Press Release

DBRS Morningstar Confirms Ratings on Americold Realty Operating Partnership, L.P. at BBB, Stable

Real Estate
September 29, 2020

DBRS, Inc. (DBRS Morningstar) confirmed the ratings of BBB with Stable trends on Americold Realty Operating Partnership, L.P.’s (AROP) Issuer Rating and Senior Unsecured Notes. DBRS Morningstar notes that the rating is based on the credit risk profile of the combined entity, including AROP and its subsidiaries, as well as Americold Realty Trust (collectively, Americold or the REIT).

Americold’s ratings are supported by the REIT’s robust financial profile, its leading market position in the temperature-controlled warehouse (TCW) business, the experience and sophistication of its management team, and property and geographic diversification. While DBRS Morningstar views asset quality as adequate, DBRS Morningstar believes Americold’s assets provide stable cash flows as they exhibit better-than-average ability to withstand market weakness. As well, Americold increasingly demonstrates a sustainable competitive advantage from a number of sources, including customer-switching costs, intangible assets, and efficient scale. These considerations are somewhat offset by its short lease maturity profile with exposure to relatively high counterparty risk, relatively small size. and asset-type concentration with pure-play exposure to the TCW space.

DBRS Morningstar anticipates pent-up demand from the Coronavirus Disease (COVID-19) pandemic to subside during the second half of 2020, thereby moderating revenue, with costs relating to the coronavirus remaining elevated. DBRS Morningstar expects EBITDA to resume a stronger upward trajectory in 2021 as the impact of the coronavirus pandemic wears off, and recent acquisitions and facility expansions drive modest growth. DBRS Morningstar anticipates that Americold’s leverage will range near 5.5 times (x) total debt-to-EBITDA and EBITDA interest coverage close to 3.5x over the next couple of years. In addition, continued growth in consumer preference for fresh and frozen unprocessed food products will maintain heightened demand for TCW space for the foreseeable future. Furthermore, DBRS Morningstar sees further potential avenues for growth in other nonfood areas, such as pharmaceuticals, specialized electric equipment, and the floral business.

The Stable trends reflect DBRS Morningstar’s expectation that Americold continues to efficiently manage its portfolio throughout the coronavirus pandemic and expand in its current markets while maintaining a conservative financial risk profile.

A positive rating action would be considered if Americold achieves significant growth, most likely through new and expanded customer relationships as well as construction of new and expanded facilities, while maintaining a prudent financial risk profile, such that EBITDA approaches $450 million while maintaining or lowering leverage ranges (debt 5.5x to 6.0x EBITDA normalized). A negative rating would be considered with a meaningful loss of EBITDA below $250 million, possibly resulting from continued pandemic-related challenges , and a corresponding increase in debt-to-EBITDA near 7.0x and decrease in EBITDA interest coverage near 2.5x.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are Rating Entities in the Real Estate Industry (June 4, 2020) and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 25, 2019), which can be found on under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

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