Americold Realty Trust, Inc.

Welcome to the Armacol Realty Trust second quarter earnings call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Mr. Scott Henderson. Please go ahead.

Good afternoon. We would like to thank you for joining us today for a Marigold Realty Trust second quarter 2021 earnings conference call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investor section on our website at www.marigold.com. This afternoon's conference call is hosted by AmeriCold's Chief Executive Officer, Fred Bowler, and Chief Financial Officer, Mark Smirnoff. Management will make some prepared comments, after which we will open up the call to your questions. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated. Forward-looking statements are based on current expectations, assumptions, and beliefs, as well as information available to us at this time and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including core EBITDA, core FFO, and AFFO. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures is contained in the supplemental information package available on the company's website. Before I hand it over to Fred, I would like to provide some brief commentary on our second quarter results and activities. We continue to see food manufacturers producing at less than full capacity, primarily due to labor constraints, which ultimately reduces our physical occupancy. However, we expect production to continue to gradually ramp up and normalization to occur by mid-2022. We continue to execute on our external growth plan and have announced three mission-critical development projects totaling $111 million and three new strategic acquisitions totaling $488 million. Finally, we continue to demonstrate our commitment to ESG as evidenced by our partnership with Feed the Children and Tyson Foods in launching an alliance to defeat hunger. Now, I will turn the call over to Fred.

Thank you, and welcome to our second quarter 2021 earnings conference call. We continue to remain focused on delivering on all three of our drivers of long-term value creation. our same store pool, mission-critical developments, and strategic M&A. However, we continue to see COVID-related supply chain and labor market disruptions, which impacted our second quarter results. Let me be a bit more specific. During the second quarter 2021, existing inventory in cold storage was below prior year levels. While end consumer demand continues to remain steady, manufacturers have not yet gotten back up to pre-COVID production levels. During 2020, production levels were reduced as a result of process changes put in place by manufacturers to slow the spread of the virus. These initiatives, combined with subsequent labor challenges, have resulted in lower production levels. Over the last 15 months, these sustained initiatives and ongoing labor challenges have ultimately reduced our physical inventory levels. While COVID cases were declining in the second quarter of this year, we're now seeing increases in cases in certain locations, which may continue to impact production. The retail channel continues to run at higher levels than before COVID, and the food service channel is showing signs of recovery. However, food manufacturers are finding it challenging to recruit and retain workers. This is broadly limiting the amount of food being produced. This, along with steady end-user consumer demand, continues to weigh on our physical inventory levels. Our commercial business processes, including our fixed commitment contracts, mitigate some but not all of this impact. While we continue to make progress, we would remind you that nearly all of our recent acquisitions over the past few years did not initially have a meaningful number of fixed commitment contracts. That said, we are actively working with our customers to bring these acquisitions onto our commercial standards. This is how we continue to enhance value for our customers and shareholders. We fully expect food production levels to ultimately return to pre-COVID levels over time. Recently, 26 states announced they would no longer accept COVID-related supplemental federal unemployment benefits. Many of these states are in the Southeast, Midwest, and Northwest areas of the U.S., which are home to major food production plants. While the rising case counts in some areas in the U.S. and around the world pose some risk, we continue to believe that recent improving trends will continue in the second half of 2021. As of now, school openings remain on track for most regions of the country. freeing up many caretakers from the additional responsibility of being at home with their children during the day. This, combined with the announced end of the supplemental federal unemployment benefits in September, should increase the size of the labor pool, enabling food manufacturers to improve their staffing positions and ramp up production to more normalized levels and inventory positions. U.S. same-store inbound volume increased for the second quarter versus the first quarter by approximately 5% and versus second quarter of 2020 by approximately 3%. This illustrates that food manufacturers are gaining traction in ramping up production. However, as our occupancy shows, product is not being stored long enough in our facilities to increase inventory levels yet. Conversations with our food manufacturers indicate that production volumes are expected to continue to increase. Many of our customers are seeking to improve their inventory positions to better support their customers, who are the retailers and food service companies. Not only does end consumer demand remain stable, but retailers and food service companies have increased expectations of service levels and fill rates to pre-COVID levels. This further incentivizes manufacturers to ramp up production. We recently conducted a formal survey of our top 50 customers, which generate approximately 60% of our warehouse revenue. Many of our manufacturing customers are currently producing at approximately 80% to 85% of pre-COVID levels. While they continue to ramp up production, they are not expecting to reach normalized inventory levels until mid-2022. We remain confident in the global demand for all types of food in our diverse portfolio. and we are confident that food manufacturers will return to pre-COVID inventory levels as end consumer demand remains firmly intact. Now, let me turn to our external growth activity. We continue to execute on strategic development and acquisitions that will help us better serve our customers and their supply chain needs on a global scale. Today, we announced three development projects in Atlanta, Georgia, Dunkirk, New York, and Dublin, Ireland, for a total of investment of approximately $111 million. On the back of strong demand for our recently completed Atlanta development, we are launching phase two of our Atlanta major market expansion at our Gateway facility. This will be a highly automated expansion, similar to phase one, with a diverse mix of existing and new customers in our pipeline. We have also started construction of a dedicated build-a-suit facility for a large private consumer packaged goods manufacturer in Dunkirk, New York. This is a conventional build for a top 25 customer, which will be on a fixed commitment pricing structure with an initial 20-year term. This is a great example of how we continue to work with our customers to find ways to support their production and supply chains with long-term infrastructure. Finally, We are launching a major market expansion at our Dublin, Ireland site that we acquired with Agro at the start of the year. This will be a conventional build on a site located 10 miles from the Dublin port, which is a critical gateway for protein exports and perishable imports. We have a diverse mix of customers in our pipeline, consisting of manufacturers of protein, dairy, fresh fruits and vegetables, as well as retail customers. Turning to our developments that were completed in the second quarter. Our three facilities in Lurgan, Northern Ireland, Auckland, New Zealand, and Atlanta, Georgia, received their certificates of occupancy and are all on track to stabilize as previously disclosed. As a reminder, Lurgan was a major market expansion to support several customers and is fully sold. Auckland was an expansion to support a top five retail customer underwritten with a long-term fixed commitment contract. And lastly, Atlanta is a fully automated site anchored by two top five customers on long-term fixed commitments. Turning to other recently completed projects. If you recall, we disclosed in February that we are hampered by travel restrictions with our European-based automation partners who are tasked with improving the performance at our Rochelle facility. Since May, they have been on site and have made improvements to the systems. Working with our development team, they have also identified additional recommendations to improve performance and stability, which we are evaluating. Based on these discussions and the minimized customer and operational disruptions, we expect this work to be done over the next 12 months. As a result, we now expect the project to be stabilized in the fourth quarter of 2022. Additionally, With respect to our recent Savannah build, which we completed on time and on budget, the facility's ramp has been impacted by the same broader market dynamics affecting our overall portfolio. We expect this facility to return to plan commensurate with the broader market recovery. We also continue to grow our portfolio through strategic acquisitions. Subsequent to quarter end, we completed one transaction and have entered into purchase agreements for two other acquisitions, for a combined total of $488 million. As we have said, strategic tuck-in acquisitions meaningfully enhance our existing network. Just as important, all of these transactions bring opportunity to drive NOI growth as we commercialize existing business and implement the AmeriCold operating system. On August 2nd, we closed on the acquisition of Coldco in St. Louis, Missouri. Coldco consists of one owned facility in St. Louis, generating approximately 93% of total NOI, and one leased facility in Reno, Nevada. Coldco's customers are primarily focused on direct-to-consumer distribution. The company provides traditional rent and storage and value-added services for its customers. Almost all of Coldco's customers are new to AmeriCold and include unique brands focused on meal kits, protein bars and drinks, smoothies, confectionery items, baby foods, and high-end pet foods. We are retaining the Coldco founders to help grow this direct-to-consumer business with a new type of customer. We also recently entered into a purchase agreement to acquire Newark Facility Management in Newark, New Jersey. Newark consists of one owned facility that is a dedicated retail distribution center for a leading regional grocer serving the Northeast and Mid-Atlantic US. This grocer is a top 10 customer of ours and has been with us for decades. We currently serve this customer out of two other facilities in our network. As we said earlier, nearly all of our previous acquisitions did not have meaningful contractual commitments in place with their customers. But in this case, Newark has a fixed commitment structure in place with this grocer with approximately 16 years of duration remaining on the contract. In addition, we are also acquiring three acres adjacent to this site for future development. Retail distribution is one of the fastest growing areas for AmeriCold, and we are very excited about expanding our relationship with this leading grocer. We expect to close this transaction in September of 2021. Finally, we recently entered into a purchase agreement to acquire Lago Cold Stores in Brisbane, which is Australia's third largest and fastest growing city. Lago consists of one owned facility generating approximately 78% of total NOI and two leased facilities. Lago's own facility, which is 5.4 million cubic feet, is adjacent to our recently acquired Agro Brisbane facility. These facilities are strategically located less than 10 miles from the Port of Brisbane. This transaction grows our exposure with several top 100 customers and adds new customers to the portfolio. The customer mix includes protein and potato producers, quick service restaurants, and retail customers. This acquisition is subject to customary closing conditions and regulatory approval and is expected to close in the fourth quarter of 2021. With regard to our ongoing ESG efforts, we continue to be very active on this front. In the second quarter, we partnered with Tyson Foods, one of our largest customers, and Feed the Children, an organization AmeriCold has sponsored for numerous years, to launch an alliance to defeat hunger with a 10-city tour across the U.S. Throughout the tour, our three organizations will supplement nearly 2 million meals to help feed families in rural communities. Additionally, we recently submitted our responses for the 2021 Gresby Real Estate Assessment and the Carbon Disclosure Project. These are important milestones for us as we continue to progress in our ESG initiatives. In summary, we continue to drive internal growth through our portfolio's diversity and scale, the effectiveness of our commercial processes, and the AmeriCold operating system. On the external growth front, We continue to execute on the mission critical development projects and strategic acquisitions as evidenced by this quarter's activity. Barriers to entry remain high in our business. It would be difficult, if not impossible, to replicate our strong market share in our integrated global platform, which now spans four continents. I will now turn the call over to Mark.