were named a Visionary Partner of Feeding America and a Fast Company’s 2021 World Changing Ideas Awards finalist in the Pandemic Response category.

We have also signed The Climate Pledge, committing to achieve net zero carbon emissions across our global operations by 2040. Through solar installations at our facilities, we are the fifth-largest corporate producer in the United States, and the second-largest REIT producer, of on-site solar and battery capacity per the 2022 Solar Means Business Report published by the Solar Energy Industry Association (SEIA). Our goal is to achieve a top-three corporate ranking in the coming years. Our energy efficiency initiatives have resulted in four consecutive awards from the U.S. Department of Energy from 2019 to 2022 for innovations and leadership in flywheeling, blast freezing, energy procurement and hedging and deployment of advanced refrigeration control systems.

Our Growth Strategy

Our objective is to maximize stockholder value by growing our business to expand solutions for our customers, creating opportunities for new and existing team members and driving innovation across our business

 

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and the supply chain to create efficiencies and increase sustainability. We believe these objectives are supported by our strategy for growth illustrated in our growth flywheel:

 

LOGO

 

   

We grow our same warehouse NOI and free cash flow through numerous organic business initiatives we have developed over many years. This growth helps delever our balance sheet and creates capacity for new investments.

 

   

Our strong cash flows and our tax efficient REIT structure help to create an efficient and attractive cost of capital to support our inorganic growth.

 

   

We deploy our capital into a deep pipeline of investments within our existing facilities, accretive greenfield and expansion development projects and acquisition opportunities at returns in excess of our cost of capital.

 

   

We then use our organic business initiatives and drive operational and administrative synergies to seek to grow our same warehouse NOI and cash flows post investment.

 

   

We then repeat the process through our growth flywheel.

Same Warehouse Growth

We have a history of robust same warehouse growth with strong operating leverage and cash flow generation. In 2023, our same warehouse NOI was $1,210.9 million, representing growth of 15.3% compared to same warehouse NOI of $1,050.6 million the prior year, and in 2022, our same warehouse NOI was $936.2 million, representing growth of 12.7% compared to same warehouse NOI of $830.5 million in 2021, which growth rates compare favorably to those of our largest competitor and publicly traded peer. Our same warehouse NOI margins of 40.3% in 2023 compared to 37.2% in the prior year and 39.0% in 2022 compared to 38.8% in the prior year compare favorably to those of our largest publicly traded competitor. In addition, we increased our global same warehouse storage revenue per economic pallet 6.2% and 8.1% and our same warehouse services revenue per pallet 7.4% and 13.8% in 2023 and 2022, respectively.

We expect to continue our organic growth through the following business initiatives:

 

   

Leverage the scale of our warehouse network and the breadth of our integrated solutions offerings to win new customers and expand our footprint with existing customers;

 

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Maximize our same warehouse NOI growth through occupancy and commercial optimization initiatives;

 

   

Further implement productivity tools and cost containment measures;

 

   

Use our integrated platform, scalable corporate infrastructure and business processes to realize synergies from recent acquisitions and drive same warehouse growth post-acquisition;

 

   

Strategically deploy innovative technologies to provide customers more sophisticated solutions while enhancing profitability; and

 

   

Transform the industry through our data science driven approach to warehouse control and design.

Accretive Capital Deployment

A cross functional network optimization, data science and automation team has overseen 39 major greenfield or expansion projects since the start of 2019, with total cost of approximately $1.2 billion, representing an NOI yield of approximately 9% to 11%. The total aggregate cubic feet of these projects is approximately 291 million, which is equivalent to the total warehousing capacity of the fourth largest standalone global temperature-controlled warehousing company. Since 2019, this team has also supported more than 375 economic return on capital projects within our warehouses to enhance organic growth. We have spent significant time and cost to establish a team of experts in construction, energy, automation and innovation, and we believe our development process and expertise, together with our robust pipeline of facility expansions and greenfield development, has the potential ability to drive future growth and ongoing value to our stockholders.

We believe we are an acquiror of choice in the industry, as demonstrated by our long history of acquiring leading companies through direct sourcing and long-term relationships with their owners. Our acquisition strategy targets profitable businesses with strategic, high-quality assets that complement our network and customers’ needs. These businesses often present opportunities to accretively deploy capital and recognize revenue and cost synergies. We have extensive experience acquiring cold chain companies of all sizes. In the last 16 years through March 31, 2024, we have executed 116 acquisitions with nearly two-thirds of those proprietarily sourced. Moreover, through 2023, we have achieved an approximately 12% NOI compounded annual growth rate from the temperature-controlled warehousing companies we acquired during the period of 2011 through 2021, excluding additional NOI growth as a result of post-acquisition greenfield and expansion initiatives, demonstrating the positive impact of Lineage’s comprehensive approach to integration and Lineage’s ability to compound capital over a long period of time.

We intend to continue our track record of accretive capital deployment through the following business initiatives:

 

   

Invest in potentially accretive projects across our existing facilities to enhance same warehouse growth;

 

   

Execute on our greenfield and existing facility expansion initiatives; and

 

   

Capitalize on strategically attractive and financially accretive acquisition opportunities.

Same Warehouse Growth

Same Warehouse Growth: Leverage the scale of our warehouse network and the breadth of our integrated solutions offerings to win new customers and expand our footprint with existing customers.

As the world’s largest temperature-controlled warehouse REIT based on cubic feet, we believe our portfolio of strategically located temperature-controlled warehouses and comprehensive set of integrated solutions create the scale and breadth of services to maximize value for both existing and new customers. Our platform includes 482 warehouses and is supported by more than 26,000 dedicated team members across 19 countries. Our modern warehousing assets are predominantly located in key port and infill locations that are strategic to customers of the

 

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cold chain. We believe the interconnected nature of our network and our presence in these strategic locations enables us to provide comprehensive solutions, competitively positioning us to both win new business and expand our footprint with existing customers.

Our warehouse portfolio is complemented by our integrated solutions business, offering an “all services under one roof” experience for our customers, providing our customers a holistic solution to their complex needs. This approach supports our growth by deepening our relationships with existing customers as well as allowing us to compete effectively for new customers. Additionally, the depth of our relationships allows us to seek to increase the penetration of customers utilizing both warehousing and integrated solutions.

Providing a global system of top-tier warehouses and ever broadening services has deepened our customer relationships with a growing customer base. As evidence of the interconnected nature of our warehouse and integrated solutions segments, as of March 31, 2024 our top 25 customers utilize an average of 23 of our warehouses per customer, with eight of our top 10 customers using our facilities in multiple countries. The interconnected nature of our integrated solutions business is demonstrated by our estimate that approximately 93% of our total NOI was generated by our warehouse customers for the twelve months ended March 31, 2024 (based on our global warehousing segment NOI and, as it relates to our global integrated solutions segment NOI, the relative revenue contribution from our customers who utilize our warehousing business and our customers who exclusively utilize our integrated solutions).

Same Warehouse Growth: Maximize our same warehouse NOI growth through occupancy and commercial optimization initiatives.

We seek to grow our same warehouse NOI through occupancy and commercial optimization initiatives. Our occupancy initiatives are highlighted by a focus on optimizing physical warehouse occupancy and improving economic occupancy through increased use of minimum storage guarantees, while our commercial optimization initiatives are enabled by customer profitability tools and allowing us to align rates charged to customers with our cost to serve.

 

   

Optimizing Physical Warehouse Occupancy Through Increased Utilization. Increases in warehouse physical occupancy generate high flow-through to NOI due to operational leverage. We seek to optimize physical occupancy in our existing warehouse network by winning new customers, expanding our business with existing customers and more efficiently matching customer profiles to the best available pallet positions in our markets. We support these initiatives with a team of sales and customer account management people who are focused on using the Lineage network to solve customers’ supply chain needs. These utilization initiatives have increased our physical occupancy from 78.0% in 2021 to 79.2% in 2022 and to 80.0% in 2023.

 

   

Increasing use of Minimum Storage Guarantees to Improve Economic Occupancy. We plan to expand our use of minimum storage guarantees that pay us minimum or fixed storage fees for pallet positions, whether they are physically occupied or not. We believe that transitioning certain customer contracts from on-demand, as-utilized structures to minimum storage guarantee structures will drive greater consistency of our NOI by increasing revenue predictability and enabling us to better manage our labor force while meeting customers’ needs. This strategy helps maintain our storage revenues during periods of lower inventories—matching ongoing revenue streams with fixed warehousing costs while allowing customers to reserve space to meet their needs. We believe that implementing minimum storage guarantees will continue to boost recurring revenue and enhance stability of cash flows, while allowing customers to plan for periods of increased need by reserving capacity and ultimately enabling a better temperature-controlled warehousing experience for our customers. Our minimum storage guarantee initiatives have increased our economic occupancy from 82.3% in 2021 to 83.2% in 2022 and to 86.0% in 2023.

 

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Commercial Optimization Initiatives. We employ three main types of customer contracts: warehouse agreements, rate letters and tariff sheets. We also earn rent under lease agreements pursuant to which we lease a portion of a warehouse or an entire warehouse. Warehouse agreements and rate letters generally provide us with some flexibility to pass on rate increases to customers during the term of the contract. Warehouse agreements and rate letters often also include mechanisms to adjust rates for inflationary cost increases and customer profile changes, while tariff sheets are short-term in nature and can generally be updated upon 30 days advance notice. We are generally able to translate industry-wide rent increases into storage rate increases to customers, and our various rate adjustment mechanisms generally allow us to pass on both storage and handling rate increases to customers as necessary to account for inflation in operational costs such as wages, power and warehouse supplies as well. Additionally, we have been refining an array of tools to evaluate relative customer profitability to ensure that we are allocating our warehouse space to the customers that value it the most.

 

   

Aligning Rates with Cost to Serve. We are deploying technologies such as a third-party contracting and invoicing platform to professionalize our commercial optimization capabilities across our company. We are driving standardization of rates across our warehouse network as well as seeking to implement standardized billing practices to ensure that we are adequately compensated for all services performed. Incremental cost to serve charges capturing previously unbilled services are anticipated to support NOI growth as these initiatives are implemented across our warehouse network. In addition, to deliver the best service and most efficient cost to serve, we seek to closely monitor agreed-upon customer profiles in our contracts and make pricing adjustments as necessary to compensate for variances.

Same Warehouse Growth: Further implement productivity and cost containment measures to grow same warehouse NOI.

We seek to grow our NOI by reducing our operating expenses with a specific emphasis on two of the largest cost drivers facing the temperature-controlled warehouse industry: labor and energy.

 

   

Labor Productivity. Labor and benefits represent the largest variable cost of operating a temperature-controlled warehouse. We employ multiple strategies to maximize labor productivity, such as our focus on lean operating principles and our emphasis on team member retention. The implementation of lean operating principles drives operational excellence, which we believe leads to greater productivity and consistency over time resulting in better customer service and better operating results in certified warehouses. We anticipate the implementation of these operating principles will support NOI growth as we significantly expand internal certification in our portfolio from 67 warehouses certified out of 482 total warehouses as of March 31, 2024. We internally certify warehouses based on their progression across six categories—culture, standardized work, visual management, problem solving, just-in-time and quality process. Our focus on labor retention through total rewards, market wage benchmarking, team member onboarding and training leads to increased tenure and reduced turnover, which generally increases productivity, reduces recruiting costs and has knock-on benefits in other areas of the warehouse such as reduced maintenance expense and claims, as well as better customer service. We have extensive experience with many of these tools through various labor market conditions, including the challenging labor market driven by COVID-19. We are seeing evidence that these tools are having a positive impact as the labor market continues to normalize post pandemic.

 

   

Energy Efficiency. We seek to maximize energy efficiency in our warehouses through the application of best practices, implementation of the latest technology and generation of alternative sources of energy. Our best practices include energy hedging strategies and a centralized energy and sustainability team that deploys these initiatives across our network to ensure standardization and minimization of energy waste. The technologies we deploy to optimize energy efficiency include variable frequency drives, advanced refrigeration control systems, rapid close doors, motion sensor technology, LED lighting and “flywheeling,” an innovative process that leverages machine learning and artificial

 

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intelligence to manage energy load based on predictions of power prices based on fluctuations in demand. Our approach to generating alternative sources of energy is primarily through the deployment of onsite solar, onsite battery capacity and onsite generators. Our focus on energy efficiency in our portfolio reduces our operating costs and supports stronger and more predictable NOI margins and growth while also supporting our sustainability initiatives.

Same Warehouse Growth: Use our integrated platform, scalable corporate infrastructure and business processes to realize synergies from recent acquisitions and drive same warehouse growth post-acquisition.

We have a long history of acquiring and integrating companies into the Lineage platform and expect to continue to drive growth from more recently acquired companies as well as acquisitions in the future. We anticipate driving future growth by leveraging our broad and deep customer relationships, applying our management best practices, driving penetration of our suite of integrated solutions and technology offerings, investing growth capital and generating cost efficiencies through our corporate scale and elimination of redundant overhead expenses.

Since inception, we have demonstrated an ability to drive growth from the integration of acquisitions to capture synergies and fuel greater future earnings potential. We believe we will continue to unlock potential substantial value from acquired companies. Moreover, through 2023, we have achieved an approximately 12% NOI compounded annual growth rate from the temperature-controlled warehousing companies we acquired during the period of 2011 through 2021, excluding additional NOI growth as a result of post-acquisition greenfield and expansion initiatives, demonstrating the positive impact of Lineage’s comprehensive approach to integration and Lineage’s ability to compound capital over a long period of time.

Our rapid pace of inorganic expansion and the need for significant integration resources and the expense related to Core WMS conversions have resulted in substantial growth in general and administrative expenses. As we integrate our many acquired businesses, we are focused on realizing the benefits of scale and operational leverage and believe we have opportunities to further eliminate redundant overhead expenses and reduce expenditures on integration resources over time. Historically, as we have integrated acquired companies, we have also often been able to generate synergies in areas such as procurement, benefits and insurance, where our corporate programs are often more efficient than those of the acquired companies and anticipate continuing to do so in the future.

Same Warehouse Growth: Strategically deploy innovative technologies to provide customers more sophisticated solutions while enhancing profitability.

We view innovative technologies as core to who we are at Lineage and strategic to maintaining our competitive position relative to our peers, driving industry leading margins and growth and providing the best service to our customers. We believe our significant previous investments have allowed us to build a superior technology-enabled platform designed to meet the needs of our customers into the future and anticipate that deploying these technologies will support potential continued growth in our NOI while transforming the experience for our customers with a digitally connected cold chain and enhancing operational excellence inside our warehouses.

 

   

Transforming the experience for our customers with a digitally connected cold chain. We plan to continue the roll out of proprietary operating systems and third-party platforms focused on providing a superior customer experience and increasing customer loyalty. Our proprietary Lineage Link platform empowers customers to digitally manage their inventories, orders, shipments and transportation appointment scheduling across our warehouse network through a dynamic user interface that significantly improves the customer experience. This tool also replaces antiquated paper and email based processes that lead to faster interactions, fewer errors and a meaningfully lower cost to serve, which should drive potential incremental NOI. As of March 31, 2024, Lineage Link has been rolled out

 

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across approximately 63% of our network as measured by global warehousing segment revenues for the twelve months ended March 31, 2024. We believe the continued roll out of this tool and continued product enhancement will yield attractive future benefits.

 

   

Enhancing operational excellence inside our warehouses. We seek to integrate our network onto our common technology systems to standardize operations and increase productivity. We have already largely integrated all of our facilities into our human capital and financial ERP software and our proprietary metricsOne operating KPI dashboard. We are working to increase the number of our warehouses that utilize one of our four Core WMS systems. As of March 31, 2024, approximately 69% of our global warehousing segment revenue for the twelve months ended March 31, 2024 flowed through one of our four Core WMS, excluding facilities leased to customers and managed facilities. We are in the process of growing this percentage across our network. We expect increased penetration of our four Core WMS throughout our network to drive operational productivity, reduce general and administrative expenses and accelerate our ability to deploy digital technology solutions network-wide. We believe that the development and subsequent deployment of LinOS and a third-party contracting and invoicing platform will make our operations more efficient and potentially generate NOI growth once fully integrated.

Additionally, our general and administrative spend currently includes substantial growth and technology investments, which we refer to as transformational technology G&A, such as the development and subsequent deployment of our technology operating systems. Once fully integrated, we believe we will benefit from operating leverage as these new investments are spread across our growing portfolio.

Same Warehouse Growth: Transform the industry through our data science driven approach to warehouse control and design.

Our productivity and process automation initiatives are supported by our in-house data science team, which is comprised of 50 applied science and product professionals that provide data-driven business intelligence and innovations to maximize operational efficiencies, revenues, profitability, energy efficiency and cash flows. Our innovations have yielded 96 patents issued and 151 patents pending as of March 31, 2024, in such areas as facility design, methods and mechanisms for operating facilities, refrigeration and thermodynamic designs and cold-rated instrumentation. These innovations offer numerous ways to potentially grow our NOI, including through optimization of our conventional racking systems, algorithms that better allocate tasks in the warehouse and improvements in electricity consumption for blast freezing. We believe that many of these innovations have now been successfully piloted and can be rolled out to other similar use cases.

Accretive Capital Deployment

Accretive Capital Deployment: Invest in potentially accretive projects across our existing facilities to enhance same warehouse growth.

We continually evaluate opportunities to drive organic growth within our existing facilities through accretive capital deployment into high economic return on capital opportunities, such as re-racking projects to increase pallet capacity, installation of opportunity chargers, solar projects to improve energy efficiency and the addition of blast cell capacity. In addition to potentially generating incremental revenues and NOI, return-on-capital projects are intended to enhance our facilities’ ability to best serve our customers’ needs with the most advanced and customized solutions available. Many of these projects are supported by our applied science, energy management and product professionals that provide data-driven business intelligence and innovations to maximize operational efficiencies, revenues, profitability, energy efficiency and cash flows. Since 2019, our team has supported more than 375 economic return on capital projects within our warehouses to enhance organic growth.

Accretive Capital Deployment: Execute on our greenfield and existing facility expansion initiatives.

Because of our reputation for delivering innovative new development projects and the benefits of participating in our industry-leading warehouse network, customers often choose to partner with us for their

 

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largest and most important projects. In addition, we have spent considerable time and investment establishing an in-house warehouse network optimization team comprised of warehouse design, automation and construction experts. We expect our development expertise will continue to support our growth as we potentially realize the returns on our recently completed greenfield and expansion projects and deliver on our industry-leading pipeline of greenfield development and expansion opportunities.

 

   

Recently Completed Greenfield and Expansion Projects. Since March 31, 2021 through March 31, 2024, we completed 25 greenfield and expansion projects totaling approximately $922 million in costs.

 

Recently

Completed

Projects

   Square Feet
(in millions)
     Cubic Feet
(in millions)
     Pallet
Positions
(in thousands)
     Total Cost
(in millions)(1)
     Twelve
Months Ended
March 31, 2024
Revenue Less
Operating
Expenses
(in millions)
     Weighted
Average
Targeted NOI
Yield
 

25

     3.3        179        571      $ 922      $
47
 
     9%-12%  

 

  (1)

Includes approximately $7 million of remaining spend.

No assurance can be given that our weighted average targeted NOI yield range will be achieved. For additional information regarding the calculation methodology and assumptions relating to our weighted average targeted NOI yield range for greenfield and expansion projects, please see “Business and Properties—Our Growth Strategy—Accretive Capital Deployment: Execute on our greenfield and existing facility expansion initiatives.”

 

   

Industry-Leading Pipeline of Greenfield and Expansion Opportunities.

 

   

Under Construction Pipeline. As of March 31, 2024, we had eight greenfield development and expansion projects under construction.

 

Under

Construction

Projects

  Estimated
Square Feet

(in millions)
    Estimated
Cubic Feet
(in millions)
    Estimated
Pallet
Positions
(in thousands)
    Estimated
Total Cost
(in millions)
    Remaining
Spend

(in millions)
    Twelve
Months Ended
March 31, 2024
Revenue Less
Operating
Expenses

(in millions)
    Weighted
Average
Target NOI
Yield
 
8     1.2       70.3       235     $ 578     $ 310     ($ 4     9% -11

No assurance can be given that we will complete any of these projects on the terms currently contemplated, or at all, that the actual cost or completion dates of any of these projects will not exceed our estimates or that the targeted NOI yield range of these projects will be consistent with our current projects.

We believe we have industry-leading automation capabilities, including 24 fully automated facilities totaling 386 million cubic feet and 57 semi-automated facilities totaling 361 million cubic feet as of March 31, 2024, which we believe is the most of any temperature-controlled warehousing provider in the world. Our proprietary technology and unique approach to automation enables us to provide customers with truly customizable solutions to address their warehouse needs. For many years, we have been building our own in-house team of automation and software integration experts. All of our development projects are designed in-house based on actual customer data and profiles. Unique to our industry, we have developed proprietary automation control software that helps us optimize our automated warehouse operations. For new developments, because we own our own software, we can select the best hardware regardless of manufacturer, to build what we believe are the most cost-effective and most advanced automated warehouses in our industry. We intend to continue our leadership in temperature-controlled warehouse automation through development of next-generation automated warehouses as part of our pipeline. We anticipate approximately 58% of the total added

 

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pallet positions of our facilities under construction as of March 31, 2024 will be fully automated. Automated facilities generally produce a lower cost to serve and lower resource consumption, presenting an attractive solution to our customers and positioning us well to win new business and grow our cash flows from operations.

 

   

Future Long-Term Pipeline. As of March 31, 2024, we owned approximately 1,227 acres of undeveloped land or “Land Bank” in addition to the owned land included in our under-construction pipeline. Our Land Bank has the potential to support future greenfield development and expansion opportunities, with an estimated cost to replace as of March 31, 2024 of approximately $462 million based on broker inquiries, comparable land sales and our internal estimates. As of March 31, 2024, we were researching or underwriting a range of greenfield development and expansion opportunities as part of our future long-term pipeline, including 16 projects globally at various phases of research and underwriting. The projects in our future long-term pipeline include both projects where we already own the land and projects for which we will need to acquire incremental land. We currently expect that the targeted weighted average NOI yield range of these projects will be generally consistent with our recent projects.

Estimated Land
Bank

(in acres)

   Estimated
Square Feet

(in millions)(1)
     Estimated
Cubic Feet
(in millions)(1)
     Estimated
Pallet Positions
(in millions)(1)
     Estimated Cost
to Replace
(in millions)(2)
 

1,227

     17.7        728        2.4        $462  
           

Greenfield
Development and
Expansion
Opportunities

   Estimated
Square Feet

(in millions)(3)
     Estimated
Cubic Feet
(in millions)(3)
     Estimated
Pallet Positions
(in thousands)(3)
     Estimated
Construction Cost
(in millions)(2)
 

16

     4.1        246        748        $1,850  

 

  (1)

Square feet, cubic feet and pallet positions reflect potential capacity undeveloped land can support through future greenfield development and expansion based on typical warehouse designs.

  (2)

Estimated cost to replace is based on broker inquiries, comparable land sales and our internal estimates as of March 31, 2024.

  (3)

Square feet, cubic feet and pallet positions reflect potential capacity of greenfield development and expansion opportunities based on current research and underwriting.

We have not commenced construction on any potential projects in our long-term pipeline, the completion of which is subject to various factors, including budgeting, diligence, internal and third-party approvals and other factors. No assurance can be given that we will pursue or complete any of these projects on the terms currently contemplated, or at all, that the actual cost or completion dates of any of these projects will not exceed our estimates or that the targeted NOI yield range of these projects will be consistent with our current projects.

Accretive Capital Deployment: Capitalize on strategically attractive and financially accretive acquisition opportunities.

The temperature-controlled warehousing sector remains highly fragmented and is generally comprised of many family-owned and independent companies that may lack the capital, technology, customer relationships, development expertise, technical knowledge and management sophistication that we possess. For example, we estimate based on GCCA data that over 100 temperature-controlled warehousing companies operate in the U.S. market alone and that there are approximately 4.4 billion cubic feet available for growth in North America. We believe that there remain substantial whitespace opportunities in geographies such as Europe, Asia, the Middle East and Africa and that there are approximately 22.4 billion cubic feet available for growth globally. As a result, we see significant potential opportunity in continuing to execute on our proven acquisition strategy, which targets profitable businesses with strategic, high-quality assets that complement our warehouse network and customers’

 

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needs. In addition to operating businesses, there also remain real estate opportunities to acquire triple-net-leased facilities and execute sale-leaseback transactions with customers and other cold storage operators.

Industry Estimate of North America and Global Market Size

 

LOGO

 

(1)

2024 GCCA Global Top 25 List (April 2024) and 2024 GCCA North America Top 25 List (April 2024), except Lineage figures, which are based on company data as of March 31, 2024. Global market share is based on total global capacity from 2020 GCCA Global Cold Storage Capacity Report (August 2020).

(2)

Represents total cubic feet for the market excluding Lineage.

 

   

Status as an Acquiror of Choice Supports Robust Acquisition Opportunities. We believe we are an acquiror of choice in the industry, as demonstrated by our long history of executing strategic acquisitions through direct sourcing and long-term relationships with their owners. We have extensive experience acquiring cold chain companies of all sizes, and to date former owners of acquired companies have rolled approximately $664 million of equity to become investors in Lineage, while hundreds of members of management of acquired companies have stayed on and grown with our company over time. Over the course of our extensive acquisition history, we have successfully leveraged existing relationships and direct sourcing channels for nearly two-thirds of the companies we have acquired, with the remainder coming to fruition through successful bidding in advisor-led sale processes. In addition, we believe we enjoy multiple advantages when participating in sale processes, including our prolific transaction experience and track record of quickly closing transactions and our flexible balance sheet.

 

   

Multiple Levers to Drive Value Creation Post Acquisitions. As described above in our other internal and external growth strategies, we can drive value creation through multiple levers, including revenue growth, cost efficiencies, deployment of capital and implementation of technology. Our proprietary integration playbook includes over 500 steps to completion and has been refined throughout the last decade to develop a consistent and successful gameplan for acquisition integration. As acquisitions are incorporated into the Lineage network, the opportunity set for deploying these strategies grows. We have a standardized and disciplined approach to integrating acquired companies while bringing acquired team members into the Lineage family. Through this approach and an open mindset to learn and adopt best practices of newly acquired business, we can seek to capitalize on growth opportunities beyond the acquisition date.

 

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Preliminary Estimates for the Quarter Ended June 30, 2024

Based on our preliminary estimates as of the date of this prospectus, management preliminarily expects to report for the quarter ended June 30, 3024:

 

   

total revenue between $1,324 million and $1,337 million, or a decrease of 1.6% to 0.7% compared to the same period in 2023, with Global Warehousing segment revenue between $956 million and $965 million, or a decrease of 0.8% to flat compared to the same period in 2023, and Global Integrated Solutions segment revenue between $368 million and $372 million, or a decrease of 3.7% to 2.6% compared to the same period in 2023;

 

   

NOI between $441 and $446 million, or flat to an increase of 1.1% compared to the same period in 2023;

 

   

same warehouse NOI reflecting a decrease between 2.0% and 2.5% compared to an increase of 19.0% in the same period in 2023;

 

   

Adjusted EBITDA between $327 million and $333 million, or an increase of 1.2% to 3.1% compared to the same period in 2023;

 

   

average physical occupancy of approximately 76.7%, or a decrease of approximately 310bps compared to the same period in 2023;

 

   

average economic occupancy of approximately 83.1%, or a decrease of approximately 200 bps compared to the same period in 2023; and

 

   

throughput pallets (in thousands) of approximately 13,177, or an increase of approximately 2.8% compared to the same period in 2023.

NOI and Adjusted EBITDA are non-GAAP financial measures. For definitions of NOI and Adjusted EBITDA and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes for which management uses these metrics, see “Summary Selected Historical and Pro Forma Condensed Consolidated Financial and Other Data—Non-GAAP Financial Measures” below. Preliminary estimates of net income (loss) for the quarter ended June 30, 2024 are not available at this time due to the lack of availability of certain financial information, such as preliminary estimates of certain adjustments (including income tax expense and non-consolidated entity results) that are necessary to provide preliminary estimates of net income (loss). Accordingly, quantitative reconciliations of our preliminary estimates of NOI and Adjusted EBITDA to net income (loss) are not available without unreasonable efforts. We are therefore unable to address the probable significance of the unavailable information.

These preliminary estimates regarding our company and our portfolio for the quarter ended June 30, 2024 are subject to change upon completion of our financial statements for the quarter ended June 30, 2024, including all disclosures required by GAAP, and any such change could be material. There can be no assurance that the range of our preliminary estimates of total revenue, NOI, same warehouse NOI, and Adjusted EBITDA for the quarter ended June 30, 2024 or our preliminary estimates of average physical occupancy, average economic occupancy and throughput pallets for the quarter ended June 30, 2024 are indicative of what our results are likely to be for the quarter ended June 30, 2024 or in future periods as a result of the completion of our financial closing procedures, final adjustments and other developments arising between now and the time that our financial results for the quarter ended and as of June 30, 2024 are finalized. The preliminary estimates included in this prospectus have been prepared by, and are the responsibility of, our management. Our independent registered public accounting firm, KPMG LLP, has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to these preliminary estimates. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto.

Our consolidated financial statements and related notes as of and for the quarter ended June 30, 2024 are not expected to be filed with the SEC until after this offering is completed. Our actual results may differ materially from the preliminary estimates for the quarter ended June 30, 2024 set forth herein. Accordingly, you should not place undue reliance on these preliminary estimates. These preliminary estimates should not be viewed as a substitute for

 

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full interim financial statements prepared in accordance with GAAP. In addition, these preliminary estimates for the quarter ended June 30, 2024 are not necessarily indicative of the results to be achieved in any future period.

Industry Overview

Under “Industry Overview,” we have included a report prepared by CBRE. Except for information pertaining to our company, the following is a summary of that report.

Introduction

“Cold storage” refers to temperature-controlled warehouses that enable secure storage and handling of goods that require (or benefit from) refrigeration or freezing, most notably food products. Cold storage properties make up a small but high-growth subset of overall industrial real estate and are a critical component of the global food supply chain. Cold storage real estate and related operations are increasingly valuable as the global population continues to become larger and more urban. Today, global cold storage capacity is estimated to be approximately 25-30 billion cubic feet, and market researchers broadly expect growth in both capacity and revenue generation as demand continues to increase.

Operating Models

The industry is broadly categorized into two operating models: third-party (i.e., public) and private. Over the past 30 years, it is estimated that about 75% of total U.S. freezer/cooler capacity has been operated by third-party providers. Food manufacturers are the primary customers of third-party operated space, whereas retailers, grocers, and distributors utilize the bulk of private cold storage capacity. Given the costs and complexity of cold storage, outsourcing has risen in recent years.

U.S. Cold Storage Customer Types by Operating Model

 

LOGO

 

Source:

CBRE Valuation and Advisory (private capacity), Lineage and Americold filings (public warehousing revenue). Private capacity reflects customer shares of privately-operated cold storage space (in cubic feet) based on 73 U.S. market studies as of October 2023. Public warehousing revenue reflects the average customer shares in 2023 financials for Lineage and Americold (who together account for more than 50% of total North American cold storage capacity).

Operating Conditions

Rental fees for storage space make up the primary revenue stream for most cold storage facilities, with customers paying either variable rates for space as it is needed or fixed rates for a set amount of space committed over a longer period. Most cold storage facilities also offer additional warehousing services, such as case-picking and product handling, to maximize the yield of their footprint.

Operating costs are typically higher for cold storage facilities relative to dry warehouses, primarily due to labor (e.g., more training and safety requirements, specialized clothing and equipment, etc.) and utilities.

 

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Given the significant cost and efficiency advantages for newer, more technologically advanced cold storage facilities, demand has waned for older facilities. CBRE estimates that the average age of U.S. cold storage facilities is 28 years, and the GCCA estimates as of 2021 that only about 5% cold storage operations were automated. As inventory becomes increasingly obsolete, owners and operators of modern facilities will be at a significant advantage in offering lower costs and faster service to customers.

U.S. Cold Storage and Dry Warehouse Average Age Benchmarking

 

LOGO

 

Source:

Lineage, CoStar Group and CBRE Valuation and Advisory. Ages (other than Lineage) based on 73 U.S. market studies as of October 2023. Ages estimated as of December 31, 2023. Refer to detailed note on methodology under “Industry Overview” section.

To lower operational costs, increase storage capacity, and enhance customer service levels, development and implementation of new technologies has risen in recent years among cold storage industry leaders. There are four areas in which technological advances are having the most pronounced impact on the industry: automation, software development and deployment, energy usage and data science. Innovations in these areas are also highly interrelated. As modern supply chain management continues to become more complex, we believe that operators that can offer customers a combination of physical and digital infrastructure will be most competitive. Given the significant investments required to develop and implement new technologies at scale, as well as the critical role of insights gleaned through analysis of large sets of warehouse operations data, the largest operators may be best positioned to capitalize on this opportunity.

Market Size and Competitive Landscape

In 2020, the GCCA estimated that the cold storage market is 5.5 billion cubic feet in the U.S. and 25 billion cubic feet globally. CBRE estimates that the U.S. cold storage market today is likely closer to 7 billion cubic feet, implying current global capacity of approximately 30 billion cubic feet.

The competitive landscape of the cold storage industry varies by location, but the general trend is for significant amounts of space to be consolidated among a few key companies with the rest of the market highly fragmented across many local and regional players. Globally, the top ten temperature-controlled warehousing operators represent only 23.5% of the public temperature-controlled warehousing cubic feet capacity.

 

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Consolidation in the cold storage industry reflects the significant advantages from economies of scale due to increased brand recognition, breadth and depth of industry relationships, greater access to and lower cost of capital, and more extensive property networks. Consolidation is likely to continue, particularly as the competitive advantages for operators leveraging modern technology and data science become more pronounced.

Barriers to Entry

The increased complexity and additional materials and equipment required to build a cold storage warehouse typically lead to construction costs that are 2-4 times higher than an otherwise similar dry warehouse. These substantial cost constraints limit new development, making the cold storage market generally less vulnerable to supply-side risk than conventional dry warehouses.

In addition to high and increasing construction costs, new developers often must lease their space directly to food manufacturers or local distributors, which reduces the available tenant pool. This can prove challenging, since most food manufacturers prefer to outsource their temperature-controlled warehousing needs rather than operate themselves. Developers that want to operate their properties must be prepared to contend with large competitors in securing and retaining customers and skilled labor.

Growth Drivers

The U.S. temperature-controlled warehousing industry has experienced relatively stable revenue growth, even in periods marked by significant turmoil in the global financial markets, commodity shocks, secular shifts in consumer habits and preferences, the global COVID-19 pandemic and the ensuing supply chain disruption and periods of significant global inflation.

The primary drivers of growth in the cold storage industry are how much food is consumed overall and what kinds of food consumers prefer. Between 2023 and 2030, the global population is projected to increase by nearly 500 million people, average household incomes are projected to rise by 10%, and inflation-adjusted consumer spending on food to rise by 15%, according to Oxford Economics.

Urbanization is also a major catalyst for cold storage growth. As populations urbanize, they are much more likely to consume food produced outside of their immediate area and to utilize grocery stores, markets and restaurants that rely on cold storage networks. UNDESA expects the percent of the global population that is urbanized to reach 68% by 2050, up from 56% in 2020.

The most significant opportunity for industry growth in the coming years is within developing economies. Nearly all these countries currently have less than three cubic feet of cold storage space per urban resident, compared to ratios in developed economies that are roughly 5-10 times higher.

In advanced economies, growth in cold storage demand will be fueled more by ongoing trends in consumer preferences (e.g., shifting more spending to fresh and frozen foods), online grocery adoption and the replacement of obsolete and energy-inefficient infrastructure.

Real Estate Performance

Post-pandemic inflows of institutional capital and steep rent gains led to a wave of speculative projects in recent years, which have historically been very rare in this sector given the unique development challenges. Despite record construction activity, the U.S. construction pipeline represents a relatively modest 3.9% of existing stock in 2023 and 3.5% in 2024 (as measured in square feet), which is similar to the expected annual pace of demand

 

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growth. After 2024, new deliveries are expected to slow substantially to 1.8% in 2025 as fewer projects have broken ground in the last two years, due in large part to higher construction costs, interest rates, financing challenges and some softening in occupancy.

On average, cap rates for refrigerated warehouses have been similar to dry warehouses, with significant compression over the prior decade. The average U.S. cap rate fell by nearly a full percentage point from the start of 2020 to the end of 2021 and remained 20-40 bps lower than the dry warehouse average during this period, based on data from Real Capital Analytics.

As investment volume slowed and the number of high-quality assets listed for sale increasingly dwindled, cap rates for refrigerated warehouses have risen but remain in line with pre-pandemic norms from 2018 to 2019. For cold storage, location factors are a major determinant of asset values. In general, cold storage cap rates are lowest for distribution facilities, particularly those located in or near ports and major population centers. General public refrigerated warehouses and production-advantaged warehouses generally have higher cap rates, with cap rates for individual assets varying based on location, tenant quality and other factors.

U.S. Average Cap Rate By Warehouse Type

LOGO

Source: MSCI/Real Capital Analytics, Q3 2023 refrigerated warehouse cap rate is interpolated due to limited transaction activity.

Summary Risk Factors

You should carefully consider the matters discussed in the “Risk Factors” section beginning on page 55 of this prospectus for factors you should consider before investing in our common stock. Some of these risks include:

 

   

Our investments are concentrated in the temperature-controlled warehouse industry, and our business would be materially and adversely affected by an economic downturn in that industry or the market for our customers’ products.

 

   

The temperature-controlled warehouses that comprise our global warehousing business are concentrated in certain geographic areas, some of which are particularly susceptible to adverse local conditions. Our inability to quickly and effectively restore operations following adverse weather or a localized disaster or economic or other disturbance in a key geography could materially and adversely affect us.

 

   

Global market and economic conditions may materially and adversely affect us.

 

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Many of our costs, such as operating expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation.

 

   

Labor shortages, increased turnover and work stoppages have in the past and may in the future continue to disrupt our or our customers’ operations, increase costs and negatively impact our profitability.

 

   

Supply chain disruptions may continue to negatively impact our business.

 

   

We are exposed to risks associated with expansion and development, which could result in returns below expectations and unforeseen costs and liabilities.

 

   

Our integrated solutions business depends on the performance of our global warehousing business.

 

   

Our growth may strain our management and resources, which may have a material adverse effect on us.

 

   

A portion of our future growth depends upon acquisitions and we may be unable to identify, complete and successfully integrate acquisitions, which may impede our growth, and our future acquisitions may not achieve their intended benefits or may disrupt our plans and operations.

 

   

We are dependent on Bay Grove to provide certain services to us pursuant to the transition services agreement, and it may be difficult to replace the services provided under such agreement.

 

   

We may be vulnerable to security breaches or cyber-attacks which could disrupt our operations and have a material adverse effect on our financial condition and operating results.

 

   

We depend on IT systems to operate our business, and issues with maintaining, upgrading or implementing these systems, could have a material adverse effect on our business.

 

   

We are subject to additional risks with respect to our current and potential international operations and properties.

 

   

Power costs may increase or be subject to volatility, which could result in increased costs that we may be unable to recover.

 

   

We depend on key personnel and specialty personnel, and a deterioration of employee relations could harm our business and operating and financial results.

 

   

Upon the listing of our shares on Nasdaq, we will be a “controlled company” within the meaning of Nasdaq rules and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

 

   

We could incur significant costs under environmental laws relating to the presence and management of asbestos, anhydrous ammonia and other chemicals and underground storage tanks.

 

   

We are currently invested in various joint ventures and may invest in additional joint ventures in the future and face risks stemming from our partial ownership interests in such properties, which could materially and adversely affect the value of any such joint venture investments.

 

   

We have significant indebtedness outstanding, which may expose us to the risk of default under our debt obligations.

 

   

Increases in interest rates could increase the amount of our debt payments.

 

   

Market conditions could adversely affect our ability to refinance existing indebtedness or obtain additional financing for growth on acceptable terms or at all, which could materially and adversely affect us.

 

   

Our Co-Founders will have substantial influence over our business, and our Co-Founders’ interests, and the interests of certain members of our management, will differ from our interests and those of our other stockholders in certain respects.

 

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Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control.

 

   

There can be no assurance that we will be able to make or maintain cash distributions, and certain agreements relating to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to our common stockholders.

 

   

Future contractual repurchase obligations may materially and adversely affect the market price of shares of our common stock and may reduce future distributions.

 

   

Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.

Structure and Formation of Our Company

Our Operating Partnership

Following the completion of this offering and the formation transactions, we will be the general partner of our operating partnership. Substantially all of our assets will be held by, and our operations will be conducted through, our operating partnership, either directly or through its subsidiaries. Our interest in our operating partnership will generally entitle us to share in cash distributions from, and in the profits and losses of, our operating partnership in proportion to our percentage ownership. Through our general partner interest in our operating partnership, we will generally have the exclusive power under the partnership agreement to manage and conduct its business and affairs, subject to certain approval and voting rights of the limited partners, which are described more fully below in “Description of the Partnership Agreement of Lineage OP, LP.”

Beginning on and after the date that is 14 months after the issuance of the OP units to a partner in our operating partnership, such partner will have the right to require our operating partnership to redeem some or all of its OP units (excluding any Legacy OP Units) for cash, based upon the value of an equivalent number of shares of our common stock at the time of the redemption, or, at our election, shares of our common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of our stock set forth in our charter and described under the section entitled “Description of Our Capital Stock—Restrictions on Ownership and Transfer.” Except for the one-time special redemption and top-up rights with respect to Legacy Class A-4 OP Units described elsewhere in this prospectus, Legacy OP Units do not have any redemption rights prior to being reclassified as OP units, but once a Legacy OP Unit has been so reclassified (assuming it is not otherwise in the process of Cash Settlement), it will have the same redemption rights as the other OP units but will not be subject to the 14-month waiting period. Such redemption of OP units will increase our percentage ownership interest in our operating partnership and our share of its cash distributions and profits and losses.

Over the course of the first three years following the initial closing of this offering, all of the Legacy OP Units will ultimately be reclassified into OP units. Reclassification will be on a one-for-one basis, with each Legacy OP Unit becoming a single OP unit upon its reclassification. Following any such reclassification, Legacy OP Unit holders will thereafter hold such OP units for such period of time as they determine or receive cash pursuant to a sale of their OP units to us in connection with the reclassification event (or a combination thereof). These reclassifications, and any related sales to us of the OP units, will occur at such times as directed by the LHR, acting on behalf of the Legacy OP Unit holders. The LHR will be an affiliate of our current majority stockholder, BGLH. BGLH will have the right to require us to conduct offerings of shares of our common stock from time to time to fund our purchases of such OP units. Each purchase of OP units will increase our percentage ownership interest in our operating partnership and our share of its cash distributions and profits and losses. See “Description of the Partnership Agreement of Lineage OP, LP.”

 

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Formation Transactions

Prior to or simultaneously with the completion of this offering, we will engage in formation transactions, which are designed to facilitate this offering. Through the formation transactions, the following have occurred or will occur prior to or concurrently with the completion of this offering.

 

   

Operating Partnership Conversion and Reclassification of Units. Lineage OP, LLC will convert from a Delaware limited liability company to a Maryland limited partnership, change its name to Lineage OP, LP and adopt the Agreement of Limited Partnership pursuant to which, among other things:

 

  (i)

We will become Lineage OP, LP’s sole general partner.

 

  (ii)

All operating partnership units that are owned by our company—all of which are currently classified as Lineage OP Class A units—will be reclassified into OP units.

 

  (iii)

All operating partnership units that are not owned by our company—all of which are currently classified as Lineage OP Class A units, Lineage OP Class B units or Lineage OP Class C units—will be reclassified into Legacy OP Units with various subclasses, each of which will have certain terms that differ from OP units in order to continue pre-existing rights of Lineage OP, LLC’s members for a period of up to three years following the initial closing of this offering, as described below. This also allows a coordinated settlement process to be conducted for our legacy equity holders as described below.

 

  (A)

Legacy Class A OP Units.

 

   

Prior to the offering, each Lineage OP Class A unit that is not owned by our company is paired with a corresponding Lineage OP Class C unit interest that is entitled to a share of the profits in respect of that Lineage OP Class A unit. These Lineage OP Class A units are owned by various legacy investors that pre-exist this offering, and the Lineage OP Class C unit interest in respect of each Lineage OP Class A unit is owned by BG Cold in order to provide BG Cold with profit sharing on the success of each Lineage OP Class A unit. We refer to this profit sharing as the Founders Equity Share, and this profit sharing applies solely to legacy equity that pre-exists this offering.

 

   

Through the formation transactions, each pre-existing Lineage OP Class A unit that is not owned by our company, and the corresponding pre-existing Lineage OP Class C unit interest that is paired with such Lineage OP Class A unit, will be reclassified together into a single Legacy Class A OP Unit with two legally separate sub-units that comprise such single Legacy Class A OP Unit. The single Legacy Class A OP Unit into which they are reclassified, and its sub-unit components, are new classifications that will be created as part of the formation transactions when Lineage OP, LLC converts into the limited partnership that serves as our operating partnership.

 

   

The two sub-units that comprise a single Legacy Class A OP Unit are legally separate interests referred to as the “A-Piece Sub-Unit” and the “C-Piece Sub-Unit.” The A-Piece Sub-Units and the C-Piece Sub-Units each retain the economic characteristics of the former Lineage OP Class A units and Lineage OP Class C units, respectively. The A-Piece Sub-Units and C-Piece Sub-Units will continue a historic calculation applicable solely to our legacy investors that determines how the holders of the A-Piece Sub-Units and the holders of the C-Piece Sub-Units will share in the settlement of Legacy Class A OP Units when they are ultimately reclassified into OP units. This enables BG Cold to continue accruing the Founders Equity Share in order to align the economic interests of our Co-Founders with the performance of our shares and OP units when our legacy investors settle their pre-existing equity and have the option to achieve liquidity.

 

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Each Legacy Class A OP Unit will be designated to one of four sub-class demarcations: Legacy Class A-1, Legacy Class A-2, Legacy Class A-3 or Legacy Class A-4, which provide for different calculations as between the sub-unit holders within a given Legacy Class A OP Unit to determine what share of a Legacy Class A OP Unit belongs to the A-Piece Sub-Unit holder and what share belongs to the C-Piece Sub-Unit holder.

 

   

Except as set forth in the following sentence, each Legacy Class A OP Unit regardless of sub-class will be economically equivalent to one OP unit, meaning that one Legacy Class A OP Unit will have the same value and represent the same share of equity in our operating partnership as an OP unit. The Legacy Class A-4 OP Units may be an exception to this because they have a special one-time redemption right that the holders of such units may exercise during a 45-day window beginning on March 1, 2025 at a guaranteed minimum value that may exceed the value of an OP unit. This special redemption right allows the holders of Legacy Class A-4 OP Units to (1) redeem any or all of the Legacy Class A-4 OP Units at a guaranteed minimum price ranging between $106.59 and $113.25 per unit depending on our share price at that time (less certain distributions received after June 26, 2024) or, if greater, the then-current fair market value of the Legacy Class A-4 OP Units to be redeemed or (2) during the same window, receive a one-time true-up paid in cash or through the issuance of new Legacy Class A-4 OP Units or new OP units (or any combination of cash and units) in the amount by which the guaranteed minimum value of $106.59 per unit (less certain distributions received after June 26, 2024) exceeds the then-current fair market value of the Legacy Class A-4 OP Units (if at all). Legacy Class A-4 OP Units can also be reclassified into an equal number of OP units at any time as may be agreed by the holders of Legacy Class A-4 OP Units and the LHR, or under certain other circumstances at the discretion of the LHR acting as representative of such holders. Immediately following the formation transactions, there will be 319,006 outstanding Legacy Class A-4 OP Units.

 

   

Each Legacy Class A OP Unit will have the same voting rights and voting power as an OP unit. The LHR will be appointed by each holder of Legacy Class A OP Units to exercise the voting power for all Legacy Class A OP Units until they are reclassified into OP units.

 

   

Legacy Class A OP Units can be reclassified into an equal number of OP units at any time at the discretion of the LHR, acting as representative of the holders of Legacy Class A OP Units, and all such units will from time to time between the initial closing of this offering and the third anniversary of the initial closing of this offering be so reclassified. Whenever Legacy Class A OP Units are reclassified into OP units, the holders of A-Piece Sub-Units and the holders of C-Piece Sub-Units will each separately receive their respective shares of the OP units into which the Legacy Class A OP Units are reclassified, according to formulas that fix their respective sharing in such reclassified OP units. The total number of OP units will nevertheless remain constant with the number of Legacy Class A OP Units that have been so reclassified, except as described above for up to 319,006 Legacy Class A-4 OP Units.

 

  (B)

Legacy Class B OP Units.

 

   

Prior to the offering, all Lineage OP Class B units are owned by various legacy investors that pre-exist this offering, and such units do not bear any Founders Equity Share.

 

   

Through the formation transactions, each pre-existing Lineage OP Class B unit will be reclassified into a Legacy Class B OP Unit. Legacy Class B OP Units will not be subject

 

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to any Founders Equity Share and will not have any separate A-Piece Sub-Units or C-Piece Sub-Units.

 

   

The Legacy Class B OP Units retain the economic characteristics of the former Lineage OP Class B units.

 

   

Each Legacy Class B OP Unit will be economically equivalent to one OP unit, meaning that one Legacy Class B OP Unit will have the same value and represent the same share of equity in our operating partnership as an OP unit.

 

   

Each Legacy Class B OP Unit will have the same voting rights and voting power as an OP unit. The LHR will be appointed by each holder of Legacy Class B OP Units to exercise the voting power for all Legacy Class B OP Units until they are reclassified into OP units.

 

   

Legacy Class B OP Units can be reclassified into an equal number of OP units at any time at the discretion of the LHR, acting as representative of the holders of Legacy Class B OP Units, and all such units will from time to time between the initial closing of this offering and the third anniversary of the initial closing of this offering be so reclassified.

 

  (iv)

The LHR will be appointed by each holder of Legacy OP Units as its representative (A) to administer on its behalf a coordinated settlement process for all legacy equity as described in the next paragraph (clause (v)) below and (B) to exercise the voting rights attributable to Legacy OP Units on various matters for so long as Legacy OP Units exist and have not been reclassified into OP units.

 

  (v)

BGLH, on its own behalf, and the LHR (an affiliate of BGLH) on behalf of the holders of Legacy OP Units, will administer a coordinated settlement process for the settlement of all legacy BGLH equity and all legacy operating partnership equity in cash, in our shares, in OP units or any combination of the foregoing, as elected by each of our legacy investors, over a period of up to three years following the first closing of our offering. By the end of this up-to-three-year period, BGLH will no longer be our controlling stockholder and the Legacy OP Units will no longer exist. At some point after this coordinated liquidity and settlement period is complete, BGLH intends to dissolve, liquidate and terminate its existence, as all legacy investors will either be direct holders in the company or our operating partnership, or they will have disposed of their shares and OP units.

 

   

Historic Management Incentive Equity. Prior to this offering, certain of our current and former officers and employees hold LMEP Units through two incentive equity pooling entities, LLH MGMT Profits, LLC and LLH MGMT Profits II, LLC, which each hold corresponding historic accrued management incentive equity interests in Lineage Holdings for the benefit of these officers and employees. As part of the formation transactions, we will have purchased in exchange for 80,950 shares of our common stock the vested awards of LMEP Units valued at less than $3.0 million per individual that are held by certain of our officers and employees who are not named executive officers. After such purchase, each of LLH MGMT Profits, LLC and LLH MGMT Profits II, LLC will contribute its vested management incentive equity interests in Lineage Holdings to our operating partnership in exchange for 2,204,162 Legacy Class B OP Units. This results in the vested LMEP Units not purchased by us becoming a fixed number of Legacy Class B OP Units prior to such time as the LMEP Units would otherwise be paid pursuant to their rights under the terms of the existing awards. Following the contribution, each of LLH MGMT Profits, LLC and LLH MGMT Profits II, LLC will distribute the Legacy Class B OP Units to its members, including certain of our officers and employees whose LMEP Units are not purchased in exchange for shares of our common stock, in complete liquidation of each such entity. Following such distribution, officers, employees and others to whom such Legacy Class B OP Units are distributed will generally continue to hold such Legacy Class B OP Units subject to settlement over a period of up to three years as part of the same settlement process that applies to all of our legacy investor equity. All outstanding LMEP Units that remain unvested as of the date of such contribution and distribution will

 

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automatically terminate at such time and will be replaced with equity-based awards under the 2024 Plan. For additional information on these awards, see “Structure and Formation of Our Company—Benefits to Related Parties.” In addition, all BGLH Restricted Units that remain unvested as of immediately prior to the completion of this offering will automatically vest in full at such time.

 

   

Internalization of Bay Grove Services.

 

  (i)

We are internalizing certain operating, consulting, strategic development and financial services that have historically been provided by Bay Grove. Prior to this offering, Bay Grove provides operating services to Lineage Holdings pursuant to a perpetual operating services agreement, and Bay Grove also holds a profits interest at Lineage Holdings that entitles Bay Grove to quarterly profits interest equity accruals (the “equity accrual right”). In connection with this internalization, we will have terminated that operating services agreement between Lineage Holdings and Bay Grove and we will have terminated all rights of Bay Grove to accrue additional future profits interests at Lineage Holdings pursuant to the equity accrual right. In exchange for these terminations, Bay Grove will receive a one-time increase in its profit share attributable to the existing profits interest it holds in Lineage Holdings equal to $200.0 million, approximately $14.0 million of which will instead be allocated to our operating partnership in settlement of prior distribution advances made to Bay Grove, its owners and their affiliates (with such amount becoming part of our operating partnership’s equity holdings in Lineage Holdings, and such amount also restoring other distribution rights of Bay Grove, its owners and their affiliates through our operating partnership and BGLH in the same amount) and the remaining approximately $186.0 million of which will be reclassified into 2,447,990 OPEUs held by Bay Grove. In connection with such one-time net increase in Bay Grove’s profits interest and corresponding reclassification of a portion of that amount into 2,447,990 OPEUs, there will be a corresponding reduction to the interests in BGLH held by Bay Grove’s owners and their affiliates to effect a true-up for a portion of this increase, the effect of which is that Bay Grove’s net increase in equity (taking into account both its direct interests in Lineage Holdings and the reduction in interests held by Bay Grove’s owners and their affiliates in BGLH) is $133.4 million rather than $200.0 million.

 

  (ii)

Also in connection with the internalization described above, following the one-time net increase in Bay Grove’s profits interest and corresponding reclassification of a portion of that amount into a fixed number of OPEUs described immediately above, Lineage Holdings will repurchase 986,842 OPEUs from Bay Grove for cash in the amount of $75.0 million.

 

  (iii)

The remaining 1,461,148 OPEUs will be exchangeable in the future (after a two-year initial holding period) on a one-for-one basis for OP units, subject to certain adjustments, and no additional OPEUs will be created in respect of any equity accrual right after the formation transactions have been completed. OP units issued in exchange for such OPEUs will not be redeemable until after the settlement of all legacy BGLH equity and all Legacy OP Units.

 

  (iv)

We will amend the operating agreement of Lineage Holdings to reflect the resulting ownership of Lineage Holdings by our operating partnership and Bay Grove after giving effect to these transactions.

 

  (v)

We will have entered into a transition services agreement with Bay Grove for a period of three years for certain transition services supporting capital deployment and mergers and acquisitions activity to help us build our full internal capability during that period.

 

   

Rollover Put Option. Certain sellers of assets we acquired who previously received rollover equity in BGLH or Lineage OP were provided with separate classes of equity of BGLH or Lineage OP that in some cases included special one-time redemption features with minimum value guarantees and/or the alternative option to elect cash or equity top-up rights to achieve a certain minimum equity valuation at a specific date (collectively, the “Guarantee Rights”). To ensure that the financial obligations associated with all Guarantee Rights proportionately impact investors at Lineage, our operating partnership, and

 

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Lineage Holdings, each of those entities has agreed to provide successive special repurchase rights and cash and equity top-up rights to such legacy investors that mirror those given by BGLH to its investors (the “Rollover Holder Put Option”) and those given by Lineage OP to its investors, in each case in connection with the Guarantee Rights (the “Lineage OP Put Option”). For more information, see “Certain Relationships and Related Party Transactions—Put Option Agreement.”

 

   

Contribution of Offering Net Proceeds. We will contribute the net proceeds from this offering to our operating partnership and receive 47,000,000 OP units (or 54,050,000 OP units if the underwriters exercise their option to purchase up to an additional 7,050,000 shares of our common stock in full), resulting in a 90.4% ownership interest in the operating partnership (90.7% if the underwriters exercise their option to purchase up to an additional 7,050,000 shares of our common stock in full), with holders of Legacy OP Units and Lineage management holding 8.7% and 0.9% ownership interests in the operating partnership, respectively (8.4% and 0.9% if the underwriters exercise their option to purchase up to an additional 7,050,000 shares of our common stock in full).

 

   

Series A Preferred Stock Redemption. In connection with this offering, we will redeem our outstanding 12.0% Series A Cumulative Non-Voting Preferred Stock, $0.01 par value per share (the “Series A preferred stock”) for $0.6 million in cash plus any accrued but unpaid dividends.

 

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Our Structure

The following chart sets forth information about our company, our operating partnership, certain related parties and the ownership interests therein on a pro forma basis after giving effect to the formation transactions. Ownership percentages in our company and our operating partnership are presented based on the assumption that the underwriters’ option to purchase additional shares is not exercised and the other assumptions regarding the number of shares of our common stock and OP units to be outstanding after this offering and the formation transactions described under the heading “The Offering.”

 

LOGO

 

(1)

OP units in our operating partnership are redeemable for cash or, at our option, exchangeable for common shares on a one-for-one basis, subject to certain adjustments, beginning 14 months after the original issuance of such units (other than OP units that were previously classified as Legacy OP Units, which generally have such redemption rights at any time and are not subject to such 14-month waiting period).

(2)

Except for the one-time special redemption and top-up rights with respect to 319,006 Legacy Class A-4 OP Units as described under “Structure and Formation of Our Company—Formation Transactions—Operating Partnership Conversion and Reclassification of Units,” each Legacy Class A OP Unit is economically equivalent to one OP unit, meaning that one Legacy Class A OP Unit will have the same value and represent the same share of our operating partnership’s equity as an OP Unit. Legacy Class A OP Units can generally be reclassified into an equal number of OP units at any time at the discretion of the LHR, and they will all ultimately be so reclassified by the third anniversary of the initial closing of this offering. Each Legacy Class A OP Unit will also have the same voting rights and voting power as an OP unit; however, the

 

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LHR will have voting and dispositive power over each Legacy Class A OP Unit until it is reclassified into an OP unit. After giving effect to the completion of the formation transactions, our operating partnership will have 11,593,846 Legacy Class A OP Units outstanding.

(3)

Each Legacy Class B OP Unit is economically equivalent to one OP unit, meaning that one Legacy Class B OP Unit will have the same value and represent the same share of our operating partnership’s equity as an OP Unit. Legacy Class B OP Units can generally be reclassified into an equal number of OP units at any time at the discretion of the LHR, and they will all ultimately be so reclassified by the third anniversary of the initial closing of this offering. Each Legacy Class B OP Unit will also have the same voting rights and voting power as an OP unit; however, the LHR will have voting and dispositive power over each Legacy Class B OP Unit until it is reclassified into an OP unit. After giving effect to the completion of the formation transactions, our operating partnership will have 10,638,862 Legacy Class B OP Units outstanding.

(4)

OPEUs will be exchangeable at the election of BG Maverick, LLC, an affiliate of Bay Grove, for OP units on a one-for-one basis, subject to adjustment in certain circumstances, at any time beginning two years after the initial closing date of this offering. Holders of OP units issued in exchange for such OPEUs, which will include Messrs. Forste and Marchetti or their affiliates, will not be able to redeem such OP units until after the settlement of all legacy BGLH equity and all Legacy OP Units. After giving effect to the completion of the formation transactions, Lineage Holdings will have 1,461,148 OPEUs outstanding.

Benefits to Related Parties

Upon completion of this offering and the formation transactions, Bay Grove and our directors, executive officers and employees will receive material benefits, including the following:

 

   

BG Cold will hold a continuing right to receive the Founders Equity Share from our operating partnership through its C-Piece Sub-Units in the Legacy Class A OP Units and similar amounts from BGLH, our majority stockholder, as described in “Certain Relationships and Related Party Transactions—Transactions with BG Lineage Holdings, LLC” and “Certain Relationships and Related Party Transactions—Transactions with Lineage OP, LLC.” However, BG Cold will no longer receive advance distributions against the Founders Equity Share, which were historically received prior to the formation transactions. All such rights to advances will terminate in connection with the formation transactions. See “Certain Relationships and Related Party Transactions—Transactions with BG Lineage Holdings, LLC,” “Certain Relationships and Related Party Transactions—Transactions with Lineage OP, LLC” and “Description of the Partnership Agreement of Lineage OP, LP—Legacy OP Units—Legacy Class A OP Units.”

 

   

Affiliates of Bay Grove will continue to hold 71.3% of the Legacy Class B OP Units of our operating partnership. See “Description of the Partnership Agreement of Lineage OP, LP—Legacy OP Units—Legacy Class B OP Units.”

 

   

The stockholders agreement will provide that we, on our own behalf and in our capacity as general partner of the operating partnership, must use commercially reasonable efforts to (i) structure certain significant exit transactions (including mergers, consolidations and sales of substantially all of our assets or the assets of our operating partnership and its subsidiaries) in a manner that is tax-deferred to Messrs. Marchetti and Forste, their respective estate planning vehicles, family members and controlled affiliates, does not cause such parties to recognize gain for federal income tax purposes, and provides for substantially similar tax protections after such transactions, and (ii) cause our operating partnership or its subsidiaries to continuously maintain sufficient levels of indebtedness that are allocable for federal income tax purposes to Messrs. Marchetti and Forste and their respective personal holding entities to prevent them from recognizing gain as a result of any negative tax capital account or insufficient debt allocation, provided that such amount of debt shall not be required to exceed the amount allocable to the parties immediately following this offering, subject to certain exceptions. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

 

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Bay Grove will have received a one-time increase in its profit share attributable to the existing profits interest it holds in Lineage Holdings equal to $200.0 million, approximately $14.0 million of which will instead have been allocated to our operating partnership in settlement of prior distribution advances made to Bay Grove, its owners and their affiliates (with such amount becoming part of our operating partnership’s equity holdings in Lineage Holdings, and such amount also restoring other distribution rights of Bay Grove, its owners and their affiliates through our operating partnership and BGLH in the same amount) and the remaining approximately $186.0 million of which will have been reclassified into 2,447,990 OPEUs held by Bay Grove. See “Structure and Formation of Our Company—Formation Transactions.”

 

   

Affiliates of Bay Grove will have received $75.0 million in cash from Lineage Holdings’ repurchase of 986,842 OPEUs from Bay Grove pursuant to the formation transactions, and affiliates of Bay Grove will continue to hold the remaining OPEUs that have not been repurchased pursuant to the formation transactions. See “Structure and Formation of Our Company—Formation Transactions.”

 

   

BGLH will receive $0.5 million in cash, plus any accrued but unpaid dividends, in connection with the redemption of our Series A preferred stock.

 

   

We will have entered into a transition services agreement with Bay Grove, pursuant to which (1) Bay Grove will provide us with certain transition services supporting capital deployment and mergers and acquisitions activity for three years following the closing of this offering to help us build our full internal capability during that period, and (2) we will pay Bay Grove an annual fee equal to $8.0 million. See “Certain Relationships and Related Party Transactions—Transactions with Bay Grove—Operating Services Agreement” and “Certain Relationships and Related Party Transactions—Transition Services Agreement.”

 

   

We will have entered into a registration rights agreement with BGLH, pursuant to which we will grant it and certain of its affiliates with certain “demand” registration rights and customary “piggyback” registration rights. We will also have entered into one or more registration rights agreements with Mr. Forste and Mr. Marchetti, pursuant to which we will grant them with certain registration rights. See “Certain Relationships and Related Party Transactions—Registration Rights Agreements.”

 

   

We, our operating partnership and Lineage Holdings will have entered into an agreement providing successive special repurchase rights and cash and equity top-up rights to certain legacy investors that benefits BGLH by ensuring that all Guarantee Rights will ultimately be satisfied by Lineage Holdings so that all investors in BGLH, Lineage, our operating partnership and Lineage Holdings are proportionately impacted by the Guarantee Rights based on their direct and indirect ownership interests in Lineage Holdings. For more information, see “Certain Relationships and Related Party Transactions—Put Option Agreement.”

 

   

Lineage Holdings will have entered into an expense reimbursement and indemnification agreement with BGLH, the LHR and Bay Grove pursuant to which Lineage Holdings will agree to (i) advance to or reimburse such entities for all of their expenses in any way related to our company, including expenses incurred in connection with the coordinated settlement process that will occur for up to three years for all legacy investors in both BGLH and our operating partnership and (ii) indemnify such entities to the fullest extent permitted by applicable law against liabilities that may arise in any way related to our company, including liabilities incurred in connection with or as a result of the coordinated settlement process. See “Certain Relationships and Related Party Transactions—Indemnification Agreements—Bay Grove.”

 

   

We will have entered into indemnification agreements with each of our directors and executive officers providing for the indemnification by us for certain liabilities and expenses incurred as a result of actions brought, or threatened to be brought, against our directors and executive officers in their capacities as such.

 

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We will have entered into certain agreements with Messrs. Forste and Marchetti, pursuant to which Messrs. Forste and Marchetti will agree that for a period of three years following the completion of this offering (or, if less, such period during which they directly or indirectly own any equity in our company) they will not compete with our business.

 

   

We will have purchased in exchange for 80,950 shares of our common stock the vested awards of LMEP Units valued at less than $3.0 million per individual that are held by certain of our officers and employees who are not named executive officers. Thereafter, we will have settled the remaining vested LMEP Units for 2,204,162 Legacy Class B OP Units. This results in the vested LMEP Units not purchased by us becoming a fixed number of Legacy Class B OP Units prior to such time as the LMEP Units would otherwise be paid pursuant to the terms of the existing awards. Following the contribution, each of LLH MGMT Profits, LLC and LLH MGMT Profits II, LLC will distribute the Legacy Class B OP Units to its members, including certain of our officers and employees whose LMEP Units are not purchased in exchange for shares of our common stock, in complete liquidation of each such entity. Following such distribution, officers, employees and others to whom such Legacy Class B OP Units are distributed will generally continue to hold such Legacy Class B OP Units subject to settlement over a period of up to three years as part of the same settlement process that applies to all of our legacy investor equity. As discussed in greater detail below, all outstanding LMEP Units that remain unvested as of the date of such contribution and distribution will automatically terminate at such time and will be replaced with equity-based awards under the 2024 Plan. In addition, all BGLH Restricted Units that remain unvested as of immediately prior to the completion of this offering will automatically vest in full at such time.

 

   

We will have adopted the 2024 Plan, under which we will grant cash and equity-based incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete.

 

   

In connection with the completion of this offering, we will grant certain of our executive officers and employees one-time awards in the form of an aggregate of $52.9 million in cash, 184,946 restricted stock units and 1,362,248 shares of our common stock. Such awards will be fully vested at the time of grant, in the case of shares of common stock, or subject to time-based vesting, in the case of restricted stock units.

 

   

As discussed above regarding holders of LMEP Units with a value less than $3.0 million, we will issue to certain of our employees, other than our executive officers, an aggregate of 80,950 shares of our common stock. Such awards will be fully vested at the time of issuance.

 

   

As discussed above, in connection with the completion of this offering, we will grant certain of our executive officers and employees one-time awards covering an aggregate of 346,722 restricted stock units and 720,041 LTIP units in respect of certain vested LMEP Units and/or the cancellation of unvested LMEP Units. Such awards will be subject to time-based vesting.

 

   

As part of our annual equity award program, we will grant certain of our executive officers and employees an aggregate of 2,677,622 restricted stock units and/or LTIP units. Such awards will be subject to time- and/or performance-based vesting.

 

   

In connection with the completion of this offering, we will grant certain of our non-employee directors an aggregate of 8,226 restricted stock units. Such awards will be subject to time-based vesting.

 

   

In connection with the completion of this offering, we will grant certain of our employees one-time awards covering an aggregate of 657,190 restricted stock units in respect of certain vested LVCP Awards and/or the cancellation of unvested LVCP Awards. Such restricted stock units will be subject to time-based vesting.

 

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See “Executive Compensation—Treatment of LMEP Units and BGLH Restricted Units in Connection with this Offering” and “Executive Compensation—Equity Awards in Connection with the IPO” for further details.

 

   

Certain LVCP Awards will vest and be settled in an aggregate of $17.9 million of cash and 179,838 shares of our common stock.

Distribution Policy

We have elected to qualify as a REIT for U.S. federal income tax purposes. To qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. To the extent we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income (determined without regard to the dividends paid deduction and including any net capital gains), we will be subject to federal corporate income tax on our undistributed taxable income. In addition, as a REIT, we will be required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions we make in a calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. For more information, see “Federal Income Tax Considerations—Taxation of Our Company—Annual Distribution Requirements.” To satisfy the requirements to qualify as a REIT and to avoid paying tax on our income, we intend to make quarterly distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders. In addition, we have a long-term target of distributing approximately 50% of our Adjusted FFO to our stockholders annually.

To the extent we are prevented by provisions of our financing arrangements or otherwise from distributing 100% of our REIT taxable income or otherwise do not distribute 100% of our REIT taxable income, we will be subject to income tax, and potentially excise tax, on the retained amounts. If our operations do not generate sufficient cash flow to enable us to pay our intended or required distributions, we may be required either to fund distributions from alternative sources, including working capital, borrowings, asset sales or equity capital, or reduce such distributions. Our actual results of operations will be affected by a number of factors, including the revenues we generate, our operating expenses, interest expense and unanticipated expenditures, among others. See “Distribution Policy.”

Restrictions on Ownership and Transfer of Our Common Stock

Our charter, subject to certain exceptions, authorizes our board of directors to take such actions as are necessary or appropriate to allow us to qualify and to preserve our status as a REIT. Furthermore, our charter prohibits, with certain exceptions, the beneficial or constructive ownership by any person of more than 9.8% in value of the aggregate of the outstanding shares of our capital stock or more than 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of our common stock. In addition, our charter contains various other restrictions on the ownership and transfer of our common stock and capital stock, including restrictions to prevent us for a limited period from not qualifying as a domestically controlled qualified investment entity. Our board of directors, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, and subject to such conditions and limitations as our board of directors may deem appropriate, from these ownership limits if certain conditions are satisfied. However, our board of directors may not grant an exemption from these ownership limits if such exemption would cause us to fail to qualify as a REIT. The ownership limits may delay or impede a transaction or a change of control that might be in your best interest. See “Description of Our Capital Stock—Restrictions on Ownership and Transfer.”

Our Tax Status

We have elected and believe we have qualified to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2020. We believe that our organization and operations will allow us to continue to qualify as a REIT for federal income tax purposes. To maintain REIT status, we must

 

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meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See “Federal Income Tax Considerations.”

Corporate Information

We were formed in April 2017. Our principal executive office is located at 46500 Humboldt Drive, Novi, Michigan 48377. Our telephone number is (800) 678-7271.

 

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THE OFFERING

 

Common stock offered by us

47,000,000 shares (plus up to an additional 7,050,000 shares of our common stock that we may issue and sell upon the exercise in full of the underwriters’ option to purchase additional shares).

 

Common stock to be outstanding after this offering

210,008,463 shares(1)

 

Common stock and OP units to be outstanding after this offering (excluding OP units held directly or indirectly by us) and the formation transactions

233,702,319 shares of common stock and OP units(1)(2)

 

Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately $3.4 billion, or $3.9 billion if the underwriters exercise in full their option to purchase additional shares, after deducting underwriting discounts and commissions and other estimated expenses, in each case, based on an assumed initial public offering price of $76.00 per share, which is the mid-point of the price range set forth on the front cover of this prospectus. We intend to use the net proceeds from this offering to repay borrowings outstanding under the Delayed Draw Term Loan, repay borrowings outstanding under the Revolving Credit Facility, fund one-time cash grants to certain of our employees in connection with this offering and estimated cash withholdings associated with stock grants and redeem our Series A preferred stock. Following such uses, we expect to use the remainder of the net proceeds for general corporate purposes, which may include the repayment of additional borrowings outstanding under the Revolving Credit Facility. See “Use of Proceeds.”

 

Directed Share Program

At our request, the underwriters have reserved six percent of the shares of common stock to be issued by us and offered by this prospectus for sale, at the initial public offering price, to (i) certain of our directors, officers and employees, (ii) friends and family members of certain of our directors and officers, (iii) individuals associated with certain of our customers, vendors, landlords and service providers and (iv) certain of our legacy investors, former owners of acquired companies and properties and other industry partners. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. See “Underwriters—Directed Share Program” for additional information.

 

Risk factors

Investing in our common stock involves risks. You should carefully read and consider the information set forth under the heading “Risk Factors” beginning on page 55 and other information included in this prospectus before investing in our common stock.

 

Proposed Nasdaq symbol

“LINE”

 

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(1)

The shares of our common stock to be outstanding after this offering include:

 

   

161,924,302 shares of our common stock outstanding prior to this offering;

 

   

47,000,000 shares of our common stock to be issued in this offering;

 

   

139,966 shares of our common stock to be issued to our executives and employees under the 2024 Plan as initial public offering bonuses;

 

   

746,251 shares of our common stock to be awarded to certain of our employees under the 2024 Plan in connection with the completion of this offering;

 

   

80,950 shares of our common stock that may be issued to certain of our employees under the 2024 Plan, and to employees, former employees and others, in private placements, in settlement of outstanding vested LMEP Units; and

 

   

116,994 shares of our common stock that may be issued to certain of our employees under the 2024 Plan in settlement of outstanding vested LVCP Awards.

The above shares of our common stock are presented on a net basis, assuming that an aggregate of 538,875 shares of our common stock issued to our executives and employees will be remitted to our company to satisfy tax withholding obligations, representing a blended withholding rate of approximately 35%. As a result, such 538,875 shares of our common stock will be held as authorized and unissued shares of our common stock and are not reflected in the shares of our common stock to be outstanding after this offering.

The shares of our common stock to be outstanding after this offering exclude:

 

   

7,050,000 shares of our common stock issuable upon the exercise in full of the underwriters’ option to purchase additional shares;

 

   

32,202 shares of our common stock underlying restricted stock units subject to time-based vesting awarded to certain of our executive officers and employees under the Lineage 2024 Incentive Award Plan prior to this offering;

 

   

284,299 shares of our common stock underlying restricted stock units subject to time-based vesting awarded or to be awarded to certain of our executive officers and employees under the 2024 Plan as part of our annual equity award program;

 

   

184,946 shares of our common stock underlying restricted stock units subject to time-based vesting to be awarded to certain of our employees under the 2024 Plan in connection with the completion of this offering;

 

   

8,226 shares of our common stock underlying restricted stock units subject to time-based vesting awarded or to be awarded to certain of our non-employee directors under the 2024 Plan in connection with the completion of this offering;

 

   

346,722 shares of our common stock underlying restricted stock units subject to time-based vesting awarded or to be awarded to certain of our executive officers and employees under the 2024 Plan in respect of certain vested LMEP Units and/or the cancellation of unvested LMEP Units;

 

   

657,190 shares of our common stock underlying restricted stock units subject to time-based vesting awarded or to be awarded to certain of our employees under the 2024 Plan in respect of certain vested LVCP Awards and/or the cancellation of unvested LVCP Awards;

 

   

up to 236,422 shares of our common stock underlying restricted stock units subject to performance-based vesting awarded or to be awarded under the 2024 Plan in connection with this offering as part of our annual equity award program (the number of shares of our common stock reflected in this bullet

 

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assumes maximum performance for performance-based awards—to the extent that we do not attain maximum performance with respect to the applicable performance goals, the actual number of shares issued under those awards will be less than the number reflected in this bullet); and

 

   

7,009,993 shares of our common stock issuable in the future under the 2024 Plan, as more fully described in “Executive and Director Compensation—Amended and Restated Lineage 2024 Incentive Award Plan.”

 

(2)

The OP units to be outstanding after this offering include 23,693,856 OP units to be outstanding after the formation transactions, excluding OP units held by our company and including (i) 22,232,708 OP units into which Legacy OP Units may be reclassified and (ii) 1,461,148 OP units issuable upon exchange of OPEUs.

The OP units to be outstanding after this offering exclude:

 

   

720,041 LTIP units subject to time-based vesting awarded or to be awarded to certain of our executive officers and employees under the 2024 Plan in respect of certain vested LMEP Units and/or the cancellation of unvested LMEP Units;

 

   

498,691 LTIP units subject to time-based vesting awarded or to be awarded in connection with this offering to certain of our executive officers and employees under the 2024 Plan as part of our annual equity award program; and

 

   

up to 1,776,421 LTIP units subject to performance-based vesting awarded or to be awarded in connection with this offering to certain of our executive officers and employees under the 2024 Plan as part of our annual equity award program (the number of LTIP units reflected in this sentence assumes maximum performance for performance-based awards—to the extent that we do not attain maximum performance with respect to the applicable performance goals, the actual number of LTIP units that vest under those awards will be less than the number reflected in this bullet).

OPEUs will be exchangeable at Bay Grove’s election for OP units on a one-for-one basis, subject to adjustment in certain circumstances, at any time beginning two years after the initial closing date of this offering. OP units, other than Legacy OP Units (until they are reclassified as OP units) and OP units issued upon exchange of OPEUs, are redeemable for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment in certain circumstances, beginning 14 months after the original issuance of such units (other than OP units that were previously classified as Legacy OP Units, which have such redemption rights at any time after their reclassification into OP units and are not subject to such 14-month waiting period). Holders of OP units issued in exchange for such OPEUs will not be able to redeem such OP units until after the settlement of all legacy BGLH equity and all Legacy OP Units. Vested LTIP units are convertible as described under “Description of the Partnership Agreement of Lineage OP, LP—LTIP Units—Conversion Rights.”

 

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SUMMARY SELECTED HISTORICAL AND PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA

Set forth below is summary selected consolidated financial and other data presented on (i) a historical basis and (ii) a pro forma basis. Lineage, Inc.’s historical consolidated balance sheet data as of December 31, 2023 and 2022 and consolidated operating data for the years ended December 31, 2023, 2022 and 2021 have been derived from Lineage, Inc.’s audited historical consolidated financial statements included elsewhere in this prospectus. Lineage, Inc.’s historical condensed consolidated balance sheet data as of March 31, 2024 and the condensed consolidated operating data for the three months ended March 31, 2024 and 2023 have been derived from Lineage, Inc.’s unaudited condensed consolidated financial statements included elsewhere in this prospectus. These unaudited condensed consolidated financial statements have been prepared on a basis consistent with Lineage, Inc.’s audited consolidated financial statements. In the opinion of our management, the unaudited historical financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the results for those periods. The historical consolidated financial data included below and set forth elsewhere in this prospectus are not necessarily indicative of our future performance, and results for any interim period are not necessarily indicative of the results for any full year.

Lineage, Inc.’s unaudited pro forma condensed consolidated balance sheet data as of March 31, 2024 and unaudited pro forma condensed consolidated operating data for the three months ended March 31, 2024 and year ended December 31, 2023 have been derived from Lineage, Inc.’s unaudited pro forma condensed consolidated financial statements included elsewhere in this prospectus. Our unaudited pro forma condensed consolidated financial data assume the completion of this offering, the formation transactions and the other adjustments described in our unaudited pro forma condensed consolidated financial statements had occurred on March 31, 2024 for purposes of the unaudited pro forma condensed consolidated balance sheet data and on January 1, 2023 for purposes of the unaudited pro forma condensed consolidated statements of operations data for the three months ended March 31, 2024 and year ended December 31, 2023. Our unaudited pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the period indicated, nor does it purport to represent our future financial position or results of operations.

You should read the following summary selected historical and pro forma condensed consolidated financial and other data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business and Properties” and our historical and pro forma condensed consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

    Three Months Ended March 31,     Year Ended December 31,  
(in millions)   2024
Pro Forma

(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Operating Data:

             

Total revenues

  $ 1,328.0     $ 1,328.0     $ 1,333.3     $ 5,341.5     $ 5,341.5     $ 4,928.3     $ 3,702.0  

Total global warehousing segment revenue

    968.6       968.6       957.6       3,856.9       3,856.9       3,432.6       2,655.8  

Net income (loss)

    (4.4     (48.0     18.6       (536.6     (96.2     (76.0     (176.5

NOI(1)

    443.4       444.2       443.1       1,748.5       1,751.7       1,455.1       1,130.6  

Global warehousing segment NOI(2)

    384.1       384.5       385.2       1,506.1       1,507.8       1,221.5       971.5  

Global integrated solutions segment
NOI(2)

    59.3       59.7       57.9       242.4       243.9       233.6       159.1  

 

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    As of March 31,     As of December 31,  
(in millions)   2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Balance Sheet Data:

         

Cash and cash equivalents

  $ 91.2     $ 91.2     $ 68.2     $ 170.6     $ 209.1  

Total assets

    18,716.7       18,734.4       18,871.0       18,557.4       16,404.1  

Long-term debt, net

    6,007.7       9,246.0       8,958.2       8,697.4       7,567.3  

Stockholders’ equity

    7,832.5       4,978.0       5,050.5       5,167.0       4,356.5  

 

    Three Months Ended March 31,     Year Ended December 31,  
(in millions)   2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Other Data:

             

FFO(1)

  $ 82.6     $ 39.0     $ 103.0     $ (191.9   $ 248.5     $ 229.1     $ 75.7  

Core FFO(1)

    123.4       86.3       135.3       433.4       415.7       400.2       335.4  

Adjusted FFO(1)

    206.3       148.3       183.3       789.3       562.3       551.9       465.5  

EBITDAre(1)

    276.4       291.4       312.7       462.4       1,147.3       953.5       656.0  

Adjusted EBITDA(1)

    328.2       326.6       333.8       1,279.6       1,278.2       1,074.4       857.8  

 

(1)

NOI, FFO, Core FFO Adjusted FFO, EBITDAre and Adjusted EBITDA are non-GAAP financial measures. For definitions of FFO, Core FFO Adjusted FFO, EBITDAre and Adjusted EBITDA, reconciliations of these metrics to net income, the most directly comparable GAAP financial measure, and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes for which management uses these metrics, see “—Non-GAAP Financial Measures” below.

(2)

We evaluate the performance of our primary business segments based on their net operating income relative to our overall results of operations. We use the term “segment net operating income” or “segment NOI” to mean a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level general and administrative expenses, corporate-level acquisition, transaction, and other expense and corporate-level restructuring and impairment expense). We use segment net operating income to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with Financial Accounting Standards Board, or FASB, ASC, Topic 280, Segment Reporting.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures as supplemental performance measures of our business: NOI, segment NOI, FFO, Core FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, net debt, adjusted net debt and adjusted net debt to Adjusted EBITDA.

We calculate NOI as our total revenues less our cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level general and administrative expenses, corporate-level acquisition, transaction, and other expense and corporate-level restructuring and impairment expense). We calculate segment NOI as a segment’s revenues less its cost of operations (excluding any depreciation and amortization, impairment charges, corporate-level general and administrative expenses, corporate-level acquisition, transaction, and other expense and corporate-level restructuring and impairment expense). We use segment NOI to evaluate our segments for purposes of making operating decisions and assessing performance in accordance with FASB ASC, Topic 280, Segment Reporting. We believe NOI and segment NOI are helpful to investors as a supplemental performance measure to net income because they assist both investors and management in understanding the core operations of

 

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our business. There is no industry definition of NOI or segment NOI and, as a result, other REITs may calculate NOI or segment NOI, or other similarly-captioned metrics, in a manner different than we do. The table below reconciles NOI to net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP, and sets forth our NOI by segment.

 

    Three Months Ended March 31,     Year ended December 31,  
(in millions)   2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Net income (loss)

  $ (4.4   $ (48.0   $ 18.6     $ (536.6   $ (96.2   $ (76.0   $ (176.5

General and administrative expense

    144.8       124.1       114.9       593.5       501.8       398.9       289.3  

Depreciation expense

    157.7       157.7       129.5       551.9       551.9       479.5       416.1  

Amortization expense

    53.4       53.4       51.7       207.8       207.8       197.7       187.6  

Acquisition, transaction, and other expense

    8.6       8.6       10.8       641.6       60.0       66.2       123.6  

Restructuring, impairment, and (gain) loss on disposals

    (0.4     (0.4     4.2       31.8       31.8       15.5       26.3  

Equity (income) loss, net of tax

    1.8       1.8       (0.2     2.6       2.6       0.2       0.3  

(Gain) loss on foreign currency transactions, net

    10.7       10.7       1.3       (3.9     (3.9     23.8       34.0  

Interest expense, net

    82.6       138.8       114.7       277.4       490.4       347.0       259.6  

(Gain) loss on extinguishment of debt

    —        6.5       —        8.4       —        (1.4     4.1  

Other nonoperating (income) expense, net

    0.7       0.7       0.2       19.4       19.4       (2.3     (4.5

Income tax expense (benefit)

    (12.1     (9.7     (2.6     (45.4     (13.9     6.0       (29.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

  $ 443.4     $ 444.2     $ 443.1     $ 1,748.5     $ 1,751.7     $ 1,455.1     $ 1,130.6  

NOI by Segment:

             

Global warehousing segment NOI

  $ 384.1     $ 384.5     $ 385.2     $ 1,506.1     $ 1,507.8     $ 1,221.5     $ 971.5  

Global integrated solutions segment NOI

  $ 59.3     $ 59.7     $ 57.9     $ 242.4     $ 243.9     $ 233.6     $ 159.1  

We calculate funds from operations, or FFO, in accordance with the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income or loss determined in accordance with GAAP, excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated operating real estate assets, plus specified non-cash items, such as real estate asset depreciation and amortization, in-place lease intangible amortization, real estate asset impairment and our share of reconciling items for partially owned entities. We believe that FFO is helpful to investors as a supplemental performance measure because it excludes the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs, which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, FFO can facilitate comparisons of operating performance between periods and among other equity REITs.

We calculate core funds from operations, or Core FFO, as FFO adjusted for the effects of gain or loss on the sale of non-real estate assets, finance lease ROU asset amortization -real estate, non-real estate impairments, acquisition, restructuring and other, other income or expense, loss on debt extinguishment and modifications and the effects of gain or loss on foreign currency exchange. We also adjust for the impact attributable to non-real estate impairments on unconsolidated joint ventures and natural disaster and COVID. We believe that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to our core business operations.

 

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We believe Core FFO can facilitate comparisons of operating performance between periods, while also providing a more meaningful predictor of future earnings potential.

However, because FFO and Core FFO add back real estate depreciation and amortization and do not capture the level of maintenance capital expenditures necessary to maintain the operating performance of our properties, both of which have material economic impacts on our results from operations, we believe the utility of FFO and Core FFO as a measure of our performance may be limited.

We calculate adjusted funds from operations, or Adjusted FFO, as Core FFO adjusted for the effects of amortization of deferred financing costs, amortization of debt discount/premium amortization of above or below market leases, straight-line net operating rent, provision or benefit from deferred income taxes, stock-based compensation expense from grants under our equity incentive plans, non-real estate depreciation and amortization, finance lease ROU asset amortization -non-real estate and maintenance capital expenditures. We also adjust for Adjusted FFO attributable to our share of reconciling items of partially owned entities. We believe that Adjusted FFO is helpful to investors as a meaningful supplemental comparative performance measure of our ability to make incremental capital investments in our business and to assess our ability to fund distribution requirements from our operating activities.

FFO, Core FFO and Adjusted FFO are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs. FFO, Core FFO and Adjusted FFO should be evaluated along with GAAP net income and net income per diluted share (the most directly comparable GAAP measures) in evaluating our operating performance. FFO, Core FFO and Adjusted FFO do not represent net income or cash flows from operating activities in accordance with GAAP and are not indicative of our results of operations or cash flows from operating activities as disclosed in our consolidated statements of operations included elsewhere in this prospectus. FFO, Core FFO and Adjusted FFO should be considered as supplements, but not alternatives, to our net income or cash flows from operating activities as indicators of our operating performance. Moreover, other REITs may not calculate FFO in accordance with the NAREIT definition or may interpret the NAREIT definition differently than we do. Accordingly, our FFO may not be comparable to FFO as calculated by other REITs. In addition, there is no industry definition of Core FFO or Adjusted FFO and, as a result, other REITs may also calculate Core FFO or Adjusted FFO, or other similarly-captioned metrics, in a manner different than we do. The table below reconciles FFO, Core FFO and Adjusted FFO to net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP.

 

     Three Months Ended March 31,     Year Ended December 31,  
(in millions)    2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Net income (loss)

   $ (4.4   $ (48.0   $ 18.6     $ (536.6   $ (96.2   $ (76.0   $ (176.5

Adjustments:

              

Real estate depreciation

     85.3       85.3       80.1       324.5       324.5       291.6       240.7  

In-place lease intangible amortization

     1.5       1.5       2.1       7.5       7.5       8.9       8.8  

Net loss (gain) on sale of real estate assets

                 1.2       7.8       7.8       4.0       1.0  

Impairment write-downs on real estate property

                 0.3       1.7       1.7       0.6        

Real estate depreciation, (gain) loss on sale of real estate and real estate impairments on unconsolidated JVs

     0.6       0.6       0.8       3.4       3.4       2.9       3.1  

Allocation of noncontrolling interests

     (0.4     (0.4     (0.1     (0.2     (0.2     (2.9     (1.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FFO

   $ 82.6     $ 39.0     $ 103.0     $ (191.9   $ 248.5     $ 229.1     $ 75.7  

 

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     Three Months Ended March 31,     Year Ended December 31,  
(in millions)    2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Adjustments:

              

Net (gain) loss on sale of non-real estate assets

     (0.5     (0.5     (1.3     2.3       2.3       4.8       2.5  

Finance lease ROU asset amortization - real estate related

     17.8       17.8       17.4       69.5       69.5       73.9       77.4  

Non-real estate impairment

                                         7.1  

Impairment of intangible assets

                       7.0       7.0              

Other nonoperating (income) expense, net

     0.7       0.7       0.2       19.4       19.4       (2.3     (4.5

Acquisition, restructuring and other

     8.7       8.7       14.7       522.6       72.9       72.3       136.9  

Technology transformation

     3.4       3.4                                

(Gain) loss on foreign currency transactions, net

     10.7       10.7       1.3       (3.9     (3.9     23.8       34.0  

(Gain) loss on extinguishment of debt

           6.5             8.4             (1.4     4.1  

Natural disaster and COVID

                                         1.7  

Allocation related to unconsolidated JVs

                                         0.5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core FFO

   $ 123.4     $ 86.3     $ 135.3     $ 433.4     $ 415.7     $ 400.2     $ 335.4  

Adjustments:

              

Non-real estate depreciation and amortization

     100.0       100.0       75.8       334.5       334.5       288.4       263.0  

Finance lease ROU asset amortization - non-real estate

     6.5       6.5       5.9       23.7       23.7       14.3       13.8  

Amortization of deferred financing costs

     3.6       5.6       4.8       16.1       19.0       17.8       16.7  

Amortization of debt discount / premium

     0.2       0.2       0.8       1.5       1.5       (0.8     (0.9

Deferred income taxes expense (benefit)

     (23.1     (22.9     (15.0     (74.1     (58.1     (41.6     (69.0

Straight line net operating rent

     (2.3     (2.3     1.2       6.5       6.5       0.2       3.9  

Amortization of above market leases

     0.2       0.2       0.5       1.4       1.4       2.1       2.3  

Amortization of below market leases

     (0.2     (0.2     (0.4     (1.0     (1.0     (1.1     (1.7

Stock-based compensation expense

     27.6       4.5       4.3       253.5       25.3       16.8       14.6  

Recurring maintenance capital expenditures

     (29.9     (29.9     (29.9     (208.2     (208.2     (144.7     (111.8

Allocation related to unconsolidated JVs

     0.6       0.6       0.4       3.0       3.0       0.4       (0.4

Allocation of noncontrolling interests

     (0.3     (0.3     (0.4     (1.0     (1.0     (0.1     (0.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted FFO

   $ 206.3     $ 148.3     $ 183.3     $ 789.3     $ 562.3     $ 551.9     $ 465.5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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We calculate EBITDA for Real Estate, or EBITDAre, in accordance with the standards established by the Board of Governors of NAREIT, defined as earnings before interest income or expense, taxes, depreciation and amortization, net loss or gain on sale of real estate, net of withholding taxes, impairment write-downs on real estate property and adjustment to reflect share of EBITDAre of partially owned entities. EBITDAre is a measure commonly used in our industry, and we present EBITDAre to enhance investor understanding of our operating performance. We believe that EBITDAre provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and useful life of related assets among otherwise comparable companies.

We also calculate our Adjusted EBITDA as EBITDAre further adjusted for the effects of gain or loss on the sale of non-real estate assets, other income or expense, acquisition, restructuring and other, foreign currency exchange gain or loss, stock-based compensation expense, loss or gain on debt extinguishment and modification, impairment of investments in non-real estate, natural disaster and COVID, and reduction in EBITDAre from partially owned entities. We believe that the presentation of Adjusted EBITDA provides a measurement of our operations that is meaningful to investors because it excludes the effects of certain items that are otherwise included in EBITDAre but which we do not believe are indicative of our core business operations. EBITDAre and Adjusted EBITDA are not measurements of financial performance under GAAP, and our EBITDAre and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDAre and Adjusted EBITDA as alternatives to net income or cash flows from operating activities determined in accordance with GAAP. Our calculations of EBITDAre and Adjusted EBITDA have limitations as analytical tools, including:

 

   

these measures do not reflect our historical or future cash requirements for maintenance capital expenditures or growth and expansion capital expenditures;

 

   

these measures do not reflect changes in, or cash requirements for, our working capital needs;

 

   

these measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

 

   

these measures do not reflect our tax expense or the cash requirements to pay our taxes; and

 

   

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements.

 

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We use EBITDA, EBITDAre and Adjusted EBITDA as measures of our operating performance and not as measures of liquidity. The table below reconciles EBITDA, EBITDAre and Adjusted EBITDA to net (loss) income, which is the most directly comparable financial measure calculated in accordance with GAAP. The table below reconciles EBITDAre and Adjusted EBITDA to net income (loss), which is the most directly comparable financial measure calculated in accordance with GAAP.

 

    Three Months Ended March 31,     Year Ended December 31,  
(in millions)   2024
Pro Forma
(Unaudited)
    2024
Historical
(Unaudited)
    2023
Historical
(Unaudited)
    2023
Pro Forma
(Unaudited)
    2023
Historical
    2022
Historical
    2021
Historical
 

Net income (loss)

  $ (4.4   $ (48.0   $ 18.6     $ (536.6   $ (96.2   $ (76.0   $ (176.5

Adjustments:

             

Depreciation and amortization expense

    211.1       211.1       181.2       759.7       759.7       677.2       603.7  

Interest expense, net

    82.6       138.8       114.7       277.4       490.4       347.0       259.6  

Income tax expense (benefit)

    (12.1     (9.7     (2.6     (45.4     (13.9     6.0       (29.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $ 277.2     $ 292.2     $ 311.9     $ 455.1     $ 1,140.0     $ 954.2     $ 657.5  

Adjustments:

             

Net loss (gain) on sale of real estate assets

                1.2       7.8       7.8       4.0       1.0  

Impairment write-downs on real estate property

                0.3       1.7       1.7       0.6        

Net loss (gain) on sale of real estate and impairment write-downs of investments in unconsolidated affiliates

                                        0.2  

Allocation of EBITDAre of noncontrolling interests

    (0.8     (0.8     (0.7     (2.2     (2.2     (5.3     (2.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAre

  $ 276.4     $ 291.4     $ 312.7     $ 462.4     $ 1,147.3     $ 953.5     $ 656.0  

Adjustments:

             

Net (gain) loss on sale of non-real estate assets

    (0.5     (0.5     (1.3     2.3       2.3       4.8       2.5  

Other nonoperating (income) expense, net

    0.7       0.7       0.2       19.4       19.4       (2.3     (4.5

Acquisition, restructuring and other

    8.7       8.7       14.7       522.6       72.9       72.3       136.9  

Technology transformation

    3.4       3.4                                

Interest expense and tax expense from unconsolidated JVs

    0.3       0.3       0.9       2.9       2.9       3.0       1.0  

Depreciation and amortization expense from unconsolidated JVs

    0.9       0.9       1.0       5.3       5.3       3.7       3.9  

(Gain) loss on foreign currency transactions, net

    10.7       10.7       1.3       (3.9     (3.9     23.8       34.0  

Stock-based compensation expense

    27.6       4.5       4.3       253.5       25.3       16.8       14.6  

(Gain) loss on extinguishment of debt

          6.5             8.4             (1.4     4.1  

Natural disaster and COVID

                                        1.7  

Non-real estate impairment

                                        7.1  

Impairment of intangible assets

                      7.0       7.0              

Impairment write-downs of investments in unconsolidated JVs

                                        0.5  

Allocation adjustments of noncontrolling interests

                      (0.3     (0.3     0.2        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 328.2     $ 326.6     $ 333.8     $ 1,279.6     $ 1,278.2     $ 1,074.4     $ 857.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Net debt is a non-GAAP financial measure reflecting our gross debt (defined as total debt, net plus finance lease obligations, failed sale-leaseback financing obligations, deferred financing costs, above/below market debt, net and the Kloosterboer preference shares), less cash and cash equivalents. We calculated adjusted net debt as net debt further adjusted for the repayment of debt with the net proceeds of this offering. Adjusted net debt to Adjusted EBITDA is calculated using adjusted net debt as of period end divided by Adjusted EBITDA for the twelve months then ended. We use this ratio to evaluate our capital structure and financial leverage. This ratio is also commonly used in our industry, and we believe it provides investors, lenders and rating agencies a meaningful supplemental measure of our ability to repay and service our debt obligations. Other REITs may also calculate this ratio or other similarly-captioned metrics in a manner different than we do. The table below includes a reconciliation of net debt and adjusted net debt to total debt and debt-like obligation as of March 31, 2024, which is the most directly comparable financial measure calculated in accordance with GAAP. As of March 31, 2024, after giving effect to the repayment of debt with net proceeds of this offering, our ratio of total debt and debt-like obligations (defined as total debt, net plus finance lease obligations, failed sale-leaseback financing obligations and the Kloosterboer preference shares) to net income (loss) for the twelve months ended March 31, 2024 will be (47.4)x.

 

     March 31, 2024  
(in millions)    As Adjusted
(Unaudited)
 

Total debt, net

   $ 9,267.7  

Finance lease obligations

     1,361.1  

Failed sale-leaseback financing obligations

     74.2  

Kloosterboer preference shares(1)

     246.6  
  

 

 

 

Total debt and debt-like obligations

   $ 10,949.6  
  

 

 

 

Deferred financing costs

     21.9  

Above/below market debt, net

     2.5  
  

 

 

 

Gross debt

   $ 10,974.0  
  

 

 

 

Cash and cash equivalents

     91.2  
  

 

 

 

Net debt

   $ 10,882.8  

Adjustment:

  

Offering net proceeds used to repay debt(2)

   $ 3,238.7  
  

 

 

 

Adjusted net debt

   $ 7,644.1  
  

 

 

 

Adjusted EBITDA (for the twelve months then ended)(3)

   $ 1,271.0  

Adjusted net debt to Adjusted EBITDA

     6.0x  

 

(1)

In connection with this offering and the formation transactions, the Kloosterboer preference shares will be reclassified from redeemable noncontrolling interests to other long-term liabilities at fair value. We have therefore included such amount in total debt and debt-like obligations.

 

(2)

In connection with this offering, our operating partnership will repay approximately $3,327.1 million of debt (inclusive of interest and fees) with the net proceeds of this offering. See “Use of Proceeds.” This adjustment represents the corresponding amount of such debt reflected on our balance sheet as of March 31, 2024.

 

(3)

Adjusted EBITDA for the twelve months ended March 31, 2024 is calculated as the sum of Adjusted EBITDA for each of the three months ended June 30, 2023, September 30, 2023, December 31, 2023 and March 31, 2024. For a reconciliation of Adjusted EBITDA to net income (loss) for each of these periods, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quarterly Results of Operations and Other Data.”

 

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RISK FACTORS

Investing in our common stock involves risks. Before you invest in our common stock, you should carefully consider the risk factors below together with all of the other information included in this prospectus. If any of the risks discussed in this prospectus were to occur, our business, financial condition, liquidity, results of operations and prospects and our ability to service our debt and make distributions to our stockholders could be materially and adversely affected (which we refer to collectively as “materially and adversely affecting us” or having “a material adverse effect on us” and comparable phrases), the market price of our common stock could decline significantly and you could lose all or part of your investment in our common stock. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section in this prospectus entitled “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Operations

Our investments are concentrated in the temperature-controlled warehouse industry, and our business would be materially and adversely affected by an economic downturn in that industry or the market for our customers’ products.

Our investments in real estate assets are concentrated in the industrial real estate industry, specifically in temperature-controlled warehouses. This concentration exposes us to the risk of economic downturns in this industry to a greater extent than if our business activities included a more significant portion of other sectors of the real estate market. We are also exposed to fluctuations in the markets for, and production of, the commodities and finished products that we store in our warehouses. For example, the demand for seafood, packaged foods and proteins such as poultry, pork and beef and the production of such products directly impacts the need for temperature-controlled warehouse space to store such products for our customers. Although our customers collectively store a diverse product mix in our temperature-controlled warehouses, declines in production of or demand for their products could cause our customers to reduce their inventory levels at and throughput through our warehouses, which could reduce the storage, handling and other fees payable to us and materially and adversely affect us.

The temperature-controlled warehouses that comprise our global warehousing business are concentrated in certain geographic areas, some of which are particularly susceptible to adverse local conditions. Our inability to quickly and effectively restore operations following adverse weather or a localized disaster, or economic or other disturbance in a key geography could materially and adversely affect us.

Although we own or hold leasehold interests in warehouses across the United States and globally, many of these warehouses are concentrated in a few geographic areas. For example, approximately 9% of our owned or leased warehouses were located in Washington, 8% were in the Netherlands, 8% were in California, 6% were in Texas and 6% were in Illinois (in each case, on a cubic-foot basis based on information as of March 31, 2024). This geographic concentration could adversely affect our operating performance if conditions become less favorable in any of the states or markets within such states in which we have a concentration of properties. We cannot assure you that any of our markets will grow, not experience adverse developments or that underlying real estate fundamentals will be favorable to owners and operators of service-oriented or experience-based properties. Our operations may also be affected if competing properties are built in our markets. Local conditions may include natural disasters, periods of economic slowdown or recession, regulatory changes, labor shortages or strikes, localized oversupply in warehousing space or reductions in demand for warehousing space, adverse agricultural events, road or rail line closures, disruptions in logistics systems, such as transportation and tracking systems for our customers’ inventory, and power outages.

We also maintain facilities in areas that may be susceptible to natural disasters or other serious disruptions caused by record or sustained high temperatures, fire, earthquakes, or other causes that may spoil, damage or destroy a significant portion of customer inventory. In addition, adverse weather patterns may affect local

 

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harvests, which could have an adverse effect on our customers and cause them to reduce their inventory levels at our warehouses, which could in turn materially and adversely affect us. Our inability to quickly and effectively restore operations following adverse weather or a localized disaster, or economic or other disturbance in a key geography could materially and adversely affect us. Although our property insurance typically insures us against such risks, these policies are subject to deductibles and customary exclusions, and there can be no assurance that such potential liability will not exceed the applicable coverage limits under our insurance policies.

Global market and economic conditions may materially and adversely affect us.

Adverse economic conditions such as high unemployment levels, interest rates, tax rates and fuel and energy costs may have an impact on the results of operations and financial conditions. The success of our business will be affected by general economic and market conditions, as well as by changes in laws, currency exchange controls and national and international political, environmental and socio-economic circumstances. Specifically, our business operations are sensitive to the systemic impact of inflation, the availability and cost of credit, declines in the real estate market, increases in fuel, energy and power costs and geopolitical issues. A severe or prolonged economic downturn may adversely impact the general availability of credit to businesses and could lead to a weakening of the U.S. and global economies. While it is difficult to determine the breadth and duration of any unfavorable market or economic conditions and the many ways in which they may affect our customers and our business in general, unfavorable market or economic conditions may result in:

 

   

changes in consumer trends, demand and preferences for products we store in our warehouses;

 

   

customer defaults on their contracts with us;

 

   

reduced demand for our warehouse space, increased vacancies at our warehouses and a reduced ability, or an inability, to retain our customers or acquire new customers;

 

   

reduced demand for the other supply chain services that comprise our integrated solutions business;

 

   

lower rates from, and economic concessions to, our customers;

 

   

increased operating costs, including increased energy, labor and fuel costs, and supply-chain challenges;

 

   

our inability to raise capital on favorable terms, or at all, when desired;

 

   

decreased value of our properties and related impact on our ability to obtain attractive prices on sales or to obtain debt financing; and

 

   

illiquidity and decreased value of our short-term investments and cash deposits.

Any of the foregoing events could result in substantial or total losses to our business in respect of certain properties, which will likely be exacerbated by the terms of our indebtedness.

Many of our costs, such as operating expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation.

Inflation in North America, Europe and the Asia-Pacific region has risen to levels not experienced in recent decades and we are seeing its impact on various aspects of our business. Certain of our expenses, including, but not limited to, labor costs, utility costs (power in particular), interest expense, property taxes, insurance premiums, equipment repair and replacement, and other operating expenses are subject to inflationary pressures that have and may continue to negatively impact our business and results of operations. While we seek to reduce the impact of inflation by increased operating efficiencies and embedded rate escalation or price increases to our customers to offset increased costs and while regulators’ efforts to reduce inflation have been achieved varying levels of success, there can be no assurance that we will be able to offset future inflationary cost increases in whole or in part, which could adversely impact our profit margins. We may be limited in our ability to obtain

 

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reimbursement from customers under existing contracts for any increases in operating expenses such as labor, electricity charges, maintenance costs, taxes, including real estate and income taxes, or other real estate-related costs. Unless we are able to offset any unexpected costs in a timely manner, or at all, with sufficient revenues through new contracts or new customers, increases in these costs would lower our operating margins and could materially and adversely affect us.

Additionally, inflation may have a negative effect on the construction costs necessary to complete our greenfield development and expansion projects, including, but not limited to, costs of construction materials, labor and services from third-party contractors and suppliers. We rely on a number of third-party suppliers and contractors to supply raw materials, skilled labor and services for our construction projects. Notwithstanding our efforts to manage certain increases in the costs of construction materials in our greenfield development and expansion projects through either general budget contingencies built into our overall project construction costs estimates or guaranteed maximum price construction contracts (which stipulate a maximum price for certain construction costs and shift inflation risk to our construction general contractors), no assurance can be given that our budget contingencies would accurately account for potential construction cost increases given the current severity of inflation and variety of contributing factors, or that our general contractors would be able to absorb such increases in costs and complete our construction projects timely, within budget, or at all.

Higher construction costs could adversely impact our investments in real estate assets and expected yields on our greenfield development and expansion projects, which may make otherwise lucrative investment opportunities less profitable to us. Our reliance on a number of third-party suppliers and contractors may also make such investment opportunities unattainable if we are unable to sufficiently fund our projects due to significant cost increases, or are unable to obtain the resources and materials to do so reasonably due to disrupted supply chains. As a result, our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders could be adversely affected over time.

In March 2022, the Federal Reserve began, and it has continued and may continue, to raise interest rates in an effort to curb inflation. Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings, which consist of borrowings under our Revolving Credit Facility, our Term Loan and our CMBS loans. As of March 31, 2024, on a pro forma basis after giving effect to the formation transactions, this offering and the use of the net proceeds from this offering, we had $3.9 billion of our outstanding consolidated indebtedness that is variable-rate debt. However, the effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings on our floating-rate lines of credit or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt. For more information, see “Risk Factors—Risks Related to Our Indebtedness—Increases in interest rates could increase the amount of our debt payments.”

In addition, historically, during periods of increasing interest rates, real estate valuations have generally decreased as a result of rising capitalization rates, which tend to be positively correlated with interest rates. Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio and result in the decline of the quoted trading price of our securities and market capitalization, as well as lower sales proceeds from future dispositions.

Labor shortages, increased turnover and work stoppages have in the past and may in the future continue to disrupt our or our customers’ operations, increase costs and negatively impact our profitability.

We hire our own workforce to handle product in and out of storage for our customers in most of our facilities. Our ability to successfully implement our business strategy depends upon our ability to attract and retain talented people and effectively manage our human capital. The labor markets in the industries in which we operate are competitive, and we have historically experienced some level of ordinary course turnover of employees. A number of factors have had and may continue to have adverse effects on the labor force available

 

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to us, including reduced employment pools and shortages in other industries with which we compete for labor, government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. In addition, we seek to optimize our mix of permanent and temporary team members in our facilities, as temporary team members typically result in higher costs and lower efficiency. Labor shortages and increased turnover rates within our team member ranks have led to and could in the future lead to increased costs, such as increased overtime to meet demand, increased time and resources related to training new team members, and increased wage rates to attract and retain team members, and could negatively affect our ability to efficiently operate our facilities or otherwise operate at full capacity. An overall or prolonged labor shortage, lack of skilled labor, inability to maintain a stable mix of permanent to temporary team members, increased turnover and labor cost inflation could have a material adverse impact on us. In addition, we may not be able to succesfully implement our labor productivity and lean operating principles initiatives, which may impede our growth.

Furthermore, certain portions of our operations are subject to collective bargaining agreements. As of March 31, 2024, fewer than 5% of our team members in the United States were represented by various local labor unions and associations. Globally (including the United States), approximately 17% (based on team members for whom we are able to ascertain union status) or 26% (assuming that the entire 9% of our team members for whom we are not able to ascertain union status due to applicable privacy or freedom of association laws are represented by labor unions and associations) of our total team members were represented by various local labor unions and associations. Strikes, slowdowns, lockouts or other industrial disputes could cause us to experience a significant disruption in our operations, as well as increase our operating costs, which could materially and adversely affect us. If a greater percentage of our workforce becomes unionized, or if we fail to re-negotiate our expired or expiring collective bargaining agreements on favorable terms in a timely manner or at all, we could be materially and adversely affected.

In addition, our customers’ operations are subject to labor shortages and disruptions that could continue to negatively impact their production capability, resulting in reduced volume of product for storage. In addition, labor shortages and disruptions impacting the transportation industry may hamper the timely movement of goods into and out of our warehouses. These labor shortages and disruptions could in turn have a material adverse effect on us.

Wage increases driven by competitive pressures or applicable legislation on employee wages and benefits could negatively affect our operating margins and our ability to attract qualified personnel.

Our hourly team members in the United States and internationally are typically paid wage rates above the applicable minimum wage. However, increases in the minimum wage may increase our labor costs if we are to continue paying our hourly team members above the applicable minimum wage. If we are unable to continue paying our hourly team members above the applicable minimum wage or at otherwise competitive wages, we may be unable to hire and retain qualified personnel. For example, beginning in 2020 and through 2023, we saw wage inflation on a global basis at all levels in our organization, which increased labor costs. For each of the years ended December 31, 2023, 2022 and 2021, labor and benefits expenses in our global warehousing segment accounted for 36.4%, 37.0% and 37.6% of the segment’s revenues, respectively, and for the three months ended March 31, 2024 and 2023, labor and benefits expenses in our global warehousing segment accounted for 36.6% and 35.7%, respectively, of the segment’s revenues. Increases in the rates we pay our team members would negatively affect our operating margins unless we are able to increase our income streams in order to pass increased labor costs on to our customers. Our standard contract forms include some rate protection for uncontrollable costs such as labor, or costs associated with regulatory action, however, despite such provisions, we may not be able to fully pass through these increased costs.

Competitive pressures may also require that we enhance our pay and benefits package to compete effectively for such personnel (including costs associated with health insurance coverage or workers’ compensation insurance) or offer retention bonuses. If we fail to attract and retain qualified and skilled personnel, we could be materially and adversely affected.

 

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Supply chain disruptions may continue to negatively impact our business.

Our business has been impacted by ongoing supply chain disruptions, which have impacted, among other things, labor availability, raw material availability, manufacturing and food production, construction materials and transportation, including increased costs, reduced options, and timing delays with respect to the foregoing. Continued disruptions in the supply chain impacting the availability of materials, causing delays in manufacturing and production, including in our customers’ products, shipping delays and other supply chain problems could materially and adversely impact us.

We are exposed to risks associated with expansion and development, which could result in returns below expectations and unforeseen costs and liabilities.

We have engaged and we expect to continue to engage, in expansion and development activities, including greenfield development and expansion projects, with respect to certain of our properties. Expansion and development activities will subject us to certain risks not present in the acquisition of existing properties (the risks of which are described below), including, without limitation, the following:

 

   

our pipeline of expansion and development opportunities is at various stages of discussion and consideration and, based on historical experiences, many of them may not be pursued or completed as contemplated or at all;

 

   

the availability and timing of financing on favorable terms or at all;

 

   

the availability and timely receipt of environmental studies and entitlement, zoning and regulatory approvals, which could result in increased costs and could require us to abandon our activities entirely with respect to any given warehouse for which we are unable to obtain permits or authorizations;

 

   

the cost and timely completion within budget of construction due to increased land, materials, equipment, labor or other costs (including risks beyond our control, such as strikes, uninsurable losses, weather or labor conditions, or material shortages), which could make completion of any given warehouse or the expansion thereof uneconomical, and we may not be able to increase revenues to compensate for the increase in construction costs;

 

   

we may be unable to complete construction of a warehouse or the expansion thereof on schedule due to the availability of labor, equipment or materials or other factors outside of our control, resulting in increased debt service expense and construction costs;

 

   

supply chain disruptions or delays in receiving materials or support from vendors or contractors could impact the timing of stabilization of expansion and development projects;

 

   

the potential that we may expend funds on and devote management time and attention to projects which we do not complete;

 

   

newly developed properties do not have an operating history that would allow objective pricing decisions in determining whether to invest our capital in such properties;

 

   

market conditions may change during the course of development, which may make such development less attractive than at the time it was commenced;

 

   

a completed expansion project or a newly-developed warehouse may fail to achieve, or take longer than anticipated to achieve, expected occupancy rates and may fail to perform as expected;

 

   

we may not be able to successfully integrate expanded or newly-developed properties;

 

   

projects to automate our existing or new warehouses may not perform as expected or achieve the anticipated operational efficiencies; and

 

   

we may not be able to achieve targeted returns and budgeted stabilized returns on invested capital on our expansion and development opportunities due to the risks described above, and an expansion or development may not be profitable and could lose money.

 

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These risks could create substantial unanticipated delays and expenses and, in certain circumstances, prevent the initiation or completion of expansion or development as contemplated or at all, any of which could materially and adversely affect us.

The actual initial full year stabilized NOI yields from our greenfield development and expansion projects may not be consistent with the targeted NOI yield ranges set forth in this prospectus.

As of March 31, 2024, we had 25 greenfield development and expansion projects that had been completed since March 31, 2021 and eight greenfield development and expansion projects under construction. As a part of our standard development and expansion underwriting process, we analyze the estimated initial full year stabilized NOI yield we expect to derive from each greenfield development project and the estimated incremental initial full year stabilized NOI yield we expect to derive from each expansion project, as applicable, and establish a targeted NOI yield range. We define estimated initial full year stabilized NOI yield as the percentage of the total estimated cost to complete the greenfield development or expansion project represented by the estimated initial full year stabilized NOI from the greenfield development project or the estimated incremental initial full year stabilized NOI from the expansion project. For greenfield development projects, we calculate the estimated initial full year stabilized NOI by subtracting the greenfield development project’s estimated initial full year stabilized operating expenses (before interest expense, income taxes (if any) and depreciation and amortization) from its estimated initial full year stabilized revenue. For expansion projects, we calculate the estimated incremental initial full year stabilized NOI by subtracting the expansion project’s estimated incremental initial full year stabilized operating expenses (before interest expense, income taxes (if any) and depreciation and amortization) from its estimated incremental initial full year stabilized revenue.

We caution you not to place undue reliance on the targeted NOI yield ranges for our greenfield development and expansion projects because they are based solely on our estimates, using data currently available to us in our development and expansion underwriting processes. For our greenfield development and expansion projects under construction, our total cost to complete the project may differ substantially from our estimates due to various factors, including unanticipated expenses, delays in the estimated start and/or completion date and other contingencies. In addition, our actual initial full year stabilized NOI from our greenfield development and expansion projects may differ substantially from our estimates based on numerous other factors, including delays and/or difficulties in leasing or stabilizing the facilities, failure to achieve estimated occupancy and rental rates, inability to collect anticipated revenues, customer bankruptcies and unanticipated expenses at the facilities that we cannot pass on to customers. We can provide no assurance that the actual initial full year stabilized NOI yields from our greenfield development and expansion projects will be consistent with the targeted NOI yield ranges set forth in this prospectus.

Our future greenfield development and expansion activity may not be consistent with the estimates relating to our future long-term pipeline set forth in this prospectus.

As of March 31, 2024, we were researching or underwriting a range of greenfield development and expansion opportunities as part of our future long-term pipeline, including 16 projects globally at various phases of research and underwriting, with an estimated construction cost of approximately $1.9 billion and potential contribution of approximately 4.1 million square feet, approximately 246 million cubic feet and approximately 748 thousand pallet positions. The projects in our future long-term pipeline include both projects where we already own the land and projects for which we will need to acquire incremental land.

We caution you not to place undue reliance on the projections relating to our future long-term pipeline because they are based solely our estimates, using data currently available to us, and our business plans as of the date of this prospectus. Our actual greenfield development and expansion activity may differ substantially from our projections based on numerous factors, including our inability to acquire the necessary incremental land or obtain necessary zoning, land use and other required entitlements, as well as building and other required governmental permits and authorizations, and changes in the entitlement, permitting and authorization processes

 

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that may restrict or delay our ability to execute on our future long-term pipeline. Moreover, we may strategically choose not to execute on our future long-term pipeline or be unable to do so as a result of factors beyond our control, including our inability to obtain financing on terms and conditions that we find acceptable, or at all, and fund our development and expansion activities. We can provide no assurance that actual greenfield development and expansion activity and/or any particular project will be consistent with the projections for our future long-term pipeline set forth in this prospectus.

The short-term nature and lack of minimum storage guarantees in many of our customer contracts exposes us to certain risks that could have a material adverse effect on us.

For the twelve months ended March 31, 2024, approximately 41.8% of our storage revenues were generated from agreements with customers that contained minimum storage guarantees. However, despite such guarantees, in the event a customer were to terminate such a contract with us, our remedies are typically limited to the amount of the guarantee.

Our customer contracts that do not contain minimum storage guarantees typically do not require our customers to utilize a minimum number of pallet positions or provide for guaranteed fixed payment obligations from our customers to us. As a result, most of our customers may discontinue or otherwise reduce their use of our warehouses or other services in their discretion at any time which could have a material adverse effect on us. Additionally, we have discrete pricing for our customers based upon their unique profiles. Therefore, a shift in the mix of business types or customers could negatively impact our financial results.

The storage and other fees we generate from customers with month-to-month warehouse rate agreements may be adversely affected by declines in market storage and other fee rates more quickly than with respect to our contracts that contain stated terms. There also can be no assurance that we will be able to retain any customers upon the expiration of their contracts (whether month-to-month warehouse rate agreements or contracts) or leases. If we cannot retain our customers, or if our customers that are not party to contracts with minimum storage guarantees elect not to store goods in our warehouses, we may be unable to find replacement customers on favorable terms or at all or on a timely basis and we may incur significant expenses in obtaining replacement customers and repositioning warehouses to meet their needs. Any of the foregoing could materially and adversely affect us.

In addition, while we plan to expand our use of contracts with minimum storage guarantees, there can no assurance that we will be able to do so or that that strategy will result in increases in recurring revenue, enhanced stability of cash flows or increases in our economic occupancy, which could impede our growth.

Our integrated solutions business depends on the performance of our global warehousing business.

Our integrated solutions business complements our global warehousing services. For example, within transportation, which is the largest area within our integrated solutions business, our core focus areas are multi-vendor less-than-full-truckload consolidation, transportation brokerage and drayage services to and from ports. Because we provide this integrated solutions business to our warehouse customers, the success of our integrated solutions business depends on the performance of our global warehousing business. A reduction in the number of our customers or in our customers’ inventory or throughput levels for any reason could in turn result in reduced demand for our integrated solutions services, which may adversely affect our operations.

Our growth may strain our management and resources, which may have a material adverse effect on us.

We have grown rapidly in recent years, including by expanding our internal resources, undertaking expansion and development projects, making acquisitions, providing expanded service offerings and entering new markets. Our growth has, and may continue to, place a strain on our management, operational, financial and information systems, and procedures and controls to expand, train and control our employee base. Our need for working capital will increase as our operations grow. There can be no assurance that we will be able to adapt our

 

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portfolio management, administrative, accounting, IT and operational systems to support any growth we may experience. Failure to oversee our current portfolio of properties and manage our growth effectively, or to obtain necessary working capital and funds for capital improvements, could have a material adverse effect on us. In addition, our inability to obtain necessary working capital and funds for capital improvements or to successfully deploy capital on accretive projects could impede our growth.

A portion of our future growth depends upon acquisitions and we may be unable to identify, complete and successfully integrate acquisitions, which may impede our growth, and our future acquisitions may not achieve their intended benefits or may disrupt our plans and operations.

We have executed on 116 acquisitions since our first acquisition in 2008 through March 31, 2024, of which 75 were executed in the four years since 2020. Our ability to expand through acquisitions requires us to identify and complete acquisitions that are compatible with our growth strategy and to successfully integrate and operate these newly-acquired companies and/or properties. We continually evaluate acquisition opportunities but cannot guarantee that suitable opportunities currently exist or will exist in the future. In addition, future acquisitions may generate lower returns than past acquisitions and past acquisitions may not generate the same returns as they did previously. Our ability to identify and complete acquisitions of suitable companies and/or properties on favorable terms, or at all, and to successfully integrate and operate them to meet our financial, operational and strategic expectations may be constrained by the following risks, among others:

 

   

we face competition from other real estate investors with significant capital, including REITs and institutional investment funds, which may be able to accept more risk than we can prudently manage, including risks associated with paying higher acquisition prices;

 

   

we face competition from other potential acquirers that may significantly increase the purchase price for a company and/or property we acquire, which could reduce our growth prospects or returns;

 

   

we may incur significant costs and divert management’s attention in connection with evaluating and negotiating potential acquisitions, including ones that we are subsequently unable to complete;

 

   

we may acquire companies or properties that are not accretive to our operating and financial results upon acquisition, and we may be unsuccessful in integrating and operating such companies or properties in accordance with our expectations;

 

   

our cash flow from an acquired company or property may be insufficient to meet our required principal and interest payments with respect to any debt used to finance the acquisition of such company or property;

 

   

we may discover unexpected items, such as unknown liabilities, during our due diligence investigation of a potential acquisition or other customary closing conditions may not be satisfied, causing us to abandon an acquisition opportunity after incurring expenses related thereto;

 

   

we may face opposition from governmental authorities or third parties alleging that potential acquisition transactions are anti-competitive, and as a result, we may have to spend a significant amount of time and expense to respond to related inquiries, or governmental authorities may prohibit the transaction or impose terms or conditions that are unacceptable to us;

 

   

we may fail to obtain the necessary regulatory approvals or other approvals required in connection with any potential acquisition or we may fail to satisfy certain conditions required to complete a transaction in a timely manner;

 

   

we may be required to acquire a company and/or property through one or more of our taxable REIT subsidiary, or TRS, entities, but no more than 20% of the value of our gross assets may consist of securities in TRSs, and as a result, compliance with these requirements could limit our ability to complete a transaction;

 

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we may fail to discover design or construction defects of an acquired property following the completion of an acquisition that may require unforeseen capital expenditures, special reports or maintenance expenses;

 

   

we may fail to obtain financing for an acquisition on favorable terms or at all;

 

   

we may be unable to make, or may spend more than budgeted amounts to make, necessary improvements or renovations to acquired properties;

 

   

we may spend more than budgeted amounts to meet customer specifications on a newly-acquired warehouse;

 

   

market conditions may result in higher than expected vacancy rates and lower than expected storage charges, rent or fees from our global warehousing business and lower utilization of and revenue from our integrated solutions business;

 

   

engineering, seismic and other reports on which we rely as part of our pre-acquisition due diligence investigations of these properties may be inaccurate or deficient, at least in part because defects may be difficult or impossible to ascertain; or

 

   

we may, without any recourse, or with only limited recourse, acquire properties subject to liabilities, such as liabilities for clean-up of undisclosed environmental contamination, defects of design, construction, title or other problems, claims by employees, customers, vendors or other persons dealing with the former owners of the properties, liabilities incurred in the ordinary course of business and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

If any of the foregoing risks were to materialize, they could materially and adversely affect us.

We may be unable to successfully expand our operations into new markets or new lines of business.

If the opportunity arises, we may acquire or develop properties in new markets. In addition to the risks described above relating to our acquisition, expansion and development activities, the acquisition, expansion or development of properties in new markets will subject us to the risks associated with a lack of understanding of the related economy and unfamiliarity with government and permitting procedures. We will also not possess the same level of familiarity with the dynamics and market conditions of any new market that we may enter, which could adversely affect our ability to successfully expand and operate in such market. We may be unable to build a significant market share or achieve a desired return on our investments in new markets. If we are unsuccessful in expanding and operating in new, high-growth markets, it could have a material adverse effect on us.

In addition, from time to time, we may develop, grow and/or acquire new lines of business or offer new services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets for these services are not fully developed. In developing and marketing new lines of business and/or new services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new service. Furthermore, the burden on management and our IT of introducing any new line of business and/or new service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new services could have a material adverse effect on us.

We are dependent on Bay Grove to provide certain services to us pursuant to the transition services agreement, and it may be difficult to replace the services provided under such agreement.

Historically, we have relied on Bay Grove to provide certain operating, consulting, strategic development and financial services, including advice and assistance concerning operational aspects of Lineage Holdings and its

 

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subsidiaries, and we will continue to rely on Bay Grove for transition services supporting capital deployment and mergers and acquisitions activity for three years following the initial closing of this offering pursuant to the transition services agreement that we plan to enter into with Bay Grove in connection with this offering. See “Certain Relationships and Related Party Transactions—Transition Services Agreement.” In addition, it may be difficult for us to replace the services provided by Bay Grove under the transition services agreement, and the terms of any agreements to replace such services may be less favorable to us. Any failure by Bay Grove in the performance of such services, or any failure on our part to successfully transition these services away from Bay Grove by the expiration of the transition services agreement, could materially harm our business and financial performance.

We can only terminate the transition services agreement with Bay Grove under limited circumstances and will be required to pay fees thereunder even if Bay Grove does not perform the services required.

The transition services agreement that we plan to enter into with Bay Grove in connection with this offering will provide that the agreement can only be terminated by mutual written consent of us and Bay Grove or by us for cause (as defined in the transition services agreement), which does not include any failure of Bay Grove to provide services under the agreement. Accordingly, even if Bay Grove were to fail to provide the services required pursuant to the transition services agreement, we would be obligated to pay Bay Grove $8 million per year for the term of the agreement. In such event, we could incur operational difficulties or losses, including the incurrence of additional costs to transition such services, that could have a material and adverse effect on us.

We will have uncapped expense payment and indemnification obligations with respect to various costs incurred by BGLH, Bay Grove and their affiliates.

In connection with this offering, Lineage Holdings will have entered into an expense reimbursement and indemnification agreement with BGLH, the LHR and Bay Grove, pursuant to which Lineage Holdings will agree to (i) advance to or reimburse such entities for all of their expenses in any way related to our company, including expenses incurred in connection with the coordinated settlement process that will occur for up to three years for all legacy investors in both BGLH and our operating partnership, and (ii) indemnify such entities to the fullest extent permitted by applicable law against liabilities that may arise in any way related to our company, including liabilities incurred in connection with or as a result of the coordinated settlement process. There is no limit to the amounts we may be required to pay under this agreement. Accordingly, there can be no assurance that our future payment obligations under this agreement will not have a material adverse effect on us.

We have no experience operating as a publicly traded REIT.

We have no experience operating as a publicly traded REIT. As a publicly traded REIT, we will be required to develop and implement substantial control systems, policies and procedures in order to maintain our REIT qualification and satisfy our periodic SEC reporting, SEC compliance and Nasdaq listing requirements. We cannot assure you that our management’s past experience will be sufficient to successfully develop and implement these systems, policies and procedures and to operate our company as a publicly traded REIT. Any difficulty we have in operating as a publicly traded REIT in compliance with these requirements could subject us to significant fines, sanctions and other liabilities and jeopardize our status as a REIT or as a public company listed on Nasdaq, which could materially and adversely affect us. See also “Risk Factors—Risks Related to Our REIT Status and Other Tax Risks—Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.”

Pandemics or disease outbreaks, and associated responses, may disrupt our business, including among other things, increasing our costs, impacting our supply chain, and impacting demand for cold storage, which could have a material adverse impact on our business.

We face various risks and uncertainties related to public health crises, including:

 

   

supply chain disruptions;

 

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potential work stoppages, including stoppages due to spread of the disease among our team members or our customers’ work forces or due to shutdowns that may be requested or mandated by governmental authorities;

 

   

labor unrest, including unrest due to risks of disease from working with other team members and outside vendors;

 

   

economic impacts, including increased labor costs, from mitigation and other measures undertaken by us and/or third parties to support and protect our team members or the food supply;

 

   

completing developments on time or an inability of our contractors to perform as a result of spread of disease among team members of our contractors and other construction partners, travel restrictions or due to shutdowns that may be requested or mandated by governmental authorities;

 

   

limiting the ability of our customers to comply with the terms of their contracts with us, including making timely payments to us, due to, among other factors, labor shortages impacting our customers’ ability to manufacture and transport product;

 

   

limiting the ability of our suppliers and partners to comply with the terms of their contracts with us, including in making timely delivery of supplies to us necessary for the operation of our temperature-controlled warehouses;

 

   

long-term volatility in or reduced demand for temperature-controlled warehouse storage and related handling and other warehouse services;

 

   

adverse impact on the value of our real estate; and

 

   

reduced ability to execute our growth strategies, including identifying and completing acquisitions and expanding into new markets.

The extent to which a public health emergency impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with any degree of confidence, including the scope, severity, duration and geographies of the outbreak, the actions taken or not taken to contain the outbreak or mitigate its impact requested or mandated by governmental authorities or otherwise voluntarily taken or not taken by individuals or businesses, and the direct and indirect economic effects of the illness and containment measures, among others.

We may be vulnerable to security breaches or cyber-attacks which could disrupt our operations and have a material adverse effect on our financial condition and operating results.

We rely extensively on information systems to process transactions, operate and manage our business. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations (including managing and operating our warehouses and our integrated solutions business), and, in some cases, may be critical to the operations of our customers. The failure of our IT systems to perform as anticipated, and the failure to integrate disparate systems effectively or to collect data accurately and consolidate it a useable manner efficiently could adversely affect our business through transaction errors, billing and invoicing errors, processing inefficiencies or errors and loss of sales, receivables, collections and customers, in each case, which could result in reputational damage and have an ongoing adverse effect on our business, results of operation and financial condition.

We recognize the increasing volume of cyber-attacks and employ commercially practical efforts to provide reasonable assurance such attacks are appropriately mitigated. We may be required to expend significant financial resources and management time to protect against or respond to such breaches. Techniques used to

 

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breach security change frequently and are generally not recognized until launched against a target, so we may not be able to promptly detect that a security breach or unauthorized access has occurred. We also may not be able to implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented. If an actual or perceived security breach occurs, the market’s perception of our security measures could be harmed and we could lose current and potential tenants, and such a breach could be harmful to our brand and reputation. Any breaches that may occur could expose us to increased risk of lawsuits, material monetary damages, potential violations of applicable privacy and other laws, penalties and fines, harm to our reputation and increases in our security and insurance costs. In the event of a breach resulting in loss of data, such as personally identifiable information or other such data protected by data privacy or other laws, we may be liable for damages, fines and penalties for such losses under applicable regulatory frameworks despite not handling the data. We cannot guarantee that any backup systems, regular data backups, security protocols, network protection mechanisms and other procedures currently in place, or that may be in place in the future, will be adequate to prevent network and service interruption, system failure, damage to one or more of our systems or data loss in the event of a security breach or attack. In addition, our customers rely extensively on computer systems to process transactions and manage their businesses and thus their businesses are also at risk from, and may be impacted by, cybersecurity attacks. An interruption in the business operations of our customers or a deterioration in their reputation resulting from a cybersecurity attack could indirectly impact our business operations. We carry insurance, including cyber insurance, commensurate with the size and nature of our operations; however, there can be no assurance that such potential liability will not exceed the applicable coverage limits under our insurance policies.

However, there can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. Like other businesses, we have been and expect to continue to be subject to unauthorized access, mishandling or misuse, computer viruses or malware, cyber-attacks and other events of varying degrees. Historically, these events have not significantly affected our operations or business and were not individually or in the aggregate material. While these incidents did not have a material impact on us, there can be no assurance that future incidents will not have a material adverse effect on us.

We depend on IT systems to operate our business, and issues with maintaining, upgrading or implementing these systems, could have a material adverse effect on our business.

We rely on the efficient and uninterrupted operation of IT systems to process, transmit and store electronic information in our day-to-day operations. All IT systems are vulnerable to damage or interruption from a variety of sources. Our business has grown in size and complexity; this has placed, and will continue to place, significant demands on our IT systems. In connection with this growth, we rely on 81 fully-and semi-automated facilities in a traditionally analog industry. To effectively manage this growth, our information systems and applications require an ongoing commitment of significant resources to maintain, protect, enhance and upgrade existing systems and develop and implement new systems to keep pace with changing technology and our business needs. Since the start of 2019, we have invested more than $725 million into transformational technology initiatives, which include developing, acquiring and deploying both proprietary operating systems and third-party platforms. In addition, since the start of 2019, we have deployed approximately $380 million to capital and operating expenses in information technology investments. This investment encompasses migrating workloads to the cloud, implementing SaaS-based tools, rolling out next-generation SD-WAN and upgrading our core human capital and financial ERP software. These initiatives are strategically designed to standardize, integrate and enhance the technological framework across our enterprise. This development entails certain risks, including difficulties with changes in business processes that could disrupt our operations, manage our supply chain and aggregate financial and operational data. We may continue to rely on legacy information systems, which may be costly or inefficient, while the implementation of new initiatives may not achieve the anticipated benefits and may divert management’s attention from other operational activities, negatively affect team member morale, or have other unintended consequences. Delays in integration or disruptions to our business from implementation of new or upgraded systems could have a material adverse impact on our financial condition and operating results.

 

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Additionally, if we are not able to accurately anticipate expenses and capitalized costs related to system upgrades and changes or if we are unable to realize the expected benefits from our technology initiatives, this may have an adverse impact on our financial condition and operating results.

If the information we rely upon to run our businesses were to be found to be inaccurate or unreliable, if we fail to maintain or protect our IT systems and data integrity effectively, if we fail to develop and implement new or upgraded systems to meet our business needs in a timely manner, or if we fail to anticipate, plan for or manage significant disruptions to these systems, our competitive position could be harmed, we could have operational disruptions, we could lose existing customers, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, have regulatory sanctions or penalties imposed or other legal problems, incur increased operating and administrative expenses, lose revenues as a result of a data privacy breach or theft of intellectual property or suffer other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition or cash flows.

Privacy and data security concerns, and data collection and transfer restrictions and related regulations may adversely affect our business.

Many foreign countries and governmental bodies, including the European Union, where we conduct business, have laws and regulations concerning the collection and use of personal data obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, IP addresses.

Recently, there has been heightened interest and enforcement focus on data protection regulations and standards both in the United States and abroad. For example, in January 2023, amendments to California’s Consumer Privacy Act of 2018 went into effect, increasing data privacy requirements for our business. We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union, and other jurisdictions. In addition, the European Commission adopted a General Data Protection Regulation (“GDPR”), that became fully effective on May 25, 2018, superseding prior European Union data protection legislation, imposing more stringent European Union data protection requirements, and providing for greater penalties for noncompliance. The United Kingdom enacted the Data Protection Act that substantially implements the GDPR. More generally, we cannot yet fully determine the impact these or future laws, regulations and standards may have on our business. Privacy, data protection and information security laws and regulations are often subject to differing interpretations, may be inconsistent among jurisdictions, and may be alleged to be inconsistent with our current or future practices. Additionally, we may be bound by contractual requirements applicable to our collection, use, processing, and disclosure of various types of data, including personal data, and may be bound by, or voluntarily comply with, self-regulatory or other industry standards relating to these matters. These and other requirements could increase our costs, impair our ability to grow our business, or restrict our ability to store and process data or, in some cases, impact our ability to operate our business in some locations and may subject us to liability. Any failure or perceived failure to comply with applicable laws, regulations, industry standards, and contractual obligations may adversely affect our business.

Further, in view of new or modified foreign laws and regulations, industry standards, contractual obligations and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to adapt to these changes. We may be unable to make such changes and modifications in a commercially reasonable manner or at all.

The costs of compliance with and other burdens imposed by laws, regulations and standards may limit the use and adoption of our service and reduce overall demand for it. Failure to comply with applicable data

 

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protection regulations or standards may expose us to litigation, fines, sanctions or other penalties, which could damage our reputation and adversely impact our business, results of operation and financial condition. Privacy, information security, and data protection concerns may inhibit market adoption of our business, particularly in certain industries and foreign countries.

If any of the foregoing risks were to materialize, they could materially and adversely affect us.

We are subject to additional risks with respect to our current and potential international operations and properties.

As of March 31, 2024, we owned or had a leasehold interest in 201 temperature-controlled warehouses outside the United States. We also intend to strategically grow our portfolio globally through acquisitions of temperature-controlled warehouses in attractive international markets to service demonstrable customer demand where we believe the anticipated risk-adjusted returns are consistent with our investment objectives. However, there can be no assurance that our existing customer relationships will support our international operations in any meaningful way or at all. Our international operations and properties could be affected by factors specific to the laws, regulations and business practices of the jurisdictions in which our warehouses are located. These laws, regulations and business practices expose us to risks that are different than or in addition to those commonly found in the United States. Risks relating to our international operations and properties include:

 

   

changing governmental rules and policies, including changes in land use and zoning laws;

 

   

enactment of laws relating to the international ownership and leasing of real property or mortgages and laws restricting the ability to remove profits earned from activities within a particular country to a person’s or company’s country of origin;

 

   

changes in laws or policies governing foreign trade or investment and use of foreign operations or workers, and any negative sentiments towards multinational companies as a result of any such changes to laws, regulations or policies or due to trends such as political populism and economic nationalism;

 

   

variations in currency exchange rates and the imposition of currency controls;

 

   

adverse market conditions caused by terrorism, civil unrest, natural disasters, infectious disease and changes in international, national or local governmental or economic conditions;

 

   

the willingness of U.S. or international lenders to make mortgage loans in certain countries and changes in the availability, cost and terms of secured and unsecured debt resulting from varying governmental policies, economic conditions or otherwise;

 

   

business disruptions arising from public health crises and outbreaks of communicable diseases;

 

   

the imposition of non-U.S. income and withholding taxes, value added taxes, and other taxes on dividends, interest, capital gains, income, gains, gross sales or other disposition proceeds and changes in real estate and other tax rates and other operating expenses in particular countries, including the potential imposition of adverse or confiscatory taxes;

 

   

general political and economic instability;

 

   

geopolitical risks, including the ongoing conflict between Russia and Ukraine and the blockage of the Suez Canal affecting the flow of trade out of Asia;

 

   

potential liability under the Foreign Corrupt Practices Act of 1977, as amended, and the U.K. Bribery Act 2010, anticorruption regulations with broad jurisdictional authority;

 

   

our limited experience and expertise in foreign countries relative to our experience and expertise in the United States;

 

   

restrictions on our ability to repatriate earnings generated from our international operations and adverse tax consequences in the applicable jurisdictions, such as double taxation;

 

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potential liability under, and costs of complying with, more stringent environmental laws or changes in the requirements or interpretation of existing laws, or environmental consequences of less stringent environmental management practices in foreign countries relative to the United States; and

 

   

disruptions to our business or that of our customers and/or our suppliers resulting from trade tensions, tariffs imposed by the U.S. and other governments, actual or threatened modifications to or withdrawals from international trade agreements, treaties, policies, tariffs, quotas or any other trade rules or restrictions.

If any of the foregoing risks were to materialize, they could materially and adversely affect us.

Competition in our markets may increase over time if our competitors open new warehouses or expand their logistics or integrated service offerings that compete with our offerings.

We compete with other owners and operators of temperature-controlled warehouses (including our customers or potential customers who may choose to provide temperature-controlled warehousing in-house), some of which own properties similar to ours in similar geographic locations, as well with as various logistics companies. In recent years, certain of our competitors, including Americold, United States Cold Storage, NewCold, and FreezPak Logistics, have added, through construction, development and acquisition, temperature-controlled warehouses in certain of our markets. In addition, our customers or potential customers may choose to develop new temperature-controlled warehouses, expand their existing temperature-controlled warehouses or upgrade their equipment. As newer warehouses and equipment come onto the market, we may lose existing or potential customers, and we may be pressured to reduce our rent and storage and other fees below those we currently charge in order to retain customers. If we lose one or more customers, we cannot assure you that we would be able to replace those customers on attractive terms or at all. We also may be forced to invest in new construction or reposition existing warehouses at significant costs in order to remain competitive. Increased capital expenditures or the loss of global warehousing segment revenues resulting from lower occupancy or storage rates could have a material adverse effect on us. We may also compete with other logistics providers that are able to offer more attractive services or rates. Such competition may affect our profitability in respect of our integrated solutions services and our intended expansion of such services. In addition, such competition could make it difficult to gain new customers and expand our business with existing customers, which could impede our utilization initiatives to increase physical occupancy. Such competition could also make it difficult to successfully implement our commercial optimization initiatives and our initiative to align rates with costs to serve, which could adversely impact our results of operations and our growth.

Power costs may increase or be subject to volatility, which could result in increased costs that we may be unable to recover.

Power is a major operating cost for temperature-controlled warehouses, and the price of power varies substantially between the markets in which we operate, depending on the power source and supply and demand factors. For each of the years ended December 31, 2023, 2022 and 2021, power costs in our global warehousing segment accounted for 5.3%, 6.4% and 5.9% of the segment’s revenues, respectively. For the three months ended March 31, 2024 and 2023, power costs in our global warehousing segment accounted for 4.9% and 5.0% of the segment’s revenues, respectively.

We have implemented programs across several of our warehouses to reduce overall consumption and to reduce consumption at peak demand periods, when power prices are typically highest. Additionally, we have introduced alternative sources of energy at several of our warehouses through on-site solar and battery capacity and linear generators. However, there can be no assurance that these programs will be effective in reducing our power consumption or cost of power, which could adversely impact our growth and the predictability of our margins.

We have entered into, or may in the future enter into, fixed price power purchase agreements in certain deregulated markets whereby we contract for the right to purchase an amount of electric capacity at a fixed rate

 

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per kilowatt. Typically, these contracts do not obligate us to purchase any minimum amounts but would require negotiation if our capacity requirements were to materially differ from historical usage or exceed the thresholds agreed upon. For example, exceeding these thresholds could have an adverse impact on our incremental power purchase costs if we were to be unable to obtain favorable rates on the incremental purchases.

If the cost of electric power to operate our warehouses increases dramatically or fluctuates widely and we are unable to pass such costs through to customers, we could be materially and adversely affected.

We depend on certain customers for a substantial amount of our revenues.

Our 25 largest customers contributed approximately 32% of our total revenues for the twelve months ended March 31, 2024. As of March 31, 2024, we had five customers that each accounted for at least 2% of our total revenues for the twelve months ended March 31, 2024. In addition, as of March 31, 2024, 34 of our warehouses were predominantly single-customer warehouses. If any of our most significant customers were to discontinue or otherwise reduce their use of our warehouses or other services, which they are generally free to do at any time unless they are party to a contract that includes a minimum storage commitment, we would be materially and adversely affected. While we have contracts with stated terms with certain of our customers, many of our contracts do not obligate our customers to use our warehouses or provide for minimum storage commitments. Moreover, a decrease in demand for certain commodities or products produced by our significant customers and stored in our temperature-controlled warehouses would lower our physical occupancy rates and use of our services, without lowering our fixed costs, which could have a material adverse effect on us. In addition, any of our significant customers could experience a downturn in their businesses which may weaken their financial condition and liquidity and result in their failure to make timely payments to us or otherwise default under their contracts. Cancellation of, or failure of a significant customer to perform under, a contract could require us to seek replacement customers. However, there can be no assurance that we would be able to find suitable replacements on favorable terms in a timely manner or at all or reposition the warehouses without incurring significant costs. Moreover, a bankruptcy filing by or relating to any of our significant customers could prevent or delay us from collecting pre-bankruptcy obligations. The bankruptcy, insolvency or financial deterioration of our significant customers, could materially and adversely affect us. In addition, some of our significant customers also utilize our integrated solutions, and a loss of such customer as a warehouse customer would also impact our integrated solutions segment, thereby exacerbating the risks described above.

In addition, while some of our warehouses are located in primary markets, others are located in secondary and tertiary markets that are specifically suited to the particular needs of the customer utilizing these warehouses. For example, our production advantaged warehouses typically serve one or a small number of customers. These warehouses are also generally located adjacent to or otherwise in close proximity to customer processing or production facilities and were often build-to-suit at the time of their construction. If customers who utilize this type of warehouse, which may be located in remote areas, relocate their processing or production plants, default or otherwise cease to use our warehouses, then we may be unable to find replacement customers for these warehouses on favorable terms or at all or, if we find replacement customers, we may have to incur significant costs to reposition these warehouses for the replacement customers’ needs, any of which could have a material adverse effect on us.

Interest rate and hedging activity exposes us to risks, including the risks that a counterparty will not perform and that the hedge will not yield the economic benefits we anticipate.

As of March 31, 2024, we were a party to 13 interest rate hedges, which effectively convert $6.2 billion of our variable-rate indebtedness to fixed-rate once the strike rates of the caps are exceeded. In addition, we have entered into certain forward contracts and other hedging arrangements in order to fix power costs for anticipated electricity requirements. These hedging transactions expose us to certain risks, such as the risk that counterparties may fail to honor their obligations under these arrangements, and that these arrangements may not be effective in reducing our exposure to interest rate and power cost changes. Moreover, there can be no assurance that our

 

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hedging arrangements will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations or cash flows. Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the hedging agreement. Failure to hedge effectively against interest rate and power cost changes could have a material adverse effect on us. When a hedging agreement is required under the terms of a mortgage loan, it is often a condition that the hedge counterparty maintains a specified credit rating. With the current volatility in the financial markets, there is an increased risk that hedge counterparties could have their credit ratings downgraded to a level that would not be acceptable under the loan provisions. If we were unable to renegotiate the credit rating condition with the lender or find an alternative counterparty with an acceptable credit rating, we could be in default under the loan and the lender could seize that property through foreclosure, which could have a material adverse effect on us.

Our business operations outside the United States expose us to losses resulting from currency fluctuations, as the revenues associated with our international operations and properties are typically generated in the local currency of each of the countries in which the properties are located. Fluctuations in exchange rates between these currencies and the U.S. dollar will therefore give rise to non-U.S. currency exposure, which could materially and adversely affect us. We hedge this exposure by incurring operating costs in the same currency as the revenue generated by the related property. We also attempt to mitigate any such effects by entering into currency exchange rate hedging arrangements where it is practical to do so and where such hedging arrangements are available and by structuring debt in local currency. As of March 31, 2024, we were a party to cross currency swaps on certain of our loans, and to interest rate swaps on our variable rate indebtedness. Periodically we enter into foreign currency forward contracts to manage our exposure to fluctuations in exchange rates. In addition, we have entered into certain forward contracts and other hedging arrangements in order to fix power costs for anticipated electricity requirements.

These hedging arrangements may bear substantial costs, however, and may not eliminate all related risks. These hedging transactions also expose us to certain risks, such as the risk that counterparties may fail to honor their obligations under these arrangements, and that these arrangements may not be effective in reducing our exposure to foreign exchange rate, interest rate, and power cost changes. We cannot assure you that our efforts will successfully mitigate our currency risks. Moreover, if we do engage in currency exchange rate hedging activities, any income recognized with respect to these hedges (as well as any foreign currency gain recognized with respect to changes in exchange rates) may not qualify under the 75% gross income test or the 95% gross income test that we must satisfy annually in order to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. Accordingly, our ability to enter into hedging activities may be limited. In addition, changes in foreign currency exchange rates used to value a REIT’s foreign assets may be considered changes in the value of the REIT’s assets. These changes may adversely affect our status as a REIT. Further, bank accounts in a foreign currency which are not considered cash or cash equivalents may adversely affect our status as a REIT. See “Federal Income Tax Considerations—Taxation of Our Company.” For more information regarding our currency exposure, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risks—Foreign Currency Risk.” Moreover, there can be no assurance that our hedging arrangements will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations or cash flows. Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the hedging agreement. Failure to hedge effectively against foreign exchange rates, interest rates and power cost changes could have a material adverse effect on us.

We may incur liabilities or harm our reputation as a result of quality-control issues associated with our global warehouse storage business and other services provided by our integrated solutions business.

We store frozen and perishable food and other products and provide food processing, repackaging and other services. Product contamination, spoilage, other adulteration, product tampering or other quality control issues could occur at any of our facilities or during the transportation of these products, which could cause our

 

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customers to lose all or a portion of their inventory. We could be liable for the costs incurred by our customers as a result of the lost inventory, and we also may be subject to liability, which could be material, if any of the frozen and perishable food products we stored, processed, repackaged or transported caused injury, illness or death. The occurrence of any of the foregoing may negatively impact our brand and reputation and otherwise have a material adverse effect on us.

We are subject to risks related to corporate social and environmental responsibility and reputation.

A number of factors influence our reputation and brand value, including how we are perceived by our customers, business partners, investors, team members, other stakeholders and the communities in which we do business. We face increasing scrutiny related to environmental, social and governance (“ESG”) activities and disclosures and risk damage to our reputation if we fail to act appropriately and responsibly in ESG matters, including, among others, environmental stewardship, supply chain management, climate change, human rights, diversity, equity and inclusion, workplace ethics and conduct, philanthropic activity and support for the communities we serve and in which we operate. Any damage to our reputation could impact the willingness of our business partners and customers to do business with us, or could negatively impact our team member hiring, engagement and retention, all of which could have a material adverse effect on our business, results of operations and cash flows. We could also incur additional costs and devote additional resources to monitoring, reporting, and implementing various ESG practices.

We may be unable to achieve or demonstrate progress on our goal of carbon neutrality for our global operations by calendar 2040.

In 2021, we announced we had signed onto The Climate Pledge and committed to a goal to achieve carbon neutrality by calendar 2040. Achievement of this goal depends on our execution of operational strategies relating to energy efficiency measures, onsite energy generation and storage, and network-wide standards to minimize and eliminate carbon emissions associated with daily operations.

Execution of these strategies, as well as demonstrable progress on and achievement of our calendar 2040 goal, is subject to risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, but are not limited to:

 

   

our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and achieve the anticipated benefits and associated cost savings of such strategies and actions;

 

   

the availability and cost of, and our ability to acquire, solar-panels, alternative fuel vehicles, alternative fuels, global electrical charging infrastructure and other materials and components, which may not be available at scale;

 

   

unforeseen production, design, operational and technological difficulties;

 

   

the outcome of research efforts and future technology developments, including the ability to scale projects and technologies on a commercially competitive basis such as carbon sequestration and/or other related processes;

 

   

compliance with, and changes or additions to, global and regional regulations, taxes, charges, mandates or requirements relating to greenhouse gas emissions, carbon costs or climate-related goals;

 

   

labor-related regulations and requirements that restrict or prohibit our ability to impose requirements on third parties who provide contracted transportation for our transportation networks;

 

   

adapting products to customer preferences and customer acceptance of sustainable supply chain solutions and potentially increased prices for our services; and the actions of competitors and competitive pressures.

 

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There can be no assurance that we will be able to successfully execute our strategies and achieve or demonstrate progress on our calendar 2040 goal of carbon neutrality. Additionally, we may determine that it is in our best interests to prioritize other business, social, governance or sustainable investments and/or initiatives over the achievement of our calendar 2040 goal based on economic, regulatory or social factors, business strategy or other reasons. Failure to achieve or demonstrate progress on our calendar 2040 goal could damage our reputation and customer and other stakeholder relationships. Further, given investors’ and banks’ increased focus related to ESG matters, such a failure could cause large stockholders to reduce their ownership of our common stock and limit our access to financing. Such conditions could materially and adversely affect us, as well as on the market price of our common stock.

Our temperature-controlled warehouse infrastructure and systems may become obsolete or unmarketable and we may not be able to upgrade our equipment cost-effectively or at all.

The infrastructure at our temperature-controlled warehouses and systems may become obsolete or unmarketable due to the development of, or demand for, more advanced equipment or enhanced technologies, including increased automation of our warehouses. Increased automation may entail significant time and start-up costs and lost revenue opportunity, and may not perform as expected. In addition, our IT platform pursuant to which we provide inventory management and other services to our customers may become outdated. When customers demand new equipment or technologies, the cost could be significant and we may not be able to upgrade our warehouses on a cost-effective basis in a timely manner, or at all, due to, among other things, increased expenses to us that cannot be passed on to customers or insufficient resources to fund the necessary capital expenditures. The obsolescence of our infrastructure or our inability to upgrade our warehouses would likely reduce global warehousing segment revenues, which could have a material adverse effect on us.

The transportation services provided by our integrated solutions business are dependent in part on in-house trucking services and in part on third-party truckload carrier and rail services, each of which subjects us to risks.

We use in-house trucking services to provide transportation services to our customers, and any increased severity or frequency of accidents or other claims, delays or disruptions in services or changes in regulations could have a material adverse effect on us.

We use in-house trucking transportation services to provide refrigerated transportation services to certain customers. The potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable. A material increase in the frequency or severity of accidents or workers’ compensation claims or the unfavorable development of existing claims could materially and adversely affect our results of operations. In the event that accidents occur, we may be unable to obtain desired contractual indemnities, and, although we believe our aggregate insurance limits should be sufficient to cover our historic claims amounts, the commercial trucking industry has experienced a wave of blockbuster or so-called “nuclear” verdicts, including some instances in which juries have awarded hundreds of millions of dollars to those injured in accidents and their families. As a result, our insurance may prove inadequate in certain cases. The occurrence of an event not fully insured or indemnified against or the failure or inability of a customer or insurer to meet its indemnification or insurance obligations could result in substantial losses. Moreover, in connection with any such delays or disruptions, or if customers’ products are damaged or destroyed during transport, we may incur financial obligations or be subject to lawsuits by our customers. Any of these risks could have a material adverse effect on us. In addition, our trucking services are subject to regulation as a motor carrier by the U.S. Department of Transportation, by various state agencies and by similar authorities in our international operations, whose regulations include certain permit requirements of state highway and safety authorities. These regulatory authorities exercise broad powers over our trucking operations. The trucking industry is subject to possible regulatory and legislative changes that may impact our operations and affect the economics of the industry by requiring changes in operating practices or by changing the demand for or the costs of providing trucking services. Some of these possible changes include increasingly stringent fuel emission limits, including potential

 

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limits on carbon emissions, changes in the regulations that govern the amount of time a driver may drive or work in any specific period, classification of independent drivers, “restart” rules, limits on vehicle weight and size and other matters including safety requirements.

We also rely on third-party truckload carriers and rail services to transport customer inventory.

We also act as a transportation broker and depend on third-party truckload carriers and rail services to transport customer inventory. We do not have an exclusive or long-term contractual relationship with third-party trucking or rail service providers, and there can be no assurance that our customers will have uninterrupted or unlimited access to their transportation assets or services. Additionally, we may not be able to renegotiate additional transportation contracts to expand capacity, add additional routes, obtain multiple providers, or obtain services at current cost levels, any of which may limit the availability of services to our customers. Our ability to secure the services of these third parties, or increases in the prices we or our customers must pay to secure such services, is affected by many factors outside our control and failure to secure transportation services, or to obtain such services on desirable terms, may adversely affect us.

Factors outside our control could adversely affect our ability to offer transportation services, which could reduce the confidence our customers have in our ability to provide transportation services and could impair our ability to retain existing customers and/or attract new customers and could otherwise increase operating costs, reduce profits and affect our relationships with our customers. Such factors include increases in the cost of transportation services, including in relation to any increase in fuel costs, the overall attractiveness of transportation service options, changes in the reliability of available transportation options, transportation delays or disruptions, including those caused by weather-related events, labor shortages, supply-chain issues and delays relating to manufacture and delivery of new equipment, equipment failures and national security or other incidents that affect transportation routes or rail lines.

We may be unable to maintain railcar assets on lease at satisfactory lease rates.

The profitability of our railcar leasing business depends on our ability to lease railcars to customers at satisfactory lease rates, to re-lease railcars at satisfactory lease rates upon the expiration and non-renewal of existing leases, and to sell railcars in the secondary market as part of our ordinary course of business. Our ability to accomplish these objectives is dependent upon several factors, including, among others:

 

   

the cost of and demand for leases or ownership of newer or specific-use railcar types;

 

   

the general availability in the market of competing used or new railcars;

 

   

the degree of obsolescence of leased or unleased railcars, including railcars subject to regulatory obsolescence;

 

   

the prevailing market and economic conditions, including the availability of credit, interest rates, and inflation rates;

 

   

the market demand or governmental mandate for refurbishment; and

 

   

the volume and nature of railcar traffic and loadings.

A downturn in the industries in which our lessees operate and decreased demand for railcars could also increase our exposure to re-marketing risk because lessees may demand shorter lease terms or newer railcars, requiring us to re-market leased railcars more frequently. Furthermore, the resale market for previously leased railcars has a limited number of potential buyers. Our inability to re-lease or sell leased or unleased railcars in a timely manner on favorable terms could result in lower lease rates, lower lease utilization percentages, and reduced revenues and operating profit.

Our railcar leasing business is regulated by multiple governmental regulatory agencies, such as the U.S. Department of Transportation and the administrative agencies it oversees and industry authorities such as the

 

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Association of American Railroads. All such agencies and authorities promulgate rules, regulations, specifications, or operating standards affecting railcar design, configuration, and mechanics; maintenance; and rail-related safety standards for railroad equipment. Future regulatory changes or the determination that our railcars are not in compliance with applicable requirements, rules, regulations, specifications or standards could result in additional operating expenses, administrative fines or penalties or loss of business that could have a material adverse effect on our financial condition and operations.

In addition, we are exposed to asset risk resulting from ownership of the railcars we lease to customers. Asset risk arises from fluctuations in supply and demand for the leased railcar. We are exposed to the risk that, at the end of the lease term or in the event of early termination, the value of the railcar will be lower than expected, resulting in reduced future lease income over the remaining life of the railcar or a lower sale value. Demand for and the valuation of the railcar is sensitive to shifts in economic and market trends and governmental regulations. Although we regularly monitor the value of the railcars we own, there is no assurance that the value of these assets will not be adversely impacted by factors outside of our control.

We depend on key personnel and specialty personnel, and a deterioration of employee relations could harm our business and operating and financial results.

Our success following this offering depends to a significant degree upon the continued contributions of certain key personnel, including our Co-Founders and Co-Executive Chairmen, Adam Forste and Kevin Marchetti, as well as our President and Chief Executive Officer, Greg Lehmkuhl, each of whom would be difficult to replace. If any of our key personnel were to cease employment with us, our operating and financial results could suffer. Further, such a loss could be negatively perceived in the capital markets. We have not obtained and do not expect to obtain key man life insurance on any of our key personnel. Our ability to retain our management group or to attract suitable replacements should any members of our management team leave is dependent on the competitive nature of the employment market. The loss of services from key members of our management team or a limitation of their availability could materially and adversely affect us.

We also believe that our future success, particularly in international markets, will depend in large part upon our ability to hire and retain highly skilled managerial, investment, financing, operational and marketing personnel. The customer service, marketing skills and knowledge of local market demand and competitive dynamics of our employees are contributing factors to our ability to maximize our income and to achieve the highest sustainable storage levels at each of our warehouses. We may be unsuccessful in attracting and retaining such skilled personnel. In addition, our temperature-controlled warehouse business depends on the continued availability of skilled personnel with engineering expertise and experience. Competition for such personnel is intense, and we may be unable to hire and retain such personnel.

We could experience power outages, disruptions in the supply of utilities, outbreak of fire or other calamity or breakdowns of our refrigeration equipment.

Our warehouses are subject to electrical power outages, disruptions in the supply of utilities such as water, outbreak of fire or other calamity and breakdowns of our refrigeration equipment. We attempt to limit exposure to such occasions by conducting regular maintenance and upgrades to our refrigeration equipment, and, in several locations, using backup generators and power supplies, generally at a significantly higher operating cost than we would pay for an equivalent amount of power from a local utility. However, we may not be able to limit our exposure entirely even with these protections in place. Power outages that last beyond our backup and alternative power arrangements and refrigeration equipment breakdowns would harm our customers and our business. During prolonged power outages and refrigeration equipment breakdowns, changes in humidity and temperature could spoil or otherwise contaminate the frozen and perishable food and other products stored by our customers. We could incur financial obligations to, or be subject to lawsuits by, our customers in connection with these occurrences, which may not be covered by insurance. Any loss of services or product damage could reduce the confidence of our customers in our services and could consequently impair our ability to attract and retain

 

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customers. Additionally, in the event of the complete failure of our refrigeration equipment, we would incur significant costs in repairing or replacing our refrigeration equipment, which may not be covered by insurance. In addition, an outbreak of fire in a warehouse could result in significant damage or even total loss of the warehouse, which would harm our customers and our business, and the business interruption insurance we carry may not be sufficient to compensate us fully for losses or damages that may occur because of such events. In April 2024, we experienced a fire at a warehouse, which represented 0.5% of our global warehousing segment revenue for the twelve months ended March 31, 2024, that resulted in a complete loss of the warehouse. We generally carry comprehensive liability and property insurance covering the warehouses we own, but there can be no assurance that insurance will be sufficient to fully compensate us for all losses. Any of the foregoing could have a material adverse effect on us.

We hold leasehold interests in 114 of our warehouses, and we may be forced to vacate our warehouses if we default on our obligations thereunder and we will be forced to vacate our warehouses if we are unable to renew such leases upon their expiration.

As of March 31, 2024, we held leasehold interests in 114 of our warehouses, out of our total of 482 warehouses. These leases expire (taking into account our extension options) from 2024 to 2060, and have a weighted average remaining term of 23.0 years. If we default on any of these leases, we may be liable for damages and could lose our leasehold interest in the applicable property, including all improvements. We would incur significant costs if we were forced to vacate any of these leased warehouses due to, among other matters, the high costs of relocating the equipment in our warehouses. If we were forced to vacate any of these leased warehouses, we could lose customers that chose our storage or other services based on our location, which could have a material adverse effect on us. Our landlords could attempt to evict us for reasons beyond our control. Further, we may be unable to maintain good working relationships with our landlords, which could adversely affect our relationship with our customers and could result in the loss of customers. In addition, we cannot assure you that we will be able to renew these leases prior to their expiration dates on favorable terms or at all. If we are unable to renew our lease agreements, we will lose our right to operate these warehouses and be unable to derive revenues from these warehouses and, in the case of ground leases, we forfeit all improvements on the land. We could also lose the customers using these warehouses who are unwilling to relocate to another one of our warehouses, which could have a material adverse effect on us. Furthermore, unless we purchase the underlying fee interests in these properties, as to which no assurance can be given, we will not share in any increase in value of the land or improvements beyond the term of such lease, notwithstanding any capital we have invested in the applicable warehouse, especially warehouses subject to ground leases. Even if we are able to renew these leases, the terms and other costs of renewal may be less favorable than our existing lease arrangements. Failure to sufficiently increase revenues from customers at these warehouses to offset these projected higher costs could have a material adverse effect on us.

We are subject to risks relating to the manufacture and sale of food products for human consumption.

Certain services within our integrated solutions segment constitute the manufacture and sale of food products for human consumption. The manufacture and sale of food products for human consumption involves the risk of injury, illness or death to consumers and we and/or our customers may be subject to product recalls, claims or lawsuits should the consumption of any food products manufactured by us and/or our customers cause injury, illness or death. Injuries may result from product tampering by third parties, product contamination or spoilage, or the presence of foreign objects, chemicals, or other agents in the product. Even if a product liability claim is invalid, unsuccessful or not fully pursued, the claims may be expensive to defend and may generate negative publicity that adversely affects our reputation, operations and overall profitability, or that of its customers. Any insurance coverage maintained by us may be unavailable or insufficient to cover a judgment against us in regard to any of these matters. A judgment awarded in excess of our insurance liability may adversely affect our financial condition and operations. Additionally, a judgment may affect our ability to maintain existing insurance coverage or find replacement coverage, if at all, at a reasonable cost or on acceptable terms; and a judgment may adversely affect our ability to retain or attract our customers.

 

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Our results of operations are affected by certain commodity markets.

Our results of operations are affected by certain commodity markets. Changes in the overall environment affecting any specific commodity can have a significant and potentially negative impact on our results of operation. The commodity markets may be affected by factors such as weather patterns, fluctuations in input prices, trade barriers, international political conflicts, change in consumer preference, disease outbreaks, seasonal availability, or overall economic conditions. Our concentration of customers in commodity businesses ties our performance to the health of the commodity markets. Any adverse change in the commodity markets may have negative derivative impact on our financial performance.

We face ongoing litigation risks which could result in material liabilities and harm to our business regardless of whether we prevail in any particular matter.

We operate in multiple U.S. and international jurisdictions, with thousands of team members and business counterparts. As such, there is an ongoing risk that we may become involved in legal disputes or litigation with these parties or others. The costs and liabilities with respect to such legal disputes may be material and may exceed our amounts accrued, if any, for such liabilities and costs. In addition, our defense of legal disputes or resulting litigation could result in the diversion of our management’s time and attention from the operation of our business, each of which could impede our ability to achieve our business objectives. Some or all of the amounts we may be required to pay to defend or to satisfy a judgment or settlement of any or all of our disputes and litigation may not be covered by insurance.

Upon the listing of our shares on Nasdaq, we will be a “controlled company” within the meaning of Nasdaq rules and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

After completion of this offering, affiliates of Bay Grove will continue to control a majority of the combined voting power of all classes of our stock entitled to vote generally in the election of directors. Moreover, under the stockholders agreement with Bay Grove and its affiliates that will be in effect as of the completion of this offering, so long as Bay Grove and its affiliates together continue to beneficially own at least 5% of the total outstanding equity interests in our company, we will agree to nominate for election to our board of directors individuals designated by Bay Grove, whom we refer to as the “BGLH Directors,” as specified in our stockholders agreement. As a result, we will be a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our common stock:

 

   

a majority of our board of directors consist of independent directors;

 

   

our board of directors have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

our board of directors have a nominating and corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Although upon completion of this offering a majority of our board of directors will consist of independent directors, our compensation and nominating and corporate governance committees will not be composed entirely of independent directors, and we may utilize any of these exemptions prior to the time we cease to be a “controlled company.” Accordingly, to the extent and for so long as we utilize these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

 

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We will incur significantly increased costs as a result of operating as a public company, and our management will be required to devote substantial time and attention to compliance efforts.

We will incur significant legal, accounting, insurance and other expenses as a result of becoming a public company upon the completion of this offering. As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, including the requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, related regulations of the SEC and requirements of Nasdaq, with which we were not required to comply as a private company. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, operations and financial statements. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting.

Section 404 of the Sarbanes-Oxley Act will require our management and independent registered public accounting firm to report annually on the effectiveness of our internal control over financial reporting. Substantial work on our part will be required to implement appropriate processes, document the system of internal control over key processes, assess their design, remediate any deficiencies identified and test their operation. This process is expected to be both costly and challenging.

These reporting and other obligations will place significant demands on our management and our administrative, operational and accounting resources and will cause us to incur significant expenses. We may need to upgrade our systems or create new systems, implement additional financial and other controls, reporting systems and procedures. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to public companies could be impaired.

If we fail to implement and maintain an effective system of internal control over financial reporting, we may not be able to accurately determine or disclose our financial results. As a result, our stockholders could lose confidence in our financial results.

Upon completion of this offering, we will become subject to the informational requirements of the Exchange Act and will be required to file reports and other information with the SEC. As a publicly-traded company, we will be required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with, or submit to, the SEC is recorded, processed, summarized and reported,

within the time periods specified in the SEC’s rules and forms. They include controls and procedures designed to ensure that information required to be disclosed in reports filed with, or submitted to, the SEC is accumulated and communicated to management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Effective disclosure controls and procedures are necessary for us to provide reliable reports, effectively prevent and detect fraud, and to operate successfully as a public company. Designing and implementing effective disclosure controls and procedures is a continuous effort that requires significant resources and devotion of time. We may discover deficiencies in our disclosure controls and procedures that may be difficult or time consuming to remediate in a timely manner. Any failure to maintain effective disclosure controls and procedures or to timely effect any necessary improvements thereto could cause us to fail to meet our reporting obligations (which could affect the listing of our common stock on Nasdaq). Additionally, ineffective disclosure controls and procedures could also adversely affect our ability to prevent or detect fraud, harm our reputation and cause investors to lose confidence in our reports filed with, or submitted to, the SEC, which would likely have a negative effect on the market price of our common stock.

 

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In connection with its audit of our consolidated financial statements for the year ended December 31, 2023, our independent registered public accounting firm identified a material weakness in internal control over financial reporting. Material weaknesses or a failure to maintain an effective system of internal control over financial reporting could prevent us from accurately reporting our financial results in a timely manner, which would likely have a negative effect on the market price of our common stock.

As a publicly-traded company, we will be required to report annual audited consolidated financial statements and quarterly unaudited interim consolidated financial statements prepared in accordance with GAAP. We will rely on our internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP. More broadly, effective internal control over financial reporting is a necessary component of our program to seek to prevent, and to detect any, fraud and to operate successfully as a public company.

In connection with its audit of our consolidated financial statements for the year ended December 31, 2023, our independent registered public accounting firm identified a material weakness in internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The identified material weakness arises from our failure to timely complete our risk assessment and design, implement and/or effectively operate controls for a sufficient period of time. We are actively engaged in the planning for, and implementation of, remediation efforts to address this material weakness, including the hiring of additional internal resources and the engagement of third-party specialists.

There can be no assurance that our remediation efforts to address this material weakness described above, which may be time consuming and costly, will be successful, that we will not identify material weaknesses in the future or that our internal control over financial reporting will be effective in accomplishing all of its objectives. Furthermore, as we grow, our business, and hence our internal control over financial reporting, will likely become more complex, and we may require significantly more resources to develop and maintain effective controls. Designing and implementing an effective system of internal control over financial reporting is a continuous effort that requires significant resources, including the expenditure of a significant amount of time by senior members of our management team.

In addition, as a public company, we will be required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting. Management’s initial certification under Section 404 of the Sarbanes-Oxley Act will be required with our annual report on Form 10-K for the year ending December 31, 2025. In support of such certifications, we will be required to document and make significant changes and enhancements, including potentially hiring additional personnel, to our internal control over financial reporting. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2025. To date, neither our management nor an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act because no such evaluation has been required. In connection with our ongoing monitoring of our internal control over financial reporting or audits of our consolidated financial statements or our management’s assessment of the effectiveness of internal control over financial reporting, we or our auditors may identify additional deficiencies in our internal control over financial reporting that may be significant or rise to the level of material weaknesses. Any failure to maintain effective internal control over financial reporting or to timely effect any necessary improvements to such controls could cause us to fail to meet our reporting obligations (which could affect the listing of our common stock on Nasdaq). Additionally, ineffective internal control over financial reporting could also adversely affect our ability to prevent or detect fraud, harm our reputation, subject us to regulatory scrutiny and cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the market price of our common stock.

 

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Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting, including as a result of the material weakness identified by management and discussed above.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting, including new and revised financial and IT-related controls that we have been designing, implementing and operating, may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies in our internal control over financial reporting, including any material weakness which may occur in the future, could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity.

Charges for impairment of goodwill or other long-lived assets and declines in real estate valuations could adversely affect our financial condition and results of operations.

We regularly monitor the recoverability of our long-lived assets, such as buildings and improvements and machinery and equipment, and evaluate their carrying value for potential impairment, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. We review goodwill on an annual basis to determine if impairment has occurred and review the recoverability of fixed assets and intangible assets, generally on a quarterly basis and whenever events or changes in circumstances indicate that impairment may have occurred or the value of such assets may not be fully recoverable. Examples of indicators of potential impairment of our long-lived assets may include a significant decrease in the market price, an adverse change in how a property is being used, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or development, a change in our intended holding period due to our intention to sell an asset, a history of operating losses or a material decline in profitability (of a property or a reporting unit). If such reviews indicate that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value and fair value of the long-lived assets in the period the determination is made. The testing of long-lived assets and goodwill for impairment requires the use of estimates based on significant assumptions about our future revenue, profitability, cash flows, fair value of assets and liabilities, weighted average cost of capital, as well as other assumptions. Changes in these estimates, or changes in actual performance compared with these estimates, may affect the fair value of long-lived assets, which could result in an impairment charge.

Geopolitical conflicts, including the conflict between Russia and Ukraine and continued instability in the Middle East, including from the Houthi rebels in Yemen, may adversely affect our business and results of operations.

We have operations or activities in numerous countries and regions outside the United States, including throughout Europe and Asia-Pacific. As a result, our global operations are affected by economic, political and other conditions in the foreign countries in which we do business as well as U.S. laws regulating international trade. Specifically, although we neither have warehouses nor conduct business in Russia or Ukraine, the current conflict between Russia and Ukraine is creating substantial uncertainty about the future impact on the global economy. Countries across the globe are instituting sanctions and other penalties against Russia. The retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

While the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine conflict, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business and results of operations, including:

 

   

increased inflation and significant volatility in commodity prices;

 

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disruptions to our global technology infrastructure, including through cyberattacks, ransom attacks or cyber-intrusion;

 

   

adverse changes in international trade policies and relations;

 

   

our ability to maintain or increase our prices, including freight in response to rising fuel costs;

 

   

disruptions in global supply chains, specifically within the food supply chain and construction materials;

 

   

increased exposure to foreign currency fluctuations; and

 

   

constraints, volatility or disruption in the credit and capital markets.

To the extent the current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many other risks disclosed in this prospectus, any of which could materially and adversely affect our business and results of operations. We are continuing to monitor the situation in the Ukraine and globally and assess its potential impact on our business.

Further, the Houthi movement, which controls parts of Yemen, has targeted and launched numerous attacks on commercial marine vessels in the Red Sea as the ships approach the Suez Canal, resulting in many shipping companies re-routing to avoid the region altogether. While the consequences of this conflict on our and our customers’ businesses are uncertain at this time, the continuation and/or escalation of the Suez Canal blockage create a number of risks that could adversely impact our business and results of operations, including:

 

   

worsening supply chain issues, including delays

 

   

increased transportation costs; and

 

   

decreased throughput as a result of longer shipping times.

General Risks Related to the Real Estate Industry

Our performance and value are subject to economic conditions affecting the real estate market generally, and temperature-controlled warehouses in particular, as well as the broader economy.

Our performance and value depend on the amount of revenues earned, as well as the expenses incurred, in connection with operating our warehouses. If our temperature-controlled warehouses do not generate revenues and operating cash flows sufficient to meet our operating expenses, including debt service and capital expenditures, we could be materially and adversely affected. In addition, there are significant expenditures associated with our real estate (such as real estate taxes, maintenance costs and debt service payments) that generally do not decline when circumstances reduce the revenues from our warehouses. Accordingly, our expenditures may stay constant, or increase, even if our revenues decline. The real estate market is affected by many factors that are beyond our control, and revenues from, and the value of, our properties may be materially and adversely affected by:

 

   

changes in the national, international or local economic climate;

 

   

availability, cost and terms of financing;

 

   

technological changes, such as expansion of e-commerce, reconfiguration of supply chains, automation, robotics or other technologies;

 

   

the attractiveness of our properties to potential customers;

 

   

inability to collect storage charges, rent and other fees from customers;

 

   

the ongoing need for, and significant expense of, capital improvements and addressing obsolescence in a timely manner, particularly in older structures;

 

   

changes in supply of, or demand for, similar or competing properties in an area;

 

   

customer retention and turnover;

 

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excess supply in the market area;

 

   

availability of labor and transportation to service our sites;

 

   

financial difficulties, defaults or bankruptcies by our customers;

 

   

changes in operating costs and expenses and a general decrease in real estate property rental rates;

 

   

changes in or increased costs of compliance with governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder;

 

   

our ability to provide adequate maintenance and insurance;

 

   

changes in the cost or availability of insurance, including coverage for mold or asbestos;

 

   

unanticipated changes in costs associated with known adverse environmental conditions, newly discovered environmental conditions and retained liabilities for such conditions;

 

   

changes in interest rates or other changes in monetary policy;

 

   

disruptions in the global supply-chain caused by political, regulatory or other factors such as terrorism, political instability and public health crises; and

 

   

civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses.

In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decrease in rates or an increased occurrence of defaults under existing contracts, which could materially and adversely affect us. For these and other reasons, we cannot assure you that we will be able to achieve our business objectives.

We could incur significant costs under environmental laws relating to the presence and management of asbestos, anhydrous ammonia and other chemicals and underground storage tanks.

Environmental laws in certain jurisdictions require that owners or operators of buildings containing asbestos properly manage asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is damaged, is decayed, poses a health risk or is disturbed during building renovation or demolition. These laws impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos and other toxic or hazardous substances. Some of our properties may contain asbestos or asbestos-containing building materials. Asbestos exposure can also cause damage to our customers’ goods stored with us.

Most of our warehouses utilize anhydrous ammonia as a refrigerant. Anhydrous ammonia is classified as a hazardous chemical regulated by the U.S. Environmental Protection Agency, or the EPA and similar international agencies. Releases of anhydrous ammonia occur at our warehouses from time to time, which we have historically identified and reported when required, and any number of unplanned events, including severe storms, fires, earthquakes, vandalism, equipment failure, operational errors, accidents, deliberate acts of team members or third parties, and terrorist acts could result in a significant release of anhydrous ammonia that could result in injuries, loss of life, property damage and a significant interruption at affected facilities. Anhydrous ammonia exposure can also cause damage to our customers’ goods stored with us. For example, in 2020, contractors and subcontractors were working on the blast cells at our freezer warehouse in Statesville, North Carolina when an incident occurred triggering the release of anhydrous ammonia at the facility, resulting in the death of a subcontractor and injury to another subcontractor, as well as damage to customers’ goods. Litigation with respect to this incident is ongoing and while we believe we have strong defenses to claims arising from this incident, there can be no assurance that we will prevail on any claim.

 

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Although our warehouses have risk management programs required by the Occupational Safety and Health Act of 1970, as amended, or OSHA, the EPA and other regulatory agencies in place in the jurisdictions in which we operate, we could incur significant liability in the event of an unanticipated release of anhydrous ammonia from one of our refrigeration systems. Releases could occur at locations or at times when trained personnel may not be available to respond quickly, increasing the risk of injury, loss of life or property damage. Some of our warehouses are not staffed 24 hours a day and, as a result, we may not respond to intentional or accidental events during closed hours as quickly as we could during open hours, which could exacerbate any injuries, loss of life or property damage. We also could incur liability in the event we fail to report such anhydrous ammonia releases in a timely fashion.

Environmental laws and regulations subject us and our customers to liability in connection with the storage, handling and use of anhydrous ammonia and other hazardous substances utilized in our operations. Our warehouses also may have under-floor heating systems, some of which utilize ethylene glycol, petroleum compounds, or other hazardous substances; releases from these systems could potentially contaminate soil and groundwater.

We could incur significant costs related to environmental conditions and liabilities.

The properties we own or have owned in the past may subject us to known and unknown environmental liabilities. Under various federal, state and local laws and regulations relating to the environment, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from environmental matters, including the presence or discharge of hazardous or toxic substances, waste or petroleum products at, on, in, under or migrating from such property, including costs to investigate or clean up such contamination and liability for personal injury, property damage or harm to natural resources. We may face liability regardless of:

 

   

our knowledge of the contamination;

 

   

the timing of the contamination;

 

   

the cause of the contamination; or

 

   

the party responsible for the contamination of the property.

There may be environmental liabilities associated with our properties of which we are unaware. In addition, some of our properties have been operated for decades and have known or potential environmental impacts. We obtain Phase I environmental site assessments on nearly all properties we finance or acquire. The Phase I environmental site assessments are limited in scope and therefore may not reveal all environmental conditions affecting a property. Therefore, there could be undiscovered environmental liabilities on the properties we own. Many of our properties contain, or may in the past have contained, features that pose environmental risks including underground tanks for the storage of petroleum products and other hazardous substances as well as floor drains and wastewater collection and discharge systems, hazardous materials storage areas and septic systems. All of these features create a potential for the release of petroleum products or other hazardous substances. Some of our properties are adjacent to or near properties that have known environmental impacts or have in the past stored or handled petroleum products or other hazardous substances that could have resulted in environmental impacts to soils or groundwater that could affect our properties. If environmental contamination exists on our properties, we could be subject to strict, joint and/or several liability for the contamination by virtue of our ownership interest. Some of our properties may contain asbestos-containing materials, or ACM. Environmental laws govern the presence, maintenance and removal of ACM and such laws may impose fines, penalties, or other obligations for failure to comply with these requirements or expose us to third-party liability (e.g., liability for personal injury associated with exposure to asbestos). Environmental laws also apply to other activities that can occur on a property, such as storage of petroleum products or other hazardous toxic substances, air emissions, water discharges and exposure to lead-based paint. Such laws may impose fines and penalties for violations, and may require permits or other governmental approvals to be obtained for the operation of a business involving such activities.

The known or potential presence of hazardous substances on a property may adversely affect our ability to sell, lease or improve the property or to borrow using the property as collateral. In addition, environmental laws

 

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may create liens on contaminated properties in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which they may be used or businesses may be operated, and these restrictions may require substantial expenditures.

Our environmental liabilities may include property and natural resources damage, personal injury, investigation and clean-up costs, among other potential environmental liabilities. These costs could be substantial. Although we may obtain insurance for environmental liability for certain properties that are deemed to warrant coverage, our insurance may be insufficient to address any particular environmental situation and we may be unable to continue to obtain insurance for environmental matters, at a reasonable cost or at all, in the future. If our environmental liability insurance is inadequate, we may become subject to material losses for environmental liabilities. Our ability to receive the benefits of any environmental liability insurance policy will depend on the financial stability of our insurance company and the position it takes with respect to our insurance policies. If we were to become subject to significant environmental liabilities, we could be materially and adversely affected.

Moreover, there can be no assurance that (i) future laws, ordinances or regulations will not impose new material environmental obligations or costs, including the potential effects of climate change or new climate change regulations, (ii) we will not incur material liabilities in connection with both known and undiscovered environmental conditions arising out of past activities on our properties or (iii) our properties will not be materially and adversely affected by the operations of customers, by environmental impacts or operations on neighboring properties (such as releases from underground storage tanks), or by the actions of parties unrelated to us.

In the future, our customers may demand lower indirect emissions associated with the storage and transportation of frozen and perishable foods, which could lead customers to seek temperature-controlled storage from our competitors. Further, such demand could require us to implement various processes to reduce emissions from our operations in order to remain competitive, which could materially and adversely affect us.

Risks related to climate change could have a material adverse effect on our results of operations.

Climate change, including the impact of global warming, creates physical and financial risks. Physical risks from climate change include an increase in sea level and changes in weather conditions, such as an increase in storm intensity and severity of weather (e.g., floods, tornados or hurricanes) and extreme temperatures. For example, 84 of our warehouses are in zones subject to what we believe to be a moderate to high risk of flooding. The occurrence of sea level rise or one or more natural disasters, such as floods, tornados, hurricanes, tropical storms, wildfires and earthquakes (whether or not caused by climate change), could cause considerable damage to our warehouses, disrupt our operations and negatively affect our financial performance. Additional risks related to our business and operations as a result of climate change include physical and transition risks such as:

 

   

higher energy costs as a result of extreme weather events, extreme temperatures or increased demand for limited resources;

 

   

utility disruptions or outages due to demand or stress on electrical grids resulting from extreme weather events;

 

   

limited availability of water and higher costs due to limited sources and droughts;

 

   

higher materials cost due limited availability and environmental impacts of extraction and processing of raw materials and production of finished goods;

 

   

lost revenue or increased expense as a result of higher insurance costs, potential uninsured or under insured losses, diminished customer retention stemming from extreme weather events or resource availability constraints;

 

   

reduced storage revenue due to crop damage or failure or to reduced protein production as a result of extreme weather events;

 

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decreased occupancy in certain regions as a result of global shifts in shipping routes to account for droughts, such as the ongoing drought in Panama, and extreme weather events;

 

   

delays during transit of customers’ products resulting from natural disasters or extreme weather events; and

 

   

spoiled, damaged or destroyed customer inventory as a result of natural disasters or other serious disruptions caused by fire, earthquakes.

In addition, risks associated with new or more stringent laws or regulations or stricter interpretations of existing laws could directly or indirectly affect our customers and could adversely affect our business, financial condition, results of operations and cash flows. For example, various federal, state and regional laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. Such codes could require us to make improvements to our properties, increase the cost of maintaining, operating or improving our warehouses, or increase taxes and fees assessed on us.

Climate change regulations could also adversely impact companies with which we do business, which in turn may adversely impact our business, financial condition, results or operations or cash flows. In the future, our customers may demand lower indirect emissions associated with the storage and transportation of frozen and perishable food, which could make our facilities less competitive. Further, such demand could require us to implement various processes to reduce emissions from our operations in order to remain competitive, which could materially and adversely affect us.

Our insurance coverage may be insufficient to cover potential environmental liabilities.

We maintain a portfolio environmental insurance policy that provides coverage for sudden and accidental environmental liabilities, subject to the policy’s coverage conditions, deductibles and limits, for most of our properties. There can be no assurance that future environmental claims will be covered under these policies or that, if covered, the loss will not exceed policy limits. From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield an attractive risk-adjusted return. In such an instance, we factor the estimated costs of environmental investigation, cleanup and monitoring into the net cost. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties. A failure to accurately estimate these costs, or uninsured environmental liabilities, could materially and adversely affect us.

Our properties may contain or develop harmful molds or have other air quality issues, which could lead to financial liability for adverse health effects to our employees or third parties, and costs of remediating the problem.

Our properties may contain or develop harmful molds or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediating the problem. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, poor equipment maintenance, chemical contamination from indoor or outdoor sources and other biological contaminants, such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants present above certain levels can cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property, to reduce indoor moisture levels, or to upgrade ventilation systems to improve indoor air quality. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our team members, our customers, associates of our customers and others if property damage or health concerns arise.

 

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Illiquidity of real estate investments, particularly our specialized temperature-controlled warehouses, could significantly impede our ability to respond to adverse changes in the performance of our business and properties.

Real estate investments are relatively illiquid, and given that our properties are highly specialized temperature-controlled warehouses, including built-in automation, our properties may be more illiquid than other real estate investments. This illiquidity is driven by a number of factors, including the specialized and often customer-specific design of our warehouses, the relatively small number of potential purchasers of temperature-controlled warehouses, the difficulty and expense of repurposing our warehouses and the location of some of our warehouses in secondary or tertiary markets. As a result, we may be unable to complete an exit strategy or quickly sell properties in our portfolio in response to adverse changes in the performance of our properties or in our business generally. We cannot predict whether we will be able to sell any property for the price or on the terms set by us or whether any price or other terms offered by a prospective buyer would be acceptable to us. We also cannot predict the length of time it would take to complete the sale of any such property. Such sales might also require us to expend funds to mitigate or correct defects to the property or make changes or improvements to the property prior to its sale. The ability to sell assets in our portfolio may also be restricted by certain covenants in our credit agreements. Code requirements relating to our status as a REIT may also limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.

We could experience uninsured or under-insured losses relating to our global warehousing business, including our real property, as well as our integrated solutions business.

We carry insurance for the risks arising out of our business and operations, including coverage on all of our properties in an amount that we believe adequately covers any potential casualty losses. However, there are certain losses, including losses from floods, earthquakes, acts of war or riots, that we are not generally insured against or that we are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not covered by insurance (in part or at all), the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties. Any such losses could materially and adversely affect us. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future on favorable terms or at all.

In the event of a fire, flood or other occurrence involving the loss of or damage to stored products held by us but belonging to others, we may be liable for such loss or damage. In April 2024, we experienced a fire at a warehouse, which represented 0.5% of our global warehousing segment revenue for the twelve months ended March 31, 2024, that resulted in a complete loss of the warehouse. Although we have an insurance program in effect, there can be no assurance that such potential liability will not exceed the applicable coverage limits under our insurance policies. In addition, the business interruption insurance we carry may not be sufficient to compensate us fully for losses or damages that may occur because of such events. A number of our properties are located in areas that are known to be subject to earthquake activity, such as California, Washington, Oregon and New Zealand, or in flood zones, such as 84 facilities in zones subject to what we believe to be a moderate to high risk of flooding, in each case exposing them to increased risk of casualty.

If we or one or more of our customers experiences a loss for which we are liable and that loss is uninsured or exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

We are self-insured for workers’ compensation and health insurance under a large deductible program, meaning that we have accrued liabilities in amounts that we consider appropriate to cover losses in these areas. In

 

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addition, we maintain excess loss coverage to insure against losses in excess of the reserves that we have established for these claims in amounts that we consider appropriate. However, in the event that our loss experience exceeds our reserves and the limits of our excess loss policies, we could be materially and adversely affected.

Costs of complying with governmental laws and regulations could adversely affect us and our customers.

Our business is highly regulated at the federal, state and local level, as well as regulation outside of the United States in the jurisdictions in which we operate our business. The food industry in all jurisdictions in which we operate is subject to numerous government standards and regulations. While we believe that we are currently in compliance with all applicable government standards and regulations, there can be no assurance that all of our warehouses or our customers’ operations are currently in compliance with, or will be able to comply in the future with, all applicable standards and regulations or that the costs of compliance will not increase in the future.

All real property and the operations conducted on real property are subject to governmental laws and regulations relating to environmental protection and human health and safety. For example, our U.S. warehouses are subject to regulation and inspection by the U.S. Food and Drug Administration and the U.S. Department of Agriculture and our domestic trucking operations are subject to regulation by the U.S. Department of Transportation and the U.S. Federal Highway Administration. In addition, our international facilities are subject to many local laws and regulations which govern a wide range of matters, including food safety, building, environmental, health and safety, hazardous substances, waste minimization, as well as specific requirements for the storage of meats, dairy products, fish, poultry, agricultural and other products. Any products destined for export must also satisfy applicable export requirements. We are required to comply with applicable economic and trade sanctions and export controls imposed by governments around the world with jurisdiction over the operations of our business. These measures can prohibit or restrict transactions and dealings with certain countries, territories, governments and persons. The failure to comply with such applicable laws and regulations could result in civil or criminal penalties, other remedial measures, and legal expenses, which could have a material and adverse effect on us. Our ability to operate and to satisfy our contractual obligations may be affected by permitting and compliance obligations arising under such laws and regulations. Some of these laws and regulations could increase our operating costs, result in fines or impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contamination, regardless of fault or whether the acts causing the contamination were legal.

Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards in the future. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require that we or our customers incur material expenditures. In addition, there are various governmental, environmental, fire, health, safety and similar regulations with which we and our customers may be required to comply and which may subject us and our customers to liability in the form of fines or damages for noncompliance. Any material expenditures, fines or damages imposed on our customers or us could directly or indirectly have a material adverse effect on us. In addition, changes in these governmental laws and regulations, or their interpretation by agencies and courts, could occur.

The Americans with Disabilities Act of 1990, as amended, or the ADA, generally requires that public buildings, including portions of our warehouses, be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our warehouses, including the removal of access barriers, it could materially and adversely affect us.

Our U.S. properties are subject to regulation under OSHA, which requires employers to protect team members against many workplace hazards, such as exposure to harmful levels of toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress and unsanitary conditions. The cost of complying with

 

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OSHA and similar laws enacted by other jurisdictions in which we operate is substantial and any failure to comply with these regulations could expose us to penalties and potentially to liabilities to team members who may be injured at our warehouses, any of which could be material. Furthermore, any fines or violations that we face under OSHA could expose us to reputational risk.

We are currently invested in various joint ventures and may invest in additional joint ventures in the future and face risks stemming from our partial ownership interests in such properties, which could materially and adversely affect the value of any such joint venture investments.

Our current and future joint-venture investments involve risks not present in investments in which a third party is not involved, including the possibility that:

 

   

we and a co-venturer or partner may reach an impasse on a major decision that requires the approval of both parties;

 

   

we may not have exclusive control over the development, financing, management and other aspects of the property or joint venture, which may prevent us from taking actions that are in our best interest but opposed by a co-venturer or partner;

 

   

a co-venturer or partner may at any time have economic or business interests or goals that are or may become inconsistent with ours;

 

   

a co-venturer or partner may encounter liquidity or insolvency issues or may become bankrupt, which may mean that we and any other remaining co-venturers or partners generally would remain liable for the joint venture’s liabilities;

 

   

a co-venturer or partner may be in a position to take action contrary to our instructions, requests, policies or investment objectives, including our current policy with respect to maintaining our qualification as a REIT under the Code;

 

   

a co-venturer or partner may take actions that subject us to liabilities in excess of, or other than, those contemplated;

 

   

in certain circumstances, we may be liable for actions of our co-venturer or partner;

 

   

our joint venture agreements may restrict the transfer of a co-venturer’s or partner’s interest or otherwise restrict our ability to sell the interest when we desire or on advantageous terms;

 

   

our joint venture agreements may contain buy-sell provisions pursuant to which one co-venturer or partner may initiate procedures requiring the other co-venturer or partner to choose between buying the other co-venturer’s or partner’s interest or selling its interest to that co-venturer or partner;

 

   

if a joint venture agreement is terminated or dissolved, we may not continue to own or operate the interests or investments underlying the joint venture relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; or

 

   

disputes between us and a co-venturer or partner may result in litigation or arbitration that could increase our expenses and prevent our management from focusing their time and attention on our business.

Any of the above could materially and adversely affect the value of our current joint venture investment or any future joint venture investments and potentially have a material adverse effect on us.

Risks Related to Our Indebtedness

We have significant indebtedness outstanding, which may expose us to the risk of default under our debt obligations.

As of March 31, 2024, we had $9.3 billion of total consolidated indebtedness outstanding, of which $4.2 billion was secured, and borrowing capacity under our Revolving Credit Facility of $1.0 billion (net of

 

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outstanding standby letters of credit in the amount of $66.1 million, which reduce availability), and as of March 31, 2024, on a pro forma basis, we had $6.1 billion of total consolidated indebtedness outstanding, of which $1.8 billion was secured, and borrowing capacity under our Revolving Credit Facility of $1.9 billion. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Outstanding Indebtedness.” Total debt payments for the remainder of 2024 and 2025 are $3.7 billion (including $30.0 million of scheduled amortization). We expect to meet these repayment requirements primarily through financing activity or net cash from operating activities. Our organizational documents contain no limitations regarding the maximum level of indebtedness that we may incur or keep outstanding. Payments of principal and interest on borrowings may leave us with insufficient cash resources to meet our cash needs or make the distributions to our common stockholders currently contemplated or necessary to maintain our status as a REIT. Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

 

   

our cash flow may be insufficient to meet our required principal and interest payments;

 

   

cash interest expense and financial covenants relating to our indebtedness may limit or eliminate our ability to make distributions to our common stockholders;

 

   

we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon investment opportunities or meet operational needs;

 

   

we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;

 

   

because a portion of our debt bears interest at variable rates, increases in interest rates could increase our interest expense;

 

   

we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under any hedge agreements we enter into, such agreements may not effectively hedge interest rate fluctuation risk, and, upon the expiration of any hedge agreements we enter into, we would be exposed to then-existing market rates of interest and future interest rate volatility;

 

   

we may be forced to dispose of properties, possibly on unfavorable terms or in violation of certain covenants to which we may be subject;

 

   

we may default on our obligations and the lenders or mortgagees may foreclose on our properties or our interests in the entities that own the properties that secure their loans and receive an assignment of rents and leases;

 

   

we may be restricted from accessing some of our excess cash flow after debt service if certain of our customers fail to meet certain financial performance metric thresholds;

 

   

we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations; and

 

   

our default under any loan with cross default provisions could result in a default on other indebtedness.

The occurrence of any of these events could materially and adversely affect us. Furthermore, foreclosures could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Code.

Increases in interest rates could increase the amount of our debt payments.

As of March 31, 2024 and on a pro forma basis, we had $7.1 billion and $3.9 billion, respectively, of our outstanding consolidated indebtedness that is variable-rate debt, and we may continue to incur variable-rate debt in the future. We have entered into interest rate swaps to convert $1.0 billion of this indebtedness to fixed-rate. As of March 31, 2024 and on a pro forma basis, we have entered into approximately $5.2 billion and $2.8 billion, respectively, of interest rate caps to protect the majority of remaining variable debt against rising interest rates.

 

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Increases in interest rates may raise our interest costs under any variable-rate debt that is not effectively converted to fixed-rate debt and increase our overall cost of capital, which could materially and adversely affect us, reduce our cash flows and funds from operations, and reduce our ability to use the capital that is being paid in interest in other ways, including to make distributions to our stockholders. Increases in interest rates would also increase our interest expense on future fixed rate borrowings and have the same collateral effects described above. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments. Interest rate increases may also increase the risk that the counterparties to our swap contracts will default on their obligations, which could further increase our exposure to interest rate increases. Conversely, if interest rates are lower than our swapped fixed rates, we will be required to pay more to service our debt than if we had not entered into the interest rate swaps.

Market conditions could adversely affect our ability to refinance existing indebtedness or obtain additional financing for growth on acceptable terms or at all, which could materially and adversely affect us.

Credit markets have experienced over the past several years, and may continue to experience, significant price volatility, displacement and liquidity disruptions, including the bankruptcy, insolvency or restructuring of certain financial institutions. Such circumstances could materially impact liquidity in the financial markets, making financing terms for borrowers less attractive, and potentially result in the unavailability of various types of debt financing. As a result, we may be unable to obtain debt financing on favorable terms or at all or fully refinance maturing indebtedness with new indebtedness. Reductions in our available borrowing capacity or inability to obtain credit, including the Revolving Credit Facility that we expect to have upon the completion of this offering, when required or when business conditions warrant could materially and adversely affect us.

Our existing indebtedness contains, and any future indebtedness is likely to contain, covenants that restrict our ability to engage in certain activities.

The agreements governing our borrowings contain or are likely to contain financial and other covenants with which we are or will be required to comply and that limit or are likely to limit our ability to operate our business. These covenants, as well as any additional covenants to which we may be subject in the future because of additional borrowings, could cause us to have to forego investment opportunities, reduce or eliminate distributions to our common stockholders or obtain financing that is more expensive than financing we could obtain if we were not subject to the covenants. In addition, the agreements governing our borrowing may have cross default provisions, which provide that a default under one of our debt financing agreements would lead to a default on all of our debt financing agreements.

The covenants and other restrictions under our debt agreements may affect, among other things, our ability to:

 

   

incur indebtedness;

 

   

create liens on assets;

 

   

cause our subsidiaries to distribute cash to us to fund distributions to stockholders or to otherwise use in our business;

 

   

sell or substitute assets;

 

   

modify certain terms of our leases;

 

   

manage our cash flows; and

 

   

make distributions to equity holders, including our common stockholders.

Additionally, these restrictions may adversely affect our operating and financial flexibility and may limit our ability to respond to changes in our business or competitive environment, all of which may materially and adversely affect us.

 

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Secured indebtedness exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets subject to indebtedness and limits our ability to raise future capital.

We have granted certain of our lenders security interests in certain of our assets, including equity interests in certain of our subsidiaries and in certain of our real property. Incurring secured indebtedness, including mortgage indebtedness, increases our risk of asset and property losses because defaults on indebtedness secured by our assets, including equity interests in certain of our subsidiaries and in certain of our real property, may result in foreclosure actions initiated by lenders and ultimately our loss of the property or other assets securing any loans for which we are in default. Any foreclosure on a mortgaged property or group of properties could have a material adverse effect on the overall value of our portfolio of properties and more generally on us. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the indebtedness secured by the mortgage. If the outstanding balance of the indebtedness secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could materially and adversely affect us, including hindering our ability to meet the REIT distribution requirements imposed by the Code. As a result, our substantial secured indebtedness could have a material adverse effect on us.

Risks Related to Our Organizational Structure

Our Co-Founders will have substantial influence over our business, and our Co-Founders’ interests, and the interests of certain members of our management, will differ from our interests and those of our other stockholders in certain respects.

Immediately after this offering and the formation transactions, Bay Grove and its affiliates, including BGLH, will beneficially own approximately 77.1% of our outstanding shares of common stock and 100% of our outstanding OP units (including Legacy OP Units but excluding OP units held directly or indirectly by us and assuming such affiliates do not purchase any shares of our common stock pursuant to the directed share program or in this offering). As a result, Bay Grove and BGLH will have significant influence in the election of our directors, who in turn will elect our executive officers, set our management policies and exercise overall supervision and control over us and our subsidiaries. Certain potential transactions will affect Bay Grove and/or BGLH differently than other stockholders and it is possible that Bay Grove and/or BGLH will have different interests than those other stockholders with respect to such transactions.

The interests of Bay Grove and BGLH, as well as the interests of other investors in BGLH, will differ from the interests of our other stockholders in certain respects, and Bay Grove’s and BGLH’s significant stockholdings and rights described above may limit other stockholders’ ability to influence corporate matters. In this regard, sales or other dispositions of our properties may have adverse tax implications for Bay Grove, its affiliates and/or other investors in BGLH. In addition, certain additional members of our management have certain equity interests in Bay Grove and its affiliates, including BGLH, that cause Bay Grove and BGLH to have interests that differ from our other stockholders. The concentration of ownership and voting power of Bay Grove and its affiliates, including BGLH, may also delay, defer or even prevent an acquisition by a third party or other change of control of our company and may make some transactions more difficult or impossible without the support of Bay Grove and BGLH, even if such events are in the best interests of our other stockholders. The concentration of voting power in Bay Grove and its affiliates, including BGLH, may have an adverse effect on the market price of our common stock. As a result of Bay Grove’s and BGLH’s influence, we may take actions that our other stockholders do not view as beneficial, which may adversely affect our results of operations and financial condition and cause the value of your investment in us to decline.

Investors in BGLH engage in a broad spectrum of activities, including investments in real estate. In the ordinary course of their business activities, investors in BGLH may engage in activities where their interests conflict with our interests or those of our stockholders. Our charter will provide that, if any director of our company who is also an officer, employee or agent of BentallGreenOak, D1 Capital, Oxford Properties Group,

 

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OMERS Administration Corporation or Stonepeak or any of their respective affiliates acquires knowledge of a potential business opportunity, we renounce any potential interest or expectation in, or right to be offered to participate in, such business opportunity unless it is a retained opportunity (as defined in our charter). Investors in BGLH also may pursue acquisition opportunities that may be complementary to or competitive with our business without our consent and, as a result, those acquisition opportunities may not be available to us. See “Certain Provisions of Maryland Law and of Our Charter and Bylaws—Corporate Opportunities.”

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Maryland law provides that a director has no liability in the capacity as a director if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by the Maryland General Corporation Law (the “MGCL”), our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

 

   

actual receipt of an improper benefit or profit in money, property or services; or

 

   

a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

In addition, our charter requires us to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by Maryland law, and we intend to enter into indemnification agreements with our directors and executive officers. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. Accordingly, in the event that any of our directors or officers are exculpated from, or indemnified against, liability but whose actions impede our performance, our stockholders’ ability to recover damages from that director or officer will be limited.

Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control.

Our charter and bylaws contain a number of provisions, the exercise or existence of which could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stockholders or otherwise be in their best interests, including the following:

 

   

Our Charter Contains Restrictions on the Ownership and Transfer of Our Stock. In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which we elect to be taxed as a REIT. Subject to certain exceptions, our charter prohibits any stockholder from owning beneficially or constructively more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock, or 9.8% in value of the aggregate of the outstanding shares of all classes or series of our stock. We refer to these restrictions collectively as the “ownership limits.” The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding shares of common stock or the outstanding shares of all classes or series of our stock by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Our charter also prohibits any person from owning shares of our stock that could result in our being “closely held” under Section 856(h) of the Code, otherwise cause us to fail to qualify as a REIT or cause us not to qualify as a domestically controlled qualified investment entity until the third anniversary of our initial public offering or such other date that our board of directors determines that it is no longer in our best interests to attempt to, or continue to, qualify as a domestically controlled qualified investment entity (the “Foreign Ownership Limitation Period”). Any attempt to own or transfer shares of our stock in violation of these restrictions may result in the shares being

 

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automatically transferred to a charitable trust or may be void. These ownership limits may prevent a third-party from acquiring control of us if our board of directors does not grant an exemption from the ownership limits, even if our stockholders believe the change in control is in their best interests.

 

   

Our Board of Directors Has the Power to Cause Us to Issue Additional Shares of Our Stock Without Stockholder Approval. Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase or decrease the aggregate number of our shares of common stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve payment of a premium price for our shares of common stock or that stockholders may otherwise consider to be in their best interests.

Certain provisions of Maryland law may limit the ability of a third-party to acquire control of us.

Certain provisions of the MGCL may have the effect of inhibiting a third-party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

 

   

“business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and

 

   

“control share” provisions that provide that holders of “control shares” of our company (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.

Pursuant to the Maryland Business Combination Act, our board of directors has by resolution exempted from the provisions of the Maryland Business Combination Act business combinations between us and any other person, provided that the business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person). Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. There can be no assurance that these exemptions or resolutions will not be amended or eliminated at any time in the future.

Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain corporate governance provisions, some of which we do not have. In accordance with the MGCL, our charter provides that, without the affirmative vote of a majority of the votes cast on the matter by our stockholders entitled to vote generally in the election of directors, we may not elect to be subject to the provision of Subtitle 8 that permits our board of directors to classify itself.

 

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Termination of the employment of certain members of our senior management team could be costly and prevent a change in control of our company.

The employment, severance and equity award arrangements with certain members of our senior management team provide that if their employment with us terminates under certain circumstances (including in connection with a change in control of our company), we may be required to provide them significant amounts of severance compensation and benefits, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders.

Our board of directors may change our investment and financing policies without stockholder approval, and we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our investment and financing policies are exclusively determined by our board of directors. Accordingly, our stockholders do not control these policies. Further, our organizational documents do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Although we are not required to maintain a particular leverage ratio, we generally intend to target a level of net debt (which includes recourse and non-recourse borrowings and any outstanding preferred stock issuance less unrestricted cash and cash equivalents) that, over time, is less than six times our Adjusted EBITDA. However, from time to time, our ratio of net debt to our Adjusted EBITDA may exceed six times. Our board of directors may alter or eliminate our current policy on borrowing at any time without stockholder approval. If this policy changed, we could become more highly leveraged, which could result in an increase in our debt service. Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to our policies with regards to the foregoing could materially and adversely affect us. We plan to notify stockholders of any material change to our investment and financing policies by disclosing such changes in documents furnished to the SEC, posted on our website or filed with the SEC, such as a current report on Form 8-K and/or a periodic report on Form 10-Q or Form 10-K, as appropriate, to the extent required by applicable laws, rules and regulations.

Upon the completion of this offering and the formation transactions, we will be a holding company with no direct operations and will rely on funds received from our operating partnership to pay liabilities and distributions to our stockholders.

Upon the completion of this offering and the formation transactions, we will be a holding company and will conduct substantially all of our operations through our operating partnership. We will not have, apart from an interest in our operating partnership, any independent operations. As a result, we will rely on distributions from our operating partnership to pay any distributions we might declare on shares of our common stock. We will also rely on distributions from our operating partnership to meet any of our obligations, including any tax liability on taxable income allocated to us from our operating partnership. In addition, because we will be a holding company, your claims as stockholders will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our operating partnership and its subsidiaries will be able to satisfy the claims of our stockholders only after all of our and our operating partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

In connection with our future acquisition of properties or otherwise, we may issue units of our operating partnership to third parties. Such issuances would reduce our ownership in our operating partnership. Because you will not directly own units of our operating partnership, you will not have any voting rights with respect to any such issuances or other partnership level activities of our operating partnership.

 

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Conflicts of interest exist or could arise in the future with our operating partnership or its partners.

Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our directors and officers have duties to our company under applicable Maryland law in connection with their direction of the management of our company. At the same time, we, as general partner of our operating partnership, have duties to our operating partnership and to the limited partners under Maryland law in connection with the management of our operating partnership. Under Maryland law, the general partner of a Maryland limited partnership has fiduciary duties of care and loyalty, and an obligation of good faith, to the partnership and its partners. While these duties and obligations cannot be eliminated entirely in the partnership agreement, Maryland law permits the parties to a partnership agreement to specify certain types or categories of activities that do not violate the general partner’s duty of loyalty and to modify the duty of care and obligation of good faith, so long as such modifications are not unreasonable. These duties as general partner of our operating partnership to the partnership and its partners may come into conflict with the interests of our company. Under the partnership agreement of our operating partnership, the limited partners of our operating partnership will expressly agree that the general partner of our operating partnership is acting for the benefit of the operating partnership, the limited partners of our operating partnership and our stockholders, collectively. The general partner is under no obligation to give priority to the separate interests of the limited partners in deciding whether to cause our operating partnership to take or decline to take any actions. If there is a conflict between the interests of us or our stockholders, on the one hand, and the interests of the limited partners of our operating partnership, on the other, the partnership agreement of our operating partnership will provide that any action or failure to act by the general partner that gives priority to the separate interests of us or our stockholders that does not result in a violation of the contractual rights of the limited partners of our operating partnership under the partnership agreement will not violate the duties that the general partner owes to our operating partnership and its partners.

Additionally, the partnership agreement of our operating partnership will expressly limit our liability by providing that we and our directors, officers, agents and employees will not be liable or accountable to our operating partnership or its partners for money damages. In addition, our operating partnership will be required to indemnify us, as general partner, our directors, officers and employees, employees of our operating partnership and any other persons whom we, as general partner, may designate from and against any and all claims arising from operations of our operating partnership in which any indemnitee may be involved, or is threatened to be involved, as a party or otherwise unless it is established by a final judgment that the act or omission of the indemnitee constituted fraud, intentional harm or gross negligence on the part of the indemnitee, the claim is brought by the indemnitee (other than to enforce the indemnitee’s rights to indemnification or advance of expenses) or the indemnitee is found to be liable to our operating partnership, and then only with respect to each such claim.

No reported decision of a Maryland appellate court has interpreted provisions that are similar to the provisions of the partnership agreement of our operating partnership that modify the fiduciary duties of the general partner of our operating partnership, and we have not obtained an opinion of counsel regarding the enforceability of the provisions of the partnership agreement that purport to waive or modify the fiduciary duties and obligations of the general partner of our operating partnership.

In addition, the stockholders agreement will provide that we, on our own behalf and in our capacity as general partner of the operating partnership, must use commercially reasonable efforts to (i) structure certain significant exit transactions (including mergers, consolidations and sales of substantially all of our assets or the assets of our operating partnership and its subsidiaries) in a manner that is tax-deferred to Messrs. Marchetti and Forste, their respective estate planning vehicles, family members and controlled affiliates, does not cause such parties to recognize gain for federal income tax purposes, and provides for substantially similar tax protections after such transactions, and (ii) cause our operating partnership or its subsidiaries to continuously maintain sufficient levels of indebtedness that are allocable for federal income tax purposes to Messrs. Marchetti and Forste and their respective personal holding entities to prevent them from recognizing gain as a result of any negative tax capital account or insufficient debt allocation, provided that such amount of debt shall not be

 

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required to exceed the amount allocable to the parties immediately following this offering, subject to certain exceptions. In connection with the obligation to maintain sufficient liability allocations, if we or our operating partnership believes insufficient liabilities may be allocated to Messrs. Marchetti and Forste and their respective personal holding entities, we shall, and shall cause our subsidiaries to, provide Messrs. Marchetti and Forste, their respective estate planning vehicles, family members and controlled affiliates with an opportunity to guarantee indebtedness. These rights granted to Messrs. Marchetti and Forste, their respective estate planning vehicles, family members and controlled affiliates will last with respect to each as long as such person (or his estate planning vehicles, family members and controlled affiliates) has not disposed of more than 60% of his interest in us or obtained a fair market value adjusted tax basis as a result of the death of Messrs. Marchetti or Forste, respectively. These requirements could limit our ability to allocate debt to other members of our operating partnership or structure certain transactions in a way that may otherwise be favorable to us and/or our stockholders.

Our bylaws designate any state court of competent jurisdiction in Maryland and the United States District Court located in Maryland, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders and provide that claims relating to causes of action under the Securities Act may only be brought in federal district courts, which could limit our stockholders’ ability to bring a claim in a judicial forum that the stockholders believe is a more favorable judicial forum for disputes with us or our directors, officers or other employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, any state court of competent jurisdiction in Maryland, or, if such state courts do not have jurisdiction, the United States District Court located within the State of Maryland will, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any Internal Corporate Claim, as such term is defined in the MGCL, including, without limitation, (i) any action asserting a claim based on an alleged breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders or (ii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws, or (c) any other action asserting a claim that is governed by the internal affairs doctrine. These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which federal courts have exclusive jurisdiction. Furthermore, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claim arising under the Securities Act. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is more favorable for disputes against us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and other employees.

Risks Related to this Offering and Ownership of Shares of Our Common Stock

There has been no public market for our common stock prior to this offering and an active trading market for our common stock may not develop following this offering.

Prior to this offering, there has been no public market for our common stock, and there can be no assurance that an active trading market will develop or be sustained or that shares of our common stock will be resold at or above the initial public offering price. We expect that our common stock will be approved for listing, subject to notice of issuance, on Nasdaq. The initial public offering price of our common stock will be determined by agreement among us and the underwriters, but there can be no assurance that our common stock will not trade below the initial public offering price following the completion of this offering. See “Underwriters.” The market value of our common stock could be substantially affected by general market conditions, including the extent to which a secondary market develops for our common stock following the completion of this offering, the extent of institutional investor interest in us, the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate-based companies), our financial performance and general stock and bond market conditions.

 

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The market price and trading volume of shares of our common stock may be volatile following this offering.

The market price of shares of our common stock may fluctuate. In addition, the trading volume in shares of our common stock may fluctuate and cause significant price variations to occur. If the market price of shares of our common stock declines significantly, you may be unable to resell your shares of our common stock at or above the public offering price. We cannot assure you that the market price of shares of our common stock will not fluctuate or decline significantly, including a decline below the public offering price, in the future.

Some of the factors that could negatively affect our share price or result in fluctuations in the market price or trading volume of shares of our common stock include:

 

   

actual or anticipated declines in our quarterly operating results or distributions;

 

   

changes in government regulations;

 

   

changes in laws affecting REITs and related tax matters;

 

   

the announcement of new contracts by us or our competitors;

 

   

reductions in our FFO, Core FFO, Adjusted FFO or earnings estimates;

 

   

publication of research reports about us or the real estate industry;

 

   

increases in market interest rates that lead purchasers of shares of our common stock to demand a higher yield;

 

   

future equity issuances, or the perception that they may occur, including issuances of common stock upon exercise or vesting of equity awards or redemption of OP units;

 

   

changes in market valuations of similar companies;

 

   

adverse market reaction to any increased indebtedness we incur in the future;

 

   

additions or departures of key management personnel;

 

   

actions by institutional stockholders;

 

   

differences between our actual financial and operating results and those expected by investors and analysts;

 

   

changes in analysts’ recommendations or projections;

 

   

speculation in the press or investment community; and

 

   

the realization of any of the other risk factors presented in this prospectus.

There can be no assurance that we will be able to make or maintain cash distributions, and certain agreements relating to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to our common stockholders.

We intend to make cash distributions to our stockholders in amounts such that all or substantially all of our taxable income in each year, subject to adjustments, is distributed. Our ability to continue to make distributions in the future may be adversely affected by the risk factors described in this prospectus. There can be no assurance that we will be able to make or maintain distributions and certain agreements relating to our indebtedness may, under certain circumstances, limit or eliminate our ability to make distributions to our common stockholders. There can be no assurance that rents from our properties will increase, or that future acquisitions of real properties or other investments will increase our cash available for distributions to stockholders. In addition, any distributions will be authorized at the sole discretion of our board of directors, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, Core FFO Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, liquidity, cash flows and financial

 

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condition, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable law and such other factors as our board of directors deems relevant.

If we do not have sufficient cash available for distributions, we may need to fund the shortage out of working capital or borrow to provide funds for such distributions, which would reduce the amount of proceeds available for real estate investments and increase our future interest costs. Our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock.

We may use a portion of the net proceeds from this offering to make distributions to our stockholders, which would, among other things, reduce our cash available to acquire properties and may reduce the returns on your investment in our common stock.

Prior to the time we have fully invested the net proceeds from this offering, we may fund distributions to our stockholders out of the net proceeds, which would reduce the amount of cash we have available to acquire properties and may reduce the returns on your investment in our common stock. The use of these net proceeds for distributions to stockholders could materially and adversely affect us. In addition, funding distributions from the net proceeds from this offering may constitute a return of capital to our stockholders, which would have the effect of reducing each stockholder’s tax basis in our common stock.

Increases in market interest rates may result in a decrease in the value of shares of our common stock.

One of the factors that will influence the price of shares of our common stock will be the distribution yield on shares of our common stock (as a percentage of the price of shares of our common stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of shares of our common stock to expect a higher distribution yield and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could cause the market price of our common stock to decrease.

Broad market fluctuations could negatively impact the market price of shares of our common stock.

The stock market may experience extreme price and volume fluctuations that have affected the market price of many companies in industries similar or related to ours and that have been unrelated to these companies’ operating performances. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us in particular. These broad market fluctuations could reduce the market price of shares of our common stock. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations. Either of these factors could lead to a material decline in the market price of our common stock.

This offering is expected to be dilutive to earnings, and there may be future dilution to earnings related to shares of our common stock.

On a pro forma basis, we expect that this offering will have a dilutive effect on our expected earnings per share, FFO per share and Core FFO per share. The actual amount of dilution cannot be determined at this time and will be based upon numerous factors. The market price of shares of our common stock could decline as a result of issuances or sales of a large number of shares of our common stock in the market after this offering or the perception that such issuances or sales could occur. Additionally, future issuances or sales of substantial amounts of shares of our common stock may be at prices below the initial public offering price of the shares of our common stock offered by this prospectus and may result in further dilution in our earnings, FFO per share and Core FFO per share and/or materially and adversely impact the market price of our common stock. See “Dilution.”

 

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Future offerings of debt, which would be senior to shares of our common stock upon liquidation, and/or preferred equity securities that may be senior to shares of our common stock for purposes of distributions or upon liquidation, may materially and adversely affect the market price of shares of our common stock.

In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities (or causing our operating partnership to issue debt securities). Upon liquidation, holders of our debt securities and preferred stock and lenders with respect to other borrowings will receive distributions of our available assets prior to our common stockholders. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. Our stockholders are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on distribution payments that could limit our right to make distributions to our stockholders. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Our stockholders bear the risk of our future offerings reducing the market price of our common stock.

Future contractual repurchase obligations may materially and adversely affect the market price of shares of our common stock and may reduce future distributions.

We have issued rollover equity to various sellers of assets acquired by us as part of the purchase price consideration for those assets. This rollover equity has generally taken the form of units in BGLH or units in Lineage OP, although in certain circumstances we have issued such rollover equity at our subsidiaries. Some of these sellers who received rollover equity were provided with separate classes of equity that included special one-time redemption features such as minimum value guarantees and in some cases the alternative option to elect cash or equity top-up rights to achieve a certain minimum equity valuation at a specified date (collectively, the “Guarantee Rights”). The ultimate obligations in respect of the Guarantee Rights, while currently structured at BGLH and Lineage OP, will become obligations of Lineage Holdings in connection with the formation transactions in order to ensure that the financial obligations associated with the Guarantee Rights impact investors in Lineage, our operating partnership and Lineage Holdings proportionately at the time they arise. Any trigger of the Guarantee Rights at BGLH or our operating partnership will result in successive redemptions or successive top-up cash payments or equity issuances between Lineage, our operating partnership and Lineage Holdings to effect this result, which may reduce our liquidity or dilute the ownership interest of our common stockholders. Such amounts could be material and could materially and adversely affect the market price of shares of our common stock and reduce future distributions to our stockholders.

In addition, pursuant to the coordinated settlement process that will occur for up to three years following this offering, all of the shares of our common stock outstanding immediately prior to this offering will transition from the control of BGLH, and all of the Legacy OP Units will transition from the control of BGLH’s subsidiary, the LHR, through (i) Cash Settlements of such equity in amounts that are expected to be material and (ii) Securities Settlements for all remaining amounts of such equity, resulting in the transfer of control of all such securities to the underlying legacy investors who will then determine the timing of their future disposition of such securities. Such transactions may reduce our liquidity and materially and adversely affect the market price of shares of our common stock and reduce funds available for distribution to our stockholders.

Sales of substantial amounts of our common stock in the public markets, or the perception that they might occur, could reduce the price of our common stock and may dilute your voting power and your ownership interest in us.

Sales of substantial amounts of our common stock in the public market following our initial public offering, or the perception that such sales could occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. We expect to have outstanding 210,008,463 shares of our common stock (or 217,058,463 shares of our common stock if the underwriters exercise in full their option to purchase additional shares).

 

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The shares of our common stock that we are selling in this offering (except for shares of our common stock purchased by our directors and officers in the directed share program, which are subject to a 180-day lock-up period) may be resold immediately in the public market unless they are held by “affiliates,” as that term is defined in Rule 144 of the Securities Act. The common stock, OP units, Legacy OP Units and OPEUs to be issued in the formation transactions will be “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemptions contained in Rule 144. Bay Grove (as well as our directors, director nominees, officers and certain other persons buying shares of our common stock through the directed share program) has agreed, subject to certain exceptions, not to sell or otherwise dispose of any of its common stock, OP units (which may be exchanged for common stock), Legacy OP Units (which, upon reclassification as OP units, may be exchanged for common stock) or OPEUs from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the underwriters’ prior written consent. Pursuant to the coordinated settlement process that will occur for up to three years following this offering, all of the shares of our common stock outstanding immediately prior to this offering will transition from the control of BGLH and all of the Legacy OP Units will transition from the control of BGLH’s subsidiary, the LHR, through (i) Cash Settlements of such equity in amounts that are expected to be material and (ii) Securities Settlements for all remaining amounts of such equity, resulting in the transfer of control of all such securities to the underlying legacy investors who will then determine the timing of their future disposition of such securities. Legacy investors that receive Securities Settlements will have registration rights with respect to shares of our common stock, including common stock that may be issued in exchange for OP units (including OP units that may be issued upon reclassification of Legacy OP Units or exchange of OPEUs). As a result of these registration rights agreements, however, all of these shares of our common stock, including common stock that may be issued in exchange for OP units (including OP units that may be issued upon reclassification of Legacy OP Units or exchange of OPEUs), may be eligible for future sale without restriction, subject to applicable lock-up arrangements. See “Shares Eligible for Future Sale” and “Certain Relationships and Related Party Transactions—Registration Rights Agreements.” Sales of a substantial number of such shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these agreements, could cause the market price of our common stock to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

In addition, upon completion of this offering, our charter will provide that we may issue up to 500,000,000 shares of common stock and 100,000,000 shares of preferred stock, $0.01 par value per share. Moreover, under Maryland law and as will be provided in our charter, a majority of our entire board of directors will have the power to amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue without stockholder approval. Future issuances of shares of our common stock or securities convertible or exchangeable into common stock may dilute the ownership interest of our common stockholders. Because our decision to issue additional equity or convertible or exchangeable securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future issuances. In addition, we are not required to offer any such securities to existing stockholders on a preemptive basis. Therefore, it may not be possible for existing stockholders to participate in such future issuances, which may dilute the existing stockholders’ interests in us.

A lack of research analyst coverage or restrictions on the ability of analysts associated with the co-managers of this offering to publish during certain time periods, including when we report our results of operations, could materially and adversely affect the market price and liquidity of our common stock.

We cannot assure you that research analysts, including those associated with the underwriters of this offering, will initiate or maintain research coverage of us or our common stock. In addition, regulatory rules prohibit research analysts associated with the co-managers of this offering from publishing or otherwise distributing a research report or from making a public appearance regarding us for 15 days prior to and after the expiration, waiver or termination of any lock-up agreement that we or certain of our stockholders have entered into with the underwriters of this offering. Accordingly, it could be the case that research concerning our results of operations or the possible effects on us of significant news or a significant event will not be published or will be published on a delayed basis. A lack of research or the inability of certain research analysts to publish research

 

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relating to our results of operations or significant news or a significant event in a timely manner could materially and adversely affect the market price and liquidity of our common stock.

Risks Related to Our REIT Status and Other Tax Risks

Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.

We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2020. We believe that our organization and method of operation has enabled and will continue to enable us to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes. However, we cannot assure you that we will qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. The complexity of these provisions and of the applicable regulations (as in effect from time to time) of the United States Department of the Treasury under the Code is greater in the case of a REIT, like us, that holds assets through a partnership. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.

In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the ownership of our stock and the composition of our gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.

If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face material tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

 

   

we would be subject to regular United States federal corporate income tax on our net income for the years we did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing our taxable income);

 

   

we could be subject to a federal alternative minimum tax and possibly increased state and local taxes for such periods;

 

   

unless we are entitled to relief under applicable statutory provisions, neither we nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which we were disqualified; and

 

   

for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, we could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. If we fail to qualify as a REIT, we would no longer be required to make distributions to our stockholders.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash available for distribution to our stockholders.

Even if we have qualified and continue to qualify as a REIT for U.S. federal income tax purposes, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local

 

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income, property and transfer taxes. In addition, we conduct a significant portion of our U.S. business through TRSs that are regular taxable corporations. Furthermore, our status as a REIT for U.S. federal income tax purposes generally does not reduce non-U.S. taxes on our operations and assets outside of the United States. Moreover, to the extent that we incur non-U.S. taxes outside of a domestic TRS, we have limited ability to utilize credits against our U.S. federal income tax liabilities for foreign taxes paid or accrued. Any of these taxes would decrease cash available for distributions to stockholders.

If our operating partnership or any other subsidiary partnership or limited liability company fails to qualify as a partnership or disregarded entity for U.S. federal income tax purposes, we could fail to qualify as a REIT and would suffer adverse consequences.

We believe that our operating partnership is organized and will be operated in a manner so as to be treated as a partnership, and not an association or publicly traded partnership taxable as a corporation, for U.S. federal income tax purposes. As a partnership, our operating partnership will not be subject to U.S. federal income tax on its income. Instead, each of its partners, including us, will be allocated that partner’s share of our operating partnership’s income. No assurance can be provided, however, that the Internal Revenue Service, or the IRS, will not challenge the status of our operating partnership or any other subsidiary partnership or limited liability company in which we own an interest as a partnership or disregarded entity for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating our operating partnership or any such other subsidiary partnership or limited liability company as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we could fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, could cease to qualify as a REIT. Also, the failure of our operating partnership or of any such other subsidiary partnership or limited liability company to qualify as a partnership or disregarded entity would cause it to become subject to U.S. federal corporate income tax, which would reduce significantly the amount of its cash available for debt service and for distribution to its partners or members, including us.

Our operating partnership has a carryover tax basis on certain of its assets as a result of certain transactions, and the amount that we have to distribute to stockholders therefore may be higher.

Certain of our operating partnership’s assets were acquired in tax-deferred transactions and have carryover tax bases that are lower than the fair market values of these assets at the time of the acquisition. As a result of this lower aggregate tax basis, our operating partnership will recognize higher taxable gain upon the sale of these assets and our operating partnership will be entitled to lower depreciation deductions on these assets than if it had purchased these assets in taxable transactions at the time of the acquisition. Such lower depreciation deductions and increased gains on sales allocated to us generally will increase the amount of our required distribution under the REIT rules, and will decrease the portion of any distribution that otherwise would have been treated as a “return of capital” distribution.

Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow.

Even if we qualify as a REIT for U.S. federal income tax purposes, we are required to pay state and local property taxes on certain of our assets. The property taxes on our assets may increase as property tax rates change or as our assets are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past. If the property taxes we pay increase, our financial condition, results of operations, cash flow, per share trading price of our common stock, and ability to satisfy our principal and interest obligations and to make distributions to our stockholders could be adversely affected.

We use TRSs, which may cause us to fail to qualify as a REIT.

To qualify as a REIT for U.S. federal income tax purposes, we hold, and plan to continue to hold, substantially all of our non-qualifying REIT assets and conduct certain of our non-qualifying REIT income

 

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activities in or through one or more TRS entities. A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS. A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to U.S. federal income tax as a regular C corporation at a current rate of 21%.

The net income of our TRS entities is not required to be distributed to us, and income that is not distributed to us will generally not be subject to the REIT income distribution requirement. However, our TRS entities may pay dividends. Such dividend income should qualify under the 95%, but not the 75%, gross income test. We will monitor the amount of the dividend and other income from our TRS entities and will take actions intended to keep this income, and any other non-qualifying income, within the limitations of the REIT income tests. While we expect these actions will prevent a violation of the REIT income tests, we cannot guarantee that such actions will in all cases prevent such a violation.

Our ownership of TRS entities is subject to limitations that could prevent us from growing the portion of our business that does not qualify for operating through a REIT, and our transactions with our TRS entities could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.

No more than 20% of the value of a REIT’s gross assets may consist of interests in TRS entities. We hold a portion of our business that could adversely impact our status as a REIT, if conducted directly by the REIT, through one or more TRS entities. In addition, we may acquire companies and properties through our TRS entities until such companies or properties can be restructured to operate in a REIT compliant manner. Compliance with the TRS ownership limitation could limit our ability to grow the portion of our business that does not qualify for operating through a REIT. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. Our board of directors may determine in good faith the valuation of our gross assets, including the value of securities in our TRS entities, on a quarterly basis. We will monitor the value of investments in our TRS entities in order to comply with TRS ownership limitations and will structure our transactions with our TRS entities on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the TRS ownership limitation or be able to avoid application of the 100% excise tax.

REIT distribution requirements could adversely affect our ability to execute our business plans, including because we may be required to borrow funds to make distributions to stockholders or otherwise depend on external sources of capital to fund such distributions.

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to continue to qualify as a REIT. To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income (determined without regard to the dividends paid deduction and including any net capital gains), we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we may elect to retain and pay income tax on our net long-term capital gain. In that case, if we so elect, a stockholder would be taxed on its proportionate share of our undistributed long-term gain and would receive a credit or refund for its proportionate share of the tax we paid. A stockholder, including a tax-exempt or non-U.S. stockholder, would have to file a U.S. federal income tax return to claim that credit or refund. Furthermore, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.

We intend to make distributions to our stockholders to comply with the REIT requirements of the Code and to avoid corporate income tax and the 4% excise tax. We may be required to make distributions to our

 

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