Largest East Coast retail grocery group taps Americold for new frozen facilities

Temperature-controlled warehouse owner and operator Americold Realty Trust (NYSE: COLD) has been chosen to build two new facilities.

The largest retail grocery group on the East Coast with brands like Food Lion, Giant Food and Hannaford, Ahold Delhaize USA (Koninklijke Ahold Delhaize OTCUS: ADRNY), will partner with Americold to build two new fully automated frozen warehouses in Plainville, Connecticut and Lancaster, Pennsylvania. The two facilities will expand Ahold Delhaize USA’s cold-storage capabilities by 500,000 square feet, create 59,000 new pallet positions and serve more than 750 stores in the Northeast and Mid-Atlantic.

The $325 million two-facility project will commence in the second quarter of 2020 with plans to be fully operational by the second half of 2023. Americold expects the facilities to yield net operating income (NOI) and return on invested capital (ROIC) of 10% to 12%.

Illustration of Lancaster, Pennsylvania facility (Photo: Americold)

“We’re extremely proud of this new partnership with Americold and the opportunity to fully expand our cold-storage capacity as part of our current storage needs and future growth plans,” said Chris Lewis, executive vice president of supply chain at Retail Business Services, LLC, Ahold Delhaize USA’s services group.

The supermarket giant is in the process of transitioning its supply chain into a self-distribution model by transforming facilities to improve automation and implement an integrated transportation management system along with end-to-end forecasting and replenishment capabilities. The company operates more than 1,000 trucks along the East Coast, traveling over 120 million miles annually.

The new locations will position inventory in close proximity to the group’s retail stores, increase the availability and freshness of local products and improve delivery times. Additionally, 200 new jobs are expected to be created at each location.

“We are thrilled to partner with Ahold Delhaize USA to design, build and operate these strategically located retail distribution fulfillment centers over an initial term of the next 20 years,” said Americold President and CEO Fred Boehler.

The new facilities are in addition to expansion and development projects representing 124,000 pallet positions Americold had in the works at the close of first quarter 2020. Since the beginning of the year, Americold has completed expansion projects and acquisitions representing 112,000 pallet positions.

Americold’s first quarter 2020 came in ahead of analyst expectations and the company reiterated its full-year 2020 guidance, a rare move in the COVID-19 environment that has forced most companies to pull earnings forecasts. The company’s management team expects a sequential slowdown from the first quarter, but noted that demand will remain higher than normal on their quarterly call.

Americold is an Atlanta-based real estate investment trust (REIT) that operates 183 temperature-controlled facilities, including 11 facilities in its third-party managed segment, with more than 1 billion refrigerated cubic feet of storage in the United States, Australia, New Zealand, Canada and Argentina.