Morningstar DBRS Assigns Credit Rating of BBB with Positive Trend to Americold Realty Operating Partnership, L.P's $500 Million of 5.409% Notes Due 2034

DBRS, Inc. (Morningstar DBRS) assigned a credit rating of BBB with a Positive trend to Americold Realty Operating Partnership, L.P's USD 500,000,000 of 5.409% Notes Due 2034.

The Senior Notes are guaranteed by Americold Realty Trust, Inc., Americold Realty Operations, Inc. and select subsidiaries of the Issuer. The Senior Note is a direct senior unsecured obligation of Americold Realty Operating Partnership, L.P. and ranks equally and rateably with all other present and future unsecured and unsubordinated indebtedness of the Issuer. Morningstar DBRS understands that the net proceeds from the offering will be used to repay a portion of outstanding borrowings under the revolving credit facility and for general corporate purposes.

The credit rating assigned to this newly issued debt instrument is based on the credit rating of an already-outstanding debt series of the above-mentioned debt instrument. Please refer to the most recent Morningstar DBRS press release dated August 26, 2024, for more information, including all relevant disclosures.

Morningstar DBRS notes that the ratings are based on the credit risk profile of the combined entity, including the Company and its subsidiaries, as well as Americold Realty Trust, Inc. (collectively, the REIT).

KEY CREDIT RATING CONSIDERATIONS
On August 26, 2024, the trends were changed to Positive from Stable following the improved financial risk assessment (FRA) factors throughout 2023 and first half of 2024 with visibility to continue in the near and medium term.

The Positive trends consider (1) the Company's improved leverage profile following the $413 million equity raise in Q3 2023 to reduce outstanding debt; (2) Americold's ability to improve same-store net operating income (NOI), which has lately been driven by greater warehouse services margins; (3) the increased percentage of fixed commitment rent and storage revenue (up to 56.6% of rent and storage revenue as of Q2 2024); and (4) anticipated cost savings from the implementation of Project Orion, a $107.3 million investment in technology systems and business processes across the global platform. The aforementioned factors provide greater visibility in the Company sustainably maintaining a total Debt-to-EBITDA of 6.0 times (x) or better over the medium term.

CREDIT RATING DRIVERS
All else equal, Morningstar DBRS would consider credit rating upgrades should the total Debt-to-EBITDA continue to sustainably and comfortably remain below 6.0x while the EBITDA Interest Coverage exceeds 3.50x. All else equal, Morningstar DBRS would change the trends to Stable from Positive should the total Debt-to-EBITDA weaken to 6.0x or worse, or if the EBITDA Interest Coverage deteriorates below 3.50x.

FINANCIAL OUTLOOK
Morningstar DBRS expects the Company to maintain a total Debt-to-EBITDA in the mid-5.0x range throughout 2024 and 2025, relative to the last 12 months ended June 30, 2024, total Debt-to-EBITDA of 5.6x. EBITDA is projected to moderately increase through 2025 as a result of improved same-store NOI, the stabilization of recent developments and acquisitions, and the delivery of ongoing development projects. Morningstar DBRS notes the weakened economic occupancy rate has been driven by a weaker end-consumer; however, this is mitigated by continued pricing initiatives, expanded services margins, and greater labor productivity. Debt levels are projected to increase over the medium term to primarily fund development projects and potential acquisitions.

The EBITDA Interest Coverage ratio (including capitalized interest) is expected to remain strong and stable, reaching the low-4.00x range by year-end (YE) 2024 and slightly softening to the high-3.00x range for YE2025. Interest costs are projected to increase given the greater debt amounts; however, it should be noted 18% of the debt stack is considered unhedged variable interest rate that would benefit from monetary easing.

CREDIT RATING RATIONALE
The rating confirmations reflect (1) Americold's strong FRA factors relative to its rating category; (2) the Company's strong market leadership position in the North American market and globally; (3) its geographical diversification across North America, Europe, and the Asia Pacific region; and (4) its overall portfolio size in terms of EBITDA. The Company also benefits from its low amount of secured debt-to-total debt (11.2% as of June 30, 2024); however, Morningstar DBRS does not apply any consideration for low prior ranking debt given the limited liquidity of the unencumbered asset pool. Conversely, the rating continues to be constrained by (1) Americold's lease maturity profile relative to traditional real estate entities; (2) its asset type concentration within the temperature-controlled warehouse (TCW) sector; (3) the specialized nature and limited liquidity of TCWs relative to traditional real estate, affecting overall asset quality; and (4) development risk.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of BRA Factors
In the analysis of Americold Realty Operating Partnership, L.P., the BRA factors were considered in the order of importance
contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of Americold Realty Operating Partnership, L.P., the FRA factors were considered in the order of importance
contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of Americold Realty Operating Partnership, L.P., the BRA carries greater weight than the FRA.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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